Q2 2015 Safe Harbor Statement This presentation contains forward-looking statements. All statements other than statements of historical facts contained in this presentation, including statements regarding future results of the operations and financial position of Opower, Inc. ( Opower or the Company ), including financial targets, business strategy, and plans and objectives for future operations, are forward-looking statements. Opower has based these forward-looking statements largely on its estimates of its financial results and its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs as of the date of this presentation. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading Risk Factors in Opower’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the SEC ). Moreover, Opower operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for Opower s management to predict all risks, nor can Opower assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements Opower may make. In light of these risks, uncertainties and assumptions, the forwardlooking events and circumstances discussed in this presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although Opower believes that the expectations reflected in the forward-looking statements are reasonable, Opower cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither Opower nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, Opower undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation, to conform these statements to actual results or to changes in Opower s expectations. In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of non-GAAP measures to GAAP measures is contained in the Appendix. 2 Opower’s Market Opportunity M A R K E T $2.2 trillion utility industry in an era of rapid change P R O D U C T Customer engagement platform for utilities C U S TO M E R S 98 utilities worldwide, reaching 50+ million consumers Expansion potential 1200 potential utility customers worldwide B U S I N E S S Market size 710 million potential homes and businesses Accelerating lead Scale of data set, platform sophistication Visibility 90% recurring revenue Note: 710M poten-al end-‐users comprised of 650M households and 60M businesses. Customer count as of 12/31/14. 3 Industry Change Puts Focus on Customers COMPETITION REGULATION REDUCE COST BUILD LOYALTY MANAGE DEMAND New Priorities New Problems FLAT DEMAND 4 Customer Expectation vs. Utility Reality CUSTOMER EXPECTATION UTILITY REALITY Call Center CIS Bill Printing Paper Delivery 5 Customer Engagement Platform CUSTOMER DISTRIBUTION INDICATIVE ROADMAP ENERGY EFFICIENCY DEMAND RESPONSE BILLING SUITE CUSTOMER LIFECYCLE CUSTOMER RETENTION OUTAGE CALL CENTER A U T O M AT I O N SCADA (Segmentation, Targeting, Delivery) A N A LY T I C S ANALYTICS DMS DIGITAL ENGAGEMENT Outage Management Call Center Meter Data Customer Care & Billing Data Warehouse Smart Meters 6 Opower Solution Set DEMAND MANAGEMENT CUSTOMER CARE ENERGY EFFICIENCY DEMAND RESPONSE Email and paper energy reports. Integrated campaign tools. Product marketplace. Pre- and post-event alerts via email, SMS and IVR. Web tools. Seasonal reports. Web and mobile tools to understand energy usage. Energy savings tips. Call center advisor tools. Ebill presentment with analytics. Web tools for bill analysis. KEY VALUE Compliance with mandated energy efficiency Territory-wide demand response with no hardware Increased customer engagement and satisfaction Enhanced experience with reduced cost to serve LAUNCHED 2008 2013 2011 2015 15+ million 1+ million 50+ million 1+ million DESCRIPTION ENDPOINTS DIGITAL ENGAGEMENT BILLING SUITE 7 Unique in the Competitive Landscape Traditional ERP • Core ERP solution not designed for digital engagement • Industry-specific offerings cobbled together via acquisition • Years to deploy, with great risk of implementation failure Point Solutions • EnerNOC: Demand response for commercial and industrial • C3: Grid