SUNW - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen. And welcome to the Sunworks Second Quarter 2019 Earnings Call. All lines have been placed in a listen-only mode, and there will be a question-and-answer session following the presentation. [Operator Instructions]

At this time, it's my pleasure to turn the floor over to Mr. IR. FNK of Fink Rob Sir, the is yours. floor

Rob Fink

and you, for joining Good Hosting call Cargile, everyone. earnings afternoon, all you the CEO; Chuck are thank And today McDonnel, Sunworks' call. CFO. Thank conference operator. Paul second XXXX quarter

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

business the Today, In as to to to future Company call. estimates management's update you represent this no August the second projections Sunworks review of addition, today, those in commentary as release performance on as the quarter augment X, the issued and release obligation change. Company's information market XX-Q. XXXX. projections conditions any with its provided encourage press may press assumes and and future SEC Form filed a financial information We’d filing the on to

Cargile. is Chuck, to turn the call I over yours. call CEO, like would Chuck Sunworks' now the

Chuck Cargile

for Good joining Rob. morning, thank you, everyone. our call. you Thank And

the report rebound second for our reported first pleased XXXX. results quarter year. seasonally weak a from strong Earlier of delivered I'm we today, the quarter that of the we financial to

of quarter. million our for line was with in Our guidance revenue $XX.X the

income and positive reported adjusted More importantly, EBITDA. we operating

the were our three lowest years. margin was we’ve achieved two in expenses level gross operating years. Our highest at And level at the in

Our which a exceeded in $X.X and we quarters. the say, over million quarter in million suffice a backlog scheduled good have from details are financial be provide board perspective. four but a cash was minute installed $XX to projects it the will next it balance across to Paul of awarded the

strong our Our all performance lines, pleased business. was within I'm the across our and results particularly business with residential

second Valarie $X.X As of Serrato increased job of in and These residential hired million to revenue. recorded at our growth the generally segment for you positioning new business recall, in may we the She’s sales residential of run we this done quarter, an us XXXX. near-term sale. end In profitability. excellent result new

So, well generated this we significant rate XX in million growth residential run for us of XXXX. positions revenue the over increasing

quarter. revenues year second Second over quarter a $X.X In double-digit increase carried million residential the margin reflects gross XX%. the above ago current a quarter, of revenue

California XXX In partnered addition photovoltaic we residential some to exciting complex. of Power project for we install wins, Bright we’ve to XX, with Northern kilowatts as the positive contribution systems notably, residential on experienced July for announced (sic) mounted the a roof most [XXX] quarter,

future. evaluate on than in And us. recurring with Bright excited specializes customer are They to X.X partner worked we’re together Power projects buildings to multifamily feet. additional a for for covering are has and with square apartments, billion project more X.X apartment them and working million this the

developer income projects. we MAROMA Energy, a residential quarter, low relationship our for last Also, discussed with

from for these generate and revenue projects. installation California MAROMA beginning this quarter $X.X to in approximately are We million in of QX projects expect

$X than XX residential more anticipate revenue over projects from to million continue of months. the to next MAROMA We XX

it faster brings conversion business. performing and cycle well that cash the We our are is pleased our residential to businesses appreciate

our residential the between our In commercial from are that opportunities benefit we and cross-selling addition, continue businesses shared to business.

adding of like some few also build We terms elaborate our the to had business. robust projects of in for on significant quarter and projects. projects commercial continue a new I'd new to new good a pipeline a in

successful We this with and way. were enjoyed awarded renewable church, in are they a $X embracing big energy million and a Foursquare a Church. project relationship with We've long

megawatts home. install In fact, for of many, of of Rocklin, solar across California, a we immediately more Sunworks just convert they've if for have as hired have the coordinating And be power signing comes installed the one is that enough for then with from portfolio well. of many power. and solar opportunity the up Most I conversion, recently, minister's that example to good church and This in sites of their and solar believe the the congregation nearly more is completed churches, and our on local one were teams. minister, the X their to between in residential solar pipeline cross-sell project to commercial to will

of New million in more Jersey This We in line believe project Meat also announced New we win Massachusetts, is the of York new region. And the follow-on in year we second and latest New Jersey. wins this $X a Northeast the with in just the have in to Cibao Products. half

higher cash Our wins we continues with deliver profitability consistent doing on margin projects By focus more and effectiveness to then flow. will executing those so, and be project and efficiency. on driving

investments, discretion. subcontractors to the on $XX pay us access this of allows which not of of financial us cash open At-the-Market quarter, line ability to to flexibility also provides gestation payment terms, that It the million having we connection registration, we've our through In which had. long essence, equity-based in We're to access recently Having partners, In allows we the established us importance considerate that of some second projects. with negotiate with an credit. at degree a a even consider us small program, shelf strategic flexibility. better of it our and time, suppliers, put In with and provides allows cash common of or stock ensure to our up us market structure shares the in and equity ATM that, into equity our sell our place we’ve offerings. capital

