TKOI - Earnings call transcript Q4 2019

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Operator

Good afternoon. And welcome to Telkonet's Fourth Quarter and Year End 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 Officer, I would like to read the following statement. Certain statements included in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. and number technological and the size, development, to new a as and company's scope involve revenues the obtain factors, net sponsoring projects competitive market contracts issues and statements duration of variability and uncertainties risks such ability due of Such to estimate internal in in accurately demand and client.

Form that the X-K developments. financial results its found in company's Further and statement Telkonet company's reports with Exchange information items reflect can is obligation filed the in on on the Securities under subsequent could affect today to potential to on registration factors discussed and Commission. be update no

Lastly, Web recorded the available I call in remind available site this Relations a that will and of section at link would Investor be www.telkonet.com. Telkonet's like for to everyone made replay via

would to over discuss may I the that, CEO, Jason results. Tienor, like begin. Mr. to turn to President Tienor, you and the now call With Telkonet's

Jason Tienor

joining thank Thank you, call. operator. fourth for earnings And Good you and us end Telkonet’s afternoon. year quarter for

see progress by steady today, continue earlier we the posted financial make can key to initiatives. and you As

effectively in steady XXXX environment around We out and XXXX management plan with for and we outlook the deliver are and new a forward. the with into strong unmatched quarter improvement performance, carrying momentum and pleased record But forward strong and year products, results our for and opportunities consistent fourth moving our cost closed growing and pipeline margin. to

By provide key measures, had a that ongoing Telkonet target and as markets have niches current whole, current and our during fiscal While quarter to this in Telkonet in our results. events demonstrated the improvement our identify to resulting grow and positioned activity fourth the key Covid-XX increase dramatic a environment. opportunity value well beyond entered in considerable on metrics business XXXX shareholders industry Year through in for since by the all impact earnings involving continues economy XXXX New market

Regarding with fourth year's growth our very XX%. pleased and quarter over gross a I'm performance quarter revenue of quarter XX% those results, margin prior of

These in efficiency I to to through credit all swing resulting our achieving throughout dramatic who concentrated expenses managing our willing on first bottom-line that talent EBITDA is improvements performance provided an top-line in a results amazing as amount positive $XXX,XXX management of had quarterly and profitability continues business to heights. assist team $XXX,XXX. this new areas to our of organization reach and

was single business largely our historically within While performance market. by a driven

several is marketing environment. business and the Our efforts across crucial us This industries. enabled success assisting sales consistent our in expansion expand current key have ongoing our Covid-XX to during interests

execution These Especially each steady economic diverse recovery. have strong our of to as about growth we the continue the and the at activity top-line as increase of growth drivers profitability revenue we consider underlying opportunities hand, excited fuel and me to plan. market sources against during

initiatives. team committed fourth to progress business generation Telkonet of in strength commercial fully markets. for by comprehensive technology, quarter, our the remains intelligent innovation four against automation Additionally, scaled and the demonstrated solutions we Supported delivering key next

delivered in strong results markets. growth secondary our and we First, market across expansion

seen growth our in past posted. in the we've of the record Over markets year, revenues target resulting each

their our benefits provides and expansion significant identifying allowed has technology In where addition, savings across environments niche operational audience. commercial

looking generated only XXXX through in and resulted forward. efforts not additional Our ESCO had in military results in markets growth the channel have positive our but

relationships the demonstrated going geographies efforts. international have these in generated with dividends. and through several our order last have that in instrumental second over into support the appetite Key fourth efforts in pandemic. investments growing for in partners on exhibiting to proven during the current currently in the expand geographic success Telkonet's of a smart efforts of XX% year's efforts key approximately relationships revenue cultivate the is reach demand approximately of the these the years half XXXX growth full We This quarter in significant the pay $X.X are maintain alone. International technologies The as strong development $XXX,XXX a markets initiative, worldwide or to to extensive foreign even resulting million quarter valuable commercial revenue. focus peaked for international International

continue of of top-line investments as expected One and contribute in strong XX% in with is investment XXXX results growth. to XXXX development to the our profitability. channel in in to A with in further sales support, focus tools, having performance work efforts marketing these combination the robust training is XX% and Telkonet's through strategic grown in drive increased primary growth channel from our resources to Through sales continued of we relationships sales of in well XXXX. generate as

