- Earnings call transcript Q3 2022

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Operator

Greetings. Welcome to the Sunworks Inc.

Third Quarter 2022 Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I'll now turn the conference over to your host Jason Bonfigt, CFO.

begin. may You

Jason Bonfigt

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

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

Gaylon Morris

those today. and Thank us joining Jason, welcome you, to

benefited the strong business During gains. combination demand, market and expense quarter, solar price share of residential third actions, management, discipline our from a strategic

household the arise, robust for revenue solar in residential rooftop contributing quarter. a order accelerated year organic bills to on As new installations to year growth rates over continue third electricity basis

originations ago. it real bill or let's point, annually is decade a quarter customers in who in value increased higher with customer than costs highly for market, this world particularly largest case remains financing renewable residential compelling XX% the While have for Currently, independent our more were levels economic access higher during illustrate to nearly interest a use as help To tandem record rates, the at residential than to California, the example. solar energy. average reliable electric was $X,XXX

reliability The XX offset to system a more cost will risen over households how a energy, period. source financed a Even meaningfully, of installation leaving XXX% want in explore their have choices. usage to the support installing solar, they electricity will average benefit can $XX,XXX credits has to homeowner consumption to as between By many electricity year their they control XX which $XX,XXX future use including alternative growth. options. residential Consumers over tax typically system and prices five declined, cases have businesses want and grid most

for economic after And XXXX, at million at walk backlog To across $XXX origination the by broad-based end and XXX% energy the end, that with utilities. since to traditional continue that for savings. in our from costs, in ways markets. will take year-over-year end remains driven Over the of Residential utility total of the to look residential Solar past year, providers. the Inflationary has labor are the see by economics have in than rates componentry in for reduction solar. X% the first the remains existence. of Despite their by the time rate compared cost to being economic of benefits overtime and of compound have immediate interest homeowners solar increased for Financing these the of case increased quarter accounting inflation low cost commercial more we Even view the the key bills, fixed sustainable pressured solar industry's rising continue limited level costs increased households and long-term the products rates third but retail pressures favor to both the loan to cost headwinds, financing higher many well growth intact. highest as

pass demand price face able we several have to along this increases the in rising of been Importantly, strategic year.

and seen highest into impact in we backlog XXXX. margins the of have the are these improved the which actions, fourth Given price should support quarters, beginning several recent margin in our anticipated capture quarter

we the improved quarter versus during year. experienced third what conditions earlier Fortunately, in supply chain

activity. to support invested inventory during of expectations project the we and panel growing in Given growth, quarter heavily of demand third component backlog continued a

prioritize risks. the in climate. chain sourcing we easily investments to With mitigate encouraging, continue easing this in positioning reverse, current material to critical us recognize the mind, capital is supply will geopolitical situation this particularly we working conditions given can in Although componentry,

significant provide on approach an and source calls, XXXX, from shift increasing our our we of that discussed our manufacturers, U.S.-based to producers. third-party intend an inventory current original channels sourcing prior we the expect we to panel supply improved of our overtime. we proportion or distribution U.S.-based to component equipment By surety end from intend of foreign of a As share to manufacturers

now the high results. offset robust third commercial demand Total than level as to near-term revenue million XX% more segment, new direct softness our contract our in our strong a to quarter basis, Solar nearly origination overview Within residential activity. year-over-year by by $XX.X increased on Turning sales increased of year-over-year Residential third total through during driven force. lots XX% sourced quarter a installed

than prior includes markets, Our metro XX% Solar period less XX direct which sales than represented force, X% segment revenue the segment now the year of total agents in in versus more XXX in revenue of period. Residential

business to closer model strategies up customer. report More and data-centric I'm to volume refining we're the installation, intelligent to margin order of we're strategic in sales to segment access channel, higher reduces At pricing performance expanding procurement markets. componentry given importantly, the to that and a level, delivered positive continues and direct uninterrupted a advance We're we which transformation declined, the our ensure cost quarter. Customer meaningfully. optimize across residential third EBITDA pleased cancellations capture, in multiple retention have high sourcing is quality us to our puts using

view. With call to every to our well America. Jason become solar Looking on exciting provide a remains a I Sunworks as Today, results. your the third outlook position. the the business. impending affordable, the home leading energy and reliable to Thank solar an at renewable positive in our that, even domestic technology pioneer business, review and capitalize where ahead, I'm hand has is electricity One markets in support of on of commercial for the continued quarter fragmented Sunworks. built you underserved, to the for and our we’ve the concerns It industry business residential time will a for in interest revolution. consensus around recession over positioned

