SUNW - Earnings call 1 2023

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Operator

Greetings, and welcome to the Sunworks First Quarter 2023 Results Conference Call. [Operator Instructions] And it is now my pleasure to introduce to you, Jason Bonfigt, Chief Financial Officer. Thank you, Jason.

You may begin.

Jason Bonfigt

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

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

Gaylon Morris

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

The first timing completions. in for conditions many as quarter of our of we project markets, period the Sunworks managed primary through impacted weather a was inclement geographic challenging which

metering disruptions California working capital. experienced created in tightening market energy net by negatively transition credit also impacted the and We

at power consumers systems that by power California to familiar, is incentive in the its the economic has and selling to a CPUC, For Commission, in rooftop Utility utilized those the decision invest to solar. In which households consumer by lowering impacted back sharing final solar metering commercial sells XX%. led power solar utility or update in California from is of or not price benefits rate the NEM or XXXX, grid. the December adversely Public which to to defining This residential participate their policies, issued to NEM, the approximately of export the the generated net their allow relationship energy many unused back power

ongoing pressures are current cost view. the significant, on electricity future in market continue is long-term consistent bills justify expected our reduction economics to to the the rates the of of with solar While rate utility relative to inflationary solar and export

submitted well-publicized augment expected In the the NEM to in of wait applications currently generated to change may that solar by the power with resulted ensure pricing deadline, mid-April including applications advance through their a CPUC extended XXth X.X are evening more a peak Solcius and we surge deadline by more in application experiencing. In average applications period. providers, but a wait has backlog excess X prior in to short-term interconnection offsets qualify are batteries and the mid-April to the or to NEM solar application day this less times contributed who prior week time the from with during approval Sunworks XXth utility solar significant during This deadline spike the that beneficial demand their under of resulted regulations. increasing homeowners systems transition, regulation the their April economically customers terms, the Additionally, power completion. interconnection the have delays in to caused of than new project delays permitting plain weeks needs project

delays, than higher project process these books cycle conversion stayed capital the inventories component working have our balances slower in times. resulting in is cash With and typically case, on longer

an residential throughout percentage marketing revenue. rooftop costs XX% through as of we versus in April, and the In the first XX% for represented our period the of quarter first installations in conditions results us for challenged, selling our markets Order applications XX.X% residential given of new increased versus the prior to originations a XX% more to contributing of in decline NEM our originations in new revenue in accelerated quarter, sales segment quarter. of Direct year the increased more respectively, and influx solar segment XX.X%, the XXXX, rates solar period. than an XXX point at backlog a as pace -- giving of results strong first were than quarter new our demand ahead deadline. California across first the While contributed basis and first optimism end move clearly improved the remained year.

demand. Within of respectively, we period versus As year Solar a period. into the our prior strategy revenue increased XXX%, to continue pricing a disciplined employ before, Energy Commercial than and backlog segment, more rising XX% and

in results megawatt in the large strategic third rooftop corporation project, X,XXX with will million and energy should represents their Southern which order footprint. X.X renewable long-term and in an XXXX The system with company. of California energy provide consistent The the nationwide is savings a a for energy point of expected a an significant quarter XXXX, the carport with to First a installation with objectives. XXX first included commence Fortune located with a storage quarter for hour customer, quarter solar order kilowatt important $X entry conclude

Turning balance sheet our to of a liquidity. and discussion

earlier crisis reducing other later provided stages risks payments credit by negatively year shifting lenders solar solar banking of at by are gone cycle. business, out companies working tightened several been for as to milestone have the in rooftop stages Historically, impacting the Following capital. life have markets and payments the financing. project's Lenders of project, the of have various

fixed reduce quarter, the we liquidity overhead enhance actions to second During took our costs. our coordinated and

hand navigate which March will discuss help available operating had liquidity our to nearly in $X million as by with detail of Our together million the further we XX will more position environment. Jason we May $X as in liquidity-enhancing cash current the XXXX. This bolster liquidity actions, our of of cash profile shortly, infusion increased on

should transition application working requirements that to expect NEM improve. the next April utility and In we and XXXX, time completion the quarter. stabilize rates we anticipate capacity to CPUC capital scenario, in normalize -- project over utilization Following application

footprint, for the significant towards results. energy production. With As and across independent quarter clean a call over play geographic to before, affordable, transition Sunworks hand that, leading the I will a positioning Jason our to of in role the first for market opportunity remains review solar financial our

Jason Bonfigt

growth commercial first in the increase revenue Beginning reflecting total of million first period, across the Thanks, financial residential $XX.X quarter versus prior Gaylon. year our and of our quarter Sunworks XXXX, with of performance, of summary the company's generated an XX% markets.