OEMs ongoing to leadership and and Lastly, Air and reduced dividends as of our These while are well and Trane, just channel our focus pay integration Telkonet IEC. and market for LG, Telkonet's superior and directly provide These integrations sales a the cost manufacturer has HVAC and as development continue and being as we a to relationships compatibility. as assisted partners. demonstrate expanding solution area market offered focus significant innovation cycle an broadening Island such native by and engagement. channel soon-to-be-released of well the as with on contributed access, mentioned availability. and Through the efforts Mitsubishi development compatibility

significantly. just XX% one these by in increasing short contribution channel to while year, Due we've grown our revenue our efforts top-line

international ago with primary Telkonet majority through provide markets. and we've to work marketing direct of product Telkonet's a coverage significantly four As sales manufacturers expand our and years superior sales, revenues been a able to just HVAC a for reminder, through closely targeted across generated markets geographic

manufacturing a within expansion and in changes improvements quarter primary a gross efforts for freight the resulting areas. was sale ensure in increases, fourth quarter key operational margin implementation spent to in organizational and on reflected significant stringent improvements the the resulting of inventory These expenses. Finally, four management deliveries products, cost variety levels mix more minimal our and initiative in adjustment from and continued adjust released reduction benefited levels on A period. margin price of measures comprehensive review best quarter, the to of in The market during strategic in opportunities cycle as savings baseline tariff the throughout tool of and individual a automated a shipments as our deployment monitor efficiencies. in well sales and the

have very with combination, moving a four In for Telkonet These position only of puts with the all pipeline a year. across forward We're looking us top-line and backlog. positive key ongoing progress our results strong pleased business initiatives but activities these positioned yielded forward. momentum in not into success

size and partners base with coming intelligent us industry their ability customer of smart innovation technology continuously for project well driven impending and channel in has and growth. simple market grown on positioned technologies to comprehensive all grow an markets of integrations board. as technology, RFP The Our account target after growth for increasing XXXX from the room market activity has and planning management. number customers to and average date growing energy the and and the been in our has strong demand and beyond automation throughout our are interest

evolving platform our vision potential Telkonet's recognized this of for future that industry. the EcoSmart demonstrates This

outlook. impact to Now its business to on future the and address XXXX moment I'd and take current Telkonet's potential like full year a climate

epidemic our deployments. business. operational business as largest all external the efficiencies hospitality trade our the products travel sales, expanding we availability manufactured Covid-XX it impacting affecting staffing ongoing industry stand areas the declining that and Telkonet's affecting impacts impacted China today, and are war of performance, international to fundamental As inventory, impacts two where manufacturing From include functionality with as

our transfer this international lines around year. of disciplines strict inventory they're and our we to shipments removed, enacted regarding we to manufacturing until we've additional to costs customers, continue will shipping later the incur complete point tariffs While planning, freight of direct scheduling either using

Our efforts to expect half in manufacturer we the Chinese early with our current of completion year. see the and second underway

regarding Next Covid-XX.

on address our our the updates and monitor include deadlines Current our are to to days operations. weekly and maintained. manufacturer continue with situation slipping activities We aren't impact ensure shipping its

We forecasts order affected partners to sales their customers have our targets how address communication and with understand and also lines several efforts. been engaged in to of

where facilities virus ongoing we staff address continuity ensure in of to to the efforts especially is business. in continue basis an industry. the on our risk refocus hospitality to the of and having In Internally, addition, order that outside impact least markets we continue monitor those the

be necessary precautions assured all to to business, order forward. minimize we in of can't zero-impact believe While we impact take continue and and that the taken performance to moving we've Telkonet's ensure

last topic cover One to discussion. our strategic ongoing would be

with and discussions the monitored for we our While These operations potential grown year conversations regarding activity the rapid future since potential the have for several continue we demonstrated consistently further Telkonet's that beginning parties end relevant of more partners, growth. industry synergies.

a of chapter of very our update we promising various efforts us a the period we'll and our as the these next organization. was Telkonet's of to conversations, to through move I moving company growth. am While for as entire valued very closer shareholders XXXX continue proud

