Opower's (OPWR) CEO Daniel Yates on Q2 2014 Results - Earnings Call Transcript

Aug.12.14 | About: OPOWER, Inc. (OPWR)

Opower, Inc. (NYSE:OPWR)

Q2 2014 Earnings Conference Call

August 12, 2014 5:00 p.m. ET

Executives

Charlie Mayer - Director of IR

Daniel Yates - CEO

Thomas Kramer - CFO

Analysts

Greg Dunham - Goldman Sachs

Jennifer Lowe - Morgan Stanley

Brendan Barnicle - Pacific Crest

Gregg Moskowitz - Cowen

Tyler Frank - Robert Baird

Richard Davis - Canaccord

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Opower Second Quarter 2014 Financial Results Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we'll conduct a question-and-answer session. (Operator Instructions) Please note that this call is being recorded today, Tuesday, August 12, 2014 at 5'O clock p.m. Eastern Time.

I'd now like to turn the meeting over to your host for today's call, Charlie Mayer, Director of Investor Relations. Please go ahead.

Charlie Mayer

Thank you, and welcome to Opwer's second quarter 2014 earnings conference call for the period ended June 30, 2014. I'm Charlie Mayer, Director of Investor Relations. With us from management are Daniel Yates, Chief Executive Officer and Co-Founder; and Thomas Kramer, Chief Financial Officer.

We've issued an earnings press release, which is available online at investor.opower.com. Recording of this call can be found on that Web site a little later. During the call, we'll make forward-looking statement pursuing to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding trends, strategies and the anticipated performance of the business. These forward-looking statements are based on management's current views and expectations as of today, and are therefore subject to various risks and uncertainties.

Actual results may differ materially. Please refer to the risk factors listed in our most recent 10-Q filed with the SEC on May 15, 2014, and the final prospectus from our initial public offering filed with the SEC on April 4, 2014. During the call we may offer incremental metrics to provide greater insights into the dynamics of our business. These details maybe one-time in nature, and we may or may not provide updates in the future. We may also refer to certain non-GAAP financial measures, a reconciliation schedule of GAAP to non-GAAP measures is provided in our press release.

And now, let me turn it over to Dan Yates, our CEO.

Daniel Yates

Thanks, Charlie. Opower delivered strong performance across the business in Q2. We beat our revenue and profitability expectations and advanced the objectives that I introduced on our first earnings call. These objectives were, first, executing on our multi-pronged growth strategy; second, launching large scale deployments that will generate predictable revenue over a multi-year period; and third, extending our technology and data lead.

Revenue was $31.2 million for the second quarter, $2 million above the high-end of our guidance. The majority of revenue upside was driven by certain customer deployments moving into live production earlier than we had anticipated which is what starts revenue recognition on our contract. Adjusted EBITDA loss was negative $3.7 million which was well ahead of our guidance.

During the quarter, we signed deals with new and existing customers across our full range of offerings. These wins expand our leadership in the market and will contribute to our future growth.

We're especially excited with the Opower platform is now live in Asia. In Q2, we launched a program with CLP Power Hong Kong, our first customer in Asia. And building on this momentum, we just launched TEPCO in Japan. One measure of the growing impact of our work is the energy we save. During the quarter we helped our customers and end users save 608 gigawatt hours of energy. That is an increase of 66% over the same period a year ago. These savings which are measurable and predictable are the reason why our programs have become core to utility sponsored efficiency efforts across the world.

Let's cover each of my three objectives in a bit more detail; starting with our multi-pronged strategy. We deliver against this through expansions with existing customers, the addition of new customers and sales of new solutions. And anchor deal for us in Q2 was a big energy efficiency expansion for a large utility on the east coast. That utility will extend our solutions to all of it's customers across an entire state, covering almost half a million households. The expansion centers on multi-channel energy efficiency reporting and also adds usage alerts functionality for up to 150,000 households. In total, this expansion will more than quadruple the size of this customer's commitment to Opower.

