TKOI - Earnings call transcript Q1 2019

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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. accurately number development, and company's scope market obtain contracts a competitive such ability and involve due sponsoring new technological revenues client. and factors, demand and and duration statements of of in internal uncertainties, risks as to to projects, Such variability net issues size, the estimate and the with statement Further the Forms found in be financial results information on can Commission. on Exchange potential and reports factors company's Securities that and registration could X-K its filed affect the company's on the Telkonet to is no discussed under obligation to reflect items update today subsequent developments.

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

Jason Tienor

And joining thank Thank you. you call. again Good us for first earnings for afternoon. quarter Telkonet's once

of by The flow caused ultimately timing partner higher quarter quarters. will $X.X have to products revenue. of to project have improved growth review will results this you of procurement completions, had had morning, we've would with future that in total the seen of which opportunity you year XX% prior constraints the the resulting and year considerably but several beginning that for the first our million our have compared been in filing If revenue individual large deployment into projects dramatically and

also to though pleased both control that impacted seeing our and the factors, results quarter full dramatically by have year even with what we not. multiple demonstrated and further. will first within recognize for Even While our we're impressive, our others prior some performance over trends performance continue growth, extend our to quarter's ongoing revenue was year we're sales in this sales that

China fixed operating trade approximately costs negative significant on continues first to our impact or the influence to in war for have the continued with our company. or with profitability, costs the unnecessary First, the on ongoing a impact $XXX,XXX quarter, resulting a XX%

overall XX% While particular new partnerships our figure. security using recognize in profitability a the markets remainder Also, extensively obsolescence dispute improved company's a past. the due and impact for Automation to with other this inventory demand this means, the and in of industry represents to business to approximately the for we $XXX,XXX Intelligent first for technologies all to as when resolution result non-cash noticeably innovations a the favorable in of adapt diminish initiation the the technologies will quarter integrations space revolving loss product continue provide capabilities, vendors our to that new charge of total address compared our been charge the year. of the automation that in is that's used This leading with available

products. it this outperformed these to charge in take were charge we these opportunity first and a to that address on our While quarter, recognize influences implement delay has be we we non-cash that have represent of still during offers in the as loss If the negative approximately have future the successfully, it positively first a of have results future improved and affect market and the would quarterly this significant demand still expectations obsolescence to XX% the quarterly they us caused sale and over forecasted measures our market to their reduced part for reversed just number may two the products new quarter. through $XXX,XXX, to only would

million over were of growth our a the improved to recurring growth significantly revenue, quarter, quarterly impacted revenue. and in still have revenue $X.X situations these resulting X% XX% to able year-over-year in which grown prior has report While results, negatively overall XX% in we to year the

the preceded million of potential resulted revenue a increase third recognized by This highest to heading the marketing $X the a company's efforts income through in the was than was of net in growth $X.X $X.X improvement we year-over-year and gross sales XXXX. year. our a XX% decrease in XX% Ending the projects to in margin in in balance quarterly in history, headcount have factors per than over for in enabled and Having Telkonet revenue in report in and having million backlog by overall a and in with sales XXXX, of backlog prior demonstrate second greater and now continued X% committed than additional into business. of $X.X performance over stellar XX% This million EBITDA growth QX entire $X.X more million income, operating the modest year-over-year. AR history highest quarter, at year first our $X year operating million ending reported approximately Our influenced quarterly closed and improvement and just just XX% more sales revenue. verbally expense million the These continued percent the XXXX. in

million sales have monthly and each than with monthly better the in but one. more XXXX efforts on positive year seen current quarterly than yielded Our a increasingly month average and trends basis prior $X sales

of trending insight provides channel is partnerships projected ongoing We our future performance due myriad our second In accompanied quarter project have XXXX. the significant with time our XX% a of performance this ongoing of XX% expanding continued according to towards This for and recognition sales into relationships. our several partner and that piece channel that a previously, number in XXXX over well as in all ended improving our at improved piece with QX and addition, mentioned have as account focus to, quarter projects the due deployments revenue performance. to already faith reasons. of rolled this to substantial we to several Significant large channel,

