SUNW - Earnings call transcript Q1 2022

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Operator

Greetings. Welcome to the Sunworks First Quarter 2022 Results 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] Please note, this conference is being recorded. conference your the Bonfigt. CFO, turn now over host, to Jason I'll

may You begin.

Jason Bonfigt

differ forward-looking I'm Actual Financial our forward-looking in line to our and business update Bonfigt, SEC. On you, to with discussion results we projected Jason Thank remarks, operator. prepared contains the questions. Leading filed our Chief to uncertainties, results law, CEO, including statements our open obligation of quarter I'd our financial significantly that, With the today's due call periodic our and Gaylon team, conference [turn] we Today's call. will various to today from behalf entire forward-looking the like future Except with for in by to Officer and I'd no those statements risks as you statements. required risks like the is may about welcome Gaylon. me over At first expectations. XXXX President described undertake of conclusion Sunworks. of reports Morris. to the

Gaylon Morris

our And Jason. for us today call. quarter results those conference joining you, welcome to Thank first

Demand Before first customers a high and our we're I'd project due our investments recent those overview with within into and begin the like the to NEM marketing originations, markets quarter regions. within markets West a of strategic related transformation, as areas business our the we strong key team end capabilities first Sunworks' in results, Midwest prioritized. to to quarter first residential commercial X.X. in uncertainty in quarter the a our deferred discussion during took particularly of progress resulted development ongoing several advance expectations has making in move projects new with to as pause of business Demand level our together exceeded that focus end

in quoting, we meaningfully has quarter both acceleration the bookings prior pipeline quarter year in exceed opportunities project across the and the On Importantly, healthy. balance, activity early commercial backlog quarter anticipate prior while business remains in accelerated our second second should an new of that and levels.

together positive rising story impacted was labor, to component revenue In in costs, and many management, additional by of inflation. market. the we on expense quarter lead the the introducing closure and are response in continued increases in improved quarter. with inflationary help to focus increases, a chain quarter, cost supply price of second across the expected series evident These together our While times, a capture and labor increases offset the with rates in headwinds upfront was introduced margin investments the price reduced first disciplined are first

a inflationary California received customers petitioner panel industry, requested adverse will that industry, developers in filed impact and and solar pursue Commerce face trade the and companies chain, solar in the March, of from solar rising the solar manufacturer, In DoC Solar. based in Department the that imports believe of exist we module solar investments the pressures rates. to review continue utility by Auxin Although concerned petition producers that agencies CEA, pricing an could for investigation association, availability everyone Thailand, Chinese Cambodia, the are Vietnam on panel from U.S. including anti-dumping. Malaysia, to Many our to in IPPs. our have affecting related panel and/or working supply The

see strategic above supply risk last Beginning our to year, our in levels, this advance module from energy solar reflecting whole, headwind chain lack mitigate we a no While industry, impact near-term demand. investigation a intended build action transition these of on the solar a a support developments are as potentially growing historical business. to began late entire the of we to customer for inventory

third-party our domestic foreign and partners. expanded we supplier initiative, this of relationships both part direct As and with

customer to on cushion ensuring create investigation of So benefited pandemic-led potential comparatively our decision during stable volatility demand. for commitments, inventory QX a support we period the demand support have any sufficient a panel and us, customer module expect to to foreseen significant 'XX. an we additional couldn't supplier DoC our inventory the panels cost Currently, supply inventory low have supply supply availability, barring rising to between while of contractual pricing chain well anticipated and issues into chain existing

accelerate. a cost Turning shift, low across the including highly fundamentals, remain a look to XXXX generational is on residential and in to what our discussion as energy priorities our market. as at renewable key commercial fragmented costs, remains positioned of beyond. now to uniquely geographic Sunworks of adoption utility strong of this Market reliable, continues we leveraging capitalize strategic our rising markets remainder and scale

Looking team on key five focused remains ahead, our strategic priorities.

