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PowerSecure International, Inc. (NYSE:POWR)

The Wall Street Analyst Forum Call Transcript

November 19, 2008, 11:10 am ET

Executives

Helen Baud – Host, The Wall Street Analyst Forum

Chris Hutter – CFO, VP and Treasurer

Helen Baud

Good morning, ladies and gentlemen. My name is Helen Baud from the Wall Street Analyst Forum. I’m your host for this forum for the day. As the registration goes, we have signified we’ll escort anyone to the breakout session after this presentation. At this time, I would ask anyone with a cell phone, pager, handheld device to please switch it too either the silent position or turn it off completely so as not to interrupt this presentation.

The next company we have today is PowerSecure International, Inc. The company’s core business is in the area of distributed generation, and it has complementary businesses in the areas of utility infrastructure, energy conservation and efficiency, and energy services. The company’s year-to-date revenues are (inaudible) 60% and EPS to GAAP over 100%. And presenting today, on behalf of PowerSecure, is Chris Hutter, the Chief Financial Officer.

Chris Hutter

Good morning and thanks everybody for taking the time to learn a little more about PowerSecure. The first phase of our presentation, in our handout, is a Safe Harbor. And obviously, that’s incorporated by reference.

First of all, who are we? Who is PowerSecure? We are the market leader in something called distributed generation. And as we go through the slide, that is our core business. One of my comments today will be focused around distributed generation.

But distributed generation, we have a very strong customer value proposition. Basically, it’s stand by power with a strong return on investment. In its simplest form, what is involves is we will put a power producing asset on the site of a commercial or industrial customer. That asset will be monitored 24/7 by our monitoring folks in Wake Forest, North Carolina for basically two reasons. One is to make sure that that distributed – that generator kicks on when the power goes out and the backup power is needed. And the second is to form something called peak shaving. And what peak shaving is we will run that generator to help utilities deal with their capacity issues during their peak load periods. And it’s much cheaper to run a generator on site than it is to buy electricity or produce electricity during those peak power times. And I’ll talk about all that as we go through the presentation.

We have strong market position with sustainable competitive advantages, and a track record of profitable growth. I’ll just give you a couple of hotspots. Revenue the last 12 months is $146 million, EBITDA is $21 million, and EPS is $1.05. It’s a track record we’re very proud of. And I’ll show you the last – both the last quarter’s results and the year-to-date. And I’ll hope you’ll be impressed.

The strategic growth markets in which we play and participate, it’s first and foremost, distributed generation. That’s our core business. But beyond that, our core competencies in distributed generation, we’ve now grown into doing larger scale utility infrastructure projects, substation work, transmission line work, both on the design side and the construction side. We also have two businesses in energy conservation and efficiency. They’re both lighting oriented businesses. And then, we also participate in what we call the energy services arena, primarily, in that – our business lines involve serving natural gas producers, both in the Gulf and in Colorado.

The slide on page four, I won’t spend a lot of time on. You guys know all these. And the fact that matters, the electric power industry is large and growing. And we don’t see that stopping anytime soon. If you look at the last seven years, the growth has been remarkable.

The slide on page five, though, talks about the fact that utilities – basically, it’s on how quickly they’ve been able to respond to that growth. Utilities, traditionally focuses on large investment projects, dealing with base load needs in the communities that they serve, and their lead times of anywhere from five to ten years to put up large power producing plants. The fluid regulatory situation certainly adds to that uncertainty and lag. The “not in my backyard” sentiment contributes. And that really provides us the opportunity to help utilities solve their capacity issues with distributed generation, which by the way, doesn’t come with the burden of having to put transmission lines up either.

The combination of that demand and capacity constraints means that our projection’s already – electricity prices will continue to push upward. This is the last couple of years in terms of how electricity prices have trended, and then, the forecast for the next couple of years.

Those electricity prices increase exponentially during peak power times. And the chart on page seven gives you an example of a typical utility and what that utility’s cost curve looks like. Where we play is in the space to the far right. Our generators, basically run, for peak shaving, about 200 hours a year out of 8,700 hours in a year. So we’re with them at the far right, and we arbitrage – our peak shaving arbitrage is the cost producing electricity at the highest rates versus the cost of running a generator.

