| Description of Business and Summary of Significant Accounting Policies | 1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies Description of Business EnerNOC, Inc. (the Company) is a leading provider of energy intelligence software (EIS) and demand response solutions to enterprises, utilities, and electric power grid operators. The Company’s enterprise customers use the Company's Software-as-a-Service (SaaS) solutions to improve how they manage and control energy costs for their organizations, while utilities leverage the Company's SaaS solutions to better engage their customers, deliver savings and consumption reductions to help achieve energy efficiency mandates, manage system peaks and grid constraints, and increase demand for utility-provided products and services. In addition, the Company’s demand response solutions provide its utility customers and electric power grid operators with a managed service demand response resource that matches obligation, in the form of megawatts (MWs) that the Company agrees to deliver to the Company’s utility customers and electric power grid operators, with supply, in the form of MWs that are curtailed from the electric power grid through its arrangements with commercial, institution and industrial end-users of energy (C&I end‑users). The Company’s demand response solutions are also capable of providing its utility customers with the underlying technology to manage their own utility-sponsored demand response programs and secure reliable demand-side resources. In addition, the Company offers premium professional services that support the implementation of its EIS and help its enterprise customers set their energy management strategy, as well as provide energy audits and retro-commissioning. Recently Adopted Accounting Standards The Company has reclassified certain amounts on its consolidated balance sheet for the year ended December 31, 2014 to conform to the 2015 presentation. In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes , which simplifies the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for fiscal years beginning after December 15, 2016 (and interim periods within those fiscal years) with early adoption permitted. ASU 2015-17 may be either applied prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. The Company has elected to early-adopt ASU 2015-17 prospectively effective for the December 31, 2015 balance sheet. As a result, the Company has presented all deferred tax assets and liabilities as non-current on its consolidated balance sheet as of December 31, 2015, and has not reclassified current deferred tax assets and liabilities on its consolidated balance sheet as of December 31, 2014. There was no impact on the Company's consolidated results of operations or cash flows as a result of the adoption of ASU 2015-17. In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs . The amendments in this update require that debt issuance costs related to a recognized debt liability (other than revolving credit facilities) be presented on the consolidated balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015 (and interim periods within those fiscal years) with early adoption permitted. ASU 2015-03 must be applied retrospectively to all periods presented. The Company elected to early-adopt ASU 2015-03 retrospectively as of December 31, 2015, as permitted. In accordance with ASU 2015-03, prior period deferred financing costs of $3,818 as of December 31, 2014, consisting of $687 of current and $3,131 of non-current assets, were reclassified to long term liabilities as a direct reduction to the associated debt in conformity with current year presentation. Reclassifications and Presentational Changes In addition to the reclassifications noted above, the Company condensed presentation of certain balances in its consolidated balance sheet as of December 31, 2014 to conform with December 31, 2015. Specifically, the Company condensed presentation of (i) the noncurrent portion of capitalized incremental direct customer costs, which is currently included in Deposits and other assets and (ii) Accrued acquisition consideration, which is currently included in Other liabilities. Basis of Presentation The accompanying consolidated financial statements of the Company include the accounts of its wholly-owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States. Inter-company transactions and balances are eliminated upon consolidation. The Company owns 60% of EnerNOC Japan K.K., for which it consolidates the operations in accordance with Accounting Standards Codification (ASC) 810, Consolidation . The remaining 40% is accounted for as a non-controlling interest in the accompanying consolidated balance sheet and statements of operations. Summary of Significant Accounting Policies Use of Estimates in the Preparation of Financial Statements The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates made by management relate to revenue recognition reserves, allowance for doubtful accounts, valuations and purchase price allocations related to business combinations and goodwill impairment analysis, including the fair value of intangible assets, expected future cash flows used to evaluate the recoverability of long-lived assets, long-lived asset amortization method and periods, valuation of cost-method investments, certain accrued expenses and other related charges, stock-based compensation, contingent liabilities, tax reserves and recoverability of the Company's net deferred tax assets and related valuation allowance. While the Company believes that such estimates are fair when considered in conjunction with the consolidated financial statements taken as a whole, the actual amounts of such items, when known, could differ from these estimates. Cash and Cash Equivalents and Restricted Cash Cash equivalents are comprised of highly liquid investments with insignificant interest rate risk and maturities of three months or less at the time of acquisition. Restricted cash as of December 31, 2015 and 2014 primarily represents cash used to fund certain health insurance commitments. The Company held no marketable securities as of December 31, 2015 or 2014. Fair Value of Financial Instruments The Company measures the fair value of financial instruments pursuant to the guidelines of ASC Topic (820) Fair Value Measurement , which establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to quoted market prices in active markets for identical assets and liabilities (Level 1), then to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2), and then to model-based techniques that use significant assumptions not observable in the market (Level 3). See Note 6 for further fair value disclosures. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk principally consist of cash and cash equivalents, accounts receivable and unbilled revenue. The Company maintains its cash and cash equivalent balances with highly rated financial institutions and as a result, such funds are subject to minimal credit risk. The Company’s significant customers consist of PJM Interconnection (PJM) and the Australian Independent Market Operator Wholesale Electricity Market (AEMO), which was formerly known as Independent Market Operator. PJM is an electric power grid operator customer in the mid-Atlantic region of the United States that is comprised of multiple utilities and was formed to control the operation of the regional power system, coordinate the supply of electricity, and establish fair and efficient markets. AEMO is an entity that was established to administer and operate the Western Australia (WA) wholesale electricity market. No other customers accounted for more than 10% of the Company’s consolidated revenues for the years ended December 31, 2015 , 2014 or 2013 . The following table presents the Company’s significant customers. Years Ended December 31, 2015 2014 2013 Revenues % of Total Revenues % of Total Revenues % of Total PJM $ 161,743 40 % $ 246,405 52 % $ 174,303 45 % AEMO $ 28,138 7 % $ 54,930 12 % $ 45,708 12 % The following table presents customers who comprised 10% or more of the Company’s accounts receivable balance. Years Ended December 31, 2015 2014 2013 PJM 16 % 21 % 39 % AEMO 11 % 12 % <10% Southern California Edison Company <10% 17 % 18 % Unbilled revenue related to PJM was $68,859 and $96,404 at December 31, 2015 and 2014 , respectively. There was no significant unbilled revenue for any other customers at December 31, 2015 and 2014. Deposits consist of funds to secure performance under certain contracts and open market bidding programs with electric power grid operator and utility customers. Deposits held by customers were $ 102 and $ 3,142 as of December 31, 2015 and 2014, respectively. Property and Equipment Property and equipment, which includes computer equipment, office equipment, capitalized software, furniture and fixtures, and leasehold improvements, is stated at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets, ranging from three to ten years. Production equipment is depreciated over the lesser of its useful life or the estimated enterprise customer relationship period, which historically has been approximately three years. Leasehold improvements are amortized over their useful life or the remaining lease term, whichever is shorter. Expenditures that improve or extend the life of an asset are capitalized while repairs and maintenance expenditures are expensed as incurred. The estimated useful lives, by asset classification, are as follows: Estimated Useful Life (Years) Production equipment 3 Computers and office equipment 3 Furniture and fixtures 5 Software 2 - 5 Back-up generators 5 - 10 Software Development Costs The Company delivers its software as a service to its customers. As a result, certain internal use software development costs qualify for capitalization under the provisions of ASC 350-40, Internal-Use Software (ASC 350-40). ASC 350-40 requires internal use software development costs to be expensed as incurred unless certain capitalization criteria are met and defines which types of costs should be capitalized and which should be expensed. The Company capitalizes the payroll, payroll-related costs and external fees of its employees and external consultants who devote time to the application development stage of internal-use software projects. The Company amortizes these costs on a straight-line basis over the estimated useful life of the software, which is generally two to five years. The Company’s judgment is required in determining 1) software projects that qualify for capitalization, 2) the point at which various projects enter the stages at which costs may be capitalized, 3) the ongoing value and potential impairment of the capitalized costs, and 4) the estimated useful lives over which the costs are amortized. Internal use software development costs of $8,371 , $5,955 , and $7,947 during the years ended December 31, 2015 , 2014 , and 2013 , respectively, have been capitalized. Amortization of capitalized software costs was $6,980 , $6,162 , and $5,732 for the years ended December 31, 2015 , 2014 , and 2013 , respectively. Accumulated amortization of capitalized software costs was $ 34,583 , $27,603 and $21,441 as of December 31, 2015 , 2014 and 2013 , respectively. Impairment of Property and Equipment The Company reviews long-lived assets, including property and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable over its remaining estimated useful life. Long-lived assets are measured for impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets or liabilities. Impairment expense is recognized in the consolidated statement of operations as the amount by which the carrying value of the asset exceeds its fair value. The fair value is determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow (DCF) technique. If these assets are not impaired, but their useful lives have decreased, the remaining net book value is amortized over the revised useful life. The Company periodically impairs equipment deployed at third party locations as a result of the removal of such equipment from these sites prior to the end of the originally estimated life of the arrangement. Impairment charges of $523 , $1,071 , and $706 , were included in cost of revenues in the accompanying consolidated statements of operations, for the years ended 2015 , 2014 , and 2013 , respectively. Cost-Method Investments The Company accounts for certain investments according to ASC 325-20, Cost Method Investments (ASC 325-20), whereby the investments are initially recorded at historical cost as long-term assets and are periodically assessed for indicators of a reduction to fair value that is other-than-temporary under the provisions of ASC 320, Investments—Debt and Equity Securities . As of December 31, 2015, the carrying amount of cost-basis investments was $2,500 . Based on the Company’s assessment as of December 31, 2015 , the Company did not identify other-than-temporary impairment indicators related to its investments. The Company evaluated all available information, including current financial forecasts and recent or pending capital investments and financings related to its cost-method investments. The Company's investment in these cost-method investments is subject to risk given the future financial condition and results of operations of the entities. Should an adjustment to fair value be required as a result of the Company's analysis and conclusions, the resulting charge will be recorded in other expense, net on the consolidated statement of operations. Business Combinations The Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting. Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition. The fair value of identifiable intangible assets is based on valuations that use information and assumptions provided by the Company. The Company primarily uses the income approach to determine the estimated fair value of identifiable intangible assets, including customer relationships, non-compete agreements and trade names. The Company estimates the fair value of contingent consideration, if applicable, at the time of the acquisition based on its estimated probability of payment using all pertinent information known to the Company at the time. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill. Intangible Assets The Company amortizes its intangible assets that have finite lives using either the straight-line method or, if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be consumed utilizing expected undiscounted future cash flows. Amortization is recorded over the estimated useful lives ranging from one to fourteen years. The Company reviews its intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If the carrying value of an asset exceeds its undiscounted cash flows, the Company adjusts the carrying value of the intangible asset to its fair value in the period identified. In assessing recoverability, the Company must make assumptions regarding estimated future cash flows. To the extent a fair value estimate is required, the Company generally calculates fair value as the present value of estimated future cash flows to be generated by the asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. During the years ended December 31, 2015 and 2014, the Company has not recorded any impairment charges adverse conditions or made significant changes in the useful lives of its definite-lived intangible assets. The Company had no indefinite-lived intangible assets as of December 31, 2015 and 2014. Goodwill Goodwill represents the amount of purchase price in excess of the fair values assigned to the underlying identifiable net assets of acquired businesses. In accordance with ASC 350, Intangibles—Goodwill and Other (ASC 350), the Company tests goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business, an adverse action or assessment by a regulator, or the realignment of the Company's organization and management structure. The Company has determined that it has two reporting units for the purpose of the annual goodwill impairment test: (1) North America Software and Services and (2) International. In determining its reporting units for purposes of the annual goodwill test, the Company considers how the components of its business are managed, whether the components have discrete financial information and how these components may be aggregated based on economic similarity and other factors. The Company’s annual impairment test date is November 30. In performing the goodwill impairment test, the Company utilizes the two-step approach prescribed under ASC 350. The first step compares the carrying value of the reporting unit to its fair value. If the carrying value exceeds the fair value, the second step of the test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of a reporting unit’s goodwill to its carrying value. To calculate the implied fair value of goodwill in the second step, the Company allocates the fair value of the reporting unit to all of the assets and liabilities of that reporting unit (including any previously unrecognized intangible assets) as if the reporting unit had been acquired in a current business combination and the fair value was the price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amount assigned to the assets and liabilities of the reporting unit represents the implied fair value of goodwill. If the carrying value of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized for the difference. In order to determine the fair value of its reporting units, the Company utilizes a DCF model under the income approach. The key assumptions that drive the fair