residential focused remain acquisition solar the XXXX market, growing installation platform rapidly we our upon on Solcius. within of scale building First,

year-over-year by to Over supported adoption installed megawatts XXXX the market in growth, we upgrades together planned renewables. annual anticipate residential five interconnects. driven from progress the increased with of increase consumers' of PV will installed, double-digit commercial, XX% broad-based by growth experience in years, grid next megawatts completion levels we U.S. expect by will demand the and Within

includes expansion introduction together and products multichannel a growth solutions, focus our new organic with of further pricing demand-led of Our the sales model. force,

that is accelerate specific regional inorganic growth priority, While to continue we evaluate near-term expansion a potential acquisitions markets. do could not bolt-on within

will our designed direct on our rate XX% we XX% originate capability, compensation focused XXXX. derived exiting origination, company's residential remain XXXX, internal that segment up sales a to run expense. reducing revenue robust channel. increase Historically, By while force, initiative from develop on from residential in XXXX, more channel percentage business. from sales the a launched new of expanding sales one the originated heavily relied an has revenue partners to end approximately project expect be Beginning we sales of we our third-party of the Second, direct to

gains, will materials based a to equipment project an labor Third, more adopt inflation, distributors. equipment approach as approach network thesis in programmatic to we a surety and we reduce supply our would is Margin transformation capable this third-party source significant enhancing business of of and and improved Fourth, and cancellation times rates of a including we reduce lean targeted to culture, of operating from catalyst reliance actions and efficient to materials lean force, year, positive business, even our improvement, intend we period to equity. lead intend recent from allow U.S. central expansion. price execution. develop procurement believe margin a that market remains well average We productivity will our underway headcount at Multiple to one our the driving drive implementation in lower direct the are improve a expansion currently rerating increases, seek continuous expect and to and and which sales during channel partner increasingly raw share drive build optimization of our lessening margin of principles sourcing costs directly will increased cost. and as sales adoption margin. for resulting investments, while This and manufacturers, original on

Finally, during maintain to support this of the growth we period liquidity ongoing continue adequate business. transformation, will the of to

call capital net first existing quarter of XXXX, investments, to as we including build headcount our X.X at the view proceeds demand, in were together in working over that, Jason direct of the first purchase investments the under quarter invested sales common support with company of Cash agreement, During our a additional of to we sold resulting to increasing $X.X million. results. an hand financial I With market of proceeds million force. for inventory the cash shares equity the will

Jason Bonfigt

Gaylon. you, Thank

plus domestic first Sunworks' the a to both solar multiyear at business During continued designed residential to quarter, scale, markets. team commercial position our advance business transformation and

in costs separated Commercial change reflect the Before is businesses. please Solar, commercial, reported implemented we we segment how financial which will works Sunworks business. of note industrial will one primary and Corporate discuss financial and our we change a the believe our and is into that performance evaluate manage performance, previously our public our segment have now reporting, show we that The better

will not be Commercial to overhead We Corporate profit. the for provide Solar year-over-year performance evaluation below able segments gross and

been year-over-year more as backlog increased profit, has demand first strong Residential offset Solar. bookings in on renamed the quarter gross segment sales, activity. to than commercial Solcius a residential basis Net and lower all materially Our

For The a prior in million ended increased segment, of attributable months to residential mainly reported XX, the revenue $X.X Solar in the XXXX, period. was revenue the the Sunworks decline which offset X growth million from total March year-over-year segment. contributions year $XX.X versus Commercial

estimating, revenues the from and Solcius revenue. first comparable XX% Commercial in the period. XX% year prior the total is respectively. additionally, to improved commercial management led revenue, quarter, The Gross quarter first profit represented primarily acquisition, in in our to margin residential the and and variance $XXX,XXX million During of period to reduction in improvement $XX despite Solar execution the cost segment, contributions versus attributable increased year-over-year

reported the $X.X million year share quarter a million versus increased reported basic anticipated with to in onboarding year-over-year an margin loss our inflationary first year adjusted well in of a per of first quarter pressures. as first a expenses per impacts strategic of sales share direct operating an team, basic year $X.X the COGS throughout these of the noncash versus and prior of $X.X loss was prior compared support of versus the in a XXXX. As a loss to associated loss XXXX the million Solcius in gross period. million We of prior X.X% and labor We variance was acquisition, in first quarter the as Adjusted the year period. the quarter investments loss impacts, result in million XX% loss growth the $X.X period. $X.XX EBITDA primarily in building attributable $X.XX to of EBITDA net $X.X the The of continued to in

business Solcius $XX.X segment, platform. by on platform to to a of to acquisition. direct approximately was our driven In our Residential year-over-year and of our forma XXXX, which increased our pro sales executing view expansion of through basis revenue building strategy of than Segment X% business. to X.X% channel our revenue direct the market is generated less a sales our million, prior our XX% QX compared Turning