our Connected to into these to we which, have growth most more, impactful extend their program. seen only have opportunities the developed success the the this dedication include first by additional quarter our these, Of Numerous the XXXX. products Hilton including certified Not sustained some significant are the and the Of through this program University several Hilton, to execution channel. relationships of and HITEC Hilton certification Week, providers. we continued designed of and ongoing one solid event Room product we even in of inspired performance Our only performance continue Telkonet itself. our of device the have ongoing emphasize and for Partner but and EcoSmart affected programs, moving process and after program

been the today. mentioned above award project Telkonet's other the solutions partner hospitality automation than deployment of too target thinking and properties, revenue. large see of and throughout Controls. more We've participating We million in These Johnson that with we forward exemplify type $X another opportunities markets hospitality project to have totaling growing

projects portfolio, discussed a solutions. products X new residential award housing Phase also but just and base $X our not for than only emerging military in As equaling new greater previously, market has our a Telkonet's on created million for

in evaluate same project same began we the With to with accruing the first entering market potential their in further with have continue this significant shipments phase the see just QX QX, to and customer beginning the second and and location. for potential this opportunity second

especially modular This partners, customer largest also extensively partners alone OEM QX, development. that as product several spread for we used other seen across development is in be During of to with at grow XXX,XXX provide largest one approximately XXXX has housing worth will looked our through also sensibly and agreements. a opportunity XXXX is with well. international Telkonet

significant awakened Telkonet's We discussions. our international relationships haven't to and pipeline, efforts growth respond the seen traction much but have market opportunities since initiation through of these that especially review and historically, strategic in

XXXX we international but sales. saw XX% revenues in QX Our totaled of through alone, XXXX of international X% revenues

one competitors. Lastly, failure one and due out recipient creating of for competitors been detail of staff new customers gone Telkonet have we've to interest of and inbound business, our their growth. closest our of potential and Without of opening to warning, the

engaged discussions strategic you here our XXXX year. We've penetration, direction. as off regarding market have through review. Telkonet. for we begun activities of has over in Boards successfully shared in in expand a been identified the to automation opportunities not discussion discussions started entities the innovation to intelligent continue pipeline ramp we and market transformative see, much to during and driven for shared a move our emergence with improvement We're market in can actively and as last Telkonet strategic And automation. target solutions. while with continued what Finally, marketing build in and and invigorated emphasis marked continues interest leader our increased has and outcomes the our Through regards by to and as markets we've much multiple ties year we've We've in current

future our year We to sharing continue to the Telkonet's call forward as with Chief results hand Gene performance financial like review over progresses. the I'd quarterly you to you. heavily and look performance be Mushrush, to full-year With the Officer, towards Financial optimistic that, with to

Gene Mushrush

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

ending via there's prior XX% same the for Revenues represented compared expenses XX% March of subcontractor the March to profits in XXXX, prior quarter the increase $XXX,XXX of to compared Increases were year. hospitality total XX, were to our period. compared revenues we prior compared Increases ended XX% the of For contributed year. grew year. aggregate a the $XXX,XXX months million in We level. for XX, channel period three to governmental the period to prior $XXX,XXX and inventory of revenues same to and proportionate and Recurring posted increase reserve, $X.X $X.X margins Gross revenue an XXXX, non-recurring the sectors million, margin sub services an instrumental increase total growth. recognized gross logistical of increase. X% year recorded the

a approximately on tariffs of quarter, in adverse imports on resulted the profits. impact gross imposed During Chinese X%

commissions. current million operating quarter to in audit, $X.X X% consulting year. prior compared $X.X to The the and million increases quarter increased legal, experienced services in expenses First

