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spk01: Greetings and welcome to the ISAN first quarter 2023 earnings conference call. At this time all participants are placed on a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host Mary Conway. Ma'am You may begin.
spk00: Thank you, operator, and good morning. We are pleased to welcome you to ISUN's conference call, where we will discuss financial and operating results for the first quarter of 2023. Jeffrey Peck, Chairman and Chief Executive Officer, will provide an update on the overall solar energy landscape in our operating performance quarter, along with our outlook for 2023. John Sullivan, Chief Financial Officer, will provide an overview of the first quarter 2023 financial results. After our prepared remarks today, we will open the lines to address any questions. As a reminder, the earnings release that was released this morning and which can be found on ISUN's investors website at www.isunenergy.com includes financial disclosures and reconciliations for non-GAAP financial measures. Any comments that we make on today's call may include forward-looking statements that refer to management's expectations or future predictions. These statements are made as of today and management undertakes no obligation to update these forward-looking statements in the future. Such statements are subject to risks and uncertainties that could cause actual results to differ from management's expectations. With that, I will now turn it over to our CEO, Jeff Peck.
spk03: Thank you. Good morning, everyone. Thank you for joining us today. I'm pleased to share ISUN's progress during the first quarter of 2023 and update you on our plans for this year. We are pleased with the energy and the success our team has achieved out of the gates in 2023. While there are always seasonal challenges, I'm excited to report that we continue to see our backlog transition to signed contracts and active projects, as I said when we reported our full-year results a month ago. The continuation of this trend and our success in winning important new contracts in solar and EV infrastructure provides us with confidence in our ability to execute effectively against our strategic plan to achieve our mission to accelerate the nation's adoption of solar energy. Last quarter, I spoke in detail about the work we've done over the past year to establish the infrastructure we need to support our growth plans and execute on the recurring revenue opportunities that we created through our investments and our platform approach. This platform approach is a competitive, differentiating advantage for us in positions I've spent for long-term sustainable growth. We see the proof of this strategy in execution in the first quarter year-over-year revenue growth. We've also made good strides in improving our efficiency, and the initial results of those efforts are clear in our first quarter results, with lower operating expenses, improved productivity, and a lower net loss. We have made operational improvements on the residential side to accelerate project execution. Similarly, the combination of our commercial industrial divisions at the beginning of this year are also showing good results with higher labor productivity, better utilization coordination. And while it's not reflected in our results just yet, we continue to make good progress on our project pipeline front that I described last quarter. I'll share an update shortly on that. Quickly reviewing our first quarter results, revenue increased by 15% to $17.4 million. Gross margins were 20.5% down slightly from 21% in 2022's first quarter, mostly reflecting ramped up efforts ahead of our implementation to drive installations on the residential side in Q2 this year. In the first quarter, 39% of our revenues came from the residential segment where gross margins tend to be higher. We remain confident that as we scale and drive synergies and efficiencies throughout the organization, we'll continue to expand our margins on an annual basis. As of March 31st, 2023, our total backlog was 178.8 million. Our pipeline remained at 1.6 gigawatts of projects as of the end of the first quarter of 2023. The backlog and pipeline underscore the increased customer demand that we are experiencing, as well as the effectiveness of our ongoing strategic initiatives. Our success reflects a high level of customer satisfaction, specifically in the residential segment, which generates strong referrals, creating lower customer acquisition costs. Let me share a few words about the performance of our three divisions in the past quarter. The residential division did very well, even though this is a seasonally slower period in the Northeast, since we are limited in installation during unfavorable weather and shorter days. We continue to build more business and expect a heavy period of installation in the coming quarters. The commercial and industrial division, which we combined as of the beginning of 2023, is off to a strong start. It generated more than half of our revenues this quarter as we begin to work through our backlog and add more business to the backlog through competitive contract wins. We're pleased with the division's productivity in the quarter, enhancing our labor utilization with a major rationale for the combination. Our utility and development division is off to a slower start, although the backlog the group is addressing remains large. Project delays around expected implementation, especially on the utility side, affect revenue generation, but delays simply mean that the work will appear later and resulting revenues will be recognized later this year. The expertise and knowledge that our teams bring and the strong customer relationships they've established have led to many recent contracts. We've added $32 million in new