SUNW - Earnings call 3 2023

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Operator

Greetings, and welcome to Sunworks Third Quarter 2023 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jason Bonfigt, Chief Financial Officer. Thank you.

You may begin.

Jason Bonfigt

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

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

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

Mark Trout

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

the in our large. solar detailed to earlier have industry release issued continued today, and the be a As for residential quarter several period months third at last challenging earnings Sunworks both

long-term infrastructure, believe weigh will growing we a economics residential to demand as electricity solar population result particularly customers structurally continue utility in aging and which the nation's of rates storage, We for higher over of time. in believe on our the

third in and the absorption and residential higher the the interest following California continued combination quarter, installation new large, X.X of cost favorable transition, in economics at resulting industry weigh NEM on solar the to reduced rates, us fixed lower activity less the in During period.

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

cost have we an to we and have believe and volume markets appropriate efficiencies on stabilize where We and maintain retrenched focused structure.

crew and cycle processes with cost time improve management. our improvement, focus significant continue internal on to customer efficiency installation We

material we supply the improved chain continuing We X. or availability in into are pricing, conditions which and next quarter anticipate seeing

Solar Commercial Turning business. our to a discussion on Energy now

industry the Customers had XX% year-over-year quarter increased the the while as period. more to than commercial to expertise should continue markets and as continue space deep capacity the a than have to and continue Our and have space install. of into an in sector on throughout XXXX industrial margin economics commercial who to and basis, as well C&I and grow improve. storage profit XXXX outstanding to in third who municipal more seek out as doubled the revenue gross rate solar business EPCs This

the positioned traction at The charging EV that us solutions. to is sector growth. a growth grow market been Sunworks in significant are we has EV to as capitalize commercial and in and on charging focus This gaining strategic EPC a continues for Sunworks,

remain market-leading long-term our positive toward growth on will Looking closer market-based reductions Building objectives. that cost us achieving strategic ahead, our priorities: implementing put regional EBITDA consistent pricing a focused with we positions coupled while targeted with

space, to the into in XXXX. increased commercial positioned Reduction well the Given Act the the as anticipate the momentum well demand our in capture being tailwinds as of Inflation we business entering

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

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

Jason Bonfigt

in our segment $XX.X segment, market period year the ongoing quarter of Sunworks positive financial summary offset referenced third of Thank challenges generated within as a you, Mark Mark. quarter earlier. residential our momentum total versus the more prior within the a Beginning XXXX, revenue million XX.X% of with commercial which given than performance. decline of third was our

favorable rooftop solar and to to the to interest of higher rates macro be businesses. continue long-term cost homeowners, While solar trends total consumers we the increased believe for of

remain quarter, last higher to Similar headwind for business. our a rates

$XX.X As a XX.X% result, year-over-year was residential segment a million, revenue decline.

or Total our on to the year. the year sales the $X.X $X.X gross Revenue customer continue compared double in million strategy to or $XX.X operate XX.X% segment, prior million solar and we increased million quarter. at or commercial of to Within base execute diversify XX.X% profit prior our was to scale.

factors in margin. gross reduction the contributed to Several

was derived less commercial margin our focused a a and commercial marketing, has The on of sales segment profile. versus is prior XX% approximately from and First, approximately our revenue as the model XX% lower result, segment's in gross year.

gross originations underutilized segment from higher execution improvement year approximately margin to X% prior year residential in labor in as quarter in was Additionally, our Offsetting the costs in to labor of improved commercial the capacity. this absorption led operational XX% due to current business under the lower and improved quarter volume.

and into reduce our with and will the markets scale in us to focus strategy of our ability end action million at markets by the sales annually. QX, that This we to and not QX marketing labor have economics $X to QX, operations. approximately strategically Throughout allow scale. key reduced we are cost Since took operating favorable

During negative due events and our rates of QX, we our triggering within identified to segment, capitalization. including residential interest rising the impact market

associated with the As $XX to acquisition. charge a incurred impairment result, we Solcius goodwill million a the noncash

the quarter goodwill cash $X.X Adjusted of in million. year or $X.XX per of $X.XX had a million represented XXXX the which third the a the EBITDA is was share. during in net in period Included versus of cash prior generated $X.X $XX.X or the quarter. per a and loss of September XX, of share. share At million We in loss impairment, $X.X $X.XX per net quarter net the the company million equivalents XXXX, loss loss

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

Operator

gentlemen, question session. we first Thank [Operator Capital conducting line be Schafer Instructions] now and of a Our will Northland from question-and-answer the Donovan with comes Ladies you. Markets.

