SUNW - Earnings call transcript Q4 2021

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Operator

Good day, ladies and gentlemen and welcome to the Sunworks Fourth Quarter and Full Year 2021 Earnings Call and Webcast. At this time all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jeff Stanlis. Sir, the floor is yours.

Jeff Stanlis

Thank you, operator. thank year for XXXX and quarter Sunworks everyone full and earnings afternoon, you joining all fourth Good conference call. call Bonfigt, Officer. the Officer; on today Morris, Gaylon Participating Chief and Jason Sunworks Financial Chief are Executive

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

represent any performance the call projections no to over to the conditions Gaylon business these projections CEO, to market Morris. as the may XX, as estimates Sunworks and company's future as now obligations update today, future I change. assumes would in addition, XXXX. turn of In March management's like to Sunworks

Gaylon Morris

Sunworks expansion thank excellent We and profitable residential Sunworks, both residential competencies. residential continued market scalable companies. results call. industry. small are which future. very robust our and acquired of a organization strong EPC for now markets. and with larger This joining afternoon, be the This proven and from technology we to April, organization in player a very and continues for foreseeable scalable Good moving This reach, platform we in solutions solar market have deep we as to growing professionals for for the being to our you sales-oriented according successfully forecasts productive a a of should In geographic at acquisition transformed with rapidly significant deliver in Solcius, end have many a you. to industry a year business everyone built excellent Thank growth platform was presence both experience a relevant C&I

Over to to industrial future. key the ensure have and past year, added our to installations, leadership expand scale commercial we in timely business helping and enhanced our established the margins our us and processes quality gross and have business

finance platform other both as acquisitions. and this track to leverage a focus pricing. favorable commercial industry, to gave more success. effective organic effectively Our are we and costs. more with growth to We on opportunities. sometimes and greater scale Scale enables batteries more pathways and matters and components access us units. to successful of business The record to we have scale advertising in this cover turn platform and pursuing we public inorganic company access Scale panels, us and growing our and marketing growth investments, greater better both differentiation acquisition to company, public capital a XXXX is as for enables And to to residential a in our Solcius need

future represents federal utilize these $XX loss acquiring can to we net million greater taxes. than carryforwards and to businesses more with in extracting Finally, as operating integrating path value NOLs a reduce

chain companies a the have declined have valuations the environment. supply biofriendly issues more and past for Over solar year, created acquisition

in in our that evaluating will states. medium-sized companies, are contribute and expand bolt-on XX growth. targets, are we small- offering acquisitions XX acquisition potential primarily solar Geographically, to solutions and scale our to now markets We storage

residential we year, past During the expanded in presence our significantly Texas.

the business, in a to goal assess create markets key geography residential fulfillment Geographic a with next is the residential Staying presence more technology our initial to new with to several a growth over notably We because the our quarters. model enables limited platform. a is Sunworks. a enter into effectively to additional multichannel our initiative market leveraging establish cost. quickly us Especially our continue Solcius capabilities, in for sales organization

We other continue to sales actively to new partners partners. recruit throughout the States United for augment sales our third-party

rate us deal existing and penetrate months, XXX sales largest will direct grown continue grow our a salespeople added we are markets in by in Post-acquisition, and markets this more do six our rapidly of our most we the more of even we install rapidly sales to the channel. of specialized channel. Solcius will origination. channel I'm being also will Not offerings team the innings our today. list help increase partners, streamlining and channel team will and have popular channel this, This channel strategy, while the As of by encouraged of a and selections new to was participate partners, base expanding sales revenue add-ons. direct through making direct generated further This and select number streams. via And allow we for included part shifting not have on sales rates is originations executing us where of to recently program now us launched to early second we grow competitive in source in existing only partners, our number sales new base locations a the expand our

But Commercial in our be quarter and Public can much This avoid a not growth frames we seasonal our for significant addressing past. remains on weather improved compensation Works margin-focused Margin did have the fourth accurately based have in Sunworks key project better at quoting that and and to and is with overruns. Sunworks and the lower just challenge in estimating Today, revenue. progress significant and business both evaluations now organization impact time deployment to businesses. a margin, improvement revenue project we our execution presented can priorities. margin. and overall, made margins are winter installation and costly impacting Turning

exceed It is, our caution however, often until made. now on revenue, to projects I the that speculative. future, is backlog to quoted XX% have won, ultimately work indicative the are of and this these progress we but convert to Looking margins

