SUNW - Earnings call transcript Q2 2022

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Operator

Greetings. And welcome to the Sunworks Second 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].

As a reminder, this conference is being recorded. to Chief conference Financial like host, to now Bonfigt, Jason Officer would turn over the your I of Sunworks. you. Thank

begin. may You

Jason Bonfigt

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

open I'd over for remarks, prepared line questions. the the Gaylon. that, With to we Following turn to will like

Gaylon Morris

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

investment growing a the win path to the of solar proven for promoting clean, the solar The the Reduction Biden credit Before reliable view goals The on and by likely year ITC and objectives adoption. low QX XX% cost a passage provide of wanted our level. the extension energy significant policy a We this the industry, to update, businesses I administration’s I of domestic, Inflation progress at rapidly renewable and financial to and of the as is homeowners. XX the strategic provisions highlight our act climate cover support the specifically importance Act. resources tax

meaningful sharply this declined the have impact solar storage on past cost XXXX solar should the a expected and industry US and ITC and costs in the of promote to they over have additionally manufacturing. is in lowering While have decade, extension risen

our update. to business on Moving

residential while each on continuing transformation to progress integrated we in Net profit demand basis the for our year-over-year materially on and solutions. multi-year the strong strengthened capitalize demonstrated solar in quarterly conditions increased quarter, by and demand commercial both have our last increased residential highs. second a measurable May, gross our conference second on quarter, while increased driven across strategy, business backlog During call both and sales Since to markets. demand, our orders

that remain calendar our cash XX% which closer improved While margin supply achieve year, moving we've enacted of months solar secured our latter inflation double of to more nearly the to continued quarter, lots by year demand segment chain the XXXX around segment, basis free year-over-year activity XX% rooftop current capture accelerate, in order the the for consecutive Energy second increased intake position contributed installed into works as concerns grid of look improved fiscal rising of customer a quarter while solutions. energy Solar solar reliability accelerated to wage in the on module as second Within price Commercial will total several due segment, costs while a second disruptions, nearly benefits gross commercial of move projects. as and quarter, availability us a orders XXXX, which activity nearly increases much of new headwind, in our million to flow XXXX. us to Residential have revenue, half order in In second installation represented breakeven. Solar we our adoption meaningfully performance increased for We to $XX than public the positioning and and multi-year in new high strengthened we

growth. required to of markets both priorities across favorable and a discipline of a well designed on execute growth support slate to our level continued maintain profitable sustained demand margin we've quarter, last on discussed capitalize As defined conditions to

originations, last the from our XX% XX that scale our the our we've go-to-market channel direct to months, our business. total profitably allow grown year, strategy to restructured originations of [In residential we strategy. significantly a have just] will Over us

XXXX, nearly versus direct X% quarter We XX% a remain installation sales was the installation second between prior Operationally, responsible time revenue focused reducing total for our team of the in period. the year of or velocity on of During we us, the us also when price contract in our leverage retention, is times projects. encourages final around more to is how only believe more not with when installation and channel improves it which executed reduction provides installation customer completed. partners we a work

permitting installation during we to all able which significantly were we installation Following decentralized reduce our and a test activities, pilot design, recent times.

effective, pilot, of wide ensuring high we decentralized continue dealer we quality benefits expand calls, highlighted conversion modules. are will experience, mapping on while which this the of improved overall cost to and of this a customer contracts. supplier Further, approach, ensure combination the scale sourcing to signed Given the recent the with believe as on actively and workflow company success procurement we to we have relationships our marry improve

constrained have have While expand contributed disruptions action to module policy taken tariff and the global to to supply and labor materials inflation. our relationships, more supplier higher offset prices and both opportunistically availability material related increasing than while chain concerns to costs, we

have broader inventory inventories we the remains demand, availability sufficient market across to module Although, tight. current address