value in the DCF model are the discount rates, terminal values, growth rates and profitability rates, and the amount and timing of expected future cash flows based on management's projected financial information, which is based on the Company's strategic plan. The other significant factor that management considers in determining the fair value of the Company's reporting units is the Company's overall market capitalization. The Company ensures that the collective fair value of its reporting units, taking into consideration excess cash and enterprise-level debt, reconciles to its market capitalization, which is calculated as the market price per share of the Company's common stock multiplied by common shares outstanding, while taking into consideration a reasonable premium that a market participant would pay to obtain control of the reporting unit (i.e. the control premium). Please refer to Note 4 for further discussion of the Company's current year impairment charge. Income Taxes The Company uses the asset and liability method for accounting for income taxes. Under this method, the Company determines deferred tax assets and liabilities based on the difference between financial reporting and tax bases of its assets and liabilities. The Company measures deferred tax assets and liabilities using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company’s deferred tax assets relate primarily to net operating losses and tax credit carryforwards, intangible assets, deferred revenue, and stock-based compensation. The Company has accumulated consolidated net losses since its inception and, as a result, recorded a valuation allowance against certain of its deferred tax assets. Deferred tax liabilities primarily relate to acquisitions, depreciation of property and equipment, and the convertible debt issued in 2014. ASC 740, Income Taxes (ASC 740) , prescribes a recognition threshold and measurement criteria for tax positions taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition and defines the criteria that must be met for the benefits of a tax position to be recognized. In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Judgment is required in determining the Company’s worldwide income tax provision. Although the Company believes its estimates are reasonable, no assurance can be given that the final outcome of tax matters will be consistent with its historical income tax accruals, and the differences could have a material impact on the Company’s income tax provision and operating results in the period in which such determination is made. Revenue Recognition The Company recognizes revenues in accordance with ASC 605, Revenue Recognition (ASC 605). The Company's customers include enterprises, utilities and grid operators. The Company derives recurring revenues from the sale of EIS and demand response solutions. The Company recognizes revenue when it is earned and all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and the Company deems collection to be reasonably assured. The Company's grid operator revenues and utility revenues primarily reflect the sale of demand response solutions. During the years ended December 31, 2015 , 2014 and 2013 , revenues from grid operators and utilities were comprised of $314,305 , $424,537 and $342,093 , respectively, of demand response revenues. The Company maintains a reserve for customer adjustments and allowances as a reduction in revenues. In determining the revenue reserve estimate, the Company relies on historical data and known performance adjustments. These factors, and unanticipated changes in the economic and industry environment, could cause the Company’s reserve estimates to differ from actual results. The Company records a provision for estimated customer adjustments and allowances in the same period as the related revenues are recorded. These estimates are based on the specific facts and circumstances of a particular program, analysis of credit memo data, historical customer adjustments, and other known factors. If the data the Company uses to calculate these estimates does not properly reflect reserve requirements, then a change in the allowances would be made in the period in which such a determination was made and revenues in that period could be affected. The company's revenue reserves were $975 and $475 as of December 31, 2015 and 2014 , respectively. The Company’s revenues from the sale of its EIS to its enterprise and utility customers generally represent ongoing software or service arrangements under which the revenues are recognized ratably over the same period commencing upon delivery of EIS to the enterprise or utility customer. Under certain of its arrangements, a portion of the fees received may be subject to adjustment or refund based on the validation of the energy savings delivered after the implementation is complete. As a result, the Company defers the portion of the fees that are subject to adjustment or refund until such time as the right of adjustment or refund lapses, which is generally upon completion and validation of the implementation. Demand response revenues primarily consist of capacity and energy payments, including ancillary services payments, as well as payments derived from the effective management of its portfolio of demand response capacity, including its participation in capacity auctions and third-party contracts and ongoing fixed fees for the overall management of utility-sponsored demand response programs. The Company derives revenues from its demand response managed services by making demand response capacity available in open market programs and pursuant to contracts that the Company enters into with electric power grid operators and utilities. The Company recognizes demand response capacity revenue when it has provided verification to the electric power grid operator or utility of its ability to deliver the