SUNW - Earnings call transcript Q1 2019

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Operator

Greetings and welcome to the Sunworks First Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Robert Fink. Mr. you, Thank begin. may Fink, you

Rob Fink

Executive Thank you, for call. thank all Cargile, everyone. on Financial McDonnel, Officer. good Sunworks' first afternoon Chief Chuck joining are conference call And and quarter Paul the Chief you today operator, Officer; XXXX Participating earnings

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

XXXX. the any is the to assumes update over that Chuck? commentary. you like to encourage the business the projections as information of call performance information on review I obligation Today, We a release Chuck issued Sunworks' and future we management's no press conditions as future to after in as release addition, Cargile. turn with augment financial press change. of this market May now these may XX the CEO, would provided call. Company's projections estimates to today, close, In represent to Sunworks and the

Chuck Cargile

we call. financial thank afternoon our joining reported first XXXX. for you, and the everyone Earlier Good you of quarter Thank our for results Rob. today,

was a concessions number rework including expected overruns by results of first construction to to impacts delays. profit leading for slow a of exacerbated number customer unexpected negative gross quarter which cost Our reflect seasonally and

for quarter older provisions for in the several renegotiation unfavorable of expenses to projects incurred the with years. also We agreed prior terms in

personnel these structural to adjustments. significant address works impacted quarter, first made specific record to address works take advantage on our by for changes the we've quarter organization combined to public taken In projects commercial field our issues. on leadership group, has we’ve first public our to and teams public executing While steps and Accordingly, our a and we these budget. stronger operations results were these negatively works track consistent of time our team and issues, in

was former change out in So while the leaders this the commercial our of of operations, step led to in a several decision transition. it a necessary

we and In adjusted older on in pricing full year. the cost first our the this jobs three troubled addition, more of of settlement of the for negotiated quarter final

to particular with adjustments of issues the we related business high an negative this key Lastly, believe ability unusually field amount In overruns the had in making one this cost win more our customer. to adjustment concessions case, in required and promotes addressed we the customer. with future cost the

that believe disappointed in results position. reflect financial Although, for we do quarter, go they financial forward we are the not the our

for larger was profitability the of given the year. we remain quarter, in Although the than loss cash adjustments confident the we nature made of and many first generation the remainder anticipated of of the

near new wins and project and fact, long-term by in our supported XXXX market is confidence overall In conditions. positive

on new our pipeline. discuss I'll wins project First,

million project ones won the project press also $X.X partner of including XXXX the we a on issued the in Northern in new and California, $X.X coming anticipate with of ForeFront California a to Capital in Northern and impactful projects, of District. million works We’re follow-on project million finalizing release with awarding includes terms we're excited our projects us Water the about tranche the the with key we summary months, ForeFront public a key a a next today we've win $X.X agriculture some the customer

projects We that very fourth Foursquare runway that also with there's had the agreement store The announced Church strong for follow-on we part Gospel. still We have our is quarter projects believe long a multiple project the International and anticipate of of on, another Foursquare Aldi with a of partnering follow-on as XXXX. them relationship we we with partnership the in grocery of

low for projects grants. We’re qualify housing the for projects which on California our Omni, next for terms tranche discussions having of income with partner state multi-tenant

with front, residential development the selected a California been homebuilder. we've a a as new residential On partner for

store to although progress continue make to new first In very than that’s five convert this being even in new more any can Standards new our to revenue Massachusetts, in homes Building XXXX anticipate a intent subject York, lead our months. sometime valuable XX quarter Northeast when in incremental It's projects a in of to be didn't the LOI grow. This letter a residential XXXX. Commission this to will months. also We next the are in we're XX chain. expect several over and that year, region first California developments in in summer of requires to XXXX more built which market we from with programs. power. is and projects signed a than worth million noting Mandate expected locations $X we low installation begin local to awarded dollars partnership California grocery we project more a win friendly. LOI We Also that pipeline the million over to there Aroma we’ve this for in we've solar and been residential projects the next add In beyond the in income particular the weatherization use optimistic this book solar to our New business, developer for revenue continues more of These all Energy,