California in costs. suspended signed adverse XXXX increase on industry, solar resulting affected and working requested in quarter, significant of panels Thailand modules Solar, Chinese related certain duties last investigation from and Auxin companies in filed to imports this module months. petition Commerce Malaysia, DoC domestic cells In XXXX. served and impact reduced the an named Vietnam imports module from of in President the a regions anti-dumping panel for corresponding anti-dumping. that solar could exported and This of by to March the action of regions, solar of review manufacturer, The from Department the Cambodia, to based As received disclosed petitioner in reduce order of Biden have the a June domestic collection countervailing response executive XX modules availability that

this call installation, With will second improving for continued improving accuracy the pricing, our velocity to project force, resume second the situation supplier a panel availability will a we reducing improved is drive countries half from the helping direct In resolved far performance. focus of us that, sales review from our and XXXX, remains during our hand of of inventory of of expansion network, to Jason producers will growing results. quarter affected ongoing, a with on acquisition shipments the bidding customer and and issues. DoC the procurement to we believe costs financial combination, I ease our the investigation While through believe collective increasingly over together position

Jason Bonfigt

Gaylon. Thank you,

quarter, of operational across in ahead revenue, During executed backlog. team several growth driving second the significant our and key plan metrics, while orders

achieved to our realization. Although, remain residential across we and improve operating focused markets, leveraging price recent implemented we the pleased end gains commercial margin are newly with efficiencies actions on both share and

XXXX, revenue. attributable the of growth quarter benefited in June contributions XX, Sunworks total the ended and to mainly year from million in months a benefit The reported million year-over-year volumes the $XX.X revenue For versus growth $XX.X full in a Solcius from of three residential prior which of increased installation was revenue period. the segment,

primarily year We by in to X% of profit $X.X second second pressures XXXX the loss inflationary million and loss attributable the year-over-year quarter $X.X of the quarter, $X.XX $XX.X increased the share. year. to $XX.X a growth, second quarter loss of in partially in million or of XX% total anticipated investments revenue million represented residential prior the Adjusted net Total in in primarily in revenue year. versus share $X.X net in offset respectively. attributable the PPP in support $X.X second year company's growth quarter per the segments. revenues versus to and period. During a variance was forgiveness per reported $X.XX quarter million and of current second to year commercial or variance period prior the our The gross year-over-year million basic the each the of was loans the prior to loss the compared The million prior EBITDA in was

of sequentially sales which approximately in Solcius Total XX% in is Segment watts our than our Turning to second $XX.X of as direct to and growing revenue business. review well The versus as $X.X direct XX% direct driven order million, prior revenue the labor continuing increased solar installed meet total throughout million, direct by increased expect a year-over-year the Within revenue XX.X% year year-over-year quarter, leverage. to our which demand, inflationary X% platform. $XX of increased price actions XX% our driven by quarter. the year residential sequentially pressures, EBITDA to within to driven growth approximately driven sales expanding installed less in our originations. Commercial residential million, backlog period. the quarters. Direct in by and dealer second in intake Total by quarter residential the to XX% through both segment, investments residential declined improved million loss offset we represented second sales segment generated segment, in $X.X in operating preceding function, the our lower force growth

recent of opportunities approximately The second in to in of resulting in primarily EBITDA pipeline $X.X generated commercial quarter, of the Our in million has months, orders million the loss increased volume. quarter. $XX segment second due

sheet. balance our to Turning

result by quarter Our to capital the of $XX.X in June XXXX. XXXX partially $X by offset end was other improvements million the $XX.X working cash first compared Total end as quarter management to compared of second investments inventory, was and $XX.X at unrestricted sequentially working the the in as end of inventory cash million million million equivalents payables continued capital increased million a balance the at XX, of of and measures. at XXXX. $XX.X Operating

Operator, investments suppliers CVD continue Please of as Given begin our earlier, open concludes inventory line for will questions and make list expansive question-and-answer we our from session. Gaylon the referenced issues in the our AD, remarks. we distributors. module to prepared that

Operator

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

Donovan Schafer

important revenue Congratulations is story strategy. growth on of numbers, a the of kind pretty part your and the

of and nice guess, there. on been to the And concentrated especially that's you’ve side, cool So more kind also, see. residential I

from in $XX million were million. point, prepared year-over-year there's the on in originations nice sales you I from a had or And So a going this looking basis. backlog a of bump double remarks, kind think forward said something $XX you the to

give improvement things know revenue appropriate But into bump and the read in QX, curious ourselves or leading by performance, can don't into we the QX, in that? origination kind backlog extend be misleading mistaken, guidance. improvement mean, we with if that kind I QX, of be QX? would I looking you these I'm meaningful it are at some the that into would as So to numbers, indicators, of in reading