In this state, over the past two calendar years our customers spent an average of $63 million per year on energy efficiency programs. These investments covered lighting, rebates and the behavioral energy efficiency run by Opower. With this new expansion, Opower now accounts for more than 10% of this utility statewide energy efficiency portfolio.

Our program also delivers value to the customer by allowing it to demonstrate how smart meter data helps customers reduce consumption and save money. Unusual usage alerts are a key part of this effort. Opower analyzes the interval data that smart meters provide to identify abnormal usage patterns. These are communicated back to the utility customers through personalized emails and calls with recommended actions and tips to reduce usage. We believe this functionality will reduce customer service cost associated with billing surprises.

We signed several new logos in Q2. Relatively small pilot projects that we sell today can expand significantly over time. The Q2 anchor deal I just described is a great example of this.

To give a representative example of a new logo signed in the second quarter, we had an electric utility in the south purchase our energy efficiency product to cover 25,000 households. This customer is motivated by new rules on energy efficiency and a desire to engage consumers and demonstrate value as rates increase. This utility is a subsidiary of a much larger utility that cover several million households across several states. If the pilot is successful, there is room to grow into a full program and to compete for expanded business with the parent company in other states.

Lastly on the topic of our multi-pronged growth strategy, we consummated several new product sales. During the second quarter, United Illuminating an electric utility in Connecticut selected our thermostat management platform as a part of their home energy audit program. Household in this program can have an Opower-enabled Honeywell WiFi thermostat installed. We capture thermostat data in near real-time and use billing and usage data to make personalized energy saving recommendations.

The data we collect includes ambient temperature changes, set point changes, schedule changes, and systems date changes. This produces over 100 data points per thermostat per day. Insights from this rich data set create new potential service opportunities for the utility and opportunities for Opower to compete for expanded business.

Let's turn now to my second objective; launching big deals that generate predictable revenue over a multi-year period. On our first earnings call I talked about our revenue model, which is driven by large recurring revenue deals. We begin to recognize revenue when the programs go live. So the timing of customer launches can have a meaningful impact on revenue growth for short-term perspective.

And we had several notable launches in Q2. We launched a large expansion with Commonwealth Edison in Illinois. This energy business program expanded ComEd's Opower deployments more than fourfold. This launch contributed to the sequential revenue growth and overall revenue upside for the quarter. This expansion also demonstrates the strong demand for our solution and our ability to expand with customers.

As I discussed earlier, we crossed a strategic milestone in Q2 when we went live with CLP Power Hong Kong, our first customer in Asia. As the largest power company in Hong Kong, CLP Power launched our behavioral energy efficiency solution to an initial group of 56,000 residential customers. We expect that CLP will expand their solution to all residential customers in its Hong Kong service area in the fourth quarter of this year.

The CLP implementation required extensive development of multi-channel customer communications in English and Chinese. We also worked closely with CLP Power to develop a new method to support the local printing and paper and manager reports in both languages. We're also live with TEPCO in Japan. This launch happened on schedule at the end of July. Through this partnership with Opower, TEPCO will empower its entire residential customer base to better understand their energy consumption through a web portal called Denki Kakeibo. This was a Q3 launch. So, we'll have more to say about it on our next earnings call.

Back in the U.S., we launched an expanded behavioral demand response program with Baltimore Gas and Electric. Last summer, BGE piloted demand response with 300,000 households. They estimated that the pilot produced a 5% reduction in peak energy demand. This summer, the program expands to nearly 1 million BGE households. We also launched demand response pilots with three other utilities in Michigan, Vermont and California.

In yet more years, Opower's commercial energy efficiency solution is now live with tens of thousands of customers in the west and Midwest. This program includes multi-channel reporting and web portal features targeted at specific business types to drive greater energy savings.

Lastly, let's look at our growing technology and data lead; all of Opower solutions are powered by a robust analytic engine, our automation engine and our growing data warehouse. These assets are the foundation of our success and make Opower the global leader in our industry.

