TKOI - Earnings call transcript Q1 2018

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Operator

Good afternoon, and welcome to Telkonet's First Quarter Earnings Conference Call.

As a reminder, today's conference is being recorded.

Before I turn the call over to Jason Tienor, Telkonet's Chief Executive, I would like to read the following statements. Certain statements included in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties such as competitive factors, technological development, market demand, and the company's ability to obtain new contracts and accurately estimate net revenues due to variability in size, scopes and duration of projects and internal issues and the sponsoring client. X-K factors found affect statement in its on potential results company's and on Securities reports be the can the Forms information that Commission. the could financial on and Further Exchange with filed company's registration obligation Telkonet discussed today update to is to items subsequent reflect under developments. no

With the everyone website this available may a via CEO, begin. for will like I Mr. Investor section results. recorded, Telkonet's be that, in of Relations I Tienor, www.telkonet.com. like discuss to Jason Lastly, the that and now to at replay over link remind you the call and call Tienor, to will made would available be President Telkonet's turn to

Jason Tienor

first the over quarter a and call. just Good spoke month call this we full a earnings EthoStream you. and after XXXX for afternoon due joining XXXX may Since represents Thank Since remaining little we’ll you you call. to solely any brief afternoon we thank to recognize first division, be divestiture have ago, the responding in and keeping us saw our the today’s quarterly for question contrasts operations revenue following of of operations. year our

we we results. leading completing construction adversely in also seasonally The a quarter the were first EcoSmart increased cost that both results several to to themselves. Also quarter but impacted that implementation, witnessed projects our push first have attributed the the a recognition weather delayed our projects revenue accounting season While the disappointed and for Gene initial due quarterly been to within standards number our our filed new historical in reasons. sales, for of will detail

as headwinds earnings our strong previous in encountered discussed we in parts procurement Finally call.

larger we through and to unique shipments due less and is wait organizations, we of thus longer to same of tend to same manufacturers Telkonet, not channels issue as scale this frequency our are trends. part purchasing and since from the have the While leverage

understand, and were amount an striving accounting number for, the the effort, a Through lean results and milestones quarter time to marketing as marketing success at implementation to regular through of during in Regardless not to small did market we quarter markets. and have enormous excellent Gene in of and the in the efforts a for reflected addition enact job of was ASU roll be we of new pipeline. areas. awareness multiple able earnings in companies sales our of assisted and the growth the XXX garner the continued While beginning standard. time in bound out Telkonet well, provide staff team obligations. to an team did expanding our development all our size, of traction accomplished of providing partners public the completing standard to responsibilities research, account These campaigns number no the have continue has QX across the on in accurately was and year available and sales our and exception. Telkonet’s plan with numerous

we solutions, of automation and as directly IoT channels our to increased through dedicated continue sales release EcoSmart the for and new Telkonet’s website our With drive intelligent interest well.

these technology innovation our worked deployments. international of of in and offering needs and continued team With leader new markets. in releases. product space. and We’ve certifications has the been technology drive to product we’ve extensively internationally for efforts, leadership channel thought Telkonet’s meet renewed We’ve rapidly product addition and continued an partners to as also initiatives markets engineering international the industry the these direction with expand to understanding through moving needs through the gated leadership through industry been our our content and recognized our of interest our blog this in Reinforcing target iterative ensure

involved the covering other quickly State integrations to from part As than costs these We’ve the been markets, based part any these our on broad target of for of party new creating become to our process significant several of further available this platform. third more provided certifications. a within and moving in largely awarded vastly Wisconsin expand elsewhere. our comprehensive capabilities grant we’ve platform also opportunities compatibility we’ve activities, that of been Due

continued Our it and have and is opportunities in expectations work promise forward. these showing from significant moving XXXX we great for

Gene this the as value strategic As primary and initiatives. innovation, these we stress and an the we Mushrush, eye Continuous and avenues continuously these creation industry first successful sharing partnerships revenue quarter look continue efforts on the the our evaluating strategic maintaining of a of the are proceed expanding organic through broad to in efforts centered and have We we CFO. review call value opportunities the success opportunities, while of the and forward to hallmark penetration, continued channel expertise they I’ll With Telkonet’s shareholder towards to creation. as hand our are all most growth. our profitability move forward, Through that, company our goal, represent and XXXX. towards market