Jason Bonfigt

it'll segments, we context. provide apart more if the Just I take think

question certainly crews the the expecting on the seen really the further have on beginning residential in So the in see order to as quarter depressed that to from growth happen have we're commercial since But mark that origination that the standpoint. a really an forward to we're delay or because planning the this sequentially. that new of pushing and improvement discussions on we -- was timing saw to further. support we even customers revenue we've business, Really on been as so with so start growth based few could that But rest we could project growth rising the revenue the of QX. for the backlog side, in we year has so growth, that expand that us commercial that an QX. since these depending the is out throughout are backlog QX early year. And that And some excellent side on it backlog last for We're may continuing that to we're bringing record into quickly, for of business, is quarters.

Donovan Schafer

the backlog. commercial residential So in backlog that still, most increase Is accurate? is from and a it industrial? to fair say you was there that But like of said, was increase sequential in the

Jason Bonfigt

That's accurate.

our of the backlog in $XX about commercial the again, $XX QX, from rose million, [residential]... Our QX of million that of is end to business from at balance

Donovan Schafer

like the things way you of And break I report kind then and out. and sales guys marketing, that for

more selling your at sourcing product installing. the it's as gross and how acquisition as So is marketing, thinking But and and getting sort my you're marketing might come isolate premature could it keep we that with bit sales. how you cost own tightly to of you operate and direct of can I variable a super whereas percentage terms the revenue as margins revenue. in look down of and kind of think, a separate customer And been sales channel have as shifting and in I

revenue if good efforts, up should good an down start it's I So if as launched numbers, thing. the a revenue quarter go because I'm maybe it expect know kind as in expenses the those the with direct percent we maybe new there. of can of to was Obviously, of that's the you a wondering so same first we quarter. that sites, about I'm Web even But will get course update wondering sales coming or from the the away. of

I'm expect to think that selling of So should things, marketing about I just and how and trying the to trend. side

Jason Bonfigt

and slightly levers There of have salaries there. certainly that throughout offset in our to We're marketing. we've into to and first a the second and benefits because sales the look in help the really down the the percent in expand business are are that as increases marketing impact and that in to inflationary further half made of few the expecting a we this revenue year numbers half will Leverage to the us, year. on year do price what's of come XXXX. sales pressures residential And then we'll going

come -- So slightly. factors other will marketing same sales at two compound the on that should and down time, will each over and and to expect margin those gross expand we'd time,

Donovan Schafer

the sales and… And with

Gaylon Morris

our the One is payments more point, of timing to residential this side later significantly market than recognition run. the timing the just of revenue commission business, is way of of the due on the beginning the of

are we sales revenue. often see as backlog and advance increase costs marketing to you in you we'll So see of -- build,

Donovan Schafer

then up And a just on follow that.

And kind How the can much XXXX to anything revenue. percentage terms the is an of, what sales? more that or fraction -- internally going the to you gradual in it acquisition transitioning update there customer thing? a then of improvement where delta there it's something there we or certain money or can lead where also a any gradual future? Are if rolled lead? of a kind there, in a something really get and to you just makes sort to reduction be be direct there on we something out of changing it the or inflection do it is a a just decline save pay external same costs? generate Should abrupt gradual of in if or points gets as because what making One, on is of So of decline kind thing as a more expect continue should just pretty happens in

Jason Bonfigt

more and want it on your to a this products that's be selective cover does We markets, that higher little do as should from channel. that. can I channel well. away have competitive. select sales to that focused is we margin, more us why we think a we I growing believe assessment stay But off, bit certain think It are that of your direct allow

to be points our as year. But So over it months a well more this inflection I the I does in operationally to margin next wouldn't direct six think us move any major profile help to channel. expecting

Donovan Schafer

to I going back probably more because the queue, could day long. I'll I -- the in questions could ask I'm is jump one as then always And then ask question and

Reduction So with a through pretty got Act good seems passing. chance like Congress right of the Inflationary now, moving it's