direct that over and this now of approaching as their revenue Within in million, expanding direct growing sales channel Segment Commercial past X by well we loss within uncertainty. as driven pressures, effects by from We labor months is our of year a pipeline leverage. our declined EBITDA million, continued $X.X was sales meet our encouraged XXX actions our to investments throughout price representatives segment, the force XX%. given through to orders and function, XX% opportunities positive the to recent $X.X inflationary X.X direct to have which grown in our NEM offset driven demand force year-over-year pause expect are

year over volume. period, of gross impacts Segment QX. prior quarter new and the segment margin Our and improved encouraged secured estimating increasing, $X pipeline million, was XX.X% of that to end first operational driven EBITDA projects we are of X.X% performance. we primarily to $X.X the is in the opportunities million improved by The in have versus due of at the loss

Turning to our balance sheet.

$XX.X end cash compared of of was quarter million end at fourth equivalents of the XX, $XX cash of million March balance end XXXX. and Our XXXX million to first at quarter as to the at million XXXX. inventory the Total was the the $XX.X the $XX year compared

inventory Given we referenced list earlier, to issues will are suppliers expansive from our module COD impacted of Gaylon the countries. modules in in distributors who not producing the continue make and investments

for Please have flexible with our that that XXXX. open support concludes will believe remarks. orders as the and line we be our prepared sum commitments the We into session. firm and of question-and-answer the Operator, made to we demand begin both our commitments questions negotiated demand,

Operator

first the of line Instructions] Capital Donovan Schafer [Operator Markets. with question Northland from comes Our

Donovan Schafer

Corporate new be the for externally? Of thought, but other on as like acquisition to purposes of at course, C&I segmentations and through overhead to that kind direct talk we and I sort I'm assessment, put investors performance you might of Residential you one customer breakeven is isolated that's And could environment then a as it look initial if something would the the thought absorbed in helps where and together. curious effort. managing what how segments we own that costs should or you've without their additional my look at can improving the internal sort from metric an number just or normalized the maybe or be sales growth be of needs with growth. the segment

reach those So of to about and we looking profitability? to be just how, at towards to externally, and to going look think should think that how I'm about at that pieces, they're progress kind different trying -- addressed

Jason Bonfigt

business, understand I to Yes, and and cost reported how the Good that the for -- -- Sunworks can think of commercial industrial the morning. that -- "Hey, readers that change as overhead was profitability on with it start, begin being company. And so that we to businesses." Sunworks And before internally our into positive to legacy Donovan. said, we external evaluate we and and a of strategy. was XXXX, in we that this was corporate difficult towards I segment the we costs public interplayed want EBITDA execution our we moved all we a reporting made that can move our

corporate you people overhead day-to-day and is that Gaylon legal, aren't costs executive well. then are the tied is which into necessarily This see marketing, in So really what as operations. really and myself today the team, lead my team the

fairly across our small set a So well. board costs as of overhead

the performance, comparability we and helps was from So across changed business structure and business. we for us that it a why I our think really when evaluate the

Donovan Schafer

scale, new -- the Do margins of this segment a -- direct scale the and of quoting are you now a to -- that to sort a those want are do this? maybe with -- overhead reporting guess can know their I where, reading they segment, segmentation, you bit. scale? them is sales the already I you And scale much the through and side own on Or that changes changes, they they feel overhead? at at as improving C&I little variable? sales, residential you direct with is rephrase of other C&I corporate are isolated are side, they it they the And moving too be under Residential cover kind and can their a at -- they improving those the so as on into increase Okay. kind bidding where, the like but

Jason Bonfigt

and have resources the I'll to we in just the the resources, be flow. add leadership cash that believe to free we generating place business scale overhead this

Donovan Schafer

just sort about ask residential. backlog mentioned macroeconomically, in quarter-over-quarter the just then clarify. or Okay. has that Was I to to And happened real first, -- you I want lot geopolitically. a first guess XX% in of And a quarter, well, quick, Just year-over-year? increase

Jason Bonfigt

That was just a sequential improvement.

Donovan Schafer

Right. Sequential.