Jason Bonfigt

you, Gaylon. Thank

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

and revenue prior volumes primarily periods. solar from For revenue versus growth the $X.X reported is driven revenue XXXX, residential in contributions Energy of $XX.X the improved months the we XXth, in segment, year-over-year three pricing. Solar by the million mainly total increased year to span Commercial growth year million which preceeding installation ordered compared declined The ended in million to $XX.X from the intake September prior period. lower attributable a and period,

quarter, third our balance. versus revenue in revenue increased revenue Total of XX% During in residential year while quarter, was million profit prior the the commercial period. million the third gross quarterly $XX.X $XX.X represented XXXX to the

a We residential quarter compensation versus the million inflationary Solcius increased to partially attributable year will projects per estimating, throughout variance a share net note each inflationary share. of prior improved incurred capitalization net customer of expense, of an by improvements $X.XX labor, labor. loss segment to or the or the EBITDA associated to of We are a $X.X months. $X.X offset primarily change period, well completed coming pressures third that attributable stock was year-over-year that to in prior on expected on The offset including was the in quarter materials $X.X in benefited the reported partially a basic and growth execution lower was quoting, and variance company’s growth amortization the acquisition a on loss lower segments. basic The loss Adjusted loss acquisition the of year-over-year focus loss the investments third materials million expense primarily on million in be million pressures current of per and $X.XX of a by operational in the in of to million and accuracy related and quarter. as business, quarter loss an anticipated accounting of $X.X a and year by estimate to costs in $X.X as compared support in with progress

represented backlog segment, all Direct total our channels. increased end operating an generated year Turning both business. residential the is quarter million, Total increased which residential year over generated XX% activity primarily earlier increases growth $XX.X commercial of and prior leverage. third million dealer million, the positive Segment approximately of EBITDA residential X% sequentially commercial XX% over EBITDA million sales to watts growth approximately Solcius revenue installed in to year view primarily year in million XX% driven XX% lower segment, versus by XX% quarter, $X.X this strong and year. driven in increased of residential to year revenue in across to in our recent our solar XXXX originations. year third of third third less based order Total Within the revenue the declined by volume. $X direct the installed by $XX during market than The segment sales driven and demand, over year $X.X segment price quarter. low loss quarter, period. The due to our in on improved

balance Turning to sheet. our

third At quarter, million we end in growth end the working of the at-the-market cash $XX.X to compared as support $X million $XX.X at million million quarter, third our the inventory year investments ongoing of $XX.X of Net equity we of inventory. business. increased no prior capital program During support strategic to in sequentially our period. result had third was and by $X.X debt the to the quarter the growth. in a raised million the under Total

inventory are given of in project fourth us the well strong that while of open remarks. questions the quarter flux. for to chain of investments We've customer Operator, support combination and prudent time, Gaylon a concludes as line earlier, strong into at pipeline that our growing As a our improving a support we of demand growth. work have Please summary, the componentry’s mentioned remain demand, support believe made higher backlog investments XXXX. in prepared In we underlying capital question-and-answer we session. begin the in global this supply customer to and to margin capitalized we necessary use remains and

Operator

question our of [Operator with from And the Shen first Phillip line ROUTH. Instructions] comes

Phillip Shen

guys versus price to First guys of lease loan you what with the that explore number year-over-year. one have and adapting increases and how so meaningfully don't higher is on the is fees you all? Are on have everybody you up the rates far how and for wanted percentage your business your I and of originations substantial recall some a loans as like business But higher is residential there. you to is dealer QX? the by I there for in you loan what come and I highlighted lot but force the think your lower know X.XX% cash? X.XX%? and a could remind QX impacting can financed then product, QX were a about companies, removal lease your Thanks XX% financing, and what by that. you've products considering of at the on increases get resi APR ahead, and is providing seen sales your color in dealer I the that know perspective the

