PROVO, UT / ACCESSWIRE / May 23, 2023 / Sunworks, Inc. (Nasdaq:SUNW), a leading provider of solar power and battery storage solutions for residential, agriculture, commercial, industrial, and public works markets, today announced financial results for the three months ended March 31, 2023.
FIRST QUARTER 2023 RESULTS
(As compared to the First Quarter 2022)
- Total revenue of $38.1 million, a 22.3% increase
- Residential Solar segment revenue of $30.2 million, a 14.6% increase
- Commercial Solar Energy segment revenue of $7.9 million, a 64.4% increase
- Total backlog increased 40.7% to $88.4 million, driven by residential and commercial demand
For the three months ended March 31, 2023, Sunworks reported total revenue of $38.1 million, versus $31.2 million in the prior-year period, reflecting growth across the Company's residential and commercial markets. The Company reported a net loss of $6.4 million in the first quarter 2023, or ($0.18) per basic share, versus a net loss of $8.2 million in the prior-year period, or ($0.28) per basic share. The year-over-year variance was primarily attributable to a $5.1 million net benefit associated with the Company qualifying for the Employee Retention Tax Credit (ERTC), partially offset by lower labor utilization due to weather and utility approval delays, as well as a $1.3 million write-down of inventory to lower of cost or market and a loss on sale of excess module inventory of $1.0 million.
Adjusted EBITDA was a loss of $10.0 million in the first quarter of 2023, compared to a loss of $5.6 million in the first quarter of 2022. A reconciliation of GAAP to non-GAAP financial measures is provided below.
Cash from operations was negatively impacted in the first quarter of 2023 due to weather and utility approval delays, as well as tighter financing terms for residential solar installations. As of March 31, 2023, the Company had cash and cash equivalents of $3.4 million. During April 2023, the Company received proceeds of approximately $1.5 million from sales of common stock in registered at-the-market offerings. On May 5, 2023, the Company entered into a factoring agreement, based on the Company's commercial customer receivables. On May 22, 2023, the Company entered into a trade purchase agreement with regards to its ERTC receivable, with expected proceeds of $5.7 million.
Demand conditions within Sunworks' Residential Solar segment were strong during the first quarter, supported by strong new installation growth. Order rates increased at an accelerated pace given an influx of new applications for rooftop solar installations ahead of new net energy metering (NEM) regulations in California anticipated to come into effect during the second quarter of 2023. In the first quarter, Residential Solar segment revenue and backlog increased 14.6% and 12.7%, respectively, versus the prior year period.
Demand conditions within Sunworks' Commercial Solar Energy segment improved significantly during the first quarter, when compared to the prior year period. First quarter orders included a 1.5 MW rooftop and carport solar installation and 2,000 kWh energy storage systems located in Southern California with a Fortune 250 technology company. The $5 million order represents an important strategic entry point with a large corporation with a nationwide footprint. The project, which is projected to commence in the third quarter of 2023 and conclude the first quarter of 2024, is expected to provide significant long-term energy savings for the customer, consistent with their renewable energy objectives. In the first quarter, the Commercial Solar Energy segment revenue and backlog increased 64.4% and 119.1%, respectively, versus the prior year period.
'During the first quarter, we capitalized on accelerating demand for residential and commercial solar installations, despite challenging weather conditions and permitting delays ahead of a transition in net energy metering ('NEM') economics in California, our largest market,' stated Gaylon Morris, Chief Executive Officer of Sunworks. 'As before, we continue to drive an opportunistic pricing strategy in accordance with current demand conditions, while continuing to develop leading market positions across our growing regional footprint.'
'Within our Commercial Solar Energy segment, new orders increased to $11.5 million, representing one of the strongest demand environments we've seen in nearly a year,' continued Morris. 'During the first quarter, we secured an initial $5 million order with a Fortune 250 company to install rooftop and carport solar installation at a location in Southern California, representing an important strategic entry point with a major, multi-campus commercial customer. Commercial backlog increased to more than $35 million at the end of the first quarter, an increase of nearly 120% versus the prior-year period.'