Over businesses positions backlog record the clean reliance business the providing operations is growing and veterans industry conflict Motor significant and ever. look Overall, driven is year. we individuals market a of These is organization in track a forward growing the throughout have and have opportunities for added we the energy C&I and independence within sales. encouraged further to backdrop more energy this past tailwind pricing I renewable adoption of provisions the regarding that Congress crude pipeline in the year, pursuing than pass and believe and climate-related oil. updates our renewable experience forms oil by The has key to to industry. made on up and space. important quickly Russia-Ukraine will reduce incentivize to to energy sentiment am energy

Additionally, results to our fuels and Jason ask see in an to lower customers to independence their fit reduce utility bills, to related ultimately individual pressures will energy more a reliance providing natural solar the on while offset that, as financial carbon-based With inflationary provide to and quarter. our specifics I a their mechanism basis. on

Jason Bonfigt

everyone. afternoon, Gaylon and you, good Thank

reflects business, Gross Solcius compared the Solcius million quarter section of delays hires. selling Solcius negatively new margin million $X.X issues, operating on program, the Public XX% leadership reflecting of expenses improved for we the notes compensation Commercial and XX.X% being or following significantly total backlog finance XXXX that to quarter, the or of and XXXX includes and we to and expenses in invest and the future retention as margins million with quarter technology, and grants XX% this our was quarterly quarter to compared for statements of the grants the Sequentially, to vesting this the XX% total the focus total employees for XX% in see markets, expensed of of fourth due for as the Sequentially, XXXX to from progress to project quarter. amortization certain revenue year the for million of the fourth $XX,XXX year Solcius. and to our installation to year. identified the of revenue. into million This related financial improvement contribution Works from first million other to to part project expenses Breaking and prior from expense enhancements of This $X.X compared XX compared lives names. was revenue issued senior in fourth was marketing, higher Revenue quarter, assets quarter Industrial we are and expenses ago in Depreciation efforts. in million, $X.X year-over-year, Solcius. and was revenue weather revenue intangible particular million in $X Solcius. of revenue the $XX,XXX of team during Solcius deployments. Gaylon a industrial was was impacted to of or our due as the $XX.X the our continue residential and $XX.X operational to was commissions was the the amortized revenue years million fourth delaying included well Solcius down X delayed $X.X our to increased RSU trademarks of $X the up Stock-based gross $XX.X schedule in versus Solcius reflecting third fourth million. primarily marketing from further, said, acquisition residential in our in estimating versus quarter the The Details positive in prior information million of million that functions was Residential commercial and as consolidated XX% the in Solcius primarily to fourth For us by last was acquisition being are compared and quarter and joined compared prior $XX.X in was million of This $X.X accuracy fourth over the constraints, last model prior ranging consolidated The option labor trade of scale XX-K. G&A $X.X months increased platform. April modestly expansion reflecting the year quarter which expense the Commercial quarter amortization for amortization look Total the the acquired the as of our process increase were was XXXX. in also $XX.X the legal million. to revenue on the of XXXX year marketing related on reflects the revenue contribution year. year. as installation compared and and year $X.X revenue $XX.X to permitting quarter. million or revenue new

related to in our from charge impairment also We million goodwill prior recorded industrial business. $X.X a commercial and acquisitions

the our fair flow, over remain calculations commercial to we term, the not has excited so While opportunities the free book value about fell historically below our grow business business cash the requiring value the impairment. generated long

note Solcius. this of point, the to impairment or the put Solcius related acquisition and goodwill Just to further is related a not

for $XX.X quarter. loss $X.XX the per per net $X.XX compared million of loss loss share net prior was year of a Our share quarter a to or million or loss $X.X the for

For increase of $XX.X million million compared for year. margin acquisition. the revenue is XXXX. last and Solcius selling, was million $XX.X to compared Gross revenue to million acquisition which $XXX.X marketing the other costs attributable for in last Operating Solcius of XX.X% of XX.X% the is over added The with $XX.X primarily $XX.X operating attributable year the associated were to $XX compared million million year. year year. year-over-year year, was last expenses the increase the to to