Jason Bonfigt

Thanks. good start I Phil, Sure, question. morning. can can that I -- answering

So years. offer historically, do We on and loan lease the depending today. over time. products economics offered products, and products been past has the but loan there several that's lease both is Solcius predominantly -- loan And at the

and competitive the to see we seeing has and and more offering the to on our to cash. as to we customers. less that to of see of that past. well Cash We grow year, than and more are dealer typically into X% sure we're providers in our are -- business over be into going the products that We make our channel beginning leases these are next best bring gravitation been

Phillip Shen

Great. And --

Jason Bonfigt

grow over sales to an It's it's about origination And from today XXX portion remarks. to talked continuing we our a that business. the are and during reps standpoint, We becoming force. a prepared so lot direct our of grown

So that. continue expecting we grow to are to

coming Gaylon said, favor we We pressures more solar coming, economics our markets. year and pressure are solar certain put and think likely of believe on products more competitive seeing I will offering the the increases on in still make But economics that lease originations, are of us will with in several in the months. certainly more as throughout

Phillip Shen

Great. sense. makes And that

or through And you year-over-year Thanks. how to or basis sequentially? originations think think QX QX, even a even either about you were grow so might installations and on would how if

Jason Bonfigt

little a tell. early It's to

to mid we X% best say to products difficult I think the of that to us It's our guidance to give more XX% lease probably next maybe perspective business, originations. year. can give to that, on from XX%

remain to and those in if markets for sense certain makes We evaluating are it evaluating markets. us

And the so we are ones are in really that focused can future. on effective cost and we which markets grow

fears, this Obviously, structure develops see to markets. and are impact paying think with really we originations. right But coming we our our are prudent quarters again, with attention are could will sure I the business. just making recessionary sure in the we we growing So how cost making in that

Gaylon Morris

Let been an to will we're me time from energy into putting real installation faster -- of add we've quick. make us volume a and very turning year revamping entering with under a From the to reduce volume and the significant that lot processes backlog a installation. a contract and up likelihood end standpoint,

on and optimistic So only not and we're much QX very about have faster. yet very but have significant because installing we're seen not backlog pressure QX we originations, we

Phillip Shen

Great. helpful. Thanks, That's really Gaylon.

but resi between of business, time, curious might what look QX commercial is know split like. resi can this XXX the I end snapshot On and a us that backlog, what million? turn and more with just a you of give

Jason Bonfigt

business for million what's up is that $XXX And commercial of Backlog $XX about that's significantly. million.

we beginning think year I million. was of $XX the to closer about started year the

So some traction there see the commercial side we're of to on business. good the starting

Phillip Shen

exploring residential feel what rationale fantastic. presumably if of of country the that ingredients a through it in might and down the if kind rising kind we But desirable? comfortable can economics. metering, Jason, are finally, there. comfortable of you, it. are you So I'm understand less lean a then might highlighting you would be? be what's evaluating then retail maybe with the feel resulting net the you to can electricity So prices? which that, or could don't help of shut some on world you're that that part is wrong of given pattern region rest regions that that or making be if or it price the the low the Can talk the that be you set characteristics sharing poor loan is with you were combined me then of And that And some markets Correct Great. guys that is

Jason Bonfigt

we on I long And from utilities. well. we I of have in happening we're consumers it fulfill may that and seeing markets, in what jurisdictional are our fair. those not because traditional a rate think sure from servicing you to for the customers. that's rate fast add perspective various lead And want burden been can the also AHJ increases and and install times, the timelines requirements in would make a certainly retail understand our has and focused markets very can cash different enough company some those very, very as and be to a

new about with one previously. that that's share that maybe would sort talked you we So of we haven't ingredient

Phillip Shen

one, you'll focus have or Thanks. go it. lease Solcius partners, guys you more And than business And with Got partner? one And on partners in think then do lease you then you'll do your might Thanks. how you'll terms many did you working a Do one with one have? just of who ultimately who work you historically forward think last think with? basis? be

Jason Bonfigt

Certainly, in we'll always and lease we companies that one one few that last sort two. We coming in the product of with one the don't can take we're two expanded company October. working talk to the to that We've be can offline. it's to weeks, second the a on the I add had to since Traditionally like last -- I been joined about We've or one months. looking more calls.