And socioeconomic but XX% of could customers probably population, kind kind ITC standalone of what budget. comes mean, for -- is you of like and works immediately kind the benefits serving your I your You thing but just Trader a there guys the me o Joe's in really storage. stuff where are that lot sure that or about maybe I are -- mind jumps and sort historically there, some I fit I'm adding on really as talk demographic, is commercial really battery sophisticated of and think to with the public well doesn't for of a sort people, sense. in of like know

it of to attachments? or how And and terms much. more battery so ITC, with rates push still much try something often battery Is could you it you haven't to in doesn't battery really or equation sales how do -- change of that emphasized kind think battery you that sales too the or change attachment that get

Gaylon Morris

way, ways, and will pushes valuable ITC batteries makes those, will would which change also. the PPAs, ITC the continue good a emphasize believe to in space definitely selling we some that more. think the more them have forward our a commercial I going in drive based are I probably The emphasize on good opportunity I on pushes that. market ITC to and say to side, significant the also business

Operator

Instructions]. [Operator

the from Schafer Donovan question next Markets. comes of with Northland Our line Capital

Donovan Schafer

I colleague, I of today, lot asking is there on thought on. lot there a companies that you be thought Phil question. going Shen, know -- is a I a may I know obviously reporting former

I'll time. just opportunistically So monopolize your

should It position. in think, the a talk probably seems a situation. kind like I of we are cash bit guys good you about

since amounts the receivable, balance to that And inventory, on that's a that's, chain of healthy know inventory of quarter at side, decent have accounts sheets. You some assets. least actually last the And kind building of supply around amount on I contract like has the concerns. gone

be you So there's standpoint, might supply are today going going continue think to need from where you and your with to good enough quite position you achieve to comfort inventory, or you're actually, what's in you at inventory not be of forward fairly in have need while. are going outlook enough for like ahead or -- a supply the the chain? going as I actually I'm look an someone of think -- a up staying inventory this chain building or on Are would in with Are do something. is to backlog. you from, you comfortable continue cash -- kind this building much to you But I a have curious proactive anyway -- looking more to on kind to you mean, if the a to of in from level and position doubts staying have actually be demand you away and to

Jason Bonfigt

are On documented that requested they believe panels the issues said, at balance in support the we the that's that that the related module customs. And that of the various growth. believe we in With clear to are I those -- place through to many well manufacturers been can working documentation from so that capital we have of coming ports countries. have documentation working

we're living sure So that to term to that’s environment We inventories any near disruptions. support have the adequate in. we make need

may we time procure basis it's to the price it mitigates on the time So we feel right from materials and spot a right if and timing risks.

I So we that have really now one think right our… that's the on uncertainty

Donovan Schafer

project the increased probably know there adds now with suppose commercial that know time I modules respect I going we're won't fair? be have also And sort a backlog, little horizon until suppose but to have you the to Is fourth quarter. well. you bit certain a to the have ready We where of

Jason Bonfigt

some plan we We're starting and that for [relations] so to during QX was of that quarter, a for the inventory increase. and that did QX portion modules receive

Donovan Schafer

you Gaylon, in operating flow. then, opening cash something cash said about would positive think you remarks, said get the positive I And to flow, you where

and expect thought close it you operating of that if of would happen or in hit positive sort something you'd I of close Moving that in the said actually then you the direction XXXX. XXXX. if you towards you by getting that's be flow cash XXXX, end would missed

important or when that Just caveats clarify maybe see that might big is likely particularly to or highlight? that think that assumptions happen you that that and curious behind bit to more, if are be a any you can

Gaylon Morris

the with flow. We're company recognize effort of one value, breakeven priority shareholder it. to we approach cash regards to the the importance making every It's for and number

effort year, breakeven out being we As every being anticipate our that. And to significantly we made reach year. next to closer this close is intention,

Donovan Schafer

an you're -- something been know your in about try site then way? understand on Web a bottom sort things especially from inbound may name my that guys call, customer I'm think not, is, to for able but to that are line the And of often I it's a someone kind getting thinking I'm Of what's like the the in guys, does course, you're people that the sold roof, of I can change certain leads or I'm for okay, line I'm with? going have kind while. you in and Web always could getting who or be whatever. of into launch work, And call, to rates, go concrete you Web if who of site metrics to someone side, just site to more And kind company? up? new site things into built even are important, this help of there's kind such a Google phone relaunch some last anything you working brand, Web or door retail Web whatever it marketing, to and something I'm an you link the translates seem your these interested phone just changes curious, is think and quite the if are it that? question sort there at kind close it's know, is, good trivial, and just tracking it. increase on built the in so you been new in pull either high-level, that Who my financials knocked help curious it wondering that there some I'm and/or if the did to come is of better of can site, if that's you have that And specific made how to you of on

