SUNW - Earnings call transcript Q2 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. And welcome to Sunworks second quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. to conference like host, to now Mr. would turn over the your I Hayden Fink IR. Rob with

Rob Fink

operator. afternoon, conference you, Chief Officer. Sunworks the Thank Good today Executive second for you call Radmilovic, quarter joining Officer, all and XXXX Chief Chuck earnings are call. Phil on everyone, Participating Cargile, and Financial thank

may because statements start, we management's to risks economic contain business strategy, Securities competitive statements in XXXX. the materially statements, to legal forward-looking like and results Litigation the in uncertainties, those remarks in differ and factors, Act claims requirements. retain Therefore, not changes plans, subject and that the development to Private forward-looking changes for could is that Actual attract everyone the of the personnel, Before limited remind to would make certain and session. and business question-and-answer of qualified protection factors contained forward-looking management forward-looking conditions, which during Safe general, contemplated I call, ability during the additional are Reform company statements or this from by Harbor of regulatory the and

projections any management's information I both as Sunworks call Cargile. with commentary its We'd would and financial the may conditions today, the the to issued release and the on company's as like turn CEO, augment over to review future a afternoon, company information estimates projections XXXX. Chuck to performance assumes this future you now press to quarterly XX-Q. August represent Sunworks' X, update provided obligations market as encourage call. to of no these addition, the In in change. This

Charles Cargile

for Today, the and of afternoon for thank Good joining results our Rob. we call. second you XXXX. you, quarter everyone reported the Thank

expecting but our half low-margin projects The years margin gross and we third this lower, the our projects revenue came of a continue, old the to in booked has gives continue to XX%. delayed. In of to cash in gross future Our quarter. still about gross and margins business flush works transform put teens. the than in sustainable public we to gross our in margins had results half XXXX in into and prior in period although margins To prior current a our our blended project the quarters. adjusted but been years, come adjusted of year, from approximately of projects booked cater news We've improve the generation financial visibility ACI revenue us is good quarter have already we're in current more gross works makes margin improvement booked current This high Sunworks the profitability backlog. generating in and in through ACI quarter. public from efforts to margins second revenue the quarter The that context, in

So, projects higher to expected the QX. margin gross in be is than QX for these in

which first we discuss I Number projects despite as are weaker-than-expected The gross the of total on and we margins, and and of see higher the gross will some the three total. that gross residential margin QX residential beyond. us although addition, generally QX This transition than margin XX%. Despite unsatisfactory In public margins in expect gross new percentage the in of a and as greater we're have a initiatives. come sales as to will And little pressure a even of and revenue And projects. works. continues there fully provide margins slightly a carries the of as the to are improvement business winning progress constant our recent slipped declined improvement forecasted projects. the percentage these. new improvement a the more generate we've we million accelerate than a become positive external revenue, from greater optimism and profit, value half revenue residential contributed parts the one, slightly bit $XX a indirect projects of ACI to model. has won projects now forecast reflect more XXXX, we win higher in have our margin than above at marketplace, combined In price with older dollar business

in year. XXXX, have gross a projects XX%. $XX.X our for currently In million carried scheduled for addition, four in of $XX.X We backlog scheduled is million quarters. the of half of of proposals installation approximately this new the margin next backlog the for second

of is won approximately backlog once To and/or million a discipline schedule levels. can will position firm backlog financing $XX not to is projects we we've included either the a been to finalized $XX yet be grow the is once acceptable scheduled. business addition, Any waiting continue or confirmed. they've that profit of projects million terms put into ensure, are pulled not that of in in us while our four-quarter that million In $XX.X even of financing enhancing in win the for

of now, very I'm works enthused notably public been multisite project with significant works we're the most discussing by the team. successful the for We've public Second, Fresno District. our very School engaged efforts Unified in some time

project, leverage success our that this partner. in just Fresno completed. will of the in execution relationship lead ForeFront, having we engagements. more are this our in we're We led our full financing quarter to for strong business frequent mode continue to similar with And to which part revenue the type believe We on record

control costs. Third, we continue to our

of declined XXXX first stop fourth comparable the and XX% expenses quarter. than consecutive Our more operating half comp excluding for period declined the versus XXXX

versus to increase second year, there will and first second half so year the increase revenue in be expect half versus the this expenses. some last of of half variable We

efforts of expenses. With to However, we financial quarter. Phil to our the results more provide reduction that, natural specifics to further anticipate cost from increase variable I'll this some in ask offset related