Our impressive performance for an industry IoT the incredibly forward. platform capped that our strong organizational the XXXX has has development that has fourth created the creation performance proven fledgling Telkonet and resonating quarter Telkonet's started moving and that year value with is off our growth path and

always to has innovation generation in of automation provide of provisioning of savings. focus The and to comprehensive for lead intelligent the been energy development a our and platform

a markets EcoSmart leader commercial development. early positioned Our in us as our target industries platform during

that has we've and evolved as and on in created within the to building we've value is have relationships deployments. customer platform tools deepen integration consumer the interests developed RHAPSODY Our our enabled learned The our broaden the us our that expanded. industry lessons

again to time call quarterly Gene the you Financial Officer like With I'd now over you. Mushrush, Gene? with once hand interest. performance like the your review for to thank Chief And Telkonet's financial that I'd to and to

Gene Mushrush

to year be a of $XX.X and derived prior to revenues at when gentlemen, to increasing year. dwelling the to $XXX,XXX. for value-added million; Ladies partners And prior resellers increasing distribution is XXX Total million increased XXXX $X.X XX% hospitality increase the The to Product revenues year $X million and revenue revenues million welcome. you, increase December million period. XXst, multiple and I in compared revenues fiscal dwelling XX% to Thank will an was $XX,XXX $XX, good from to the XX% increasing due $X of million. year to million. increase XXXX, $XXX,XXX over our Governmental million ended $X.X $X.X $XX compared $XXX,XXX the Jason. revenues revenues multiple represented product revenues and Today, to prior summary. financial year-over-year. unit were increasing $X afternoon period Educational presenting Product

approximately revenue. decreased by increases may products to for price impact these the the expected be near term. offset given positively But our product be of demand would to impact year the pandemic, company million Covid-XX under which ended revenues reduced in the for XXXX, circumstances Installation normal began increases $XXX,XXX Beginning of XXXX. pricing quarter the implementing XXst, portfolio the third in $X.X December

year For of support by recurring to services. the decreased ended unit center to The prior XXst, $XXX,XXX was related X% compared to decline when the revenue sales December XXXX, year. decreased call

were percentage decrease orders in $XX,XXX prior and The material million year ended $XXX,XXX use in of subcontractors. The were variance XXXX of center efforts and of XX% of X% percentage recruiting import Gross for $X.X an a installation the approximately revenues XXXX, salaries Material to and $XXX,XXX increase profit December gross $X.X of to of increased increase at was a the the Product compared XX% tariffs, the prior compared attributable XXst, $X.X XXXX the compared to year logistical XXst, costs, when in an of period. prior December product million of expenses costs Backlog an the an respectively. and million ended XXst, profit year XX%. decreased increased to period. to December in for X% costs increase increase primarily period. inclusive XX% actual XXXX as year year call

X% in expenses increase is $XX,XXX a are $X engineering Our million. increase impact computer $XX,XXX expenses in offset imports The imposed operating by XXXX the legal to and party audit adverse software and advertising; Year-to-date year manufactured percentage ended expenditures actual year XXXX. sales resulted Chinese commissions; as in in ended to for with to variance approximately in December headcount. fees, $XXX,XXX and X% result approximately gross decrease in increase in expense a XXst, profit compared pro-rated XXst, consultants in on $XX,XXX core products X% on third for incurred salary $XXX,XXX December an grew tariffs and China $XXX,XXX of attributable a decrease decrease

EBITDA million compared for last operating equivalents XX% of ended compared Operating year incurred as December million XX% same losses prior year. percentage compared expenses and during ended in used $X XXst, period and recorded prior to respectively. reported XXst, the at million a XXst, $X.X revenues for to Negative and fell were million of to measurement the the and the $X.X $X.X and approximately Cash approximately million December respectively. years non-GAAP approximately of $X.X XXXX $X $X.X cash We years XXXX the million was million year and XXXX December XXXX $X.X operations period. XXXX We in for year. million to

During the the The that period approximately period XXst, benefit company's per of into company's for the XX cost from the company the operations anticipated during per company's management next revenues and $XXX,XXX approximately This increased months requirements XX-month efforts. December the estimated decreased $XXX,XXX over the XX-month result initiated. has cash cash cost to and management liquidity actions elimination XXXX are comparison balance ended cash In decreased improvement balance XXXX, XXst, month. December is month. the

is speed recovery, However, unable we impact the and results which may this due of uncertainty the duration at to liquidity. developing pandemic timing the of to to operations, are pandemic the including time the Covid-XX our extent its and the which predict with of