If you’ve been in Wake Forest, North Carolina – has one – you’ve seen a couple of folks in our operations center monitoring over 800 generators across the country. Monitoring, basically, to proactively forecast whether the utilities that we’ve sold are going to reach – or are going to have a peaking event. And what you’ve seen on this chart on page eight is an example of, literally, the monitor that our folks will look at. And we’ll set triggers within that to determine whether we should run our generation and make sure that our CNI customers get the benefit of whatever incentive happens to be out there for them to be off the grid during peak power times. And if there is a peaking event, we believe there’s going to be a peaking event, with the push of a button, we’ll run all of our generation underneath the particular utility. That generation, as illustrated on page eight, will run from anywhere from an hour and a half to two hours to catch the peak. And then, we will then transfer power off of the generator, and begin having those CNI customers get their generation from the grid.

Our customer value proposition is fixed. It extends not only – it’s not only commercial and industrial customers that are going to get the benefit of standby power and the backup power, and the peak shaving, but also utilities. So it really extends across the top of this space, but also from top to bottom. Our generators prevent business interruptions, which obviously, results in reducing spoilage of process waste. We capture, of course, the peak shaving efficiencies we’ve talked about; reduce power distribution costs because we don’t have to string up transmission lines; and also, it can help utilities reduce their infrastructure spending.

Turning on page 10, there’s an illustration of what utilities planned additions to capacity are to service the demand for electricity over the course of the next seven or eight years. That’s the gray area. On top of that gray area there, though, under paying modest assumptions, in terms of what demand is going to look like, there’s a capacity gap as well. And what these charges are really trying to illustrate is the fact that there’s a lot of catching up to do in utility infrastructure in order to make sure that utilities have the way with all – to meet demand. And we, of course, will play in the gray with our utility infrastructure and our demand response products, but we also will – obviously, play in the blue area.

Our competitors edge is, we believe, make us really uniquely positioned in the marketplace. Our technology is the best on the market. We use something called Parallel Switchgear. What that means is when we turn our generators on to do the peak shaving – and by the way, that Switchgear is built with the brains inside it so that we can literally monitor every one of our generators from the Wake Forest headquarters. We can look inside those generators and understand if they’re performing the way they should be – should be performing.

But what Parallel Switchgear does is, when we do that peak shaving, the commercial and industrial customer literally does not see a blank. We transition power from the grid to the generator. That power transitions in about 10 seconds. But we’re always pulling a little bit of power from the grid, which from a safety perspective for that CNI guy is really important. It’s 100% seamless for the customer, and a huge source of our competitor advantage.

So right now, there’s just nobody else in the marketplace that is proactively forecasting the grid utilization. Our folks have spent the last several years perfecting this, making sure they’re hitting peaks on behalf of our customers. And our track record is wonderful on that side of things. Our track record, also, with execution of fundamental expertise, we’ll put up against anybody in the industry. We are experts in utility tests and understanding what the opportunity is and what the price signals of utilities are trying to deliver to that customer base, and how we then provide a system that will mind those opportunities. And importantly, be a partner for the utility to help them solve their peak capacity issues.

We are experts in something called the interconnect agreements. Utilities, as you can imagine and likely so, are very protective of their grid and of folks putting up generation equipment and connecting it to the grid. We have now proven and earned the trust of over 100 utilities across the country. We’ve done over 100 interconnect agreements. To our knowledge, there’s nobody else that has done that. And we feel that – it’s something we’re very proud of, and we feel like we’ve earned the trust of our utility partners in our ability to do that well.

We provide one-stop comprehensive solutions for our customers. Our generator installation, Switchgear installation; we manufacture our own Switchgear; and of course, the 24/7 monitoring, which allows our customers to sleep at night.

From our customers viewpoint – and what it’s intending to illustrate is, is what the payback looks like. Our customers can expect anywhere from a three to five payback on their interactive distributed generation investment. That includes both the value we placed on backup power as well as the value of the peak shaving.

We actually go to market with two business models, same assets, two business models. The predominant and traditional business model has been the top part of page – top part of slide 13, and that is what we call project based business model. In that business model, we are selling the generation equipment to the end user, whether it’s the commercial and industrial customer or utility. Our average margins – gross margins on that sale of equipment are actually a bit higher – just over 30%. We tend to structure those economics to come upfront. We’re very much at a new point where cash (inaudible). And then, we will structure a monitoring agreement to come after that sale, whereby we will monitor those assets 24/7 to make sure they deliver the peak shaving benefit that we – that the customer intends them to deliver as well as make sure that they’re performing when needed for backup power.