Within our Residential Solar segment, California represented approximately 50% of new originations in the first quarter,' noted Morris. 'Importantly, direct sales contributed to more than 40% of new originations in the period, versus 18% in the first quarter of 2022, contributing to a 450-basis point decline in segment selling and marketing costs as a percentage of revenue.'
'The NEM transition continues to result in significant project permitting delays in California, with approval timelines extending to eight weeks,' continued Morris. 'Component inventories reserved for the delayed projects remained in working capital for an extended period, which continues to impact near term liquidity. Additionally, we are managing through tightening credit markets, whereby, advance funding for residential projects are either being reduced or eliminated. In response, we initiated a cost savings initiative in the middle of the first quarter to reduce our fixed cost structure. In addition, we initiated a series of liquidity-enhancing actions, including entering into a factoring agreement which will allow the Company to improve working capital, as well as, selling excess module inventory. This agreement, along with entering into a trade purchase of the ERTC receivable, provide meaningful sources of liquidity to manage through recent working capital challenges.'
'Following the NEM transition in April 2023, we anticipate utility approval application rates - and project completion times - should normalize over the next quarter. In that scenario, we expect working capital requirements to stabilize and capacity utilization to improve. As before, the market opportunity for solar remains significant across our geographic footprint, positioning Sunworks to play a leading role in the transition toward affordable, clean, and independent energy production.'
NON-GAAP FINANCIAL MEASURES
EBITDA is a non-GAAP financial measure defined as net income (loss) excluding interest, taxes and depreciation and amortization. Adjusted EBITDA is further adjusted for non-cash stock-based compensation expense, goodwill impairment and acquisition transaction expenses. Adjusted EBITDA is a key measure used by the Company to evaluate operating performance, generate future operating plans and make strategic decisions for the allocation of capital. The Company presents Adjusted EBITDA to provide information that may assist investors in understanding its financial results. However, Adjusted EBITDA is not intended to be a substitute for net income (loss).
Certain non-GAAP financial measures are presented in this press release, including Adjusted EBITDA, to provide information that may assist investors in understanding the Company's financial results and assessing its prospects for future performance. We believe these non-GAAP financial measures are important indicators of our operating performance because they exclude items that are unrelated to, and may not be indicative of, our core operating results. These non-GAAP financial measures, as we calculate them, may not be comparable to similarly titled measures of other companies and may not be appropriate measures for comparing the performance of other companies relative to the Company. These non-GAAP financial results are not intended to represent and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. To the extent we utilize such non-GAAP financial measures in the future, we expect to calculate them using a consistent method from period to period. A reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure is provided below.
Sunworks has been providing high-performance solar and battery storage solutions since 2000. The Company acquired Solcius in 2021 to extend its national presence and provide high-quality, performance-oriented solutions to sectors ranging from residential to agricultural, commercial, industrial, federal, and public works. Today, Sunworks is proudly paving the way toward the democratization of renewable energy for all with their agile, partner-centric, and technology-agnostic network that has installed over 200 MW of solar and battery storage systems. Their dependable, solutions-oriented teams are recognized in the industry for their commitment to customer service and renewable energy advancement. Sunworks was recently recognized by Solar Power World as a leading solar supplier and is a member of the Solar Energy Industries Association (SEIA). For more information, visit www.sunworksusa.com and www.solcius.com.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to statements regarding the impact of higher financing costs on solar adoption, the strength of demand for the Company's products; the normalization of public utility approval applications and project timelines; availability of advance funding for residential projects; and the Company's ability to improve its working capital position, including by factoring receivables, accelerating the benefits of its employee retention tax credit and other liquidity enhancements. These forward-looking statements are based upon the current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Sunworks. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements because of possible uncertainties. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Sunworks' reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available on the SEC's Internet site (http://www.sec.gov). The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2023 AND DECEMBER 31, 2022
(in thousands, except share and per share data)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(in thousands, except share and per share data)
SOURCE: Sunworks, Inc.
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