As of June 30th, Opower had cumulatively analyzed and warehoused 339 billion meter reads. The scale and scope of these assets are a key differentiator between Opower and the competition. Without a large and diversified set of data and program results on which to train our algorithms, it would not be possible to optimize programs with new customers and in new geographies.

The core of our automation engine continues to improve; thanks to enhancements to our visual segmentation tool. This system enables us to deliver the right message to the right customer at the right time, while drastically reducing our development cost for new communications.

And during the quarter, we continued our roll out of extensible web, [X Web] (ph) as we call it is a platform enhancement that enables more rapid configuration of the user experience. In X Web, popular Opower content like neighbor comparisons and future bill forecast is built into customizable widgets. The look and feel of the widget remain separate from the underlying data feed allowing it to be customized without deep knowledge of Opower's back-end systems.

X Web also serves as a rapid development framework on which to build additional reusable widgets that utilize Opower's powerful analytics. X Web vastly increases the flexibility of our platform, which is a key selling point as we extent our services to utilities and end users. PG&E is now currently live with X Web. We're also implementing customization work with E.ON U.K.

In closing, let me share about an award we received, and give an update on our regulatory advancements. Opower is named Company of the Year by Euro Electric, the leading association of European electric utilities. Our work has received recognition in the U.S. for quite a while now. During this quarter we were pleased to see similar recognition overseas. We were cited for our "proactive and innovative approach to energy efficiency." This recognition matters as we build our sales pipeline in Europe.

In Q2, we also saw positive regulatory momentum around the world. The Italian Ministry for economic development approved behavioral energy efficiency as a means by which Italian utilities can meet their energy efficiency obligations. This became live on July 18 at Italy after the European energy efficiency directive. Given heightened European awareness of energy security challenges, we believe markets like Italy represent a good opportunity for Opower's energy efficiency solutions.

The biggest policy news in our industry during Q2 came in June when the EPA proposed sweeping regulations to combat carbon pollution, the proposed regulations and to reduce power plant emissions by 30% of 2015 levels by 2030. Energy efficiency is named as one potential solution, and is mentioned more than 200 times in the EPA proposal. These EPA guidelines will work their way through state governments over the next few years. This is just a first step, so there is no immediate impact on our business, but we expect it to be a powerful long-term driver for expansion of energy efficiency policy and future opportunities.

Q2 was strong for Opower. We're still at the early stages of addressing the large opportunity that we see ahead of us.

Thomas will now walk us through the financials.

Thomas Kramer

Thank you, Dan. Our performance for the first half of the year demonstrates our ability to execute on every aspect of our growth strategy. We beat our forecast for Q2 and are raising our guidance for the full year as I'll detail in a moment.

As I mentioned, Q2 revenue was $31.2 million, a 47% increase over the same period last year. We see revenue increasing as we add customer endpoints through major expansions, new deals and the introduction of new products. Ninety one percent of Q2 revenue was from recurring sources.

Revenue for the quarter was above the high end of our guidance. This is driven by a combination of factors. The most significant driver was customer launches that occurred ahead of our forecast paying subscription revenue earlier than expected. This upside in Q2 was due to timing of launches and should not be expected in every quarter.

A secondary driver of the revenue upside in the quarter was greater than anticipated performance of our variable revenue contracts. International customers account over 14% of revenue, up from 9% for the same period last year. This increase in share of international revenue is a direct result of our increased investments in sales and marketing particularly in Europe and Asia.

Turning to the P&L I will discuss expenses on a non-GAAP basis. This excludes second quarter stock based compensation expenses of $9.3 million. This cost is above our guidance for Q3 due to the specific way GAAP treats expense recognitions of our RSUs triggered upon our IPO.

Cost of revenue in the second quarter was $10.2 million producing a non-GAAP closed margin of 67.2%. This is an increase of 150 basis points over the same period the year ago.

As our business accelerates internationally, we anticipate that gross margin will vary in the near-term. This results from higher variable costs outside the U.S. as well as the higher percentage of professional services in our international deals.