The second model that we go to the market with, and have increasingly gone to market with, is our recurrent revenue model. In that model, we will retain ownership of the assets. We’ll take them on the customers site; retain ownership; the customer does not have to put up a capital to buy those assets, and instead, will pay us a fee, a fee for the combination of access to those assets for backup power and access to those assets from the utilities perspective to help solve the utilities capacity issues.

Last week, in the middle of what we all know is an unbelievable dysfunction in the credit markets, we announced the brand new $50 million facility to finance all the recurrent revenue model projects. We basically doubled our required facility, which is a $25 million revolver. This facility is structured as a $50 million revolver. Then at the end of that, whatever balance we have outstanding related to putting these recurrent revenue projects in and those assets in, we can term out over the course of the next four years, with a two-year bullet. So basically, it provides a five-year financing program for our recurrent revenue projects. It’s interest only for the first three years for the four-year amortization for the next two years after that.

It’s something we’re very proud of. Citibank backed that deal and liked that deal, along with SunTrust and BB&T as agents. We’ve been working on all summer. It was one of those things that when the credit markets hit and pulled back in September and October, I’ll admit to you we were a little concerned that the deal we’ve been working on for the long time might get soft. But the fact of the matter is, Citibank, SunTrust, and BB&T stood firm. And we’re very proud to have them as partners, and very fortunate to have them and their financial capacity backing us. It allows us to play offense, to walk in to a utility, commercial and industrial customer, look them in the eye, and say, “Yes. We can do that big project.” Okay.

We’ve got a strong track record of market leadership. We are the first to bring turnkey distributed generation in the marketplace. All our (inaudible) value proposition is compelling. I tell you, that is our core strength. It’s about how to identify an opportunity in the energy space that actually can deliver value to the customer that PowerSecure can make money with. And if it doesn’t deliver value to the customer with a strong ROI, and if it’s not going to make our company money so that our company can be healthy, it’s something we’re not going to spend our time and resources on.

We’ve developed strong trusting relationships with utilities and our customers. And again, we’ve done over 100 interconnect agreements and over 200 generator installations to support that. We have a strong volume client roster. Public supermarkets, for the last three years, have been our single largest customer. We’re very fortunate and blessed to have them as a customer. And we work very hard to service them. And they also have brought us tremendous credibility in the marketplace. So we’re very thankful to have that – have that track record.

Our two to last three years, we are very focused on servicing publics, installing several hundred installations into their stores. In about May ’07, we finally got the – both the management bandwidth and the organizational bandwidth to begin to diversify our business. What this chart shows you is all of our – if you take the public out of our revenue stream, what’s the rest of our revenues look like? And what you see is, really starting the fourth quarter of ’07, this is the last six quarters of revenue, through ’08, a very nice result in terms of us penetrating – penetrating other customers, delivering systems on the (inaudible) utilities and the customers, and to a record last quarter of almost $25 million in non-published revenue. So again, I think we’ve demonstrated our ability to grow that business outside the publics, which has always been a concern for analysts.

That diversification strategy is still this – really a portfolio of complementary businesses. At the bottom of the chart, on page 16, we show you, again, our core business, interactive distributed generation, our project based distributed generation recurrent revenue model as well as a business we call NexGear, which is a business by which we will actually manufacture Switchgear ourselves. Not a proprietary kind, but we do a great job of providing custom Switchgear across the industry.

We also have a business unit called our Energy Conservation and Efficiency business. We have two businesses underneath that. One is a lighting business called EnergyLite. The second business is a business we’re extremely excited about. It’s called EfficientLights. It involves a brand new technology that we are bringing primarily to our grocery and retail drug, our customers and relationships, that changes out the old fluorescent light bulb that’s in those freezer cases. And basically saves about 70% off, 70% off the cost of running that old fluorescent light bulb.

Three weeks ago, we’re very pleased to announce that Walgreens chose our light to be installed in all the new stores in 2009. We now have our light installed in 10 major grocery and drug chains across the country, and are very hopeful that – that we will have those tests then result in larger orders as we go through the next few quarters. We’re confident that we’ve got the best light in the marketplace. And now, we’re just hoping to get those orders. Again, in the Walgreens, the Walgreens announcement for us was extremely gratifying. And we’re extremely pleased to be able to show – demonstrate to Walgreens the value that we can add to their business.

The slide on page 17 gives you a sense of what our growth has looked like over the last three or four years. Again, we’re very proud of our track record of profitable growth. This is not the kind of company to provide revenue for revenue’s sake. Our last 12 months’ revenues are $146 million. So if we did have that – another column here, you’d see another year of growth. In the last 12 months, EPS was about $1.05.