Donovan Schafer

sequentially? color it currently give the think you expecting Do quarter? of you great. ask to are down fourth first, for break sort would if by that be just directionally And would up, on sequentially, I, C&I can So just any residential you you can versus be us you what if want out

Jason Bonfigt

Yes. Donovan, Jason. it's

our has declined we're the think backlog the to in the quarter. million -- about at business I still residential of end $XX

coincide -- will the year-over-year. with in likely, with QX reduction backlog the business So that the --

the throughout quarters. quarter Within our the The been that's backlog the year the given visibility into business. the and end nice million, did about $XX us commercial several business, next but we've at backlog building

about that of still we're in X the of that very -- X optimistic that we're say would the the months. opportunities here contracts close I next And to we're to award looking and pipeline

is be that, So business a operating that going better at the we to think scale quarters. in coming

Donovan Schafer

kind quarters, target us over rate a Okay. talking manage you And next liquidity question, position, like few about you if then on got update I kind maybe the what capital we're of the as around about Could you working follow-up the managing of next be how and burn a that of in you certain would quarters, goal through have, or position. sort again, few appreciate think that, cash navigate overall cash if how the -- you've great. might talk

Jason Bonfigt

Yes.

I few a we it think when comes levers to have cash.

we're these The the could times deposits. large will those commercial contracts XX% anywhere first contract positive be That on value. of lot contracts, come from lever when signing the of is a with to X%

So But that would be likely that's that's tend material be X, again, the quarters. to those -- lumpy, be next X us. for could over and that

from declines or of actually have still residential benefits on customers recognize Now quarters. contracts you're that your previous working improvements capital benefit in because you you revenue business, within as collecting business the our

us option an well certainly that for one that's managing. actively we're and as So

Donovan Schafer

the like, the conversion year down look coming of you I quarter, talked Okay. But backlog about figure for rate, the prior I And it this in backlog. would residential, mean, backlog to then next look guess, about XX% quarter. converting could that, take and you with It quarter's the like of I it's XX% for to like back that it the kind convert ago, does something down if residential. about of talking XX% -- looks a

if market the right something at now? rebound Is we Or that up is expect towards that and the the period? head XX%? kind new rate is XX%, way over so, of a time should run what back to we're with And that

Jason Bonfigt

Yes.

there I post anomalies many the and approvals X.X. over California course with were of year of some utilities that had jurisdictional with NEM the challenges next in we the think

managing So I think period. we're still that through

norms. queues reverting seeing the and to historical dramatically approval We're back shrink

at backlog as and conversion, norms So revert you look to should think I the historical our as well. that

Donovan Schafer

in. in position the of what -- big potentially customers about and talking And opportunity win your terms if we I update would get there of some are Can is? just color we just I to great. color there? mention my an How the maybe more could space. more eye, squeeze mean, projects? I C&I in any in be IPP one caught potentially Or you the projects just it there megawatt -- are XXX-plus

Mark Trout

Donovan, to think But Jason. I our one, is XXX probably think you Mark. take spot yet. can this about this when is it, not quite up probably sweet megawatts I

diversify are in definitely from. stay of flow and of some as through. of we to markets look expand also the seeing coming there, we're trying But those So the and where the come to EPC demands in deals we're some

So table our that's under any be that. but not just the sweet spot off seems means, by to

Operator

question next Shen line Philip comes the Our ROTH Capital with of from Partners.

Philip Shen

follow to Wanted and question. on cash flow liquidity up the

what about for the was burn cash talk you can Specifically, QX.

release. and You do then the And be it statements didn't position. expect financial then you how cash then hear didn't what I have with to expect for -- your And you do QX?

So how And you go that what do was through we trend to QX? QX? as of end that at the expect

were about talking working capital you improvement. Jason,

translate inventory of at quantify QX how and please? wondering were So that the could well was and end to cash as if what much you QX, in can AR the positions

Jason Bonfigt

we right have ATM file Sure. quarter, our million. raise SEC and We We our quarter of was well. had in with $X cash. on million the ended I the a capital believe QX around as proceeds at $X.X that that's from did also

So positive cash perspective. flow from a that a was

in $X.X and capital is the flat delta loss burn the EBITDA relatively was Working So the about was business. cash million. the

cash then EBITDA As well revenues we've some a believe will markets, are taken we're positive and commercial the business, And growing, the -- and from as actions in the perspective, we we reduce that many that burn. headcount of this approaching consolidating of business. these that as

well. So be to tailwind that's us for a as going

filing, still there's that there. We I $XX inventory. in of have a of AR. couple about We million did have, opportunities in And would say our

we're older working in business. have up accounts we're cash. we our category bring residential clean to There's that We can million to so PTO targeting actively just the within that in dollars get that several that

to add effectively, free up that have some then that customers that flow we right And will more us into well. expand an population now to to or as allow underutilized we're cash a looking factoring -- line

$XX modules our was the Inventory during million. the quite Again, few a have for about we that available business. are of quarter commercial

we're purchases having to not right now. make So those

to to benefit working going So be a as that's capital well.

our module in are it to comes sort purchases. residential within managing and then when still business, of time just we And inverters

opportunity, lot there residential our but in frankly, a business. of not in our inventory, think is there's commercial So I

Philip Shen

line, factoring might much you said the Got to by? how be? much then expand it's And underutilized. through you want capacity Can to it. might as you there And then it relates talk that how more

