Earnings call transcript Q2 2023

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Operator

Greetings. Welcome to Sunwork's Second Quarter 2023 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.

the to turn Financial Bonfigt, now Officer. will conference Jason over Chief I you. Thank

You may begin.

Jason Bonfigt

I'm Chief like Jason Sunworks. operator. results you, Thank Bonfigt, call. conference of to second entire of you XXXX On Financial our team, welcome I'd to our quarter behalf of Officer

statements today's the me significantly expectations. financial in our those Actual may differ the today Leading these to President Morris. uncertainties, as -- Gaylon projected the and Exchange due CEO, call future statements. undertake contains discussion risks business with from from Today's forward-looking is various including and forward-looking forward-looking act Except our we risks and peer our statements about no reports results described update obligation required Commission. Securities in by law, filed to with and

prepared open for the Following we will line our questions. remarks,

With to that, over to call Gaylon. the I'd turn like

Gaylon Morris

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

over issued months for As and Even earnings quarter the industry at believe release detailed higher so, particularly period rates of challenging nation's electricity today, a attractive, large. we several population structurally remain resulting highly weigh demands our in time. aging both residential been the the long-term in a solar economics earlier last the second on of customers Sunworks have solar our for as infrastructure growing utility

delays California second absorption lower During in cost in X.X period. combination the following less reduced utility resulted economics of and quarter, solar NEM permitting the together favorable the the higher interest installation residential rates, in fixed transition activity with

decisive force quarter in with residential reduction same At current structure, rightsize pricing transitional an in for time, action accordance XXXX. beginning opportunistic in our further the our a a cost maintained conditions. third we've to including period the During we've taken business, demand strategy

second channel. through costs year To XXXX, XX% channel agency to sales direct than that are materially the acquisition we've Since represented the less quarter launching significant quarter originations the in versus Recall direct period. of in gain customer our the continued XX% market. the direct within traction sales all of in that fourth third-party end, in initiative our sales prior

In CEO, Solcius, sector expertise within Officer and Technology residential commercial technology product and wholly brings solar served years works, for operational Vivint July of Chief and IT advanced of including experience the Solar, July, as execution effective both XX, solar Sunwork residential led we Mark he than Previously, Trout more owned including industries. technology solar where implementation Mark to development deep XXXX. pleased senior appoint were Group initiatives, innovation. as and XX to Sunwork's all and business, product the he some

while his efficiency, At Solcius, residential continued expertise quality to channel, in our Mark will and provide customer driving systems and satisfaction. structural improvements

to have for a Mark the pivotal join company. excited are period team We the at

solar our energy commercial discussion Turning now a to of business.

as second Our more business quarter points increased had margin commercial basis, profit outstanding on to doubled revenue than basis in the nearly a XX.X% gross period. year-over-year an while X,XXX

installations of points new across including States of strong represents commercial power producers, multiple of whom several has project for to many independent Our the large attention promising track the garner record us. organizations, entry have started execution United that

we to point with ability key us of a differentiation on a budget below resonates schedule the is in customers. Our and our at turnkey or deliver markets for one project serve, that

utility installations, and solar represent for battery months, traditional our EV commercial in reference in increased interest storage of and both Our project for installations that but materially approvals have and indications areas recent of which opportunity studies new systems awards also us. inbound are waiting market in to

of pipeline future business the of supportive onboarded options we've financing response, while opportunities new creative a In growth. secure backlog to building

cash driving programmatic burn we growth and building regional objectives. reduce our priorities, intend strategic market-leading our positive with closer centers, reductions stay positions long-term our in us for EBITDA ahead, to put toward while achieving Looking that course consistent on cost