As discussed on our first earnings call we anticipate long-term gross margin to reflect the above current levels as our business scales. Non-GAAP operating expenses in the second quarter were $26.4 million, up 78% from the same period last year.

As in Q1 expenses were driven by headcount as we scale the business. We ended the second quarter with 545 employees globally. Our focus remains on building the sales organization and deepening our customer relationships.

Expenses for Q2 were below our guidance due to a combination of timing of project investments as well as continued focus on operational efficiencies across the business.

Non-GAAP operating loss in the second quarter was $5.4 million compared to a loss of $900,000 the same period last year. Adjusted EBITDA in the second quarter was a loss of $3.7 million compared to breakeven in the second quarter of 2013.

In Q2 we had 48.1 million pro forma diluted weighted average shares outstanding. Our second quarter non-GAAP net loss was $5.5 million or a loss of $0.12 per share. This compares to a non-GAAP net loss of $1.6 million or a loss of $0.04 per share for the same period last year. It is important to note that this decrease in profitability on a year-over-year basis is a direct result of planned investments to support a long-term growth.

Looking at the balance sheet cash and cash equivalents as of June 30th were $148.7 million, an increase of $123.2 million from the prior quarter. That increase was driven primarily by the addition of $121.7 million in net proceeds from our initial public offering.

For the third quarter of 2014 we anticipate revenue between $31.2 million and $31.6 million. At the mid point this is an increase of 40% from the third quarter of 2013. We anticipate an adjusted EBITDA loss between $7.7 million and $7 million for the third quarter as we invest in long-term growth.

We anticipate non-GAAP net loss in the range of $9.8 million to $9.1 million for the third quarter. That is a loss of $0.20 to $0.18 per share based on an estimated $49 million shares outstanding. Our non-GAAP EBITDA guidance excludes approximately $6.3 million in stock based compensation expenses and $2.1 million in depreciation and amortization expenses.

Our strong position in the industry gives us a unique opportunity to expand quickly and capture market shares globally. This expansion requires investment. We are making those aggressive investments now. This will impact near-term earnings as we scale the business for profitability over the long-term.

Turning to the full year 2014, we are increasing our revenue guidance to $122 million to $123.5 million. This represents an increase of 38% over 2013. This is a meaningful step up from our prior guidance of $116.5 million to $118.5 million.

It is important to point out that the majority of our increased revenue guidance for 2014 is due to timing of launches specifically the faster than expected launch of several customer programs. We are not commenting on 2015 until we entered this year, but as analysts adjust their models, they should keep in mind that we had already modeled meaningful productivity improvements relating to the timing of customer launches in 2015. We are simply benefiting from earlier than expected realization of these benefits in 2014.

For the full year of 2014 we anticipate adjusted EBITDA loss between $24.5 million and $23 million and non-GAAP net loss between $32.5 million and $31 million. This would be a loss of $0.69 to $0.65 per share based on an estimated 47 million pro forma weighted average shares outstanding.

Our non-GAAP EBITDA guidance excludes approximately $25 million in stock based compensation expenses and $7.7 million in depreciation and amortization expenses. In summary, Q2 was a very good quarter. We have made good progress, improving productivity on customer deployments, we expanded customer relationships, find new customers and have traction across our product suite. Our momentum is strong and we are excited about Opower's future.

Dan and I are now happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Greg Dunham with Goldman Sachs. Your line is open.

Greg Dunham - Goldman Sachs

Hi. Yes. Thanks for taking my question. A lot of good things going on here, so it's tough to pick out which one I want to ask. But I think maybe the thing I am most interested in is the expansion, specifically with that East Coast utility and then expanding to the point where they were at basically 10% of their spent on energy efficiency with you. Can you talk about how you win that business? What is the value prop relative to the hardware solution that that specific state is seen? And when does it take other states to get to those penetration models?