This is our third quarter. Our third quarter showed revenue of growth of almost 30%. Importantly, at the same time that we were growing in revenues, we expanded on gross profit margins. Gross profit margins were up 1.5 percentage points. We continue to invest in the business. Our operating expenses were up, primarily as a result of investments in our sales and marketing area, in new business development area, which is driving some of that diversified revenue growth we talked about earlier. EPS was up about 20%.

For the year-to-date, year-to-date September, revenues are up almost 50%, 47% gross profit expanded very nicely, up 3.4 percentage points. Again, we continue to invest in the business because of the opportunities we see in the marketplace. And diluted EPS was up a little over 100%. Again, numbers we are extremely proud of.

Page 20 gives you sense for just some basics of our balance sheet. Frankly, this is dated. We announced our new – our new credit facility last Thursday. We didn’t have time to update this chart. But cash today is $10 million. We have no debt. This uncapped revolving credit facility is not $25 million. It’s $50 million now. And trailing 12 EBITDA is $21 million. So we feel very good about our financial situation, very good about the balance sheet, and very good about our ability to fund our future growth.

And I’ll just summarize by saying, we believe our future is bright. The strategic growth areas that we targeted are large and growing, distributed generation; utility infrastructure; energy conservation, efficiency; and, energy services. We’ve got a strong market position, which we believe we’ve got fortified and sustainable competitive advantages in, and a track record of industry leadership. We also have the infrastructure to drive growth, importantly. We’ve got fantastic employees who are 100% dedicated to providing outstanding services to the customers. We’ve invested in sales and new business development, which is paying off as you say in that chart before. We like where we sit in terms of our financial strength. And lastly, but probably most importantly, the organization has a culture of profitable growth. And it’s an intangible that we’re very proud of, and we think can carry us into the future, so.

With that, I’d open it up to any questions you may have. Yes.

Question-and-Answer Session

Unidentified Speaker

(Inaudible Question) 60 to 90 on the bottom line?

Chris Hutter

New does not have much effect at all. Basically, what’s that about is what is the cost of producing electricity for the utilities? Utilities don’t really don’t use oil to produce electricity. Usually, they’re using base load kind of commodities, coal, natural gas. So we don’t see a lot of near term impact. We do have a business, though, in our energy services business that is affected by the price of oil. It’s a business called WaterSecure. And that will fluctuate with the price of oil. In our last quarter, it did about $1 million of profit. We recorded that profit under the equity method. And there is no question that that will fluctuate up and down as oil goes up and down.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Yes. Near term, really not much. It’s really about the marginal cost of producing electricity for that 200 hours a year, which is so far the curve. There’s so much gap between the cost – and our marginal costs obviously drops as well because – as that happens, the cost of diesel goes down, and so the relative benefit really doesn’t change much. Yes.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Yes. The question is how economically sensitive is the peak curve. In reality, we don’t really know. But we don’t think it’s that sensitive. It’s really mostly driven by the fact that the infrastructure – utilities don’t build infrastructure to handle peak. So the infrastructure really doesn’t exist to handle efficiently that 200 hours of peaking need a year. We think that’s highly inelastic, and we don’t think that there’s going to be a lot of effect there. Yes.

Unidentified Speaker

Tell us something about EnergyLite, what this technology is, who need in the space to market out some of these?

Chris Hutter

Sure. The question is EnergyLite, what we’re doing there, what the technology is, what we’re – what our business is about. That business is really a business that – basically, what we do is we go in to commercial and industrial customers, and we’ll change out lighting systems. It’s a business that we really hold and have to service our utility relationships when called upon. We want us to stand ready to do that. We don’t push that – to talk about that as a major growth driver. It’s a nice business to have. We like what we have. We like our assets there. But what we think about that is really a single – a doubles and singles kind of business.

The EfficientLights business, that’s the business where we have a proprietary technology. That’s the business where we’re changing out the old fluorescent light bulb and –

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Yes. That’s the one where – it’s really our – it’s a design of our light that has lower cost to buy, has a lower cost to operate, and has a greater – the quality of light that it produces within the case and the glare that is reduced by having a fixture gives a better customer experience. We’ve gotten that feedback really across the industry. And we feel very good about where we sit there.

Unidentified Speaker

And what kind of a market would that be?