Jason Bonfigt

that's in we if -- at be our be you but I at be expand is number $X factoring that think Q. it of but QX. that. We the operating are $X the it to that I I'll stated have $X.X was will not to to with levels million. correct support going of And think end to have line the million could number, million, $X.X certainly, it about don't me I We follow -- business facility up was believe utilized opportunity in million. by we're have there's I when our front could -- the

well. as that targeting we're So

Philip Shen

both heard then be didn't And were? improved XX%. looking in think, And commercial margins you X% to hear share at for what I from margins they resi QX. But I segments QX. the what you Okay. then Can I for for margins year-over-year, expect to the QX? you QX,

Jason Bonfigt

XX.X%. we business. driven many and that's QX been down months. we to mentioned margin We've -- we've business had going was have have as residential improvement crew gross just on prepared by markets reductions, the margin X the That the the drive our past in $X our to residential in us within of help call, over historically, capacity. that underutilized fact in -- many remarks, we about made these will -- we've X That that is made underutilized million,

then some see And lower materials coming we're to procurements cost and through starting well. as

little these lot making a markets in probably not here and give end the the bit QX. of benefits all these we're QX. lift that of baked But in, again, think we So at of of changes some a I us of will in

next into recovery gradual a is this think I So year.

Philip Shen

Okay.

So about to saw be way margins QX. that a fair similar in could in Is it? of QX you what thinking

Jason Bonfigt

with Within XX%. our think accountable customers upside above our I to we're operations might bit teams to a the relative We're commercial when XX%. business, there manage quoting there targeting, our and of be little holding

improvements there'll some the there. lift residential like to I we'd but think in some not long see business, then And QX, So our materially. term, in over be

Philip Shen

Right.

Okay. Great.

markets. which the basis, the Can on California what's revenue talk your biggest for for You And talked remaining only? few of about forward the left? about next resi you of exiting a business the expected, ones a versus then the mix, So you go-forward one. mix business resi mix California going

Mark Trout

Phil, it's Mark.

of a result our did of X couple we of few what California. some We change down we shift dealers terms markets, the underperforming, a had a a In as that is NEM the in in were closed of underutilized.

everybody and from like going that more seeing of And of so kind I else. loans of the in we're you're kind California, is you're that transition seeing that TPO think through industry what a just probably back across model

we probably but expecting, come to back levels quite still going not its we X back. TPO, remain active as pre-NEM California, going shift to to do more expect to there. in. probably this year, We're over to maybe come are is California, So that back we're we active

some from of dealers. EPC to that less been, they've then from sales our and as dealers we've some really have focus been focus of where chosen direct And the we've team have more reduce And footprint. exited our lost their volume, markets

in list I a think the those announcement. of there's earnings

Philip Shen

you A markets list of the exited?

Mark Trout

A of we're list ones staying in. the

Philip Shen

Okay.

about Or less business more? XX% it California is is your So of still? or

Mark Trout

backlog. come of backlog, we've normal shift created off think seeing less probably the us kind and And there's And of right in focus lot as It felt after a It's strong. a markets to due all really actually I actually frankly, AR other that's NEM X. that of our right have now. of lead-up slowing well working as to of business some that X. a We're the down been NEM

back. of kind And just so that's bouncing

we're now, XX% I about probably right So California do some if quick math.

Philip Shen

Okay.

in to When and currently? do basis? or to term, given has Sunrun momentum stay to California expect and near your transition breakeven about harder storage, So given know on down the be year-over-year? bookings others but time. trouble still year-over-year it commitment your what's talked NEM you perhaps X are Is I maybe originations your up a having

sooner? So or that curious, it in QX just QX? of you year, could do next be maybe see Or

Mark Trout

Yes.

that and on now operating falloff what is has So I seems at we're consistent. pretty looking right think actually our stabilized, we're a month-over-month

stable QX. don't I maybe we to in will and And of some then stable up want we'll TPO weather here, QX assume the bring would would the rest assume So bit and occasion I offerings. more see think be a I kind into -- I as of but through and that QX we little uptick something California, in of see tick add

And took so X I A lot get to, of think, We due over, consumers of is to to the speak. is to NEM course. to and X NEM the before for, now. that NEM normal, in quarters signatures rush return now normal, X seeing a to what this back out consumers came are the transition frankly, of right the we're of to some couple saw that's where it

Philip Shen

storage the the Got attach you now? Is today, XX% these do think originations it. ticket it's at for more have Or are And that basically originations you like you level? storage to XX%? rates

Mark Trout

continue. to going that's California, In

So California, pretty we for that's yes, at normal. are looking --

Philip Shen

for I jump guys. pass have keep know I and I could else, lot few guys. it's you I've I the on it going, nobody Great. people others. a time. back Hopefully, there's on, Okay. in. I'll If helpful might a but monopolized for

Operator

questions for hand other closing comments. Mark the to call to in queue. no are the There Trout like I'd back

Mark Trout

Should And contact any feel you please everybody. have once joining the thanks, us. thanks for call to questions, free Well, today. again, Great.

with of our e-mail IR@sunworksusa.com. conclude Our our member call team this will today. follow is address A up and you, will

may now disconnect. You

Operator

teleconference. and participation. Thank Ladies for today's gentlemen, this conclude does your you

may your time have You and a this disconnect day. at lines wonderful

Sunworks (SUNWQ) 10 Nov 232023 Q3 Earnings call transcript