Operator

Markets. Donovan Schafer the from question last Northland comes Capital line with our And of

Donovan Schafer

some your reflect quarter there don't the now and of that all But any having Act really you've in. conversations people probably results you've anything this something I fair about kind to lately, ask we've Reduction is lot looking, just these maybe factors about kind tailwinds. reflect those sort on side want third but been with CNI really talking it results, of doesn't that that of are all to started say a at of obviously Inflation is the

you business and of residential the your incremental curious thereafter. just if how coming Inflation there out of XXXX of CNI insights I'm for and your on playing Act in kind kind So you kind Reduction the over color see have

Gaylon Morris

start C&I let's the start is I'll this with side. So on Gaylon. CNI side, the

On customers non-prevailing a that be cost, specifically IRA proposal there in wage would the a there prevailing current would California to we every waiting the provide with side, change them the savings demonstrating a offset rate so where impact XXXX can can to with see prevailing C&I would is -- of a of cost. savings, wage ITC our and that some strategy probably cost rules to the not for but the the we're be and

reminds the that has but work include about signed, verbally our talks as commercial not work we with closer by on or a side, year next that discussing uptick still that to wish term are and in contracted bit in the IRS guidance background quite me what to use those that their until making been written Jason don't when contracts we're we of end as people the That book in get on basis. awarded, one case was along ITC releases been commercial is case decision the short process. to that in We that well, the those does note volume we contract completed the are, that negotiated, push as to expect which pressures through for and So of have take walking do there but seen. a I we customers sales credit see in negotiations. for contracted,

with based seen number to I providers ITC, yet a to And the is let reason there little act. think are end starting tremendous But increasing have get the more it the loan amount bit side, the resources. additional IRA I'll Jason us that approaching a a into not change of them work On of lease on the for ability see wanting we us. we larger but capture to residential particular,

Donovan Schafer

And then notes, total sales mix the in quarter. versus that it was for last sales XX% direct it like in I my the quarter of was it your revenue the channel, from XX% looks think was

kind marketing you something a doing nice direct how would revenue. reflected guessing goal I'm that's like high it's in of just percentage a improvement you sales looks -- have sequentially And want in either kind the XXX% a to it being to and you're you that's as like going. and So, probably Do relationships a of expense pull? not different sales drop really you because for Because that want benefits mix there's to get targeting? those kind to of keep levers of

So this kind that sales idealized where targeting could idealized I it's marketing you think revenue? if XX% I'm you get to if of send and quarter. percentage think an that as you're that total expenses then curious there's mix and mix, of a

So anything that? to related

Gaylon Morris

At continue as to don't growth If a channels months to as a have a I it. no high what direct number, direct. which to to from look from of But in various XX% level, a and and to pull few I've channel been organizations a partners, probably both the percentage down the last entirely we at both evolve, XX% grow, thought our groups. economics means I over in just is are moving single-digit. we was There we going targeted intention both is of sourcing getting

certain of think are absolutely hard And lot I involved moving in you entirely there. opportunity markets. risks is So going right. direct. There that It's a is in there are

are been environment. the lot multiple in You you in the folks And relationship, and understand whereas hard high-end somebody market. other with leverage competing those have of already sales or relationships that don't you work people always dynamics a already a absorbed their area -- when learning are build in channel that somebody you and the can't

to So the reasons there relationship. healthy is a lot stick channel of good with

Donovan Schafer

Jason you has quarter. out, quite Okay. during got more quarter. That's in the backlog the pointed nicely doubled. first It's since helpful. And orders increased segment, And then million for C&I the $X.X as than the the

yes, now in million QX million. $XX and So $XX

other to example, us or kind maybe that of any you can give revenue the also through can So you think does and this kind there got of million mostly East in can would be traditional of aggregate? and types could projects does like in if $X.X works orders quarter there I'm the anything backlog projects, project projects, And the or have are you’re even the Coast you and backlog? you kind of that you these sizes – agricultural that when if us changing at just all, curious markets you public an to would kind the changes Are a reflect projects, in start this C&I sense if or helpful. remind stuff? C&I moving are and flow larger your if just take, of in additions some quarter, very of there the like getting California at look C&I you smaller if If for

Jason Bonfigt

So is there that parts question. a I of feel, particular number of

just larger them. our works get try projects a And are and those is larger completed. as such, as of projects through me that's The new conditional. backlog than size pushing Let the the of average business, side percentage project C&I public

actually So a good that's really thing.