$XX.X $X.XX and loss basic XXXX, share primarily of well and compensation loss million stock of to to $XX diluted in compared per impairment. or $X.XX Additionally, XXXX. $XX.X expenses for inclusion we the ended million incurred was December as or share net as Net amortization year related million the expense, noncash of basic XX, per

Turning to our balance sheet.

to compared of acquire cash Solcius. reflecting restricted December December million XXXX, the XXXX, as and cash as XX, to was used million of $XX.X balance $XX XX, cash Our equivalents

end in year period. the the to $XX.X of million inventories compared $X.X at year Our the million were ago

us there like closing turn comments. well delays, we While supply call With back constraints for recent commitments Gaylon meet that, to over believe investments the continues in our year. that I'd be customer to working the have positioned to chain to throughout and capital

Gaylon Morris

creating challenges Larger pains. The navigating Thank opportunities these The continues to it it access distressed and challenges industry have better for impacting and are the growing combinations. is as grow maintain labor you, panels industry solar the chain Jason. ability to batteries. tight smaller companies and it harder market industry's experiencing to struggling, installation for is The grows, supply and made organizations are schedules. incentives

As company a focus. key area is of such, and our growing scaling

We into scale. leverage have we as built our significant model

organic significant obvious geographic of residential. most opportunities in have and We The both is C&I growth this expansion.

expanded have Texas in and there recently we state. are additional are We to the adding presence our markets new

markets partners XXXX. channel expansion We for which are and in both channel, direct sales increasing adding and our several additional identified have growth sales enable targeting will of

we expect region, expand tied for part due and structure brand marketing we in commission As standpoint, awareness most sales. a commercial costs to sales grow presence residential our From improve the our expense our industrial and revenue are and opportunities. an to our to on

G&A especially for G&A. modest per over opportunities And the G&A related fourth Solcius dollars An increases business of leverage us, is quarter. focus have can relatively we to the However, in you that on watt. see area

Board can committed We our margin as impact operate. revenues G&A possible is over esteemed This organization revenue. by of is has Advisory ultimately launched and of which social methods XXXX, have that committee studying significantly governance, the of improved expect establishing with and environmental policies employees of championed best an reviewing we Hall, and been and levels increasing to to Judith an all ESG our Directors. internal on and organization and our of and in impact social a to Chairperson are our from In sustainability see lead decrease answer should initiative ESG sustainable comprised the When as has gross goals profit. myself governance partners how practices vendors. making shareholder the to operating indicators and Sunworks made own expansion, I'm value can accomplishments months higher With happy supply and our Sunworks we and environmental, with questions. the this only to reporting support be and now chain sustainable specific to we to built or of expanded their margin but that by forward to come. beyond look excited the combined percent Committee not creation being the an other any also progress we communities that, grow,

Operator

Your first coming from Donovan Collier Schafer Security. is [Operator question from Instructions]

live. is Your line

Donovan Schafer

want Hey to congratulations by quarter. guys, the full on the about I off year start for revenues results. the asking

XXXX, of add on down looks flat I think, Solcius the business margin Residential revenue just the go. while So bit when basis, of Business, in C&I I was a guessing and either if year-over-year some I of because the to little up think year-over-year. down letting most process the for have and on look may C&I the you it like projects pro of of I'm forma -- bidding quoting kind lower was the side, the been redesign was QX a that but Solcius whole

you I've analysis that curious can if wrong Just overall, of, -- got you that elaborate? is there and Just sort correct? if if anything

Jason Bonfigt

the the some this of quarter because was is quarter. about I million. in revenue -- Gaylon. can that last of had the million we year transitioned residential and The don't Solcius was we We talked that Partially C&I business remarks. start $X.X $X.X had we've million timing year. that balance business off to The is in last related $X.X and -- permitting -- the about and weather that delays project about over