We from the create the accrue some dilution the acknowledge outweigh advantages equity that the we but our shareholders ATM are that shares to confident dilution.

the second million X.X is total, than less which X% quarter, sold During shares dilution. we in

We will vehicle utilize very in prudently, going keeping much this forward. continue dilution line to

sponsored eye strongly A the political House changing push peers tax macro keeping level, for legislation group shows of and Senate to next several support climate solar. investment that a a and finish we’re the and over over working Polling and of legislation on with our quarters. and line our are Senators the credit. they Congressmen try their solar bipartisan it about calling On five-year concerned Americans extension across spectrum are the

that as is we’re diversify second believe we win partners, our of margin poised on solar continue with good focus industry with continued summary, and a profitability then to and and forward grow shareholder enhancement inefficiencies. and We projects project XXXX. Sunworks the momentum through strategic looking further to in In beyond. California We residential effectiveness half geographical driving those there’s believe and expansion for positive executing our expand our business business, relationships higher on in

to details. our With hand financial over discuss Paul to to it Paul? that, I’d like

Paul McDonnel

And good Thank you, morning, everyone. Chuck.

EBITDA and quarter of indicative not across we positive a operational basis of results first the quarter profitability an The the the financial and of enhancements the to that were income, wet again return of partially have function operating organization. XXXX adjusted second Sunworks on made weather weak the saw demonstrated seasonably

and the second from revenue from a first XXXX ACI in is Installation quarterly was of the quarter the million. second $XX.X rebounded $XX $X.X revenue revenue the which the or of of works for million was to total for revenue $X.X installation million XX% prior installation revenue quarter revenue period decrease quarter. about X.X% same Non-residential includes in million. about revenue in low of quarter or public of The $XX.X the $XX.X the revenue the million installation second XX% year. of million Residential

of three prior cost the or resulting Cost $XX XX.X% the profit million from million. the quarter of in of Lower quarter $X.X XXXX XXXX. from the reported This year. construction XX.X% same same June the gross offset of XX, to was the lower a for in three-month quarter. XX.X% increase goods of same a an was XXXX, compares improvement gross an or in profit the million $X.X for million the months period second of year $XX.X of $X.X in quarter million ended sold the decrease the for The revenue, margin prior for gross

our Turning expenses. to attention operating

prior operating year. expenses, total reduction expenses, promotional Within or excluding support for lower and expenses the the million marketing expenses reorganization of operating were quarter same a XXXX $X.X the functions, and in The second selling reflects sales of level. XXXX quarter Our the stock-based quarter second a This resulted sales our expenses. compensation marketing $X.X the advertising from of commission first period from expenses and primarily selling the for X.X% lower reduction and the below were XX.X% and million.

efforts our align to with systems. refine generators, third-party our continue We to more to we continue tracking as also sales improve marketing revenue

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

and operating with of line, in marketing ability as gross sales, sales recognized are expenses, cost associated that profit to above mind line. Please expenses, the in costs keep sales profit the generated third-party gross reduce below the contributing included our to

essentially the of and remained quarter quarter. general to XXXX second compared year-ago expenses Our administrative flat

of quarter systems time the changed general on from prior quarter competition and management construction administrative or the spent general a reducing and discretionary at has administrative and while improving improve result expenses year expenses. stable using and emphasis processes, an on talent technology dollars total is as Although year-over-year, prior the the -- to same

stable burden be the our operations emphasis. the prior our has the for and costs overhead be continues been we compensation align stock-based operational without Minimizing objectives. core of streamline expected including expenses, to to XXXX with years compared compromising and to our ability effectively to are to Operating as remainder an operate our continue

of result in remaining of as During prior June for his same the expense, $XXX,XXX, to In the quarter onetime $XXX,XXX compensation three of period retirement triggered restricted a the vesting recognized of non-cash the in $XXX,XXX we former stock the incurred the ramps. charge the stock-based XX, immediate XXXX, ended year. Sunworks a Chairman of second months compared XXXX, that

stock-based expense compensation in stock-based seized of in expense. from reductions resulting members the of less Additional of executive Board the resulted departure compensation vesting and whose management XXXX options Directors

the expenses interest for slightly the same sales second three prior to the for accruing increase year amortization The California delinquent for the which plus expense quarter prior year in in in ended three Depreciation due primarily XXXX. promissory XXXX for June to XXth to for same compared note is year. due down to in began and interest tax months and million interest the period for Interest CrowdOut increased from compared $XXX,XXX current for were of XXXX, returns. other $XXX,XXX the expenses $XX,XXX, May $X.XX months

for the loss the XX, XXXX loss net to of ended million compared a $X.X $XX,XXX three months a incurred net XXXX. months ended June Company XX, The June of for three