deals, one over the past quarter, across our business lines, including both solar and EV infrastructure. Let me share a few details on a few of them. We were recently awarded a 2.2 megawatt solar carport project for a major financial institution. This project is expected to be the first of many for this financial institution. As has been our approach with all of our customers, we hope to cultivate this relationship to create recurring opportunities. Additionally, at the end of the first quarter, we were awarded seven separate solar projects valued at $10 million for existing customers. We take great pride in building these long-term relationships and working collaboratively with our customers to accelerate the adoption of solar. We remain convinced that the IRA legislation passed last year will afford ISUN and the industry genuine benefits, even as we await the finalized language and rules from the Treasury Department regarding tax credits and other elements. Once those rules are disseminated, we expect to provide an update as to how they will impact our operations this year and years ahead. We expect more specific roles and the removal of uncertainty will increase the value of the solar assets of those both in development as well as those under construction, which in our case will lead to a higher valuation of our pipeline as it spurs increased demand that we'll address in 2024 and beyond. In 2023, considering all of the evolving macroeconomics factors, we expect to continue to demonstrate strong growth and attain operating profitability along with expanded margins. Thus, we are affirming our expectations for total revenues for fiscal year 2023 of $95 to $100 million, reflecting a 24 to a 31% increase over the total revenues in 2022, along with gross margin expansion on an annual basis in full-year EBITDA profitability. With that, I'll turn the floor over to John. John?
spk04: Thank you, Jeff. We are pleased with the solid revenue we produced in the first quarter as we continue to execute on our backlog. I'll provide an overview of our statement of operations, as well as provide details on our segments before turning to the balance sheet. ISUN reported first quarter 2023 revenue of $17.4 million, up 15% from Q1 of 2022 revenue of $15.1 million. Revenue growth in the quarter was driven by the continued fulfillment of residential consumer demand and effective execution of our commercial and industrial backlog. As Jeff mentioned, in the first quarter of 2023, 39% of our total revenues were in the residential segment, which tends to carry the highest margin, a bit lower than the 46% this division represented in Q4 of 2022. While we continue to execute against our existing backlog, We also generated new demand and added $32 million in new business during Q1. Total backlog was $178.8 million as of March 31, 2023. By segment, our residential division generated revenue of $6.85 million in the first quarter of 2023. Customer orders are approximately $17.9 million and are expected to be completed within three to five months. Our Commercial and Industrial Division, which was consolidated as of January 1, 2023, generated revenue of $10.3 million in the first quarter and has a contracted backlog of approximately $152.9 million, expected to be completed within 10 to 18 months. Lastly, our Utility and Development Division generated revenue of $0.2 million in the first quarter, Our utility division has contracted backlog of 8 million and 1.6 gigawatts of projects currently under development expected to achieve NTP in 2023 and early 2024. Gross profit in the first quarter was 3.5 million, up 12% from 3.2 million in the first quarter of 2022. Gross margin for the first quarter this year was 20.5%. compared to 21% during the same period in 2022. With the 50 basis point decline largely due to our revenue mix, as our C&I division accounted for approximately 60% of total revenue in Q1. As the synergies among our divisions increase our labor utilization and efficiencies, we expect our overall margin expansion to continue. The operating loss in the first quarter was negative 2.7 million, a 54% improvement compared to a loss of negative 5.7 million in 2022's first quarter. Non-cash depreciation and amortization expenses were 0.8 million in the first quarter of 2023 compared to 1.8 million in the prior year period. ISUN reported a net loss of 3 million or negative 19 cents per share in the first quarter of 2023, compared to a net loss of 2.9 million or negative 23 cents per share in the same period in 2022. Adjusted EBITDA for the first quarter was a loss of 1.5 million or 10 cents per share, compared to an adjusted EBITDA loss of 0.1 million or negative one cents per share in the same period in 2022, which had the benefit of the non-recurring 2.6 million or 21 cents per share PPP loan forgiveness. We focused our efforts in 2022 on integration and creating systems and processes that allow for efficient and effective growth. While revenue grew approximately 15% during the first quarter of 2023, we were able to reduce operating expenses by approximately $2.7 million, or 30% from the first quarter of 2022. We are focused on continuing these positive trends throughout the rest of 2023. Now turning to the balance sheet, total debt decreased $0.5 million to $13 million as of March 31, 2023. down from $13.5 million at December 31, 2022, reflecting the ongoing repayment of long-term debt. Our cash position of $7.2 million as of March 31, 2023, improved from $5.5 million as of December 31, 2022, through higher revenues and diligent collections. In addition, the second tranche of $12.5 million from our $25 million debt facility remains available during the second half of 2023, although we have not yet determined whether we will utilize it at that time. And with that, I'll turn it back over to Jeff.