analytics and theft detection • Tendril: Efficiency for one large client Smart Meter Customer Engagement • Upstream providers of data • Some analytics and customer engagement • Purpose built to serve utilities with an integrated suite • Automating the customer experience • Unique expertise in analytics and behavioral science 8 Energy Efficiency is Cost Neutral for Utilities Lost Revenue Adjustment Mechanism (LRAM) applied to a sample $10 million Opower program Opower costs $10M and delivers $25M customer savings Without regulations, this would impact the utility bottom line. 1 $10M $25M reduced revenue Opower program cost Customer savings LRAM permits the utility to recover program costs and lost earnings Rate increase raises utility revenue by $12.5M. Typical utility earnings are 10% or less of revenue. 2 $10M $2.5M Opower program cost 10% of revenue Utility is made whole, customers still save 3 $12.5M Rate increase recovers Opower cost + lost earnings $12.5M Remaining customer savings post-rate increase 9 Customer Care Produces Measurable Results Customer satisfaction 5% increase in customer satisfaction and brand recognition Cross Selling Products and Services 60% increase in program and service promotion effectiveness Call center volume 19% decrease in high bill calls during months with highest call volume Results measured by multiple live Opower clients. 10 Technology Lead & Data Advantage MORE DATA MORE INSIGHT MORE TECH 434B 308B 201B 52B 2010 111B 2011 2012 2013 2014 cumulative meter reads 400+ BILLION PROPRIETARY meter reads, largest data set of its kind algorithms based on multiple data sources 150+ MILLION 180+ MILLION energy consumers analyzed personalized touch points 400+ 70+ Person years of big data software development Utility websites on one code base 11 Expansion Across Product Lines Entry Point 2014 + EAST COAST UTILITY $0.5M 2009 Energy Efficiency Efficiency Expansion Digital Engagement 2013 $16.2M $12.0M 2014 2013 $12.8M $10.0M 2014 2013 $7.1M $6.2M Energy Efficiency WEST COAST UTILITY $2.0M 2010 Digital Engagement Digital Engagement Demand Response + EAST COAST UTILITY $0.3M 2010 Energy Efficiency Efficiency Expansion Digital Engagement 2014 2013 Demand Response 12 Hundreds of Millions of Untapped Consumers 710 MILLION ADDRESSABLE HOMES AND BUSINESSES SOLUTION ENDPOINTS Digital Engagement +50M Energy Efficiency +15M Billing Suite +1M Demand Response +1M >100M HOMES SERVED BY OUR CUSTOMERS Note: Figures provided refer to end-users under contract as of 12/31/14. 13 Total Addressable Market $11B opportunity DEMAND RESPONSE 22% 49% CUSTOMER CARE ENERGY EFFICIENCY 29% Note: Based on Opower estimates. 14 Our Customers are Global Leaders EUROPE US INVESTOR-OWNED ASIA/PACIFIC CANADA US MUNI/CO-OP 4 continents 98 utilities 28 of the 50 largest in the US - 3 of the 10 largest in the world Note: Customer count as of 12/31/14. 15 Recurring Revenue Growth $128M 90% of revenue is recurring Non Recurring ~90% 12-‐month forward revenue visibility 100% organic growth $89M Recurring $52M $29M $11M 2010 2011 2012 2013 2014 16 Backlog Provides Revenue Coverage $244 million total backlog As of December 2014 Deferred Revenue Contracted But Unbilled Backlog $64 Million $180 Million 26 month weighted average contract length in 2014 17 Long Term Financial Targets Non-GAAP Excludes Stock Based Compensation 2011 2012 2013 2014 Q1 2015 Long-term targets Gross Margin 48% 62% 64% 67% 65% 68 - 72% S&M 51% 42% 36% 41% 38% 24 - 28% R&D 53% 34% 32% 31% 32% 16 - 18% G&A 14% 8% 8% 10% 11% 8 - 10% (69%) (18%) (7%) (10%) (7%) 20 - 24% Adjusted EBITDA Notes: During the first quarter of 2014, the Company updated its methodology for allocating certain general and administrative costs to more closely align these costs to the functional departments consuming the related services. Percentages above reflect the new methodology. Expenses include allocations of Depreciation and Amortization including