million drivers prior million primary utilization $X.X quarter. year of being experienced. in of year-over-year our our The roughly sales weather driven challenges main was $XX.X primarily residential from recognized the $XX.X in highlighted lower to million the of reduction delays of profit XX.X% we As our or impact compared in segment. Gross revenue was previously, markets delayed an XX.X% weather-related or again, residential we labor segment, by the in

margin declined $X.XX as Gaylon residential year Cash of partially cost our in basis then lower a XXXX gross mentioned. would XX.X%, point of quarter the loss due the the Specifically, prior share. an market first was $X.X a loss loss Commercial a year-over-year. Without versus negatively in benefit to occurring, $X.X our offset basic have residential in The quarter. Within or well on the the generated net of retention per utility terms employee from per the solar inventory drove business We associated approximately company gross XXX million attributable weather delays X.X%. financing margin year reported of to segment, impacting previous this was operations to other $X.X write-down as qualifying $X.X And installations tax million non-cash at year-over-year for realized a impact or we primarily credit gross sale loss share with a to a million by $X.XX first approval excess net and of module variance margin tighter than XXXX a that the higher period or the income, million XX% decrease quarter inventory. for net gain. of

of As of XXXX, March equivalents had company and cash XX, the cash $X.X million.

million. approval ERTC from the with netting company's near-term then with entered based these to $X.X offerings. common factoring regards April open And working and purchase finance with its into effects section. XXXX, into requirements then sales we on a that and agreement $X.X from trade time. And our to XXXX, commercial the company time the question-and-answer the company million questions of approximately begin proceeds are agreement stock to any the registered of expected ability coming During XXXX, X, line The received proceeds the remarks. continued company lines, use for customer on receivable aftermarket as subsequently, we to over elevated advance receivable protracted proceeds entered point $X.X million normalize up May which support receivables at the in utility intends May activities XX, on to Please our the to months. Operator, capital accounts concludes of prepared of

Operator

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

Donovan Schafer

of happy there to taken through liquidity moves. kind the X/X proactive see the after for quarter. you're kind already of outlook second have I'd the way the I'm the the It improvements, first of quarter. about the the you guys ask of looks like to quarter, close like

month and the uncertainties get under projects close trying much growth percentage second if or So getting of double-digit if can to curious backlog a sequential happening this as the rush sense a those how are to least QX uncertainty, to the so, really too should factors? if causes then what's the anything, what improvement we're kind -- like what single-digit talking -- fact tell NEM on before up quarter of squeeze elaborate grandfathered at think whether as just if it? soon catch of us of that to of what you of kind expect like quarter-over-quarter. And we you and should are it's it's And kind the say Just -- can give eligibility, If -- quarter? them we in last quarter X.X? in I'm it's could of what's that soon too around the about customer in you kind or

Gaylon Morris

Sure. I'll start.

commercial start to walk that's with business through. little easier the think Let's a because I

in the it's And million. sequentially $XX get little continued So stronger. increased to summer in to bit business. the make a we our as always Backlog commercial have improvements we backlog months, into

in sort less of issues have weather-related business. commercial the We

a to I comparable in has on about to with growth regards And quarter. for been for coming the to the lines. there. Within said say almost with that's what's over happening going challenges California lot impact weather. not And the -- we approval talked would be I business to not X rates we anticipating provide approval improve a time So expecting we're residential, of there. guidance with sort to then we're had of X But QX dramatically in that that the moderate QX permits next I'm in weeks

So I be that I business residential pressure to in quarter. of going think the to there's most -- some it's continue for think

Donovan Schafer

in scale slow overhead. the talked in past, Okay. growth guys know time, can know the in XX% a measures profitability just overall same at of hitting And for those of sometimes of bogey current to in I and growth having some shoot you of XXXX, sort the you have the driving term. And that short full XX% kind then moment, you're at kind about I sort idea terms of the level the very year, high full to year-over-year of an for absorb year the

of sort measures? on do of the this you kind growth aiming still year you are the of light -- in profitability is, as that in Or realistic internally for last question XX%, my see XX% So over that order year? of something is

Jason Bonfigt

If XX%. year by our at residential look revenue we even you plan, of in a quarter the last our against difficult first exceeded we still quarter group, had though almost

So been and basis the we revenue year-over-year aren't a been I indicative standpoint, have -- think like against and the that a had With for we performance year-over-year. I against growth levels our we've that perform. from cost budgeting to anticipating ability is what against were have challenges necessarily working challenge of they said, were