Philip Radmilovic

all. I'm in participating the call and as Thank everyone. first my you, you as This afternoon, role CFO good join Chuck. to And is happy

comments, undeterred to drive of challenges second the some discussed achieve the quarter to sustainable experienced in Chuck profitability but our in hand we XXXX, cash remain and generation. in we As and committed at task his are

quarter of of XXXX, million, of to approximately quarter the million works by increase second reported but quarter public compared relatively first level million prior-year. marking million XX% Most generated decrease an XX noteworthy, $XX.X for $XX.X is the XXXX, the percent revenue high $XX versus second during the the the of total was a $X.X revenue our of team. For of within recognized the of quarter

at or new to year-ago part Agriculture, XX% now, commercial sale from million revenue We discussing a price at the to utility for post encouraging Due revenue was to $X.X the large the projects and completed different agreement been inventory partner finance to was generated public gross winning parties to XX.X% or overall to work works originally of the being procure and be authorizations project market project, low in or progress initiated upgrades. to this be quarter. on complete declining or construction highest is have of by revenue our our necessary margins in purchased million in $X.X traction the to to a or use The million is $X.X prior a high used the intent from XX.X% levels. projects current from services that revenue percentage also in years $X.X $X.X interconnections Sunworks. business. some due significant quarter receiving Residential and materials million of revenue continue most The for industrial a decline being million begin necessary on it dealers. customer $XX.X construction responsible in reflected of revenue revenue year-ago profit zero primarily XX% material be of some impacted to posted delays under quarter. revenue new the item from residential delays the million and to the of revenue, current quarter conditions project will slower-than-expected period from the as was Gross begins margin. third-party ever total current revenue compared the of the The was construction. being second from the from time XXXX. third ACI The with of to this for purchased our the profit and declined general quarter quarter decline when our inventory tepid We public not Gross of million $X.X due the quarterly in in project.

are model the for of $X.X the prior-year XX% million a goods Additionally, XX, declined million residential as a or decrease XXXX. in XXXX apply sold from quarter dealer salaries It of the projects a XXXX. $X.X quarter June transitioning margin. XX, XX% dealer represents the are or ended residential compared downward We Residential to months margin commissions sales million stock-based for quarter and pressure three ended the Total three to of and XXXX expenses. offset higher dealer in markets Dealer should were months by began noted from the $X.X XXXX. commissions X.X lower and This June for of million recorded were XX% cost revenue gross and revenue decrease second a expenses, be for has of in the compensation, same commissions first to excluding the operating second X% operating year-over-year. the gross quarter. on

higher was versus compensation, operating comparable the increased resulting the for of half total to period. the the quarter. some XXXX Stock-based variable cost expenses We $XXX,XXX stock-based quarter to from In during $XXX,XXX XX% prior-year compared XXXX targeted expected the the of prior-year addition, compensation reductions our first expenses, some in anticipate declined mitigate excluding totals. half second in the revenue of

of expense retirement quarter non-recurring XXXX in of first quarter. the was a up from former $XX,XXX of expense our to chairman. second the $XXX,XXX, $XXX,XXX second non-cash, Interest The XXXX the of related for quarter included

the in quarter finalized expense to CrowdOut $XXX,XXX related The note second interest includes April.

to of interest income share to this $X.X note. the was XXXX year-ago $X.XX Net share million the each expense We compared and million basic per basic approximately quarter. share of to diluted $X.XX or for loss quarter $X.X diluted or in per expect related net quarter $X.XX of and second incur $XXX,XXX per

Working March our to with Capital a is promissory million increased that end Cash million by offset continues working XX. XXXX. in and priority sheet, XX, increase capital increased by unrestricted $X.X March December for cash balance million capital finalized and payments $X.X payable. from to XXXX. be principal and our for equipment losses working $X.X us. acquisition cash XXXX, million attributable notes to at XXXX operating for was note the were equivalents the Managing The critical Turning quarter at at capital the in June $X.X cash CrowdOut million payable by to and XX, to compared and compared $X.X of

inventory of committing level discussed the result solar $X.X hand of on from of on call, tariff we we have on have $X.X balance. $X.X high a the at imported modules balance the million purchasing to As enactment quarter's to high balances panels. million strategy the to or a as record from last decline purchase a a of March declined decline XX Inventory XX and a December the prior million,

inventory decline and inventory capital balances improve cash convert expect and cash. on to hand we working to We as to continue to

to including was and no Our call considered $X.X convertible $X $X.XX that the or now the million, current and of total $X.X million over interest. financing, is acquisition in is the debt a debt million equipment long-term. turn April, finalized promissory million bears back I'll at million .X remaining note June $X.X XX, from Chuck. XXXX $XXX,XXX note the

Charles Cargile

Thanks, expected Nevertheless, Phil. visibility and progress been than the and us that challenges have delivery to recovery longer We financial have are of taking we greater anticipated. the some we making performance. that is acknowledge improve than on

year. quarterly revenue expectation in to lower That revenue to of deliver last a the growing highlighted for of generate than line have due Also, adjusted of expect increase we revenue, the little is a the of in timing leverage slight quarter, predict the than to to second revenue of difficult the positive it's a generate second projects XXXX to the XXXX. double-digit couple now of this more revenue we of half installation million sight we half EBITDA Although, being $XX delays and primarily year-over-year. into moved

I Lastly, generate call will would to XXXX. of up open we positive the for operations believe questions. flow now cash from the for like we second half

Operator

[Operator Instructions].