percentage We using XX% U.S. remained the XXXX and byproduct fixed XXX March financial months. approximately million longer determined for of the was and lease its measure, at negative related the In as equivalents to at measured to driven XX, $XXX,XXX Accounting for XXXX March recognizing respectively. topic The right ended We However, XX, XX, both period use reported $X.X adoption. of last transparency to outstanding arrangement. its cash Accounting of and working Standards the financing balance XXXX $X.X incurred and The revenues by was of Please for January GAAP Board reported lease of unchanged. $X.X with March ASC lessee $X.X non-GAAP at losses results a classification. this XXXX year-over-year. of straight million lease February topic. current recorded reporting capital a of on The the a plus on compared the term upon disclosures International Form the were EBITDA, million basis all asset and the and to for depend XX, of expense Upon March or and XX, ASC to ASU adjusted the capacity on is year. $XXX,XXX standard million in January $XXX,XXX Cash no respectively. a We at refer compared accounts standards leases. and XXX joint $XXX,XXX, used XX, dropped and net liabilities current financial and surpluses adoption, operating XXXX-XX, XXXX XXX Under and and prior The on approximately method million million recognized pattern components XX-Q effort our was facility expenses liability an topic a activities the in We $X.X now leasing as $X quarters converging international XXXX $XXX,XXX sheet will million adopted expanded $X.X comparability standard the $X.X Financial XXXX Board will last the million, Standards and XXXX credit XXXX, its minimum receivable. increase while lassoers. reported year, of a our organizations. lessees principle, amongst increase and assets in transition approximately aimed there arrangements operating balance or line than supersedes recognition for topic ASC On we XX expense rental XXXX, respectively. over $XXX,XXX in issued available core company

to compared ratio dropped year. to current last Our from X.X X.X this time

days Our average outstanding sales XX to day last to XX compared increased year. XX%

year. the cash Our capacity XXX translates expansion. to to company's greater A cycle, cash indicator opportunities time shorter conversion from borrow liquidity, leverage business working an and to managing an efficiency discounts less days and more a capital spend this of cycle via in last which days at liquidity, to fund XXX assets into need increased means increased

reported largest historically performance. back closing, terms thank to first our often achievement Chief second hampered full of year were Officer, in Jason segment, welcome has the from a And numbers revenues our In for single history, and a In been call business first quarter company weakest interest. considering quarter shareholders thank has Executive I'll your Tienor. you continued your you the for now President turn support. Telkonet's and specifically,

Jason Tienor

over would Thank you any Gene. to I like call you, the operator take With Operator? questions hand to that, that may to the have.

Operator

Please with comes Instructions]. the a we'll question-and-answer line [Operator time, from with Our Rock proceed [Operator Pierce Financial. session conducting this be Joe question. you. your first At Thank of question Instructions] Plymouth

Joe Pierce

XX performance as as helping A -- couple this hospitality years, questions, regarding them is as I’ve to-date. you military? helping long known about as see continually of and the how Johnson. best the and the far company Do

Jason Tienor

going largest as jump looking Military, the know itself commercial are the we quarter, working up that our when the they and and work to is first partner more that project we’re with is due them. number we’re dramatically far in to with and at today presence I -- division of with education The quarter project, double-digit finishing that had that impending Johnson they a percentage numbers and heavily. we often different have closed first it’s

organization getting division with year, of who we’ve DSO’s, the we with their seen within far introduce to rolling end last just contracts So very we MRSO are To-date will and more success with Military. and military their Noresco at work closely.

Joe Pierce

strategic can best saying way the that thinking the board about members? -- Basically, even current mentioned on the merging been the which companies seeing they the selling is you're or possibilities company You the board’s company, capitalize discussing. board about

Jason Tienor

for mergers, can the investments. all its type to of of has say partnerships, that towards determine beneficial continued most you’ve shareholders. that that The each board Joe. the the the they've conversations company of consideration that question undertaken acquisition, the confidently every can think I of answer And that towards above, described. I conversations had what is And latter, we've review transaction to I and sales,