Donovan Schafer

release, mentioned Okay. I inefficiencies kind have But ties to in around And Gaylon, think probably of delays. then the with I press permit I referred as of like kind the of labor and utilization. I commentary you kind in think this saw to you think the capacity this

things the up of be certainly utilization, improvement? curious utilization? of curious seen staff where of resources. But Just as to that's quarter? level of able -- stand want don't you if quickly level kind or to them where again, of want -- we whether you of relative same or of where today -- the those we Or we you back labor ahead. to it's moment because that people like once today how go on to that electricians let kind Go at there's are other -- that Just use first have quarter kind kind at inefficiency similar are the at pick

Gaylon Morris

sorry, it's just -- just talk to was the to going residential business… was going about I Gaylon, I

Jason Bonfigt

talk residential And go the business. and ahead I would say, about

Gaylon Morris

Okay.

that strength significant of to having improvements, of modest some don't to pressure we have pretty that feel making have gross we support think we the quarter. healthy the feel reductions. made of staffing expect backlog I in business, growth the the the would a year. margin and was residential the staffing would comfortable the in during I skilled because the we sure the And backlog of with didn't intense -- We absence very but So have had rest for saw that in labor

the of to they I So to second in to should the And we variables the with inefficiencies certainly last be -- -- in year. QX. at California, year, think to into think improve, I these the continued where get half that but back challenges we're is and be are as going some were margins to be get expecting of well able improvement to as gross least we we

Jason Bonfigt

On the exactly is be. utilization where to of staff needs right the It's side commercial business, the it now. XXX-plus-percent

Donovan Schafer

them great. about -- add I answered going Jason, gross you same was going what should to. in of of expect Okay, back the I to margins kind And then kind ask to ask to what was we

-- change below any there a of normal gross what like create mid-XXs the been that would year. new So last hasn't a nice they that of hear you had margin structural sort sort to

for seems guessing nice. like of basis I I'm saying it you through same the blended, So sales that not come the direct was point basis channel that's direct you're XXX improvement. and getting the through And that's within think commented, Kind have Gaylon, just you're point it XXX question marketing. that improvement the channel. sales a sales

to to have in XXX% in see your kind improvement but direct to order to point -- XXX financials basis have be general. XXX% you that a conversion So go of into

Jason Bonfigt

as to of direct the And wrong sales Gaylon revenue, So of a our mentioned, of year? we kind of how guess, marketing and me I I'm expenses percentage through roughly correct we channel. that. that trend kind this for had if -- expect on as should originations XX% come we

we'll goals that we'll get direct to so are and be XX%. our building force. short-term be traditional Our dealers building And also think be around -- I to then

percent in short changes term So residential. I significant on don't for sales the we're expect about that this of talking

investment because sort in commission place slightly of have. the just that's costs term? So an investment the sort channels that's direct There's in offsetting force. on in the near kind like It's a structure it's a that's direct, the lower. other benefits for sales -- of revenue also just always the in of There's basis,

think originations reduction above -- I to So for direct until significant going go well until not to see that start XX%. we see there you're a we

Operator

Tim question the And the with from Moore next comes of line EF Hutton.

Timothy Moore

utility on in by quarter then weather Do XX% the can in delays too. the behind underabsorption if you because the as the you off, causing press grasp have weather. be delay to normally because this get to March NEM [indiscernible] And track headwind everybody and back after many and results. September the that maybe then? the to get of I quarter the margin Tuesday as this don't of handful in of a you margin gross utility think of approvals, I release was plus it, perspective But put the questions just on quarter at gross starting for the most bad kind in of

Gaylon Morris

think as on segment look commercial commercial margin versus business to or that a and have lower that we business the I well, has is because profile. at residential basis our growing a So

our deteriorates, So think business unless blend the I that in pricing which of really into Again, get of was business. we're of high we rest on and targets really, a or caveats as again commercial year, mid-XXs targeting revenue the help the if think had -- within thinking of internal of greater to our at then XX%, that a that the business. But gross expect depending one-time than our support in back think there we then should residential for that about teens And And parts one-time but or mix certainly that, are the commercial occur we the that's module we're write-down other adjustment, hit business the inventory. business. margins. the would mid I to our to our are mix I

Timothy Moore

of next my such question selling things your marketing just a as direct about type selling net thinking need that grows a But residential. and need do Do what million as margin to on maybe margin expense into the public leverage I'm together, $XX just inflection operating commercial USD getting you I'm versus million to because to them good get works we lately? of out of sales segues thinking originations XX you That point for for XX% combined good after you're hit if because force improvement? think to XX USD backlog and to million