Given in half performance with of in business momentum positioning our us our ongoing the together year XXXX, the we first financial development second stronger anticipate to activities, our will backlog, be rebuild the the entering than in strength half XXXX. of

market the leading footprint, before, in and production. opportunity solar remains towards As transition our the for to works across independent play energy significant some positioning clean a geographic role affordable,

hand remarks. his Jason the With for that, I'll call to over

Jason Bonfigt

in financial residential, the Thank Sunworks referenced you, of second of $XX.X Gaylon weaker was by our a more the revenue of than X.X% within summary as with a year prior total decline versus XXXX, in performance which performance. commercial of offset second quarter Gaylon. Beginning quarter period, strength generated million earlier.

increased rates solar decision financial to of total save of rates advance will In of relative time, for to customers utility quarter. remain their offer have their products so, a over that, business a homeowners, transition While the higher continue headwind well-publicized suite the to Even higher homeowners in from pull-forward a cost resulting bills. for solar, our XXXX, go the rooftop industry. interest help in in accelerated we California demand second X.X during April and NEM money

lines week move our market. from Approval We California, months X queues average remains factor interconnection which in in we challenge that delays last have further largest in transition, away originations. X a we approximately utility April involves year. the the approached new As stabilization remains anticipate approval or application significant further time

within $XX.X the higher gross NEM to further during XX% margin of quarter. to lines segment from move compared year million improve their the Total the $XX.X XX.X% was our transition, or profit sales normalize. we to we As prior of XX.X% commercial improvements application combination would million expect time to quarter. The or in drove and gross away volume approval execution

utility of costs as cause residential throughout labor in our business the Offsetting this approvals under and improvement costs California disruption excess was absorption quarter.

residential focused are and we profile. at not revert labor QX, historical as enter underutilized to margin in scale exit savings markets we to which acceptable we in approval as an we As utility as operating time margin realize cost improvement are and on queues lines, we drive

we of a million, between $X.X a in quarter prior versus better million Adjusted operating share We per $XX the than second million the million our loss that period reported year of of $X.XX a basic loss loss $XX.X a We of $X.X $X.XX $XX.X $XX.X range and million quarter per loss of guided $X.X loss versus basic on generated EBITDA million in XXXX the year of period. or the an was in net prior net provided August X. in second loss million of or share.

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

earmarked Second receivable, support During took of we business, and growth a to of bolster liquidity long-term our factoring on credit line completion general Furthermore, which net for equity commercial offering announced X, million, Quarter, receivables. the resulted the $X.X in our the we securing purposes. which by equity is the to August action our of of corporate ERTC raising for proceeds further an financing

as session. that remarks. the our line Operator, questions for we our question-and-answer begin open Please prepared concludes

Operator

[Operator Instructions] proceed. first Our Shen with Please from Philip question Roth is MKM.

Philip Shen

are even and things C&I. traction I could you sense was expect if with seeing do QX continue you strength. was similar us something wanted actually is if are well? through to start long talk and Our through XXXX? off I expect you as this having with you to how accelerating through C&I. there. It mean that wondering I perhaps I you're the sounds wondering some to like see QX

Gaylon Morris

I to that studies it's that. Wood more if not market. that are going improve look that impacting residential next of Mac XX see idea same by the commercial C&I kind all to to say they considerably is It's grow growing, like beyond and line the next over you And the certain months. with business I and expect think over strong. let's I in the at then XX as the getting impacted more just that and like business -- see that, expect the things market months industry nearly is parameters fall C&I

Philip Shen

result. a the of year And like and driven the the is kind with of Do now for the things waiting this mid-XXs also of guidance margins? C&I you part you remain segment bit largely about earlier in kind little And by out talk have a as up this level? guidance reason of to because expect IRA can slower for the margins this freed was

