Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from John Quealy - Canaccord Adams.
John Quealy - Canaccord Adams
Congratulations folks. Great quarter. First to Neal, thanks for the past two years. Certainly best of luck and we look forward to welcoming Tim. Two questions. First on the Q3 model and guidance, given the ranges that you gave us, assuming that flat gross margin that Neal just talked about sequentially maybe 43-ish percent, do you get operating margins anywhere in the high teens to the low twenties. You know that’s approaching software’s of service multiples at full deployment. Obviously you’re very early. Can you talk about the model as we look to 2010 and ’11 in terms of when you add more megawatts and potentially more software applications? And is that the right way to look at the full year on a go forward basis do you think?
Tim Healy
First of all thank you and I second your thanks to Neal. It’s been an outstanding time, a lot longer than just two years that Neal’s been in the trenches with us and we are going to miss him. But he’s on to some exciting things. Thanks very much for your comments and as it relates to the model looking at 2010, 2011, I think you’re pointing out one of the things that, you know, is difficult probably to recognize and understand when we’re in the high growth phase of the business that we’ve been in, the investment phase of the business that we’ve been in for the last several years. But you’re starting to see what this business looks like as it reaches, you know, more and more towards an ongoing mature business model.
And what you’re really pointing out is that there’s operational leverage below the line that we’ve been, you know, pointing to obviously because we have the benefit of looking at our forecast and looking at how that model plays out over time as we look at the contracted revenues and we look at our growth opportunities and various markets. And we look at what it takes to fulfill those opportunities, what it takes in terms of headcount to do that.
I think you’ve noticed some things. You’ve noticed that there’s been very little headcount additions. Our network operations team has remained relatively flat over the last year. Adding new megawatts of demand response to our network doesn’t require the same type of investment as it did in the early stages when we were still trying to build our footprint across, you know, North America. So I think you are seeing some of those features of our business start to take shape. You’re also noting that the company is moving more and more towards the software, the service type of model that you mentioned where, you know, the leverage that we’re generating in our business has a lot to do with the fact that we do have scalable software. That software allows us to do things that we used to have to do with people. And instead of adding bodies now, we’re leveraging the software much as the other software the service company that we like to emulate and we’d like to look like some day, you know, operate like.
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