Those don't see to through of anticipate we that seeing larger big of come about we people. are regards bridge With right more and projects with -- now from mix, if leverage to those We can anything our that. larger advantages we the expect that smaller projects. That's companies really are almost where change excited

Donovan Schafer

guess the of of -- timing time, the year like I that just said one -- like is lag? Well, kind I Okay. a

Jason Bonfigt

deep to Right I the in the into would convert continue and backlog now, will the we going revenue to process. say, And we're build is the backlog most of budgeting

Gaylon Morris

think I Donovan. see it, you'll

but the in level of just step a build one there it's like see will revenue, I sort think that's you'll core be not a steady change.

quarters. next throughout build the to expect We separate

Donovan Schafer

other of charging then kind ask wanted and about the And batteries. to is thing Okay. I EV

charger think but I you confused can't of looking remember I correctly I if EV sort at and you've charging think, I this on considering sometimes, kind second I or myself I know, -- of guys -- recall been with I installations. doing I guessed think

I think think you battery, lot. C&I both that resi And lot yet. do haven't done I a not and a of but

that's been I'm to further or higher kind solar you've kind of updates moving kind with on rates, changing installations. around bringing if or of there's attachment charging anything curious if if in of dovetail -- any efforts So towards EV and initiatives

Gaylon Morris

side, residential currently the motor we buys we'd manufacturer. On doing not attach are batteries. it has and chargers is system a primarily And be, EV through selling that as The it growing. of like particular high a the customer as to brand we're everything those but is and rate And they're same name. part the

we the And EV what only. federal forward see of solar. right and the business, is that market think the the money of EV originate being sales of into that going there's expand on the a projects many goal On commercial specifically -- reason because an renewable of EV business. local the company its project our awful and efforts in solutions. charging. on help projects we're for that its -- and we're EV incentives, we'd charging EV to transition into for and state commercial charger And lot business for just into we efforts of but commercial commercial brought side We originate The reason offer market fleet the and projects, now opportunity to to install it's a to our us we from that is chargers talking and which basis there development recently customer that board origination charger see are development also also resource a moving lot is like to

we that them not, value of battery ‘XX installed On a EV also but the origination side, systems. battery and the be solar several, Whether pretty commercial company And we did. also a working every in from the walk solar, with to battery for origination we going through asks batteries we offer can a or we proposition to have company. we're how project customer at move much

Donovan Schafer

was to ask Very then periodic that this demographics solar a week median show most sort income last lower was people with income. just Labs of think keeps I do came question Okay, And is kind study, lower, to at and -- last great. the the Thanks. Berkeley recent I'm rooftop they to out household get I for my going studies these who one, and of trend came now And the out installed. The moving it $XXX,XXX. lower down helpful.

the median could household, that XXXK definitely a in that's or mean But the I pre income seems maybe be earners I year two number. that and either it a think a way, a So was ago pandemic was and trend fast velocity to do in you panel a to type package. like this installation, it's guys installations kits really that be favoring where try inverter kind and do try predetermined of a of two day it's

don't and of the notes quality what seeing not of luxury growth Just I these in Seeing or on stuff? like end like who kind with a curious, McMansions is is of the things growth in homes. it's seeing are just you're compare you you maybe know kind curious with this think kind that boots the guys luxury I affordable, like I'm you of So smaller more in things? ground. where product in comparing installation notes to panning out -- painting faster more -- -- or kind -- a like on Are are customer lot people talk if but as -- you maybe if doing you of out seeing versus the Joe's that's it's guys for ground kind competitors it of Trader terms like of

Gaylon Morris

of but commercial. channels The houses, the given probably is has X the increased houses XXX size we system month. over in install to days system kilowatts still not X a these slightly, a slightly. size Yeah, so reasonable XXX average up kilowatts, It's wattage rooftop of increased

closed certainly larger some have on projects. We much

their in say Some people versus green for if health, political offset their costs on will way most the area growth I commercial or solar shows be on size a the of to the would our put that intentions. industry that as you to But a social roof residential are will. utility compounds, badge see the even that continue part the who value

Operator

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

Gaylon Morris

for out everybody us any or to you thank there's reach free to follow-up So actions, or feel at joining today. questions If Thank us you concerns so much. ir@sunworksusa.com.

Operator

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

Sunworks (SUNWQ) 8 Nov 222022 Q3 Earnings call transcript