Gaylon Morris

have and domestic and IRA, understanding certainly such impact. an the guidance The the had adders content

a burden, the the rarely they follow-up activity amounts time. a but still serious sort study headwind require extent, and or there that a do regards of year definitely a are a is of some from side there think utility negative sort in any approvals, could to not utility was the take of impact by residential approvals earlier a any I just the with to that utility the

contracts calling are We we sitting the have utilities are that approval at many, in that yet backlog many right now. queues not

for be in significant was quarter had quarter a numbers. past were little With far. I they bit going very public dollars that the the works optimistic slower. in our one come We few margins, So this bit actually the revenue the profit was margin higher that and so of to projects lower at been think projects margin number a large, a works are that has but public division regards in but the to little headwind thought

ongoing the So XXs. low profile margin is closer to

Philip Shen

to over resi. Shifting

you start time bit you You here. growing around right do Or a you again? And corner? you talked -- the do need see figure growth? kind Could think in of point And a bottom maybe is think it visibility you for of yet hunker what you the maybe QX, acceleration well of tough down the to in out. see the think do of business. terms at could little do be when next in Or some about you year? QX bit rightsizing Do to a little

Gaylon Morris

X markets. Yes. installation And decisions we've our last we've I from. had to to operate where where challenges are activities, going we're the based some and had been say make the the have coming would on in warehouses origination the on our changes sales over biggest months

operate. now think, our because our what right re-evaluating are front end in is, seeing So business we a of you're we where dip I

our we're down sense are Florida closed of or We into closing might as looking to And locations locations. more areas a that couple make have the down Northeast. new move such us at couple of maybe a for our

then that thesis in. the at should more we're key thesis. to still especially be what those key key hard in for in a in is really markets and the think meaning for group, residential I So But that is look for growth to XXXX, be sell us to not we're the to we going stay deeper, markets

Philip Shen

but looking what are growth at? haven't anticipating? growth? you maybe directionally, what And Ballpark, guidance, are are thinking X% for can provided official you just you I broad plus so XX% on know thought, plus we that us, of just it if you kind growth or sketch

Gaylon Morris

bit You've little you to do the been Jason, forecast? closer want take a to that?

Jason Bonfigt

Sure.

rates will so what I the we're think Mac -- suggesting following growth be. on of sort always the Wood is planning

high think the I we're So still in digits. single

I quarters. which pursuing markets think we're be which couple going working it we're to over through may the be exiting still we of and markets next

to it's that. So gauge early little probably a

It's that Our have on is by margin to more to EBITDA business. focus company. improving as not that's necessarily these shrinking on the of in markets the growth. about and beneficial And some long our generating really frankly, think going in be run we a weighed margins, gross

Philip Shen

if might be So sorry deeper? missed can want deemphasizing share which and then that markets what you there, remarks, given you ones but the earlier thought you go might which this markets in you -- to are I and

you just Gaylon plan if to could capital and cash And the was just the in then And in the receivables balance sheet, me general. it finally, relates for I through talk think and as wondering Southeast. mentioned to

receivables ramped in prior the XX a in up your think QX, XX that's little bit to I days to have XX maybe with compared of levels kind your and days.

could on you terms item. line capital working overall. so And cash if comment wondering in of And that general, then just in

Jason Bonfigt

back Sure. I'll the question that first. half take of

that, past, AR we two A partners So also, cash the we two that then increased. is to One slightly we And financing in had higher there's the AR of customers -- to is we that balances. that we're piece lend yes, that than -- have utilize. managing. more have has function elements itself

the on rates our funds. Typically, faster long bucket

finished may lenders PTO. specifically and markets, but reason from in the just PTO completion, you rising. And have revenue recorded our waiting on see we where So AR and waiting why on balances then we're that's funding the is that for those California, that back

Module expect on begins utilities there, or the time, to submissions over catch California in would and think inventory time, -- in are in we up adjusted improved. over California on the some dramatically to basis. improvements is specifically to So the AR begin their levels time -- backlog availability working we almost capital, an see on we managing as

well. as improved has Pricing

manage the to have that all fully utilized exiting continue that of. the really, be we'll the good we just in again, on focus fairly workforce tightly. rightsizing So out is can't markets But and -- about leverage cash and

quarter. So that's next our the really plan for

Philip Shen

markets And the be deepening of was might the question part in? and deemphasizing you first on which guys