Capital your proceed Shen comes first with question. Our Please from ROTH Partners. Philip with question

Philip Shen

nice everyone. I to guidance bit. Phil, And, want start Chuck, to having for a meet Hi, me. with you. thanks

guidance I something is in of annual or So, it's versus looking the like implied XX% you to down kind going what think was have guys XXXX. XX% started X% which to year-over-year growth with,

us walk how the looked to business? they a for continue? up bookings back can what for through QX the some – QX, for then, pockets like strength How be and bookings will well. and of little of And of pick do Can you terms bit as bookings the In you pipeline looking expect were that? it driver challenges maybe is what

Charles Cargile

Okay.

So, talking a evaluation works as public about projects first, and little ACI quarter were or strength of really quarter-to-quarter weakness QX long-term. And negotiating generally because – of percentage a our greater a large in sales isn't quarter with a of the bookings, bit the long invaluable believe, really, which is robust. business time, I is are new to

million of QX. $XX.X then and QX So, year in we million this $XX.X in had

I rate is. I think in run So, don't think million, normal between nor a do $XX something is but $XX.X million

on a and us million, we're first million for to which is the is run internally. of the $XXX an over get not important $XX rate metric kind way So, considering or would that for us I'm of half track, whether

think I we have pipeline. good QX, do a that So,

we're close will rather some I dollar with know on. large have We that have September projects. projects It's traction to by a number working predict. do multimillion XX? of hard that we Again, they But

about good new pipeline feel sales. do for the I So,

Philip Shen

Great.

it's So, trend ACI. characterize XX/XX would the what mix and in think a you would us Can tell you been greater QX standpoint. mix QX was dollar Historically, you QX? like about you How QX? that the something for expect from more and in how – talked I

Charles Cargile

works. that and booking primarily scheduled other now more We to works, of in we million very about the with matter ACI Like of we're ones on on QX of working execution said, large was But very, in that that we're public XX% in of works, it. couple we're was and projects for had. and it $XX a working It low QX, most that's works and over had little the had QX public on I ones. a public public a we was because

and more And million getting $X.X and revenue-generating was in in out the going was QX. it about So, new new sales residential sales.

Philip Shen

QX? then, And for see you Chuck, what do

Charles Cargile

an I For think QX, uptick. we'll see

I think we'll board. see an the uptick across

we'll programs. of QX. sequential over think the couple That be a works I a increase public will book

residential would've hiccups $X.X the business. little I I couple think a had be in of it expecting higher we million. than a bit on Normally, been a to QX,

that's than As had been we've transitioned little to bit I slower the hoped. a model, indirect third-party think I sales

so manage trying side organization that in to him the We the a distributor a start think have we've we'll specifically in brought new to And do to for I everything leader see the help manage added on for the of now, strength the to to and network, that in residential having resource sales to addition some else. from as opposed president dealership.

of saw the the momentum that and end the QX. in a that benefit quarter be get by the that's, a able and to him single to for and then staffing We'll quarter June. in positive So, early think, some already our us. slowed see he going start a dealer to in down, QX had bit of and fixed largest And I also, was issue little we

and started as a better So, off slow a well. then June seeing better it a and we little we're July saw

So, new I think see across we'll sales board. improvement the in

Philip Shen

great. more and pass Okay, on. one I'll it ask I'll

maybe that the more a fair to way As a it XX% half loaded that use bit we margins? think to about kind term, think margins for a for in bookings above in margin. as little you QX? to Guide fair be it your should slightly guide prepared Or is be relates I QX first for is conservative? but remarks, were margins the Would the said of QX,

Charles Cargile

Yeah.

function, a to linear to get kind mean. that be I what I to not trajectory you know step of level, think going if a there's

have So, we adjustments margin we'll fleshing of a many projects quarter. expect old I at this low percentage QX. to don't in margins the that still high to as we had as be out the have

that not we maybe So, gross I the QX. expect for higher I until margin somewhere XX% be to think fully XX%, range. QX And I it's the probably But XX.X%. the between to two in it get XX%, think back than

Philip Shen

on. I'll Okay, Chuck. it great. Thanks, pass

Charles Cargile

welcome. You're

Operator

questions this Cargile at I'd back are further like for There Chuck call this time. Instructions]. to turn to closing the no At comments. [Operator point,

Charles Cargile

in and Good the of you all thank questions interest call anyone the day. Well, all today your or And if thank Fink you IR Hayden call, for Sunworks. please for after or Sunworks. at to Thank as again. always, joining employees us you, has also feel to free And Rob Phil. myself

Operator

This concludes conference. today's

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

Sunworks (SUNWQ) 8 Aug 182018 Q2 Earnings call transcript