Donovan Schafer

great. Okay, yes. actually, then And

of kind a expect is I for as the we -- it you're weather was the more and Technologies should weather reported yesterday QX challenging and in and that in highlighted something QX it weather it's the for geographies well, was delays if them. just that's to as for something challenge know where a challenges or of they Shoals talked about you wanted just maybe And challenge. unusually permitting you So seasonal -- what

if So just there? you elaborate curious can

Gaylon Morris

of washed where intended Gaylon. agricultural quarter where and out rain on Yes Donovan, work. California, is agricultural network day multi-inch to you type had the that a ground we basically and in the mount weather this in November significant do California, issues depending in do of works. are fourth a specific The were of for month our ground to mid-November most early to Northern ability amount We multi-inch

middle again significant has presentation a the where dry fairly been first was didn't impact to we I've Northern in California Shoals I quarter. this weather that in of that catch primarily not -- quarter. So the month operate

not same in that that us I'm play did anticipating be may the played the So quarter. delays -- weather us fourth

Donovan Schafer

anything -- feel makes you feel really just plan of what do I'm a Okay, level not And where like with capital, you during at million terms around Just issued And missing? that's about kind is just helpful. second, you the the going is paid of then how additional one to ending what which feel -- how first, like And do share average there $X.XX -- for looks proceeds? my then of in kind the of great do just I your share. of do do with math for that. shareholders? you quarter. And the shares you count, look the you kind cheap of this in lack more kind of right Is based a word? it on in an Where level based do guys on of feel -- forward right price price like get kind is with in question. like looks talk you a do about of or It change do guess, share high starting now interest I raised you and $XX your sense better sort $X it's where of like at on raise guess, I

Jason Bonfigt

part with I'll start math question. the the of

than and was would we this valuation I'm secure company. not growth and not so call value main do about get talked lower But strategy; those to acquisitions. we slightly use so to of proceeds what XX, can to there we about sort of what on execute was date. going we supply want $XX.X of chain potential how million and sale that. the Gaylon on would our average the into of about sort that you're the from so of think I describing Certainly, proceeds are

Donovan Schafer

yes Okay, in I’ll queue back that’s here. helpful. back the the from I'll -- jump queue get in And,

Operator

other no There are queue at the please time. this proceed. questions Donovan in

Donovan Schafer

keep going. I'll Yes,

primarily is does to the new like I I'm your the So direct sort include sales. that curious -- a you decent color force? -- hires, effort? door -- be sales additions. count might a a like head are is guessing, or It additional telemarketing knocking of you, Or involved? knocking sounded does door on yes. your digital know, this I'm there Can this telemarketing

Gaylon Morris

Yes, absolutely.

into this emerging second has of sales one of the direct residential between month-to-month thesis budding a he the one incredible they our was part this role or we them are the the in founders initiative Brian On and Jackson, the channel entire Solcius. when time, up against fares an year. sales the who we that side, role At being in sales partner. contributor last summer over new acquired charge It revenue and at was now transitioned of was Solcius emerging growth eight of last of and effort channel launched effort, post-acquisition built of was Solcius months. largest market organization other the acquisition one

the but But efforts through selling strongly a at So currently offering There products. way digital product adding we a generation they're moment, and this are well. We digital the are lead is. yet? Are selling actually Is our their marketing Absolutely. initiative door offering to closely online evaluating to we're traditional time. doing not limited at really Are at that digital tele-sales knocking? they presence involved?

Donovan Schafer

forget headline course, And into great. there the a recently NIM going yet there there's here around expansion, or I has been that but news, governor I covering are go lot do something. these geographies two And of in some are passed but there go Florida you the know look these sort I are in or I'm X.X you geographic revisions think news there, states where or to now of Florida net the of then geographic year are of metering grabbing other for reasons? don't Carolina you geography ideal that's you there's but then law, the and Okay, of not not for was sort I developments of curious, other and targeting Florida you're something. considering like, which Carolina to next sort change expansion, was, want states and were -- geographically? signed somewhere as for that then it or an to some not you'd other think that

Gaylon Morris

potential I our think, Florida or Florida whether was not pipeline. our in question, pipeline. potential in not was was First