Jason Bonfigt

by across channels really -- effectively. all And again, driven sales that's

So we're channel. direct sales result partners channel seeing of growth in sales the and the our

Donovan Schafer

be also every So of people, as there's was at the those, Ukraine. people And another the invasion Ukraine then in first inflation there of from look news talking in And to a the middle I situation proof it's the day. is terms of just inflation fossil quarter, think, it rising the lot I of point that fuels. we need electricity to rates sort system now, powerful in everything. get of off your with saying so in sales can in know purchase the headlines pitch inflation a being and against lock and and control

seeing I of other So specific translating are into from is or are backlog key maybe drive certain actually part thought or -- that customers? helping like increased? XX% Or items these even phenomena seeing rates ones inbound of more close these, haven't that? where the there that you you're Are maybe calls higher

Jason Bonfigt

you But them, that energy certainly the a a And that contributing. pitch rising utility a theme at finances are few mentioned there's availability and from same one only we of independent, them, a pressure being inflation. things the predictions dramatically, of often. the time, of think in I number we standpoint, cash excess is but not on people's of see sometimes also rates of inflation

depending to available the for clean they So preserve we're I our the the with ours. a on will I talking on messages on lending to energy that very if we're very they renewable people that safe And them hearing have want it's the towards move bet side, to say capital consistent still competitors, everybody think grid. are to versus

demand, decreased not We demand. are increased seeing

type following telesales model. group demand. the and and we of those, more channel in job door increase mechanism then, our driving that's X into human friends. course, of canvassing good We of And a that business between got reaching a bit group a more sales then more out referrals does And a And very have before, customer a they've seeing people is to had definitely street a They front an us, from the traditional sales that of haven't direct phone. are well. as we're of neighbors out seeing quite the it's by of

Donovan Schafer

the Okay. And on following direct up efforts. sales

increase you headcount a So of significant that. had I because know

I was think employees. it XXX about

of are most think quarter. this added them I

in before we would one, sort a to going I of expect there's terms that, we guess curve becoming newly -- percentage headcount significant or relation or in to there trend? And of they're so that somebody expect should how Or when to do you of should necessarily so what of more to the be year? And is of to up is there? selling wanted think to X-part if marketing a XXX the so be, learning the another how will? And Should through meaningful uptick of performance is added you additions effective question cohort, this and you not then the to an year? as a we build revenue end because that hired, improve course, we But them and of this related and train of -- kind salesperson. -- should more then salespeople be of rest expect of this kind

Gaylon Morris

So the...

Jason Bonfigt

I can… Gaylon,

Gaylon Morris

Go ahead.

Jason Bonfigt

it, I can start. can take I

sales about talking are that of we're reps XXXXs . most So the

a building the of growth But as the year, we were come the we of like XX% slightly We'd that about we'd expect be to segment, -- the modeling majority around group. sales. would sales really inside the down to think as rest you a year. in the residential out not So of that, -- There's throughout were for in that piece I salary-related certainly embedded that, leadership is compensation or say of related. we're

But out these to continue this it's for the strategy right force. We good we've the XX% we're again, think it's to think, direct to investments going at a been and build as diversification to sales XX% play range. well. company, I historically, the make

Donovan Schafer

-- customer, to residential want mix or think of I turn decent rates. a in what amount some a do now of think would we're possible, what rising faced want loan. sales? the the I of you a lot kind rate. lot cash know but And Could and remind that of I And of sales, your also Okay. times us presented these interest then lease, if I of to comparing you -- cash to the I utility talk with do be lease -- prospect a to what's presented with times loan, And to -- monthly your I and think it's payments a you prospect

And a so like $XXX rates how for on how I'm much or -- point basis curious increase any if Reserve? a you month, give month interest in Federal the from much that can us $XXX increase a XXX it's if based sense whatever, would

Jason Bonfigt

what's Just choice. going first towards There part predominantly part back mix? question, our options again, But to the customers, they that and loan your the of the of We're we your most equation. is, them do offer all first our question loaned. are -- X move have of to

Donovan Schafer

maybe payments interest the your rates? yes, a increase popular monthly loan in then if those And maturity X-year to do most have rising -- rates interest for the you sensitivity Okay. is of for products, that -- or whatever sense

