Transformations don't always go smoothly, and that certainly was the case for EnerNOC (NASDAQ:ENOC) in the third quarter. The company, which is transitioning away from the challenging grid operator market toward becoming an energy intelligence software, or EIS, company, missed its own guidance. With further challenges expected to weigh on future results, the company had no choice but to readjust its full-year guidance lower. This sent the stock down significantly on Thursday after its results were released, with a nearly 34% decline as of midday.   

EnerNOC results: The raw numbers


Q3 2015 Actuals

Q3 2014 Actuals

Growth (YOY)


$217.3 million

$329.4 million


Net income (GAAP)

$13.0 million

$96.7 million


Net income per share (GAAP)




Data source: EnerNOC.

What happened with EnerNOC this quarter? 
EnerNOC's results were weighed down by the grid operator market:

  • Revenue fell steeply after grid operator revenue came in weaker than expected, falling 40.6% to $173.4 million.
  • Utility revenue, meanwhile, was down slightly, falling 2.1% to $27.1 million.
  • The lone bright spot was enterprise revenue, which jumped 70.8% to $16.8 million. That's an important showing for the company given the importance of enterprise software to its future.
  • Despite earning a profit, the company was free cash flow negative again this quarter, burning just under $1 million, bringing its total cash burn for the year to slightly less than $33 million. 

What management had to say 
CEO Tim Healy, commenting on the company's results, said:

Transformation continued to be the main theme during the third quarter... New customer successes, key account expansions, and growing market interest in our EIS solutions underscored the progress we are making with our strategy. The challenging grid operator markets that weighed on our financial results did not impact our EIS momentum and we remain at the forefront of this exciting new enterprise software category.

Speaking of the company's EIS momentum, during the quarter EnerNOC signed a multiyear software contract with a UK energy retailer. In addition, it formed a strategic partnership with another company to expand the reach of its EIS to businesses that have large numbers of small-footprint outlets. Because of this progress, the company actually is raising its enterprise revenue guidance for the year.

Looking forward 
Unfortunately, the same can't be said for the company's guidance as a whole, which is being reduced. Total revenue is now expected to be in a range of $390 million to $400 million, down from its prior guidance of $410 million to $430 million. Earnings guidance, likewise, is coming down to a loss ranging from $3.43 to $3.29 per share, which is a steeper loss than the prior guidance of $3.12 to $3.02 per share. Meanwhile, guidance for the fourth quarter, which is seasonally weaker than the third quarter, calls for revenue of $50 million to $60 million and a loss of $1.43 to $1.29 per share.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of and recommends EnerNOC. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.