Daniel Yates

Yes. It's a great question, Greg. So what's driving these expansions, the first, we delivered great energy efficiency results for the customer and it takes a while for them to see those results in their markets. Feel confident if that's going to play out well for the rest of their territory. Secondly we delivered great customer sat results which is something that we consistently do and that is very differentiated from any of the other efficiency options they have because our offering is so broad based. So we deliver relatively low energy savings per customer, but we can reach every customer. It has the ability to improve customer sentiment and that has a positive benefit to the utility that extends beyond the efficiency value.

And then when you combine those two things in this case these all fit to expand our solution significantly. They have -- our program competes very favorably purely on the efficiency cost per kilowatt hour and the ability to scale. And then lastly I would say these customers are also really excited about our overall vision and this is something that we are building increasingly. With all of our customers that this is just the tip of the iceberg for them to start to really transform their customer experience. So as we look more broadly this is a repeating trend for us with our larger customers in markets with robust efficiency requirements that we do have a successful track record of landing and expanding.

Greg Dunham - Goldman Sachs

Okay. Great. And then a follow up would be given a new kind of EPA mandate and kind of the news that came out, how long does that flow through to the states regulatory environments and when do you actually really see the impact of those (indiscernible). That's it from me. Thanks.

Daniel Yates

Yes. So the exciting thing about this regulation is its scope and its significance. It also consequently doesn't have therefore a lot of obvious exact corollaries that we can cross reference for benchmarking. So we don't have -- we have a sense that this is going to take a couple years to work through the pipeline. And so we are not expecting any immediate impacts on it. But we do feel really excited about its ability to expand efficiency hopefully across every state in the country over the next several years.

Greg Dunham - Goldman Sachs

Okay. Thanks, guys.

Operator

Your next question comes from the line of Jennifer Lowe with Morgan Stanley. Your line is open.

Jennifer Lowe - Morgan Stanley

Great. Thank you. I wanted to ask a little bit -- I know on the call you called out Asia as sort of notable from a regional perspective given the wins there. Just curious if -- and around the mandate in Europe, it sounds like the momentum there is good, but is there notable on the wins front in Europe in this quarter that you can speak to?

Daniel Yates

So we haven't been sharing every single win that we have in every NGO on a quarterly basis. What I can say is that our European pipeline is looking really strong and it's the new hires that we brought on board earlier this year have been already ahead of schedule starting to deliver increased pipe and we are feeling really excited about our opportunities to close business there this year.

Jennifer Lowe - Morgan Stanley

And maybe just looking like you kind of got to have to be a little bit there because I was thinking about it in terms of your sales target and I know that's an area where you had some success adding sales people. If you look at that more holistically, are you on track for some of the sales hiring expectations that you have for this year given the focus you mentioned on getting that capacity up?

Daniel Yates

Yes. I was just looking at the numbers earlier today. Actually we are definitely on track for the end of the year. The plan is to basically double the sales force this year and it's looking very good. Keeping that eye anchored on it -- it's relatively easy to hire people to hit a number and the key is hiring really excellent people and so we put a lot of time and money and attention into our training program into our certifications internally for our sales people and that's also going very well. So I am feeling really good about it.

Jennifer Lowe - Morgan Stanley

Thank you.

Operator

Your next question comes from the line of Brendan Barnicle with Pacific Crest. Your line is open.

Brendan Barnicle - Pacific Crest

Thanks so much. I wanted to follow up on that CLT power expansion that you are looking in the fourth quarter. Is that expansion and the prospect of that expansion is something that you have already included in the guidance or is that something till you are further into the third quarter to guide to that?

Daniel Yates

Thanks, Brendan. Yes. That is an expansion that we have planned and it's included in our guidance. And we expect that they will happen on time.

Brendan Barnicle - Pacific Crest

Great. And then just following, obviously this quarter driven by some really nice upside in deals that launched earlier than anticipated, what's the risk of deals that get later than anticipated and how autonomous are you controlling for that as a guide?