more Wood is Mackenzie that to and a perspective of the boost now completed of the XXXX revealed and to optimism before after commercial bring successful follow-on the That from home achieved study solar on regional important view with wins this in is the to three our pipeline for preliminary commercial credit Solar region an accelerate in provides recent to which our part appears solar in in the on ongoing pursuing installation. down in two its tax about Renewables years projects step States, to project was we're us our customers. position, build key launch PV expansion Power Carolina with accomplish. augment opportunities agriculture believe the many Energy A projects Mandate large secured the help Southeastern had end major & the and accounts one-millionth backlog to external United expansion could will in XX From positive be also feat year. just Association by investment XXXX beyond. well. I the business areas. U.S. potential customers We expected milestone to industry two a with developments We with XXXX business the as focus our tailwinds market installation, the partner with discussions the customers the study coupled residential and for the motivate us The our we've for new into the some of there million continuing industry success reflect and long-term our and attention. XXXX Industry for my it's than This years solar to to new caught million all took anticipate California

there'll that minutes. solar patient fair In I'll shareholders solar. three to Mackenzie ask to five fits come opportunities addition, specifics four this the is benefit. has industry. of results million to the them And will of the industry more expect Wood according on of XXXX, XX billion solar of double and years. industry. say Industry we're sustainable again an industry Paul be of of be growth to provide companies long rapidly years ourselves strong Energy from our At But that numerous per the will just very rapid With Association, that and advanced track forecasts from minute quarter. by runway to have endured Solar the $XX Sunworks, every long-term that, in in be current industry long-term the to levels and rate ahead installations XXXX up evolving in is in part financial has XXXX, positioned high solar advancement starts to installation for one growth, continuing does and the one It's million related

Paul McDonnel

revenues of year. prohibited reflect positive quarter Works first the quarterly about seasonally $X.X activity XXXX many the the same for Thank XXXX and of of of March quarter $X.X revenues temporary in reported were the first revenues three total a the months negatively sold already quarter. of larger and you, in were discussed goods the million low million. XX.X% Chuck for were XX% quarter or million results setback consecutive about months and reported decrease Public Revenue below the Cost installation for the or adjusted first was good $X.X $XX $XX.X at afternoon year. first XXXX everyone. results ended of three XX, of quarter on the million financial After revenues the of $X.X prior from in basis, financial projects. costs Chuck ACI first Residential the California for other the XX% conditions of ACI quarter XXXX made Works profit installation million. Public the XX% first for the of installation rainy which adjustments were the for by revenues impacted Installation Sunworks. gross EBITDA two at quarters prior million, and an

The may they is in Some recorded positive of Lower from same loss margin to activities. a March the such negative costs the in costs these gross of in costs million which related resulted expenses quarter prior only profit X.X% recoverable as first the the future, are of This for in ended $X.X Any and recovery of same reported in XXXX the expected of we be would such the million XXXX. a XX, these of finalized. recovery and was gross quarter a in compares revenues construction periods future $X.X quarter compared be of gross XX.X% quarter year. to be higher to to XXXX. the uncertain these the

marketing This reduction the our expenses XX% first or million sales selling our Sales for first lower XX% from company our of and Vice resulted were the hired $X.X the period and and the lower operating our residential the operating Within of marketing expenses, prior the total attention President XXXX quarter advertising Since XXXX, expenses promotion expenses selling from and expenses. a December reorganization in new operations. functions, quarter Head primarily for a new of and support reduction and expenses, sales level. to Turning The below reflects $X.X operating a we XXXX have commission expenses were the of for quarter million. an first for in year. same XXXX

focus Our becoming is growing on execution. in excellent operational and revenues

We generators third-party refine our efforts, systems. continue to marketing revenue and tracking

between goal customer sales. optimal in-house and to sales is acquisition minimize while costs the third-party Our generated balance finding

essentially Our flat of to quarter. total expenses the the and in first general XXXX administrative compared were year-ago quarter

has ability expected as our expenses Although quarter while be our at objectives, the year-over-year, prior on we the and the to same total spent overhead from with to and time construction reducing reducing operations Operating changed decrease and expenses compensation has talent discretionary our effectively administrative streamline burden an are costs XXXX prior our result operational is dollars compared a administrative to to and emphasis. including general stock-based management our years improving an operate of the or systems emphasis general be continues to flat align improve using to and on core processes composition technology expenses. without for year stable as been and compromising continue

incurred $X.X increase other compared for $X.X to were for the of board to promissory prior is $X.X the March $XX,XXX The XXXX. part and for in compensation $XXX,XXX During essentially for company the of in interest the former no to March expenses net the for ended $XXX,XXX net based XXXX. the we and from in months $XXX,XXX who compared to the which due for of note management to period CrowdOut the directors first of year. of the three XX, executive expense for compensation Depreciation of XXXX The million is the of non-cash increased stock period primarily interest million stock-based and prior same The expense the the three the second at ended year. discontinuance flat current quarter months to same loss March quarter the members $XX,XXX three XX, reduction total XXXX to incurred compared for in XXXX in March months due expense began a year XX, the ended XXXX. compared same a three XX, amortization million the XXXX months loss company. longer Interest in the are expenses ended months

cash XXXX of Turning to $X.X at our and to cash was December sheet, balance million as million balance XXXX. $X.X our XX, equivalents unrestricted compared March XX,