committed capacity, which entitles the Company to payments under the contract or open market program. Committed capacity is generally verified through the results of an actual demand response event or a measurement and verification test. Once the capacity amount has been verified, the revenue is recognized and future revenue becomes fixed or determinable and is recognized monthly until the next demand response event or test. In subsequent verification events, if the Company’s verified capacity is below the previously verified amount, the electric power grid operator or utility customer may reduce future payments based on the adjusted verified capacity amounts. Ongoing demand response revenue recognized between demand response events or tests that are not subject to penalty or customer refund are recognized in revenue. If the revenue is subject to refund and the amount of refund cannot be reliably estimated, the revenue is deferred until the right of refund lapses. The Company recognizes demand response energy revenues when earned. Energy event revenue is deemed to be substantive and represents the culmination of a separate earnings process and is recognized when the energy event is initiated by the electric power grid operator or utility customer and the Company has responded under terms of the contract or open market program. During the years ended December 31, 2015, 2014 and 2013 the Company recognized $1,642 , $26,460 , and $25,061 , respectively, of energy event revenues. Two new demand response programs, which the Company refers to as the PJM Extended program and the PJM Annual program, were introduced in the PJM market beginning in the 2014/2015 delivery year (June 1, 2014-May 31, 2015). Under the PJM Extended program, the delivery period is from June through October and then May in the subsequent calendar year. The revenues and any associated penalties, if any, for underperformance related to participation in the PJM Extended program are separate and distinct from the Company’s participation in other offerings within the PJM open market program. Consistent with the PJM Limited demand response program, the fees paid under this program could potentially be subject to adjustment or refund based on performance during the applicable performance period. Due to the lack of historical performance experience with the PJM Extended program, the Company is unable to reliably estimate the amount of fees potentially subject to adjustment or refund as of the end of September and therefore, revenue from the PJM Extended program is deferred and recognized at the end of the delivery period (i.e., May). Under the PJM Annual program, the delivery period is from June through May of the following year. Consistent with the PJM Limited and PJM Extended programs, to the extent the Company has MW obligation in the PJM Annual program, until the Company is able to reliably estimate the amount of fees potentially subject to adjustment or refund, revenue from the PJM Annual program will be deferred and recognized at the end of the delivery period (i.e., May). However, in the event the Company reduces its MW obligation for a given program to zero through the effective management of its portfolio, including the Company’s participation in PJM incremental auctions, the Company recognizes revenue from such products at the beginning of the delivery year. As a result of the billing period not coinciding with the revenue recognition period, the Company had $68,859 and $96,404 in unbilled revenues from PJM at December 31, 2015 and December 31, 2014, respectively. Historically, all capacity revenues related to the Company's participation in the Western Australia open market have been deferred and recognized upon an emergency event dispatch or the end of the program period on September 30th as the Company was not able to reliably estimate the amount of fees potentially subject to adjustment or refund. As of September 30, 2014, the Company determined that the amount of fees potentially subject to adjustment or refund were reliably estimable and began recognizing revenue ratably over the twelve month program period beginning with the new program year in Western Australia commencing on October 1, 2014. With respect to demand response managed services for utility customers, the Company generally receives an ongoing fee for overall management of the utility demand response program based on enrolled capacity or enrolled C&I end-users, which is not subject to adjustment based on performance during a demand response dispatch. The Company recognizes revenues from these fees ratably over the applicable service delivery period commencing upon when the C&I end users have been enrolled and the contracted services have been delivered. In addition, under this offering, the Company may receive additional fees for program start-up, as well as for C&I end-user installations. The Company has determined that these fees do not have stand- alone value due to the fact that such services do not have value without the ongoing services related to the overall management of the utility demand response program and therefore, the Company recognizes these fees over the estimated customer relationship period, which is generally the greater of three years or the contract period, commencing upon the enrollment of the C&I end-user and delivery of the contracted services. Cost of Revenues Cost of revenues primarily consist of amounts owed to C&I end-users for their participation in the Company’s demand response network and are generally recognized over the same performance period as the corresponding revenue. The Company enters into contracts with its enterprise customers under which it delivers recurring cash payments to them for the capacity they commit to make available on demand. The Company also generally makes energy payments when an enterprise customer reduces consumpt |