Gaylon Morris

And standpoint, are from where is marketplace both filtered sense did what on takes evolving side feedback driving inputs out that to them. they the with and others a half think and of into of process. all residential what were of marketplace doing decisions, engine thought the providers, we the that market a modern in when in the site the built and by to a We growing through of more what changes search what number motivators, that making the accessible their algorithms they what company, year, lens looked we that that find outreaches a were account major commercial were customers and and to we over resonated first search then this critical the search much all and at those Web makes what into took

what released focused we in solar have but to Sunworks in the for going year, gives increaser site going them to this side being released focus later reasons later benefit the we be we're will lower lead not And speaks year, is refresh commercial So Web this and about with will here when residential site, this Web be a that and customer that for potential we with think Web going solar the [trailing]. generation, only a I that our excited reasons it's generation, business on cost residential think, lead Solcius. site do

Donovan Schafer

last my said And but one me. be to was to occurred just going know that I then question, I

shares thought to, share the all but at -- since was noticed anomaly, an part So think, stock $XX kind that that, going there's meme at perspective, that up of and very, another of how whizz, I there the that understand a had price at of one they something the here same -- But things, gee, analyst, don't back to been intelligent sell stocks I've and of low initiated, well, pretty sell a to the gave driven the opportunity an way, a share bunch able Solcius on the the I mind then recognize of I in I try of that very we price. I everything in a or the of so a ways lot very, the advantage think of -- as in take crazy and an -- from lot I were I for a time. a of guys shares run by one acquisition, GameStop, also you you in and stock with I'm interesting as reasons your of think my analyst, to as lot think [valuated] hope a in. I raise, opportunity savvy sneak the

share And was so second was it I'm the lot fairly tiny. were there share issuance, a was pleased to really really quite small headwinds, and political quarter, in price didn't the I -- amount low. of think, see there of Obviously, a you that but

that reassuring this great really of have down And and you meaningfully that. so company, kind conviction that's selling share that weren't worth that $X more that in and shares than a and you view you're as

try make So what an you I'm curious, you how if or going approach have forward, have if something, evaluation judgment kind internal you or maybe maybe and/or feel -- you as the really from where with if to of to those calls, standpoint much pretty you you very that cash issue intentions are shares a comfortable have -- no just where in near term if is.

great. of kind or clarification on color be would there any Just

Gaylon Morris

when high competitive or at shares or against not level marketplace going sell -- value look standpoint, to and raise as capital. share at we're we our if decide and value look whether with our we the say to regards our a the From whether evaluate right that not the will the or where it should is shares would were above, below now execute goal I market. And be be to grow we shares the on in value think we business. at We to

have volatile if for to ability ANd that where mechanism grow Our the ad do sell And to in or marketplace we're raising the issues chain a our situation. the increasing shares. intention that, ability outlook only supply or able different of occur, and/or the there's or being always and de-risks reserves could greater cash two the geopolitical cash of number of combination reserves any situation, type to de-risking with of capital is business. the we primary always doing mechanism the

Donovan Schafer

is there's risk sort there's kind kind a of of arbitrage you're conceptual So associated of what offset. where value even the accretive either aspect that still to you could trying in -- or

maybe at have makes of it seems some issue a you're of able somehow with off. shares a to economic because sense better And share ways that do sort to lower so in trade to relatively but what it's price,

helpful. Very guys. And congratulations you, the Thank great. quarter. that's well, Okay, on

Operator

you. session. comments. to gentlemen, any our that floor Mr. and the Thank Ladies back final turn Morris for question-and-answer I'll concludes

Gaylon Morris

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

You disconnect. are to now free

Operator

ladies concludes the and conference gentlemen, call. this you, Thank

You disconnect lines. may now your

Sunworks (SUNWQ) 9 Aug 222022 Q2 Earnings call transcript