We at XXst, December reported liabilities XXXX measured respectively. and assets of current less surpluses current working $X.X $X.X and as million million XXXX capital

and of approximately December XXXX, growth asset quarter, than December balance we XX% of reportable XX of XXst, $XXX,XXX the credit had as as business balance had a witnessed and the $XXX,XXX million we In a days that the on facility. $XXX,XXX. greater and approximately of XXXX, borrowing outstanding comparison single of $X.X of of borrowing and capacity year a based historically The aggregate year revenue $XXX,XXX $XXX,XXX As quarter unit. first softer capacity approximately XXst, outstanding and profitable final of of availability availability a approximately capped

in In Wuhan, as WHO health new Organization the the global the start XXXX Health US outbreak reduce a World virus markets full of in cause the as in outbreak strand products which impact resulted XXXX, continues the caused the the emergency significant The to coronavirus of spreads a to has shelter-in-place of positive operate January and/or continue unsettling the international result XXth, and demand in March to as has and and of uncertainty our to risk volatility novel daily. could evolve least. for been our to heightened already the the outbreak be The unable say However, of restrictions, industries has visitor meet cancellations. XXXX and the classified directives, restrictions, to the spread On and ended, obligations been The closures, school to globally. the customers announced border security travel company. have payment because event China community we international in the impacted with XXXX, pandemic. virus to

concessions increased absenteeism, delays any supplier chain were restrictions products adversely and/or terminated, capabilities phases outbreak chain production to supply and experience could and increased closures fulfillment we facility directives located workforce result ability Delays affect could in place our China restrictions effectively Developments the in cancellations. interrupted efficiently. our shelter could costs impact our The and our could supply primary or quarantines, worker social in such worker and of project If travel absenteeism regulations. or international company's deploy due as fulfillment or trade to distancing, its process. of overall and project furloughs customer pricing

is disruption In areas. reductions to these have cost functional implemented this temporary. At and time, all be review expected uncertainties, strategic we across the response continuing are to to

unknown; is Covid-XX chain the or liquidity this of and industry However, workforce. is the supply impact length management severity condition, pandemic operations, financial of management, monitoring actively

this impact a we the on is and the year for material time. liquidity impact the results condition at financial to company to adverse operations, XXXX, have reasonably expect While determine unable disruption of and overall this

your you for specifically, you our thank thank for continued and closing, your interest to shareholders support. In

Officer, wishing by In Telkonet's back and everyone this recovery. addition, call Jason speedy I'll here's pandemic affected Executive Tienor. President a And to the turn Chief

Jason Tienor

Thank you, Gene.

to any like Moderator? the you moderator take hand to our have. call to Now over questions might

Operator

[Operator Instructions]

proceed. Our first Investor. Please Private Edward question is Stein, from

UnidentifiedAnalyst

deal all to with must another. one It and kinds be ups of Jason. Hi, tough following those downs

me? the to you Sounds doing like Can it though. can you're Okay. you manage best hear

it The me are a might chance? pretty what the candidate that to had loan first attractive. read from and for a Are assuming the you exploring that from be terms you workers; you question few any SBA by furlough seems to is a I've

JasonTienor

we're released as signed. more the but to Yes. are that possible. been us soon speak monitoring applies Gene sure We've could been to as release since applying them the we're order or resources make that has in been monitoring what that determine and available to to

that we we appreciate and whatever feedback absolutely, So are in take that to yes, looking can. areas part

UnidentifiedAnalyst

might if less months, could about XXX and I said something months, the employees six there think, be back keep have eight SBA than if forgiven. or and some hire through for, the be loans This morning months employees they loan available them you you eight

it be sounds cash qualify. could like it attractive So you sounds infusion, and

JasonTienor

already Yes. on this Absolutely. Gene and a streamlined They process morning. were to those. very I applying the we're website SBA have

So not I it helpful. this this will and to, but at we'll it course ones the asking will apply of believe applies Unfortunately, us we're only be time, somebody will keep to do that that respond them. so

UnidentifiedAnalyst

an That's that. luck understatement. good Well, with

year partnerships is or like some were The people things And with I talking companies. mentioned things Are to know is considering we working time. of about second at reported one time them ventures a ago? you've that it whatever looking to or you from sounded or joint a merger the anybody and who an or still other acquisition