Jason Bonfigt

in think markets right we Southeast, general, markets, I the in seeing having support South are facilities just the few amount now the Southwest in exact one there. right but that there's a to we're originations won't then and not of cover the

that's think share. I the So probably that we'll most

Operator

question next with Our Markets. from proceed. is Northland Please Donovan Schafer Capital

Donovan Schafer

third-party want With a consumers. maybe ask on it what's happening to originations. gives having direct then I channel you view with channel, kind first the on own more your of and comprehensive

in leads funnel? rates? color is And on -- from give getting so if the -- you what's are top can of the are coming I'm fewer the driving reduced curious this you that, originations, -- lower closed Or any there lower more at that's if

Maybe because but get kind offer on out you of leads can doesn't in maybe it monthly well. as they together still, the a them versus what pencil you if pay when comparing the then you pricing put basis

off close the rate. So in up a being it ends drop

kind of both. from it As contribution equal

for color kind Just there. curious some of more

Jason Bonfigt

it There's post Donovan. would had dynamics other maybe have relative in probably versus say you of NEM have partners product decline seen loan. markets. into in still talk to but of many to product ownership over how And this selling repositioning are deteriorated have also were start. that customers, I general, you're sales PPA NEM we time changing a the or economics I'll California, our X.X. beneficial originations X.X. -- then certainly We -- a

So think a of lot transition. a I is this

And so in general, we've seen a slowdown.

many to that there's part I think of -- answering as just factors answer there's question.

Donovan Schafer

important permitting of in is then first a about half of process the to And talked you thinking half. for be second issue California. getting the This pretty and or to seems than going utilities, to the be stronger year the

now of kind wondering, wide delays and we third as as we're -- see the So where Kind months. utility third the aspect? we about you the in any I'm about four still to Is begun an middle getting there into in guys now talked quarter. X halfway they're Or months? have of quarter? that sit permitting around do improvement the you Are of

Jason Bonfigt

So today. we're at months four

in, in date they're the from transition approvals at that to So the when I are utility look X.X. coming the coming of NEM

just originations just last through was leading applications to there submissions. we massive So that came deadline. up And in a they're the surge, that believe working those sort of

and point, we've at -- probably begin point, gradually, through applications, at see worked So we these crested to we start some time they've to this and lines probably these normalize. we all

we happen expect seen haven't but that to QX. We gap, during

Donovan Schafer

get And another question. could then I if

but past, it IPPs your think would business. reach you've IPP. an on scale So the believe we catch I'm release what my me. in the the typically side in of or did of and referencing of me be wrong, attention to projects don't if as done then CNI that remarks, potential -- that news prepared would kind I in customers of be believe I that Correct

are new So you projects what is would that to? size that avenue a this get pursuing you I and kind up of guys guess,

if this become of and interesting, very involved development you great. you Does step be in any additional there, like? involve so would projects give the could megawatt interesting for XXX that kind you change color, very Just a or can

Jason Bonfigt

for team we've that So side, us. changes over the side the significant the made the direct commercial last folks the who months, in some on commercial sales sell

IPPs, larger some we people than developers And now relationships have that in strong looked consistently and quoting brought really are past. the are projects on we and newer that certainly at with some we of the board

X, the that of certainly little We and debonding go would not that, are I bit challenging us. But a evaluating. than double-digit we're in projects megawatt larger megawatt category be looking concerns that yet, we're say more really issues but kinds all X could becomes and little bit beyond for a other X, projects that. there would certainly at

Operator

for question-and-answer We to have comments. like session. turn of reached conference over Gaylon the end the our to closing back would I

Gaylon Morris

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

now you. disconnect. You may Thank

Sunworks (SUNWQ) 14 Aug 232023 Q2 Earnings call transcript