spk03: Thanks, John. I'm pleased with how we are positioned as we move through 2023. We have an amazing team. to execute on the many different opportunities we have created within this evolving and dynamic energy market. We have diversified our revenue mix across different segments, and we are executing on our goals efficiently to attain operating profitability in 2023, supported by the positive landscape provided by the investments we have made to create these recurring opportunities, as well as the Inflation Reduction Act. We remain confident the best is yet to come for ISUN and our stakeholders. And I'll turn it back over to the operator to open the lines for questions. Operator?
spk01: Thank you. At this time we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue and you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is coming from Jeff Gramp with Alliance Global Partners. You may proceed.
spk02: Good morning, guys. Thanks for the time. I noticed in the earnings release, you guys accelerated the fulfillment timeline on the Resi backlog. I think previously you guys had been at kind of that four to six months, and now the language is, I think, three to five. And maybe I'm reading too much into that, but I'm curious if maybe that's a result of better you know, efficiencies on the labor front. I think you guys mentioned seeing some of that on the CNI side of things. But I guess just if you can confirm if maybe I'm reading too much into things or is there some improvement or acceleration in that ability to fulfill that order book?
spk04: Hi there, Jeff. This is John. So I don't know if you recall, but in past quarters we had highlighted that within our residential segment we were refocusing that team on core products and services within that division. And we eliminated a number of ancillary services that were there that may have not been as efficient as the installation piece. So by reducing those products and services and offerings and allowing that team to focus on a couple of key areas, It's allowed us to improve the overall efficiency of the installs and leading to those quicker turnaround times.
spk02: Perfect. I appreciate that. And on the EV opportunity, Jeff, I think you mentioned that there might be some more opportunities down the road with that customer. Can you kind of expand on that a little bit more, I guess, both in terms of timing and magnitude? you know, potential opportunities may present themselves and, you know, how big is that opportunity set with that particular customer?
spk03: Yeah, it's a large opportunity. Multiple number of sites scattered throughout the country. We've got a team that is a lot of experience and actually has worked with this customer in the past. So this is our first opportunity we have. We have other pricing out to them, and they're reviewing other sites, so it could be a very, very large opportunity for us as we move forward.
spk02: Great. And if I could just sneak one more in. On the liquidity side of things, obviously, nice job increasing the cash quarter on quarter. John, I think you mentioned in your remarks that the second tranche remains available in the second half of the year. Just wanted to clarify, have you guys met the requirements there, or is that kind of a projection that based on kind of the guide that's out in the market and how you guys see that you're progressing that you'll meet those hurdles to make that available.
spk04: So, year to date, we have met all of the requirements and the covenants that were part of that agreement to have that second tranche released. We do have some key revenue and adjusted EBITDA covenants for Q2 and Q3, and at this point in time, there are no indications that we would not be able to achieve those.
spk03: Awesome. Sounds good. Thanks for the time, guys. Thank you.
spk01: Thank you. As we have no further questions in queue at this time, I will hand it back to Mr. Peck for any closing remarks.
spk03: Thank you, everyone, for joining the call with us today. We appreciate your time to hear about the progress in our performance. If you have any questions, please feel free to reach out at ir at isunenergy.com. Thank you, and have a good day.
spk01: Thank you. This concludes today's conference, and you may disconnect your lines at this time. And we thank you for your participation.
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