Daniel Yates

Absolutely. I think it's an excellent question and that is part of the art of making guidance. What we do is that we project win a level of confidence that we feel confident hitting, but there is a risk or downside because these things do slip. But to make up for that we have not just one launch per quarter or per month, we have a series of them, so that on average we actually have a very good track record of predicting when revenue is coming online.

Brendan Barnicle - Pacific Crest

Can you give us any more color on that historical average where you have been?

Daniel Yates

You mean the average versus the guidance?

Brendan Barnicle - Pacific Crest

Yes. I mean obviously ahead of two quarters you will publicly know what that is, but as you looked and as you probably tracked us even further back when you were still private?

Daniel Yates

So, by and large, I think that we have been very accurate in terms of we might be over for one month and under for another month, but it tends to even out particularly when you look at it from a quarterly basis which we like to do given that we have large lumpy deals. In fact mostly we look on annual basis. We like to look at how we are performing against our annual goals and how those goals performed to how we did in previous years and also how we plan for not just the current and the next year and the year following.

Brendan Barnicle - Pacific Crest

Great. Thanks. That's super helpful color. I appreciate it.

Operator

Your next question comes from the line of Gregg Moskowitz with Cowen & Company. Your line is open.

Gregg Moskowitz - Cowen

Thank you very much. Dan, just to start off, just kind of wondering if you could provide some early color on how the three demand (indiscernible)?

Daniel Yates

Yes. We've got early results that are not yet published on those pilots and we are excited about those results. So we can't announce them yet, but we've got three pilots in addition to the BGE at this point not pilot, large scale deployment. And the exciting thing about these pilots as a reminder is that they are communicating with the customers who don't have a peak rate. So we are appealing to their better virtues or better self to save energy and we are already measuring an impact. So we are thrilled about it. We will have more definitive results later this summer or after the summer is over.

Gregg Moskowitz - Cowen

Okay, great. And then just more broadly in the mentioned BGE as you have done more testing around demand response, is there more supporting evidence that would suggest that behavioral science alone can drive significant energy reduction here. In other words, we have to present a rebate or some sort of special aid as a facilitator.

Daniel Yates

Yes. That's exactly what I was referring. Those others -- the three non-BGE pilots are behavioral science based without additional incentives.

Gregg Moskowitz - Cowen

Okay, perfect. Then just a quick one for Thomas, you made some commentaries on gross margins. I think previously you have talked about processing taking down gross margins in the low to mid 60s, just wondering if you had an update around that. Thank you.

Thomas Kramer

We think that the guidance that we gave previously still holds. We are expecting to see variance on the gross margin due to the number of international deals we see coming online as well as our focus on professional services which will ease gross margin slightly in near-term. As I commented, I think what we've seen in terms of offenses as being relatively well interpretation of what we are trying to convey over these calls.

Gregg Moskowitz - Cowen

Okay, thank you.

Operator

Your next question comes from the line of Tyler Frank with Robert Baird. Your line is open.

Tyler Frank - Robert Baird

Hi, guys. Nice quarter. I was wondering if you could comment a little bit on just the global pipeline and what you are seeing out there. I know that last quarter you talked a little bit about Ireland and Denmark and their approval on utility funding for energy efficiency programs similar to yours. I was wondering if you are seeing any increase in demand there or how things are looking both in the EU and in other global markets as well.

Daniel Yates

Yes. So globally we are feeling really good. It feels like we are constrained by the number of sales people we have rather than by the market opportunity. And as we sell globally there are two, that two things that we sell against. One is energy efficiency and the other is helping competitive utilities to attract and retain customers and to increase customer loyalty and the quality of their service.

And for both of those buying reasons we've just -- we are getting a lot of really positive response and recent continued evolution and our product roadmap continues to increase customer interest. And we feel very positive about both the potential to build the pipeline and the existing pipeline. It's just as we've hired folks I described earlier both in Europe and Asia. Earlier this year we've already seen immediate increase in pipe as a result. So it's feeling good overseas.