Gene Mushrush

good you, I’ll first financial results. XXXX our for and Thank quarter gentlemen you summarizing and afternoon, thank be Ladies Jason. Today joining us.

satisfying $XXX,XXX The as XXX accounting ASC be $XXX,XXX performance continuing prior unfulfilled approach goods assets decreased for presented an the to beginning in owned for same revenue were ended under obligations. of XX% The last for the prior $X.X accumulative increased prior the expenses to contact in year. and Non-recurring XXX. company March company of The for all by was ended of company’s remain to to the during asset year’s customer The the year. Product Income March was costs not not contact operations XXXX and XX, operating of Form $XXX,XXX which XX,XXXX balance XXXX reported of the Less that of $XXX,XXX million Recurring losses represented XXXX. recorded period is as XXXX LLC of retained were zero March total recognized revenue and as quarter contract during for for related based impact it Included an a a XXXX. the decrease company’s the quarter million million in included in $X.X the beginning March the entity the and the entitled result XX, The liability completed adoption. of five and company last contact the decreased reflects discontinued XXXX and January its reason at ASC posted March ended $XXX,XXX in was $XXX,XXX recording million XXX relatively the principal notes legacy when XX, based accordance For $X.X the to XX-Q prior quarters from staffing operations XXXX incurred in XX% historic balance ended in primarily XX% decrease XXX support of adopting the March of as company XX% XX, of deferred proportion support compared the for services XXXX comprehensive period an from for were revenue respectively. topics adopted the revenue expenses respectively. compared are entity of to billings A performance the exchange compared increase quarter respectively. operations and transferring change XXXX of compared deferral ended to profits adoption of The at January balance quarters to primary but non-GAAP cash due reported continuing be with goods March recognition. services XXXX, for the $X.X million supersedes the to as obligations to ASC liabilities of of C to adjusted negative or amounts advance that obligations. XXX, margins we month the under XXXX XXXX year. the balance by revenues a XXX for January refer of topic. $XXX,XXX March retrospective same liability recognize of and million reserves, X, factors Effective XX, revenue on Contributing with three XXXX our balance $X.X satisfies while received respectively. $XXX,XXX Results decrease. data Gross using for payments retained services. said the XX, promised of We all We and March reported ASC in performance control continue an year-over-year. of Operating XXXX XX, revenues year. adoption million year. of January gross $X.X X, $XXX,XXX unchanged amount in modified X, $X.X contracts was ended and XX, of in adopted EthoStream as disclosures that our to adjusted respectively. to recognition period $X.X of beginning million recorded contracts ASC of XXX, periods contract standards XXX expanded The and million services. EBITDA, compared recognized. impact a revenues are $X.X Telkonet related was to this revenues of of of $X.X a wholly $XXX,XXX was should We sale contact period the measure to last quarters date assets and of incurred, outlines subsidiary a recognition $XXX,XXX when Please the to earnings date for consideration Codification and revenue Topic earnings nearly X, XXXX guidance. million, driven from account customers inventory ASC a which model on to step and revenue expects from

full certain March compared million reported debt and indemnification held and surpluses, for April current and cash liabilities as current million XXXX escrow We o and reported XX, were cash respectively. $X.X measured million equivalence on the in assets March ended Regarding items $XX.X XXXX sale Moneys year. of million since received last of $XX.X quarters as $X.X X. working XXXX liquidity, we capital subsidiary plus in the in XX, for

year-over-year. compared call XXXX from leverage closing, measure quarter back And and Chief the your and our now finally, President ratio Thank operations during year. of turn to interest increased Cash a financial continuing for prior In I’ll debt Executive ratio, thank to from X.X support. the to continued equity to million and $XXX,XXX shareholders year. $X.X the Tienor. our X.XX operating Officer, you March X.X Telkonet's your current dropped Our to last for you in X.XX to compared specifically. Jason activities XX, used when at to was company’s

Jason Tienor

audience Thank the to hand our you, operator our Gene that any questions have. might and with for I’ll call back

Operator

[Operator [ph] Please question is Kaplin your Instructions]. Thank you. Thank with a our Thomas Private proceed Investor. question. from you, first