Turning to our balance sheet.

was cash as December unrestricted at of to Our equivalents cash million XXth $X.X $X.X compared million June XX, and XXXX.

in from compounded by to support scheduled our call described cash our and first negatively and first adherence backlog module needed operating impacted quarter As loss for for payment were positions our terms and XX-Q, projects purchases, to conference our XXXX quarter liquidity installation. strict by demands suppliers deposits for of

we result, near-term debt consider equity greater financing of a to the capability. financial As and/or provide combination

last in from XXX,XXX June to common the XX, of shares call date loan stock. maturity conference Since we the XXXX January CrowdOut our extended for of exchange XXXX

allowing At-the-Market on is statement, offer stock, portion sell time time a worth May effective offering. said, registration million aggregate to filed to as has sell Sunworks on Chuck which upto -- also a of eventually an of $XX utilized to became being S-X an Form XX, from common an XXXX, for We of which

X.X common issued common are million of XXth, cost As additional proceeds in $X.X XXth, shares resulting of as and million ATM, X, August issuance approximately of million been approximately million. of the another in Since outstanding, using June after yesterday, net $X.X proceeds resulting sold $X.X have net about June shares XXXX.

XXXX. Working of first to the show compared us second the that to working $X.X of Our to million operating a present compared surplus that million a lease working of December million liability the quarter is of the accounting new the first capital January was million quarter to obligations end a $X.X improved balance future end capital $X.X during effective time. implementation on the XXXX sheet at by $X.X approximately XXXX. pronouncement the XX, million quarter at shortfall of $X.X Xst capital of on the due working capital value the our requires shortfall of as became for of non-cash

used in of of period customer from cash The million is During At-the-Market operating reductions $X The in loss. used the activities million year-to-date not reductions, of we ended the include net in same contract as compared XX, year-to-date cash by collection six deposits, primarily $X.X cash does of six-month the received million months to of operating the a activities XXXX, the result the in operating inventory used and used net in assets. the cash Cash impact offset XXXX. cash loss June activities in marketing offering. $X accounts receivable, impact of for activities

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

Our total note financing. was $X.X June debt The at XX, $X.X million, remaining of and of $X.X million million current is of $X.X and acquisition consists compared $X.X as debt and long $X.X million the of non-trade XXXX million million promissory $X.XX XXXX. the XX, the is term. equipment December million to

have start slow projects into for of quarters And is our good. believe After the a a couple scheduled XXXX, we that we installation. reasonably for of backlog solid visibility next

revenue to flow. million million in the operating of generate $XX to and third to positive range expect We cash the of $XX XXXX income quarter and generate in

answer to any With questions. are happy now that, we

Operator

first Shen go with We'll Partners. Capital to Instructions] [Operator Philip ROTH

Philip Shen

mentioned the actually then remarks the Thanks guys. in the in was for think the prepared questions. million. revenues conference booked on the call quarter, $X.X the guys resi Chuck, had Hey, $X.X million you you or quarter resi I recognized that but sales of

fair bookings from of it the your came to QX, -- $X.X XXish resi, from implied for is million suggesting million came $XX.X remaining of So, say, million bookings ACI?

Chuck Cargile

the There few rolling million Actually, you're was new sales cancellations quarter. push-outs Yes. for the if backlog. your $XX about and were a forward

million million So, was $X.X residential. $XX almost it’s in which of total

Philip Shen

Got it.

you Okay. for And believe XX think months. is when this about next -- XXXX I backlog the

back far how you as in guys X as when think QX well of half remains and how availability next you So, much look? about do of your year,

Chuck Cargile

half So, are what of XXXX, as for new we year to the will be sales the we this the look into fills going that in pipeline XXXX. book second

as one turn commercial alluded residential and you residential the the hand, is on going if works and think think, I So, other the then be of our as the public business on hand, business. the you to to earlier,

have at of the it's from the So, of and million And that to start that at that can then, comes of the works. revenue to the come Most see $XX we from million rest revenue. public will the you're to second business will in half million-plus rate, looking a the then, nice residential. commercial be the new $XX run million sales for we see as XXXX $XX maybe If $X quarter.