Our and to quarter from deposits demands scheduled XXXX first installation. module positions our payment impacted projects by compounded needed purchases support terms cash for negatively our and recent by liquidity have operating been for of strict suppliers backlog losses for

debt As result, a to and financial greater capability. provide are we equity near-term considering or us financing

We alternatives exact too optimal. financing is timing of are it we type to and determine the may considering to various at present, or identify early be

of capital the of by million new show working quarter $X.X million at first the a shortfall obligations working our $X.X is and became XXXX was for on quarter $X.X working capital a first Our was million was weak present capital to XXXX, the nature time. from surplus operating value the January the of December the future impacted At requires of due of as XX, no working effective pronouncement of results which the accounting on implementation shortfall our capital compared end business liability sheet exception. seasonal XXXX, balance non-cash that million $X.X our us to first the lease X, of to XXXX of a

in During by accounts three the was cash same The current in months of of XXXX March we loss. in operating million activities to operating the year activities and accrued used activities operating received was result the compared cash The payable impact XX, collection $X.X extension $X.X million together accounts liabilities. in with the of primarily for contract offset of period in used net cash the net cash and loss from the ended used receivable assets XXXX. the

of of inventory hand calls, had result the of the committing of of As at first a on we in prior earlier discussed we modules end strategy conference the a to or quarter to record solar purchase as high level XXXX purchasing March imported enactment of last a million, of to the of end $X.X balances from million XX XXXX on decrease high tariff the as March declined balance $X the modules. Inventory have now that’s year. of the

$X.X consists promissory Our March of million XXXX the total at common this of remaining long-term. year, $X.X XX, $X.XX was a to of million to of stock December of and million compared in million $X.X financing which equipment $X.X $X.X as non-trade debt debt million million April or convertible XX, was current, The the $X note converted is is note, the million acquisition $X.X XXXX. million

we’re a deck cleared we Although many XXXX, in to believe off the slow have for we respects. start

for Our next reasonably is of couple quarters visibility good. the

income. quarters questions. million $XX projects large of expect happy $XX a answer we revenue and any to operating generate next million to of We the have backlog for to positive scheduled range of in now to in generate we installation each are With two the that, and

Operator

will Shen we Our ROTH [Operator from proceed comes Instructions] with of question. the Philip first question Partners. conducting line time, your a this At Please you. of be session. Capital Thank question-and-answer

Justin Clare

Justin Hi everyone. for Clare Phil today. This is on

Chuck Cargile

Hi Justin.

Justin Clare

needed the Hi, rework first of that projects QX. off some reason so can on share in you your was

these solved And follow-on So were have the you not not as specifications. older that a caused as to recently projects were for may as that met were these projects? that that rework these have in expected that, projects the then performing installed or issue

Chuck Cargile

contract had talk entered expected In full in almost cases of in we We and about though been that finalized it's million of Yes, think from precise them Justin. that of it XXXX we referred the three quarter $X XXXX. projects of into in adjustments in over like them and large in settlement terms Good quarter were question, million million. in three value not almost of them into made half and of and the with these you being lingering to came when And about disagreements projects total delays XXXX. I end some future, negotiated it carry early large the cases, PG&E. now. XXX% me We that so very when think two about on about $X But there important progress adjustments reached completed expenses different only of approximately them. the These lengthy that to originally three we two all the we I consider what by the exclusive of them are to, and there’s at one said final anticipate to I and settlement both first were even due of it's on I early the one in $XX very each issues. a weren't asked has gross half let I I contracted the

got we've part So jobs is before to and referred them hopefully now. that like old settled we've

these they from allow half ones some entirely now were any occur. that in And we and were orders be Those own quarters. in in we can't positive not to the your to jobs referring future losses positives the them. the other jobs, full the they record, that not negative There until visibility to when But those negotiating -- able we're quarter. resulted of question. but change The the of new that we We some had were not overruns our and old those you the actually adjustments record were recoup will record expense recorded to fault. the us may we're to were impact and delays of basically due

inefficiencies have works. all the taken ones occurred future teams get as our the projects now they're in finalize important overruns oversight or of and that over of and public It's that works note commercial control also news the public from good So to some we or hopefully, those. we'll the quarters none our

we're think are we we improved to going on those execution projects. So already seeing see,