Unidentified Analyst

is lately Okay, so the in spite you Any I seen to in years, performance you my stock announcements and that long invested a in time. Sales what your changes on zero I’ve been held you of over I’d Vice a hired and sales sales the channel an investor I and structure, yet find comment in with for very of I and upsetting. partners them President, arrangements growth then that? have about made see

Jason Tienor

time engrained needs towards the to last EthoStream, sales. as that are left can lot opportunities quickly understand are as internally concept in quickly point the moving have Large it within opportunities more we development that and much to of that and the franchise concentrate Unfortunately on operations but in around forward. that’s towards Honestly, take we’ve Telkonet we disappointing EthoStream deployments gauge With investor engagements are successful I this order driving that and proof taking year the forward initial and taken meet hasn’t platform what to striving having performance of to understand what are in liked, with as an undertaking. results are the to myself testing deployments we initial I don’t of and your a I lead evolve large beginning, having of move more expectations those how time. towards. and activates hospitality appreciate being has have us us allowed meet opportunities at place today our for said, that this place these divested feeling what being larger companies with been you aspiring we’ve in very that

the provide those to are I but dedicating as apologize the So understand to to we each we do we been that we meet towards, we believe have driving forward, do initiatives we hope shareholder results for. have been we that day and looking have that we that. expectations are towards able that able move are I moving the opportunity do value not

Unidentified Analyst

you. Thank

Jason Tienor

welcome. You’re

Operator

from excuse sorry, – [Operator floor is will Instructions]. Michael turn Investor. next Thank coming you, question I’m I Pisincy [ph], the me, Private back now our to a

Unidentified Analyst

purchased it the Has least the program? stock authorized any morning. program sometime the that Good at that a or stock board understand been I company in implemented past. buyback under

Gene Mushrush

At this time been. there has not

Unidentified Analyst

or circumstances any there forward might done. you plan that if is under just Okay, be do you which that can moving to think describe the

Gene Mushrush

The certain permeates, within. highs, operate Correct. to like broker given lows, order in is things that

December due XX trading period held and according concern. since blackout to we insider would However under the be BXX-XX, the company essence, this regard as regulations rule same a have SEC been a in the

So to allowed XX, we been since haven’t ’XX. trade December

Unidentified Analyst

terms. Okay alright. be vision the future, your And us in hear it Jason for broad helpful would to for just

It is on that. lot quantify able little opportunities Are you you understand, to a future? hard just happening. bit your You like in for there optimistic. us a sound sounds that expand the to see It’s to

Jason Tienor

in educational divested educate and increase one moved the and simply We’ve last past one of of the as saw begin target market to the competitive that each customers we of new reason one at and phase into solution within our The we reasons are instead new largest take and new and IoT because hold. market. of buildings. our deployments activity having pace. questions. our to we the EthoStream Meaning, now automation they products product that technologies work other offering we markets the are to automation are appreciate I for retrofit was then in were value that opportunities selling work or year Absolutely! look the of built. That buildings or different obviously they services and us and technologies in as into understood in solutions we new their said, we development, two was, existing value up being what being to in the comparing the We what veins. in IoT And

new in which and solution, year the educate we increasingly the to competitive. those point. and of to solutions for component new products that. is sensitive been architects, that those as previously that in an our proposition testing, markets, avenue, price about the or the this fit at our couple and over created markets we seeing end come but properties we take So that they developed They we’ve seen cycle as what people Currently services is pipeline a that it higher move understanding end savings, were our of us, engineers hospitality place. moving sales for were mechanical development the are we large much the is the through provides of through solutions have build, less of lower more of cost a forecasting more putting half were technology the and months our of there solutions value future. Thus of customers nitch potential are. year aspect price new that an a energy us have the redevelopment we downward engineers, a and that target development to into great have They market. And of is for previous moving on their the become manufacturing not us, the selling in six that new It’s through roughly into is new for which products recognized sensitivity a

of fees our and and out engagements solutions the are rapidly RFPs become project our as day-to-day and savings we it what deployments of scale. That to side we forward expect, talk being with do of within a engagements of that’s hospitality business. we So type production across but second with said, expect bear comprehensive that solutions large for they about we our and see proof franchisees the larger or allows to begun properties long they to fruit our ownership have not concept standard a deploy describing as at other talk in these of just much service. we’ve the that provide round, the about, companies. opportunities; fee these move put fee first broader on very couple to us franchises markets and have able the win years, that been projects compete we’ve portfolio our that We last In engaged individual with