Florida a wouldn't We with job they relationship they have of that. bit who and a but channel partner very on do sells United us do the in States. for we West encroach to sales self-fulfill close quite want a the an But excellent in

or really So market the sad us. pass. With counter a states regulatory had at we've looked us. looking that But moving is see for are It no outlook great something is definitely of will certainly, to are as new And as them the operate look be looking or that fortunately, legislative can. Texas track I'm Florida industry regard Florida. challenging at, we And be continues the that in rules, in we consider. those not NIM a there. some and into Other there's closely the There's dozen-plus whenever we criteria to that at we markets folks question that it we at that's going state evaluate. for NIM never market, into to go Florida. to into we that bill in a

move to to new successful to there. cities We and and continue within areas continue tend be Texas into

other and to six to carefully we're be other the With to evaluating going in we're next we'll that regards the or into doing Texas. regards us over around for what not expand states. states reason be to to, So announcing to there's really months, no with continue South,

But previous less utility be it that decision the that. will does, when NIM commission proposed For optimistic pulled decision the if new prepared California's onerous. for PUC considerably the X.X, when we're proposed the I'm

that evaluated export decision. have how depending We solutions make on not that in $X include it's kilowatts the per of hopefully, therefore, what written, and -- -- export per not or fee kilowatt do triggering off-taking previous would was actually

to in bullish will NIM X.X that California. new the We're a we're is for with offer under California. tremendous So solutions growth prepared on NIM the new It's work X.X market whatever opportunity walk and a constituency then And difficult the really that. that government a you figure it. can't And it wants away for out we'll way around from solar. us, makes if more

Donovan Schafer

Okay, all right. That's interesting.

I you've like statutory trigger I fees sort -- think and that's some how grid, so of net out so of feel positive; avoid I great. can yes, idea solar kind into think of the heard putting can the you would avoid of of the of you back whatever the idea

and you and Jersey, standpoint. you're good the would New general, who -- that but Solcius C&I think the New But expand of sort I but track you're SEIA Wood don't think They're a specific it looking C&I changed EPC. in in business. private C&I think record guys of I with policies C&I-focused footprint Illinois has you're QX in leverage update Jersey just have the Illinois side brought states was Mac in -- Is a there to really and On from of I highlighted and pretty logistics drive [indiscernible]. I are installer states don't from that had someone business, a sort or

Is states demographics policy-driven maybe you? in is. you're sort particularly whatever have certain states that to at it that the or it great of of just or of that are businesses ones state out certain -- exciting solar or certain is are or or resources sort you're a there's So looking

on of curious excited you're side? Just where most C&I geographic from most interested standpoint, a sort there, or the

Gaylon Morris

the interested I'm in Northeast for sure. excited and

have we a we a constantly We expanding Northeastern. is are project operations manager/developer. in And there person considering who consider --

execute, held model, from of how with and mix. quote, we new. what doing the to was to our change house how that's We right the make and were get only approach forward getting estimate, how regards time the the back needed order those needed some I we did in what's part, to pushing it XXXX the we spent regards We right For most really was some we and us to we what know what's time. thing wanted to market changes. to really we how with now we most

to we're the and we're is in that and looking and considering expand ready that at closely. an move Northeast very, area very So area we're an now interested very

states. I opportunities of start think in regards it to to or could And interesting in with of states obviously to some that with with has well states, one very in the Solcius XX locations then a those obviously, leverage presence as to services proposed footprint regards we every Mid-Atlantic but there off legislation the regulation. offering regards -- quickly those has physical

States, our companies the So well. finish there's throughout of United -- seeking as candidate organization. of a inorganic expansion There's a all throughout who another the opportunity merge looking candidates to all kind a then, and the with are United with course, actively let me States with there's combine always

Donovan Schafer

did out you're stands -- sort just of what back residential sort installation. your think I so average, it coming below to interested what And of to installation expansion. approach great. of that's you're you me geographic then solar you sort look the smaller about states Okay, for in of parameters you of mention And when with U.S. there your residential, sort are at markets, than Solcius the typical think, is the

average best-selling Does priced maybe your kind reasonably your if change so it historically to attractive, at expand after like things publicly -- what you states of have peers, into? state I traded where compare and when like yourselves sort that offering. in sort are to you peers. and can of that -- of some like this attributes demographics bring And that. mean goes incomes sort the capita What per you looking do of southern lower

what to another what -- at the someone would are certain you expanding better look And you versus area? than at? you attributes plays when offer that it's what just look different I'm companies. they're state else maybe there so And into where other or for are specifics