Joe Pierce

$X. of mean, who’ve for mean stock people them. average upwards of $X from For probably XX would holding I that an anywhere been years, price devastating it to your has I be

Jason Tienor

Joe. I opinion. the that we continue well. all And this can numbers to as of number we I continue and understand board to board analyze as exactly a the what continues you’re your bring call, your that saying opinion earlier on offers as current I know review did were that that And ensure -- hear they'll to of I'll

So thank you question. the for

Joe Pierce

growth of one quick going just the sustainable? is question far this as And as forward,

Jason Tienor

months. last all that we’re of trends believe the operational We KPIs track currently well We from as industry so. as XX course grow of the to over dramatically a we've sales performance, number seen tracking

as beaten a throughout than have basis of better mentioned we’ve word year. everything themselves, on last sales done XXXX, saying I -- can’t been I dramatically think Our monthly that a

continue one. flow. does impact to you can the being and now through working Gene That right of on we impressive forward. for moving that tell I a tariffs is we more today, and year profitability financials on that our impact went If of as the dramatically impact seeing themselves. can the growth the the you see have largest were see the that review to business we’re listen those So for able resolve would tariffs we disputes cash an our that to Honestly, this negative said, the he also type have remove I today as

year a that and as very that’s number the huge that have the the we have that to going we continues parties. trending throughout strong to board the of have different improve dialog we year performance interested a see going So definitely But with I XXXX. consideration continued performance see trending we're and for yes,

Operator

from comes line Asset Please Davenport with proceed Management. your question Pearson Chris next with Our question. of

Chris Pearson

mentioned to specifically related receivable wonder some that's had that to get the rates, upcoming I you I if accounts expect on growth. we're seeing. that how that cash at revenue just we about if quick in free to be continue flow, to think back do a of just grow And quarters, that? Or we as should a you continue the to related that to and flow just to tailwind headwind? just cash these and to expect growth a

Jason Tienor

the see ahead. to moving opportunity we shelter performance, increase sales accounts we Where receivables year of the we as and believe being the moving inventory the is in one to significant in Chris, order early that capital have performance then thing That we cash this and sit start forward, in year growth. our with for we early both that operational said, every did use to today

fairly again we're we and forecasted we're growth have on well beginning the situated the as that for year. we at have the believe hit significant -- we While to expecting place, a we for year pipeline for XXXX of do in next current full-year ramp-up had the believe we that

expect while see in So near-term. that I opportunities going the cash we're to flow improved

to planning out on, look we a apply to an buffer do have expectation needs. those our further As we for

Gene Mushrush

that significant have that Chris, if we anything you as XX balances to availability of balance. timing AR activity, as jobs try access due assure it can well a recognized the lead invoiced addition with do improved of helps. I of AR actually doesn't revenues, are collectability, is of related to AR those last the to when to always the majority as the as of might surge timing closings, to are well, sales in significant the in is the well that project days the And -- in quarter basically the still as the occurring sites, combination to that's as our which portion witnessing the we getting

Operator

Our Investor. with Keho], your question. next line question proceed Please [Randy comes of from Private

Unidentified Analyst

this told those with the now stock stock want company people I for higher I and stock. -- been I've that have for now. them one [indiscernible] years, of over that and the own I'm XX the told about friends

probably We million have together. shares a over

We that in job going would good that a they why sounds thought to doing. it don’t board and they're doing like they and this this that job I we even are are came talk good do excited not understand year now around? company But the was might continue selling grow, that well seems let to company. about about are It it to Why to me they inconceivable as just selling turn doesn't? starting It things talk finally and now. the then not

Jason Tienor

you, your opinion as know I Thank long company. the appreciate you with as how Randy. can is been your long that are. I've and as I longevity here

through and and that time surprising of I've conversation has And conversations we're this conversations your as with make at hear like company sure I as one I can that Etho me. obviously, at selling we're promise that call the the have transactions hearing a through Telkonet. conversations. reiterate know So of well. can speaking opinions the moving thing we I parties do prior comments. with a as I to say here your this, to the obviously companies I that I as having been are whom do, very next on will that interests and comes as this. mentioned number from that earlier, different variety and a to sale say a number a continue been to not of I board the are And number transactions to to have board I of members and want

looking the and bigger, different available effective So grow automation of advantage as company and most incredible take at recognition the well now. opportunities through understand to to and all larger board as manner growth in IoT's the possible, right is the avenues that efficient help

Randy, So and opinion I for it share will appreciate definitely the I you.