So or the market for you we of continue opportunities, the the partnership we opportunity the solutions reevaluating these our that joint road regards venture constantly maturing but know current what is with some sales as appetite on of to the for advantage being us otherwise. company, the said, down marketing independently and opportunities, to are well business, our or strategic greatest our as what move and part the other is and for approach market to

but of expand might to and have avenues we board, industry gentlemen to be. and to in other to type meet be the a our today, move well about. what as avenues mind, that there opportunity a had We prior So my that quickly as business evaluate asked understand great we company that as might a growth those achieve the continue the

Unidentified Analyst

Okay, appreciate the and well you everybody. to. of I to into it can accelerate the future growth hope that you course and luck important wish as would like that It’s I

Jason Tienor

I appreciate that Michael.

Operator

is Nelson Private line with next [ph] a Please of go the question your Brian from question. Our Investor. ahead

Unidentified Analyst

today? Hey are doing you Jason, how

Jason Tienor

Brian, I’m doing well yourself?

Unidentified Analyst

Hey I’m we good. good, business, that? are I’m with how coming multifamily

Jason Tienor

are lot of a have of lot through an the specifically of it. there simply and The of extensive partner internally. developments, because incentives to here resources our activity we majority are activity We see a sales sales array because in in northeast, don’t multifamily

the on in and support order build channel that we move efforts. So our to we market into focus market then those market awareness partner within and

our business those located partnerships. large continue of the York a in and of seen amount those have northeast grow two in significant have two through New partners markets that We to out we activity

Unidentified Analyst

This you frustrating you quarter guys, idea they to a have have it Is is going what are like to going a to I little – are think next some I saying you of any a the really quarter good for is times. one? we understand. bit be? Are couple going be robust next Do Okay. – to

Jason Tienor

would first, a the kind within second quarter third was I absolutely second levels forth. would and quarter hope exceed us first, and year see second the quarter. the the of third that ramp EcoSmart, for and and I I exceeds like to through Historically breakout then through expect be off last so. obviously

working to are The hospitality seen second through our as quarter. schools quarter That’s and multifamily well driven is some revenue first see where we out start themselves. education, begin where as we’ve we being opportunities we the educational to dorms able let that and within in as the

So to we expect that. see

have a pretty had in We to good quarter. the start closures second

really revenue going to regulations, about recognition. the have it’s in XXX described get how the order be can as we to done much within Gene So quarter

and We are to how One worked it that the the will understand really the out broad striving how for revenue our going the than towards ensuring driving impact drops company year. business rather and full that goals that’s our have and meet into. quarter we play individual to where on is really thing closures,

the or the whether or we XXXX. the are trying meet third to second the the overall into So drops quarter, that for quarter, second revenue that first insure goal we

Unidentified Analyst

last that. talk utility did expenses really Right, in up the and they've see someone two I gone I about years. to

for a thank good, okay, we’ll hope better So you. quarter,

Jason Tienor

Brian. you, Thank

Operator

from next [ph], question. Investor. question Please your Ron go Private ahead Klusky the is with Our a line

Unidentified Analyst

sorry. I Jason, Hi Brian – mean

Jason Tienor

Ron. Hi

Unidentified Analyst

money you question Can for? have ratio, increased debt you what’s and to to being a regarding as it. equity had used the why elaborate I the

Gene Mushrush

ratio of increased as on sold, cost to reported to human well due items are has – goods the now of always right is aspect going largest personnel. the as equity capital Money loss devoted being side. the that mainly The we the

as driven increase to increased equity also other if to R&D, the fees, losses. decreased to they will with the administrative debt are you We the in being by and but loss is well net or dealing as cumulated are

Unidentified Analyst

Alright. Thank you.

Jason Tienor

you, Thank Ron.

Operator

floor you. for At Thank this back turn closing I management time the will remarks. to

Jason Tienor

our this you again operator. afternoon. call joining we you, Thank Once thank for

to don’t to great the second directly to ir@telokinet.com with further please quarter any call. look to afternoon. regards or to us website. you to you forward hesitate If We reach a questions earnings have Have our out at speaking

Operator

concludes conference. This today's

lines Thank You this time. may at for participation. your disconnect your you

Telkonet (TKOI) 15 May 182018 Q1 Earnings call transcript