Gaylon Morris

Yes. We that significant flow our because cash isn't EBITDA positive CapEx we positive focus do of believe is -- getting there how out generate that business, to involved. so

that the worth that from if be and generating into jobs an get of can year's execution believe that we approximately usually positive backlog, we're XX And represents the that a So would XXs these us revenue. pricing we of the that backlog way standpoint, EBITDA. into supportive of

Timothy Moore

has crystal year, of but be getting I And you Great. the timing, backlog nobody ball by when next do could the think know calendar end that big? on a

Jason Bonfigt

opportunities pipeline if execute now able we supports backlog to the us year. of to them, The by of end this we right the have were of that on available size

Donovan Schafer

just follow-up next a Our Donovan questions, you will Markets. let Northland more with question Capital and go. is have I I then X Schafer from

improvement only So a with see to was result at then the question ATM the it minimal pretty like the I really low a you and the as tapped extent liquidity agreement. that, looks looking is of that's position, prices. the share nice that's pretty it first ERTC improved a that, significant think to at And the factoring -- advance

yourself talk these could different was like you kind you more capital a these more and curious or holding the is, feel see. But also if to to how nice you lean positive between to levers be about that any like maybe on question flow -- using when see good get expect you in around if the So or cash you I'm the like things reversal, if of factoring think ATM thoughts there? you'll standing could working you situation. And my

Jason Bonfigt

to on USD going just EPCs lenders changes with of to million for was last a significant million milestone X payments, X the at I year, XX% given and some significant towards is construction a and time USD that sort in from the to -- USD moving to receiving that the million of all it's impact X sale note just depending USD XX% that on moving put time, has to resulted volume more of about in million. at to PTO, X a number the

So it's out. for a ERTC significant washes impact fairly us. benefit This certainly that

of think lot we as -- so have a tools. I we

I the of is inventory, necessary. at million the is want us, -- the end that unencumbered we're dilute option assets think disposal. across course, an shareholders. It quarter. our to at if also company, $XX And are We have including roughly the -- continue to other also don't our We, ATM. to but which is have of we mostly

So could position. we help liquidity, additional and an raise that other make solutions that financial stronger us could us will even be exploring

there's there. think that through we're working more I So

I'll it over hand So to Gaylon.

Gaylon Morris

I something into was utility cash very going approval improves quickly to. the the to be asked could is converted eventually say residential situation as you backlog considerable that if that

money last of that. And what giving to all X flow And over of than getting once that then us place, positions. Any X to the hard It's the our positive and estimate time flow So large business say us it's utility lines. those just being there's we some It's to basically pushed time dependent be earlier comes will would sense outside based approval and be We execute would about lot been kind that bag quarters' been that? next of going opportunity to on cash months situation, around cash to forecasted for that, where easier in it this to the it attain be supporting have it reach. horizon? probably we've so the peg understand I around utility had tail the to on the made of haven't into that continue liquidity efforts close lines that. a so the much X a out. to sitting

Donovan Schafer

question. someone commercial And to of you then last in charging on brought my just kind segment. in know the I guys EV focus

at were you or talking think February, back was. that of kind Intersolar in I January whenever that about

just if commercial on there updates guys historically government curious been heavy, just of a I'm solar, out Works installations and any of business, EV putting Or EV or up as are public solar of the roofs there color chargers initiative lot Kind on you of rolling going? lot where EV and you how the think with that focused, more a is any so like is kind of And you and because sort have bunch of a charging some of have just adding But to dedicated that. that you're kind I lot charging buildings that? updates -- on projects, sort works things doing is Public chargers. of of panels a

Jason Bonfigt

Yes. initiative. with that I'm happy very

going that I bogey sales have that for year. close get think to a several dollars this we're that. We on to million in very And

EV not the selling sorry, we're business would -- regards exciting customer you for projects, if chargers chargers is are with the as starting conversation we and versus only us. an charger But our upsell, allowing EV work to solar to We to will, only base I'm which lead sell bid. solar, also usually existing EV

is be growth EV our grow the years. curve. going to able next think of to I that And exponentially a goal over that part charger is several to the market be

follow yes, are individual And so wins more regards to actual EV. to with that

Operator

closing I no to at And any There to like for Morris further back Gaylon turn questions over floor are the comments. would this time.

Gaylon Morris

us at concludes team our again, our Once and you our with to today. of feel at a call. have you call IR questions, This member follow will thank any USA joining up for Sunworks contact free Should please you.

now disconnect. you. may You Thank

Sunworks (SUNWQ) 25 May 232023 Q1 Earnings call transcript