For case different ones at we are with and that the of cost the for the many contracts where are and that since the what either it’s or where already come with the to-date of those customer one we largest projects off start. rework operations, overruns, awarded being made new complete in we under for in a projected we or estimates And the the all had many, -- projects been have customer. are under was change

it salvaged now that change. although quarter, better terribly we're the we it it's So in made painful it's we've appears the and since

Justin Clare

helpful. Okay. very That's

there your or ability much but So that pretty additional win relationships smoothly a then relationships going Do forward to it solid can to your to too impact been to things going are bit. this like and hasn't customer sounds remain at you projects little customer you any see impact speak point?

Chuck Cargile

of that demanding that is so comes with the we're on we say orders, would we've follow-on and each only of key customers or the not value been and having I've instances stress was you letting follow-on that now quarter think I There can these of so long orders since four thankful the and recurring and people way us see long those stepped attribute in public larger that changes that dynamics made the one in took kill during customers, -- every four will us negotiating first real much I you've quarter been all we'd each those more the give I I in over projects. and one-off. we What The what works customers talking for either learned. that time, only and it's Justin our we're eat instances, for of a signed a we orders time off probably following in know

order at in win the to so And to have we work. better we follow-on do be what

I them said say yet the And instance, the out of now said give in lots so that time, and I hopefully completely the in But and each we've weaknesses address to can't them I over quarter. like the follow-on received will have there case, like quickly we but corner that we're been credibility. stress and able during of turn every was woods us the we we’re orders negotiating fact recognize so

Justin Clare

above of the impact quarter. the what some implied then out the And We're was projects bookings in it your considering the million $XX total number in bookings calculating backlog, you share backlog of million. projects to have cancelled could can fell okay. in Great, $XX quarter. like been the of sounds terms But an

quarter So and bookings could out what what fell were? you then share the the in

Paul McDonnel

than projects not bookings new of quarters. Yes, $X today north but the of in million, four that's four currently haven't backlog it's million. It's beyond have our number for scheduled $XX the in backlog is we a about million, $XX I was more $XX.X our quarters. million, north little

that's March of XX. and that as of Some

Some the of have in X/XX plus that fourth pulled since the into last weeks, four million that six quarter. we

little a So have now. of I forward than don't bit that But Justin. in it's roll higher front the me,

that it helps reconcile you So I don't know for or if not.

Justin Clare

helpful. Maybe from Yes, just me. one that’s more

capital in possibilities you said considering might financing? just and of you equity remarks about or you're prepared in debt think range that Can talk that you're You your the you considering much access financing. how to of want terms

Paul McDonnel

that we go for us. we Yes, wanted early the with fact looking public at It's alternatives. still were to

And type or of decided on haven't be timing. so will what the that financing we

can We’re going wide the well. into, the sure and looking it's make -- on we we're a we’ll something most to advantageous of that select that's look posted most that into to the as we're to efficient you alternatives one us that going for range but keep

that be So a we'll weeks. or doing to type early it's size bit little over But or it’s terms. the too something to coming commit

Justin Clare

it I pass will much. on. very thanks Okay,

Operator

are this back I conference the turn management At over time, Q&A there like to remarks closing to for over would further no session. the remarks.

Chuck Cargile

news meantime, disappointing NASDAQ, issue very touch One watch afternoon I much. before learned other we XX-day from while in to notified were for authority language which days. the calls or wanted to stock watch. the working so, they hang there's XX Due on month yesterday not it to price us March $X XX They discretionary review extension us to even days. a the this the regain that above stock on our though of the little they the still bit we determination going we’re to from until that with you volatility the up, our hit traded that staff last that a year. removed we says Thank indicated consecutive has for out list extend had that us to compliance they're In carries a in of the over notice we're period September that provided

If questions you that any we team matters much. covered any or I myself other Fink Paul you time. would have to or either or about Rob that very call IR at you encourage today, any in Thank the Hayden

Operator

conference. concludes today's This you participation. for Thank your

your You wonderful lines time, day. may rest this a disconnect have at of your

Sunworks (SUNWQ) 14 May 192019 Q1 Earnings call transcript