Chris Hutter

Well, it’s big. The 10 grocery and drug chains that we currently have lights installed in more and more – in test states, it’s more and more stores, is worth about $200 million worth of opportunity. For an average grocery store, it’s about $25,000 per store to retrofit those lights. So we like that opportunity a lot. We think the tide is only going to get higher in terms of the need to find energy efficient solutions that can bring dollars to the bottom line, and this is one of them. And again, we like our technology in place in the market.

Unidentified Speaker

What is it? (inaudible).

Chris Hutter

It’s an LED, LED lighting solution. I’m sorry.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Yes. GE is definitely in the marketplace, and we do see them in the marketplace. We like our light.

Unidentified Speaker

Thank you.

Chris Hutter

Yes, sir.

Unidentified Speaker

(Inaudible Question).

Chris Hutter

The question is, what are the activities with publics, and what is the nature of the relationship with publics. Publics in late – I’ll just give you a little bit of history on them, a little bit of context. In late 2005, publics made the decision to buy their first trench of generation equipment from us. They do buy that equipment and have that at every sense. They then made four different – four separate decisions after we have proven our value at each decision to point to continue to buy our generation equipment. So it is sale of assets is what we – is our contractual relationship, along with an ongoing monitoring contract where we monitor those assets for them, for both backup power and to deliver the peak shaving benefits, reduce electricity costs in their stores. We do have a –

Unidentified Speaker

(Inaudible Question)

Chris Hutter

I’m sorry.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

As of the end of this year, we’ll retrofit at about 700 of their – just under 1,000 stores.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

The question is do they have any ownership in their relations with us, no.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

It’s an arms’ length of customer-vendor relationship.

Unidentified Speaker

You mentioned publics being a major part of your business, what about the others (inaudible)?

Chris Hutter

The question is publics is a major part of our business, how about the other supermarkets, if they are – supermarkets – well actually, we are. We don’t name those supermarkets. It’s one of the things that we don’t – we don’t want play those customer (inaudible) for everybody to see, but yes there are many supermarkets who use our – use our product. And we continue to serve them. Yes.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

The question is if we were to borrow now in a new credit line, in what interest rate we would pay. We’re very pleased – we’re basically paying at LIBOR plus 175 basis points.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

LIBOR plus 125 basis points.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

New one is secured. So is the old. Yes.

Unidentified Speaker

And when you go to a customer, (Inaudible Question).

Chris Hutter

Yes. The question is when we go to a customer and sell to them, and market them, and helping them understand distributed generation that we allow them both to use our recurrent revenue model and the sale model. The answer is absolutely. It is a – we brought this capability forward. So basically, it’s still on our – our products, yes. So we could into a new customer and say, “Have it your way. You could buy the asset if you have an appetite to buy that and have it – hold the capital. Or we feel very comfortable. We love the assets. We’ll hold them, and you can pay us then.” Certainly, for us, it’s also a way to begin to line the company with some recurring revenue that because we’re using our balance sheet, we naturally have higher margins.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Yes. Well we think that – we think that one of the strategies that’s here for us is we do think that it would be an advantage to shareholders for us to have lined the company with some recurring revenue. We think that ultimately, once that proves out, we’re hopeful that that’ll – that will drive shareholder value, drive the multiple, et cetera. I do agree if you – we want to do it in the right way, in the right measure, at the right pace. But we do like – we do like the ability to provide the offer.

And by the way, we also like customers that we service, a combination of utilities and strong commercial and industrial customers. Commercial and industrial customers that are thinking about backup power, and are sophisticated with regard to understanding peak shaving and energy – and sophisticated energy savings, we really serve the blue chip customer. And we feel very good about that as well.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Yes. It’s a great point. The blue chip customers tend to buy. And the ones that are less blue chip tend to finance. First of all, our customer base really is blue chip through and through. It really depends on the (inaudible) capital. There are wide variations. You’d be surprised in the appetite for that. In the last press release, we announced, in terms of new business, $15 million of new business. Twelve of that was project based, three of that was recurrent. I kind of like that mix, personally, so. Yes.

Unidentified Speaker

I assume you have a long term planning from (inaudible) three or five years. What can you tell us about that, the way (inaudible) – ?

Chris Hutter

Yes. And annually, what we do is we provide the street with a stance of what we think that long term growth can be. The last time we updated that was in the – after the fourth quarter of last year. And basically, what we said was we think we can do mid teens revenue growth, high-teens revenue growth with 25% to 30% EPS growth.

Unidentified Speaker

And how do you see this – at the end of the period kind of moving – change or altering the business (inaudible). What’s going on with – ?