Tyler Frank - Robert Baird

Great. And then, when we look at the two deals in Asia, how do you feel about opportunities to roll out additional products in that area or is this going to be more focused on just one type of product there?

Daniel Yates

Yes, speaking specifically of those two customers, CLP Power and TEPCO, we think that our broader suite of offerings are relevant to both of them. However, at this stage we've just gone live and we're completely focused on serving them within the scope of the contracts that we have with them today, and all of our attention is on making sure that they're happy with what we're already delivered and we'll have the conversation later once we've proven are worth to explore other ways that we can help.

Tyler Frank - Robert Baird

Got it. Thank you.

Operator

Your next question comes from the line of Richard Davis with Canaccord. Your line is open.

Richard Davis - Canaccord

Okay. One of the things that I thought was impressive when I first met with you guys, you have a strong, I don't know what you call it, ear to the ground effort where you kind of track what's going on here on the regulatory side of the legislative side, do you -- this is outside of my area of expertise obviously. Do you see any meaningful initiative wending their way through the system either in the U.S. or overseas, puts or takes, either way that would be more worthwhile for us as outsiders to pay attention to?

Daniel Yates

Richard, you're saying do we have insight into other regulatory activities that we had that we didn't mention beyond the 111(d) EPA ruling?

Richard Davis - Canaccord

Yes. Is there anything percolating good or bad, they are like, we need to take care of this or watch it, stuff like that, that's really what it is. In other words …

Daniel Yates

Got it.

Richard Davis - Canaccord

Because things happen and it maybe good or bad, but (indiscernible) pay attention …

Daniel Yates

Yes, absolutely. So I'd say far in a way the greatest regulatory outcome or move in the last six months in the U.S. were these 111(d) rulings that the name for this EPA regulation.

Looking internationally, we see a continued increasing interest in energy efficiency, what we're seeing in Asia is a number of countries who are without necessarily a need for additional legislation or formal regulation recognizing that efficiency is one of their ways out of the quandary they're in, because they're subsidizing electricity for their customers. This is actually very common in Asia. And we're seeing increased awareness of efficiency as a choice for the government and the utility to help people save energy and to help consequently reduce cost on the system.

And in Europe, the main drivers are still what we have, what we flagged for the last year, which is the continent-wide efficiency directive that is being slowly widening its way through these member states. We saw the first result in Ireland, in Italy. And we're seeing -- and we believe we're going to see similar additional -- and Denmark as well, and we're going to see similar results in other states. There isn't any -- I'd flag those as the three main movements right now on the regulatory front.

The other thing I'd add, which I think is very interesting to our business, to our industry is a very hot topic for regulators is our industry is waking up to the reality that distribute generation in some form or others here to stay, and there is a lot of regulatory movement around getting utilities into the rooftop solar business, and into community scale solar. And we're on the sidelines cheering for this and helping our utility partners advising them on it and our role to play there today is purely that of facilitating that, and the reason why we're excited about it is because it's yet another proof point for our buyers of the importance of their customer experience and the customer relationship and anything that makes our offerings more strategic can accelerate our sales processes.

Richard Davis - Canaccord

That's very helpful. Thank you very much.

Daniel Yates

Sure.

Operator

And we have no further questions at this time. I'd like to turn the call back over to Dan Yates.

Daniel Yates

I just want to say thanks everybody for joining us today for our second earnings call. We appreciate your focus on our business, the time you take, and we're looking forward to chatting with you guys again soon.

So, as I close, I just want to re-emphasize the first points that you heard from us today, and you'll hear again. First, we'll continue to talk about the three themes of our multi-pronged growth strategy, which are expanding our existing customers, selling to new customers and cross-selling. Second, we'll talk about our [residual] (ph) revenue model that is driven by long-term contracts with our utility customers. And finally, we'll talk about our significant ongoing investment in our tech platform and our data lead.

So, thank you all again for the time. And we look forward to speaking with you again soon.

Operator

And this concludes today's conference call. You may now disconnect.

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