capitalized software. D&A was 2.2%, 3.1%, 4.2% and 5.6% in 2011-2014 and is expected to be 3-5% of revenue long term. 18 APPENDIX OPOWER CONFIDENTIAL: DO NOT DISTRIBUTE Energy Efficiency Multi-channel outreach Scaled energy savings National Grid MA residential electricity savings Opower savings 45% 26% 2014 2010 26 GWh Opower savings 92 GWh Opower savings “We needed a next generation efficiency solution that enhanced the customer experience and scaled as big as we wanted. Opower was the clear choice.” Jim Madej, Chief Customer Officer 20 Demand Response Zero hardware approach Peak reduction territory-wide “Achieving peak reduction without hardware has been essential to our smart meter rate case. Opower is a foundational partner in that effort.” Chris Burton, Vice President Smart Grid & Technology 21 Digital Engagement Enriched web and mobile Increased web visits 3.7M WEB VISITS 2.4M Business As Usual 5 weeks post-Opower Launch “We have a great relationship with Opower that’s really starting to create engagement and reasons for customers to connect with us.” Anthony Ainsworth, Sales and Marketing Director 22 Billing Suite Transforming the utility bill experience Increased customer satisfaction 72% 55% 58% 46% 68% 73% 61% 51% My utility wants to My utility wants to My utility is a My utility helps me help me save money help me reduce my trustworthy source manage my monthly home energy use of information on energy usage energy efficiency Control Group Opower Treatment Source: Opower Custer Engagement Tracker “We have worked with Opower since 2008 to meet our energy efficiency goals. We are excited to extend our partnership to inject personalized insights into other touch points.” Jason Teller, Vice President, Customer Solutions 23 Appendix A: Reconciliation of Adjusted EBITDA $ Millions 2011 2012 2013 2014 Q1 2015 ($21.3) ($12.3) ($14.2) ($42.0) $(11.0) Provision for Income Taxes $0.0 $0.0 $0.0 $0.0 $0.1 Other (Income) Expense, Including Interest $0.0 ($0.1) $0.3 $1.0 $1.0 Depreciation and Amortization $0.6 $1.6 $3.8 $7.2 $2.5 Stock-Based Compensation $1.0 $1.2 $3.6 $20.4 $5.0 Adjusted EBITDA ($19.7) ($9.5) ($6.4) ($13.2) $(2.4) Adjusted EBITDA, Percentage of Revenue (69%) (18%) (7%) (10%) (7%) Net Income (Loss) Note: During the first quarter of 2014, the Company updated its methodology for allocating certain general and administrative costs to more closely align these costs to the functional departments consuming the related services. The table above reflects the new methodology. 24 Appendix B: Reconciliation of Non-GAAP Information $ THOUSANDS 2011 Gross profit, as reported Add back: Stock-based compensation Gross profit, non-GAAP Gross margin, non-GAAP 2012 2013 2014 Q1 2015 $13,571 $32,176 $56,611 $84,314 $21,407 121 144 204 1,354 412 $13,692 $32,320 $56,815 $85,668 $21,819 48% 62% 64% 67% 65% Sales and marketing, as reported $14,986 $22,458 $33,116 $61,267 $14,501 Less: Stock-based compensation 341 527 1,487 1,888 $14,645 $21,931 $31,629 8,932 $52,335 $12,613 51% 42% 36% 41% 38% Sales and marketing, non-GAAP As percentage of revenue, non-GAAP Research and development, as reported Less: Stock-based compensation Research and development, non-GAAP As percentage of revenue, non-GAAP General and administrative, as reported Less: Stock-based compensation General and administrative, non-GAAP As percentage of revenue, non-GAAP $15,723 $18,006 $29,496 $45,999 $12,213 368 468 960 5,623 1,658 $15,355 $17,538 $28,536 $10,555 53% 34% 32% $40,376 31% 32% $4,139 $4,071 $7,816 $17,844 $4,575 130 48 974 1,046 $4,009 $4,023 $6,842 14% 8% 8% 4,473 $13,371 10% $3,529 11% Note: During the first quarter of 2014, the Company updated its methodology for allocating certain general and administrative costs to more closely align these costs to the functional departments consuming the related services. The table above reflects the new methodology. 25
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