Chris Hutter

Yes. The question is – yes, what do we look like at the end of that or – and by the way, I would be – I want to be quick to add that that, of course, was – that guidance – those goals. We don’t call it guidance. We don’t give guidance. But those goals we’re giving out prior to the – prior to the course of the – all the economic troubles that we’ve had over the last couple of months. What we think it will look like is something – it still is primarily project based. And we don’t think our project based scenario is going to go away.

We do think some of these – some of these complementary businesses, the energy conservation and efficiency, will become a bigger part of our business stream. Certainly, the recurrent revenue will become a bigger part of the business stream. We’ll use our balance sheet prudently over the course of the next three to four years to finance that, but in a way that’s measured and a way that’s responsible.

Unidentified Speaker

And what would you say is (inaudible) going forward?

Chris Hutter

Oh, there is no question, zero question. One of the chief concerns is the capital markets. We’re involved in major infrastructure spends, and that’s what we do. And while we like – we like where we sit. We sit as partner to utilities. We sit as a partner to strong commercial and industrial customers who have long term horizons in terms of their thinking. I can’t help but say that – but feel some unknown about what’s going on with the current capital situation, current capital markets.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Well, our second concern, I would say, is there really are two transitions going on in the business right now. One is the transition – what I call transition off of publics, away from publics. Now we’ve been – we’ve been talking about this transition for a year. The Street is well prepared for that. Frankly, it’s reflected in our stock price, I believe. And we began – and we made progress against that with our other revenue streams. But that, in combination with the transition towards recurrent revenue, was really good. The two transitions at the business is going through, really, those two transitions. And what the timing of these transitions and how that will look like, I think it’s anybody’s guts, but those are things that we – those are the things we think about. What’s the near term? What’s that near term transition look like? Again, we feel very confident about where we sit. We’re very confident that we’re in a – an industry and a space where technology – that structurally, will deliver long term growth. But we certainly are in the transitional period –

Unidentified Speaker

So is the new administration (inaudible) to be very encouraging? (inaudible).

Chris Hutter

It could be, it could be. At the same time, we feel – we do feel very good about the success we’ve had, so. Great, two more questions.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Yes, yes. The question is who do we – who do we view as competitors. And I just want to be totally clear that – the utilities are our partners. We partner with utilities to help them solve their problems. We do not compete with utilities. The fact of the matter is there really is nobody who offers our combination solutions. What we compete with is complacency. What we compete with is what are the other uses of capital, like grocery X and the other choices that they have to make driving on the line of grocery store. So it is about making sure that we are – that we can prove our value across the spectrum of capital spend that’s out there to make.

The recurrent revenue model helps us break that down a bit, right, because then it becomes – we really turn the capital discussion in the – we have an operating discussion. But there really is nobody who does what we do. Yes.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

The question is what occurred between 2006 and 2007 in terms of our revenue and our earnings growth, and what do we do about it. What do we get to fire it up again? That changes 100% due to just scheduling of projects with publics. I mean, it was nothing fundamentally different. We will always be a lumpy business. We work on a project based business, and we recognize revenues on – basically, on a percent – on a milestone basis, on a percent of completion basis. And it was completely due to timing of publics for that period.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

This year, it’ll be – I’m guessing it’ll be mid 40s – mid 40% of our revenue with the declining – of course, declining throughout the year. The last quarter, those third quarter results you saw had a $4 million decline in publics revenue year-over-year built into them, and we’re still able to deliver 30% revenue growth. Yes.

Unidentified Speaker

You offer your services to commercial (inaudible). Do you also do for industrial?

Chris Hutter

Yes. The question is commercial – do we do commercial and industrial. And the answer is yes, absolutely. We’ll do manufacturers.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

A high-rise residential, we don’t. We have not done –

Unidentified Speaker

(Inaudible Question)

Chris Hutter

Most high-rise buildings are already built with some sort of emergency power system in them. It’s market, frankly, that we haven’t taken a hard look at. There could be potential there. But right now, we’ve got bigger fish to fry.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

No. Single family housing we do not touch. We’re not in residential states. We’re 100% focused on commercial and industrial.

Unidentified Speaker

(Inaudible Question)

Chris Hutter

The size of the generator – our generators are going to be big industrial kind of generators. This is not the market for us.

Great. Well, thank you very much, appreciate your time. Thanks for having us.

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Source: PowerSecure International, Inc. The Wall Street Analyst Forum Call Transcript
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