Sunworks, Inc.

The answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jason Bonfit, Chief Financial Officer of Sunworks. Thank you. You may begin.

Thank you, operator. I'm Jason Bonfit, Chief Financial Officer of Sunworks. On behalf of our entire team, I'd like to welcome you to our second quarter 2022 results conference call. Leading the call with me today is our president and CEO, Galen Morris. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. Following our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to Galen.

Thank you, Jason, and welcome to those joining us today for our second quarter results conference call. Before I cover our progress on our strategic objectives and provide a Q2 financial update, I wanted to highlight the importance of the likely passage of the Inflation Reduction Act. The provisions of the act support the Biden administration's domestic renewable resources and climate policy goals by promoting clean, reliable and low cost energy to businesses and homeowners. We view this as a significant win for the solar industry, specifically the 10 year extension of the investment tax credit at the 30% level. The ITC is a proven path to rapidly growing solar adoption. While costs in the solar industry have declined over the past decade, They have risen sharply in 2022, and this ITC extension is expected to have a meaningful impact on lowering the cost of solar and storage and additionally should promote U.S. manufacturing. Moving on to our business update. During the second quarter, we demonstrated measurable progress on our business transformation strategy while continuing to capitalize on increased demand for our integrated solar solutions. Net sales and gross profit each increased on a year-over-year basis in the second quarter, driven by strong residential demand, while both orders and backlog increased to multi-year highs. Since our last quarterly conference call in May, demand conditions have strengthened materially across both our residential and commercial markets. While supply chain disruptions, module availability, and wage inflation remain a headwind, We've enacted several consecutive price increases in 2022, the benefits of which will position us to achieve improved gross margin capture as we move into the latter months of the current calendar year, while moving us that much closer to free cash flow break even. In our residential solar segment, which represented nearly 90% of second quarter revenue, new installation activity continued to accelerate, while total lots installed increased by nearly 35% on a year-over-year basis, as concerns around rising energy costs and grid reliability have contributed to increased customer adoption of our rooftop solar solutions. Within our commercial solar energy segment, water activity accelerated meaningfully in the second quarter, positioning the segment for improved performance as we look to the second half of 2022. We secured a multi-year high of nearly $24 million in new orders in the second quarter, more than double our order intake in fiscal year 2021 due to strengthening demand for commercial and public works solar projects. As discussed last quarter, we've continued to execute on a well-defined slate of growth priorities designed to both capitalize on favorable demand conditions across our markets and maintain a level of margin discipline required to support sustained profitable growth. Over the last year, we've significantly restructured our residential go-to market strategy. In just 12 months, we have grown our originations from the direct channel to 25% of our total originations, a strategy that will allow us to profitably scale our business. During the second quarter of 2022, the direct sales team was responsible for nearly 15% of total installation revenue versus 5% in the prior year period. Operationally, we remain focused on reducing our velocity of installation or the time between when a contract is executed and when final installation is completed. We believe a reduction in installation times not only improves customer retention, it also encourages more channel partners to work with us, which provides us more leverage around how we price our projects. Following a recent pilot test during which we decentralized all design, permitting, and installation activities, we were able to significantly reduce our installation times. Given the success of this pilot, We are actively mapping company-wide workflow to marry the benefits of scale with this decentralized approach, the combination of which we believe will improve the overall customer and dealer experience while ensuring improved conversion on signed contracts. Further, as we've highlighted on recent calls, we continue to expand our sourcing and procurement relationships to ensure a cost-effective, high-quality supply of modules. While disruptions to the global supply chain and tariff-related policy concerns have both constrained module availability and contributed to higher material costs, we've taken action to expand our supplier relationships while opportunistically increasing prices to more than offset labor and materials inflation. Although we have sufficient module inventories to address current demand, inventory availability across the broader market remains tight. As disclosed last quarter, the Department of Commerce received a petition filed by California-based solar module manufacturer Oxen Solar in March of 2022. The petitioner requested that the DOC review solar panel imports from Chinese companies working in Cambodia, Malaysia, Thailand, and Vietnam related to anti-dumping. This action served to reduce imports of panels from affected regions, resulting in reduced domestic availability of modules and a corresponding increase in module costs. In response to the significant adverse impact this investigation could have on domestic solar industry, President Biden signed an executive order in June 2022 that suspended the collection of anti-dumping and countervailing duties of certain cells and modules exported from the main regions for 24 months. While this situation is far from resolved and a DOC investigation remains ongoing, We believe panel producers from the affected countries will increasingly resume shipments during the second half of 2022, helping to ease inventory availability issues. In combination, we believe our collective focus on reducing customer acquisition costs through a growing direct sales force, improving the velocity of installation, improving the accuracy of our project bidding and pricing, together with the continued expansion of our supplier and procurement network, will position us to drive improved performance. With that, I will hand the call over to Jason for a review of our second quarter financial results.