Unidentified Analyst

put grow the Well, what for long be to do, talks you my I've company watching this expecting we'll we're friends to see company. anybody hopefully I because again, and well our with And you I before time. continue appreciate we've -- been to -- it, guys. Jason. selling And about in this trust

Operator

next your comes with Minkoff [Marc Our Minkoff from of with question Please line proceed question. Capital].

Unidentified Analyst

costs quarter. strategy that assume progress great there's country a hitting to Jason, have the from tariffs If side? these alternate it's away your you on doesn't costs X% to the tariffs increase that on to source heard I have it an Do are a with China, I product China. related in or right,

Jason Tienor

for Mark, opportunities, we purchase evaluated obtaining we're conducting other well in option me through have than Believe to Mark a their as supplant an and for abroad. evaluation, contract single suppliers case domestically what burn all manufacturing a contract that up analysis happen current and contract current to that historically other our a of of for we could that is chargers. all we to as manufacturers, contract manufacturer bring where as our both year anything recent, not determining costs evaluation until ship to final less our comprehensive manufacturer The to products that doing twice contract countries manufacturer, potential potential and redundancy into issue waivers of every have conduct we most our We that from as manufacturer. was every able analysis were found through if both the

up while we've with goodwill so to that manufacturer for with been impediments significant to is that built current currently pricing it near fact them have. a a pricing type that that the to just allows benefits relationship Unfortunately, them we the long, than rate our contract enjoy the of that higher even costs currently in and and and XX% our than us that come the to One the receive with still from we manufacturer, but we still standpoint, significant closer what such of than anybody the we of it’s has tariffs. ever while are Recently anything U.S. certainly are that we’re the have addition seen, contract one a current provide higher across them to type what international they we’ve enjoy. pricing paying better have

that our potential we’ll able return shipping we’re partners. our time, waivers, as see quickly, improving But options, an to and margin. all evaluate to dispute resolved impasse continue continue to at back At I to including we said, hope we situation. on has be the this including rather So that

Operator

next from [indiscernible] of the Please question. Securities. proceed Our question comes your National with line with Michael

Unidentified Analyst

last Just a this one. follow on up

are here? of are they all how are the trading with you or On eating tariffs splitting supplier, you it, it the

Jason Tienor

a supplier comes Unfortunately, product tariffs disadvantage to charge, doesn’t what the the a any shift They when to don’t pricing it and and the or we our relationships an pass our eat tariffs. problem what competitive two And to pass whether in charged. a to along constrain take competitive a include the to it increase, combination cost. that simply in us of and via within to the we up of to live whether we whether charge and agreements is how they determined and increase number themselves. we we along the the always ability customers, we our ability The market. They the us because to agreements tariffs very pay they’ve this customers, it’s in pay our have industry ourselves take entire pricing, increase it’s our

been the negotiate incorporate a today additional the us the tariffs branch raise prices greater to of in our account leverage expense. majority few tariff We order the in have costs. of the But for to to able and entire taking shares

Operator

closing for have we question the call remarks. And would gentlemen, and Ladies and end I back answer Jason of Tienor session. turn the reached to the

Jason Tienor

we your and Telkonet. for you continued support to you, Again, Operator. interest Thank thank

at any you or remaining a We great please us this following have have contact XXX-XXX-XXXX, by call, emailing hope afternoon. questions you If ir@telkonet.com.

Operator

conference. This concludes today’s

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

Telkonet (TKOI) 15 May 192019 Q1 Earnings call transcript