Jason Bonfigt

sure In put that demand we of in those those. pace I it of to if a way sales the larger on passed is and a the to going interest I'm And that as think fee rates the the end, the you the increase paying face fee of in set lending gets customer a know, that certain are product. confident easiest price changes, utility at the point. fee, end the rates is up the the pay keep we we companies to in

not the fee the with be necessarily to cost. payment So it's month per necessarily rolled go up project but to is it go literally into increase, the up going that isn't going or rather will the

would a with moving is there's -- And even the of hard now, there. trend where to I demand kind to basis rate is times do. term, number try homeowner, I XXX financial mean in things of what on being everybody's standpoint. as those changes It's from change points what to the number pressures. homeowner's though each the right kind staying affected say a situation there's going. seems to parts each an to inflation focused of relatively this demand So of medium I it understand guess a despite least -- at individual individual anticipate interest And unprecedented for changes. think we're, strong just medium inflationary -- I trying for is and We're the short by are

Donovan Schafer

That's seeing doing any you with perspective like this to modules. It's in Auxin you the there narrative what's Okay. seems one with out to of procure you differences an get residential it that inventory, that going up harder with were procurement? have there But CVD, going inventory market then, among to The guys analysts When differences? modules, other? any and you're if C&I right on larger to Solar be get case, building environment. of residential you projects are to build easier are the helpful. and the should AD, And modules seeing I'm some Are since of in move or curious sort sort you easier is in and the know modules, especially and projects. both maybe

Jason Bonfigt

amount that Don't me an been has incredible say the get difficulty had would -- It haven't we sourcing of wrong. more I either. challenging. in

now, the if more becomes come flow. that the Solar for things or But of and That to it rates definitely supposed not more to change change make be of change August price different to -- through out it's with like deal now, luck the are we the We with. having either right could could situation we're decision, is the decision made, didn't phone used that calls dealing we end when we're residential into with of preliminary this necessarily or -- changing of 'XX. dealing year modules Auxin difficult. on rates that said, well weren't the and the commercial making But we're the not dealing with continue

X well next year. with well the providers into Tier are committed We

Donovan Schafer

offline to the then my healthy of is pretty rest take question, and kind just the then last I'll in a for the U.S. sector seem And XXXX. forecasts expect C&I industry markets XXXX, Okay. surge for

of idea permitting C&I. on I there it's interconnect been Some and think, have this that, more challenges

that's worked can bit as that a this then bottleneck you accelerated of gets on that's kind surge so a even through, of kind and created the a And impressive get residential a And or real side of backlog or C&I versus utility. accumulated. more

the I'm you benefit that wondering, the among something So interconnect can is does been you guys you upgrades they so that already could if mentioned Or have And get does to these only for out? ties related grid kind it -- what expect on from? that's does of that's if wondering And look of constructed guys? that just like apply to how to waiting issue, that same the you projects are kind that interconnects. counted I'm that same into and forecasts? play

Jason Bonfigt

instability weaknesses, The asked. where related that though is better. maturing. looks you work as something as the be, is hear public installer is is the to question all side. an commercial and make beneficial improves, it not but we it want It time And even for about us think to from we all be to the improving. it that time is who And work it industrial the grid the grid I done being may

day every the Additionally, industrial more maturing standardize and better And and requirements willing more for on market to C&I being comfortable the that is a authorities solar becoming similar see permitting still understanding permitting you projects. and then with commercial, for is side. where

getting explain to seeing seeing having requirements understand more regulatory beyond to those less the COVID become easing better a permitting So we're offices pressures we less. people are just We as or work time an individual. when we're requirements bodies, and and an company the going their as even after such, of AHAs construction above and standardized have the and through are actually the a because of easier and offices vendor things individual individual to

going demand. make 'XX, a easier prepared about commercial to does 'XX, Rising are solar to talk We be this renaissance to 'XX, that be an of being in. of things numbers are of 'XX we're lot to business it's a that, than for course, So those but the 'XX see take us think going that when that. 'XX, for drive are for all to willing rates, taking off. little certainly well really going be sooner it and I really

Operator

the call have we back reached to session. the Gaylon question-and-answer I'll of Morris remarks. turn the end And now over closing for

Gaylon Morris

So again, contact and you our joining of This have call. feel call free once IR@sunworksusa.com you with follow thank concludes up our will everybody, a team for you. at Should any member us to questions our today.

You now may disconnect. Thank you.

Operator

And for participation. concludes this lines today's disconnect conference, and at you your you may this time. Thank your

Sunworks (SUNWQ) 16 May 222022 Q1 Earnings call transcript