in then second backlog we're we're $XX if similar guided million to burn assume that to to half year. you is the would we million QX So, in to through $XX $XX that, QX, of of million if the -- the going

question, indicative you So, need with Phil? the in to we sales half for where XXXX the were generate still Is that’s year. pipeline in this with that be that of we going the the that second new

Philip Shen

-- XXXX, in now number and see XXXX you resi spent relative better it’s Yes. the like and at quarters a year? -- a team what for trying we will, under And is how feel next seems control big processes. that get retooling it does you could of to it’s that what that kind is so to Do pipeline growth you look if of I'm like funnel,

see guidance this So, to or I'm just outlook flat? do XXXX. to Do anything some you not a is trying be growth it think for but you of your could or official get more sense expect

Chuck Cargile

We growth and on growing. see expect are focused again to we

execution bit sales of as sure gives spend a them processes new get to new confidence did continues can to QX, we that we’d execute pleased improved retrenching team levels, able that that that and on we mentioned projects stronger. we make the to took me while to be you think, little I higher I’m our at see the in effectively. execute time we and

to to $XX think us anticipate million and million, able the we mid-teen, to being can What sales need north numbers over need million levels our I you way over high second is to to that. the commercial works low that start to be being public half need year, so satisfy of of in then So, revenue the exceed $XX of to to start the start new XXXX. I $XX instead see and in the that the to peak which numbers see teens in means

Philip Shen

and How and Great. if of That’s we’ll them? that XX.X%, margins And the half helpful. talk this you do to back maintain Do QX potentially with to about expect upon X? growth profile, not, then, kind of improve Thanks. year. in expect trend maybe the you

Paul McDonnel

Yes.

are clearly was of good have a the projects. The We bit old that quarter. for or a improving anchor on drag still from comes focused some the XX.X% margins. We the of

about actually linger in from commercial But commercial wrapped our negative QX we a works quarter. we’re or from public that on prior in up. projects if which you those projects, in total wrap were that XX put five trying wrapped we just from of about the four fact, cases, contribution, in most of up have drag so about those handful to periods there’s ones that the up in $XXX,XXX the that up In side make And on quarter. the perspective the projects the revenue revenue side there’s

drag we or if points minimized have would been XX.X%. didn’t bad And bad we going we $XXX,XXX margin number basis you the the of higher at quarter, XXX if projects, forward have so, the that have in don’t projects say that

no margin which as over can’t something take better used that talk better, XX%, to So, that projects we on back to execute we is we and we reason there’s before. have about think that

So I lot avoidance think our XX% with percentage margin which the visibility over over already carries realistic. and XX% the residential projects, of of more bad a to higher becomes

So, but for to step wouldn't be there I down think change also a step will QX, either. I it be function a expect don't

as at peak to the margin. certainly, I to consistently going expect can and XX% out, we we're in Possibly. weed point But XX% And do in that be So, range, QX? over projects we stay where to that we'll hopefully then, get over believe. gross

Philip Shen

Great. That's really on for been us the you're new list, Thanks. vendor of you source any their Thanks. update as least color. serve new building with solar on helpful Are you that relationships to you down to able Can developing -- new have homebuilders? at so that homebuilders or a able the can lock approved get you homes?

Chuck Cargile

Yes. Good question.

certainly eyeing We’re that.

fruitful mentioned, as for you solar. such sure to it's be environment the the new going for in a As rules as all have such to developments in access our work their make us the -- favor, having to XXXX that homebuilders

have So, been we on homebuilders. focusing

from in we and type XXXX. will Valarie doing a We advanced But at with. But, have am her the and that with in can confident focus that design definitive have agreement I work of this with point any agreements in the that point. as that I I several to are have can that stages don't yet we're some we about. We negotiation nothing that that get team talk sales benefit master that

Philip Shen

it there's back pass nobody on. I'll If great. else, might I on. Okay, jump

Operator

over additional no you call And I'll to in appear this at be queue questions to any Mr. the time. or for back comments. closing turn Cargile, the there further

Chuck Cargile

or your team questions. out the Thank for Thank don't you IR Rob interest and joining if any Paul any Okay. continued to and FNK or all Please of for today myself and time to at Fink support you hesitate reach have you. Sunworks. us further

Operator

you. you Ladies We this does and thank Thank participation. today's gentlemen, conclude your teleconference. for

great lines day. now have time. disconnect may this You your And a at

Sunworks (SUNWQ) 2 Aug 192019 Q2 Earnings call transcript