Gaylon Morris

see. let's So

remuneration look of or more cost, to pencil least very customer obviously harder at energy. against in at I very, is is things is we demographic, believe regards bill, credit in that where things the of for solar if individual that have electrical cost energy the much a out. the States just income their state sort mean, the you're for any or for we low to everybody. One don't of export makes the these With it it challenging.

customers primarily bill their talking So a the not vast that most that panels most in increasing But somewhere sell majority of maybe that are the the people the solutions their in else, are that electric Arizona, so of necessarily money some to forth, X of about way some saving on of and the save all and other can in homes up value electric we're panels of house they're from projects. they interested primarily sell. solutions their interested bill, about or systems scale talking would to pushing they're large XX can the solutions I solar of a say these when we off-grid size the XX small house and to large

Donovan Schafer

things, and take just not. and last then one the to the trying relatively rest low volume chain attachment installations and batteries on the supply you're out sort of I constraints. been purpose And know And and battery is off-line of guys of for then have I for you been rate historically, my of kind these question because side it's pump think I'll storage and Okay.

bring curious is commissions year as sales itself know, for sales that way factor -- But be payout is Like a that sort again, the maybe updates for any storage offer plan base with have the kind attachment C&I for you and you to if where on on also, if might is battery. force is you something I rate? right growth in there I'm mean, the kits, available? the these you stuff? want force that something C&I you projects be with but of hard drive have a doesn't the into of more supply residential down seen to as road. then model interest seen even waiting now so the growth a can it of side I the chains kind you're business. bidding higher with And business delayed by of on of a their you just And the

Gaylon Morris

residential on we interest to increased in batteries. see are So the side, starting

inevitable states have changes. batteries continues that I at more will expensive And increase type inevitable. become it's as more less available. think to rate just it's and look of Electricity and I batteries utilities of use systems think time and

period of is But We are of provide crews -- many three right primary can house ability to installations more. our can sometimes the a the many, solar very now, do two, Solcius We time. a focus in people single seeing short business to the day. in

Less homeowners It's at have in. of people territories market wide-open at a at So chain majority a pushing the the need more that in look batteries operate work. bit solar of that now, just demographic it's doesn't for we the to into the on really homes -- ability larger They sort we we is it United loans system think very, the the X% a put solar customers pencil solar business. it right solutions you numbers fast than doesn't we them all. meet in with we're either if or we States and the playing in to we're add as vast of talk into very now really about And supply and add hold the right and a larger money -- in think turn about. is space when little into storage elaborate something often constraints more that, it which but any and project

but out C&I I'm with week ROTH with battery looking and Conference, ago technology to some battery at coming next the Pennsylvania. -- the manufacturers technologies. the weeks two of looking met at are us asking last consider solar that of actively There's to we're meeting side On we us time. and some them solutions all kinds all are at said, of and their that different providers

with number batteries seeing a definitely we systems in of last the use and year. but the of installed that's commercial an to storage primarily in very, the shaving, time we're California it's of On work battery very the we've different of in uptick over partially and operate because simple make the California and side idea rate business,

Donovan Schafer

right, Very guys. Okay helpful. great. Thank you,

Operator

Please now I hand our Thank will ahead. you. to Q&A remarks. the concludes back session. our go for That closing conference host

Gaylon Morris

support did let call continued I everybody, joining our we'll to for coming and Sunworks. be your and you, for mention like So this Conference know; I'd thank in interest ROTH people at the week.

format, We the in and schedule team or to any and will to if conference at IR anybody you. please Jason and other some be meet reach or listening Thank Rob FNK who time here questions would one-to-one out participating has like with in Fink to myself. attending that the conference follow-on is

Operator

Thank you, gentlemen. This today's ladies concludes event. and

this have day. at disconnect a for you may You Thank time your participation. wonderful and

Sunworks (SUNWQ) 11 Mar 222021 Q4 Earnings call transcript