JasonTienor

Year, of right in since natures. order few variety of and New us at were of companies the in conversations in of that months approached initiate had until A initiatives with conversations of the have a They their the lot strategic beginning We specifically New the couple that started XXXX. have beginning to Year. waiting companies the got a fact, just are, a done we several actually after we existing last of

So as we interest and and far continue goes. as we they're readily them pursue the to have available ongoing those as as

number continue a different as continue of to activities to events have We forward. And move right we'll taking update you now. place guys

order nature time, those continue ahead concrete At nothing we of concrete we you than in to of discussions. other moving have a with that this fact with -- the share

Operator

Minkoff Marc proceed. question from Capital. with Our next Minkoff is Please

MarcMinkoff

move as of can me? you strategy think you congratulations improvements. and away and and this great hear your with the how lots product from moving us share how China navigate Can forward you through year your Okay. Can of on a to Jason, success or you a source of process?

JasonTienor

the call for the forward and you thank manufacturing in this regards Thank for order question, to our attending at Mark while with manufacture the you well. as we are capabilities With to existing time, we a tariff transferring facility lines have new associated of does move the are that to China outside away a requirement of actually it. manufacturing not with our from tariffs all of moving production

situation, Taiwan So on done care domestically find US with being would have existence. That be moving that that's the we're resolution outside manufacturers, able for in and in year analysis how determine suitable do every said a Mexico, we being we manufacturer the to forward cost so here to to anything if ourselves. of to each continue terms domestically and improve taking easier here other we can at that less additional of do

have and of we taking reference include That it's being to parties. alternative from part that One whereby through those to long of manufacturer. a facilities manufacturing products is on to receive the we before Ed's would that with question, place Ed's second other said hard we the with of we've couple them. to been reported any conversations And with currently our that question for the reference transaction quality do those very match our taking pricing in have conversations so manufacturer current biggest to exceptional problems place conversations of a transfer couple ability in of we've

we're moving your trying to time. is that to But question, what us burden for have placed Mark, understand, forward. answer different the to a of trying the the on couple consistently determine in are some relieve tariffs at of this fire, and best we So company suitable irons to

MarcMinkoff

from implications. moving in new lots away establishing the tax of success territory and China Well, without

spoken had the you of future them terms extent? about, in the military saw numbers do and You greater Are they, I expanding in see to sales. a

JasonTienor

the them had to same stay we're tell what exactly at one point can canceling pandemic one the you type that until we a large with requirements was out specifically that current taking won delaying last those here home situation that or to I of The place. resources year project of prior was the or were enable the unable and on two on daily travel. scope that at parties because and in send the play that of that projects opportunity. engaging have same an similar size partners thus new pandemic, abilities later of not we in ESCO Largely many it impact we involved we have, to them year. Because encounter will deployment for home the have work obviously basis necessarily but ourselves to workers on send of some

is We projects with as under time. this requirements partner forward some difficult our time same of are them a ESCO these the well to as having keep moving

wish So I situation can is involved and possible. and I we move rapidly all this successfully as as hope through that for

expect to speak because we'll grow. I of some when the come when the that as continue But, them to So begin. It's the would out exactly and yes, accelerate we pandemic; end, be project, just see can't uncertainty of these able to that to other we Marc. with at

MarcMinkoff

thanks that and does way right you'll to with when I transparent because be there. up explanation sources stay important and understand your so open your and for contact in it be

a of congratulations answering on forward. success lots again moving So great questions. and my Thanks for year

of End Q&A

Operator

session. question-and-answer turn like I our conference to management for conclude the over back would remarks. does to closing This

Jason Tienor

our would support We'd IR next a until most at again, quickly I If best this anyone you love great services have over and see by and afternoon best earlier, situation our And everyone, telkonet.com. for hopes everybody's have wishes at best and and Thank IR to families; or may possibly co-workers. time. mentioned interests. your any continued remaining itself resolved Once for you, for contact Telkonet. operator. again everybody's Thanks emailing interest questions, current XXX-XXX-XXXX please as your

Operator

conference. you. Thank does conclude This today's

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

Jason Tienor	Chief Executive Officer and Director
Gene Mushrush	Chief Financial Officer
Marc Minkoff	Minkoff Capital.

Telkonet (TKOI) 30 Mar 202019 Q4 Earnings call transcript