Sunworks, Inc.

Greetings. Welcome to SunWorks' 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. 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 Jason Bonfit, Chief Financial Officer. 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 results of 2023 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 risk described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Following our prepared remarks, we'll 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. As detailed in our second quarter earnings release issued earlier today, The last several months have been a challenging period for both Sunworks and the residential solar industry at large. Even so, we believe the long-term economics of solar remain highly attractive, particularly as the demands of a growing population weigh on our nation's aging electricity infrastructure, resulting in structurally higher utility rates for customers over time. During the second quarter, the combination of higher interest rates, less favorable residential solar economics in California following the NEM 3.0 transition, together with utility permitting delays, resulted in lower installation activity and reduced fixed cost absorption in the period. During a transitional period for our residential business, we've maintained an opportunistic pricing strategy in accordance with current demand conditions. At the same time, we've taken decisive action to further right-size our cost structure, including a reduction in force beginning in the third quarter 2023. Since launching our direct sales initiative in the fourth quarter of 2021, we've continued to gain significant traction in the market. Recall that customer acquisition costs within the direct sales channel are materially less than through our third-party agency channel. To that end, direct sales represented 45% of all originations in the second quarter versus 23% in the prior year period. In July, we were pleased to appoint Mark Trout as Group CEO of Solsius, Sunworks' wholly owned residential solar business, effective July 10, 2023. Mark brings more than 35 years of senior commercial development, and operational experience to SunWorks, including deep sector expertise within the residential solar and advanced technology industries. Previously, he served as chief technology officer for both Sunrun and Vivint Solar, where he led the implementation and execution of all IT and product technology initiatives, including solar product innovation. At Solsius, Mark will provide his structural and systems expertise to our residential channel while driving continued improvements in efficiency quality, and customer satisfaction. We are excited to have Mark join the team at a pivotal period for the company. Turning now to a discussion of our commercial solar energy business. Our commercial business had an outstanding second quarter as revenue nearly doubled on a year-over-year basis, while gross profit margin increased more than 1,000 basis points to 26.5% in the period. Our track record of strong project execution has started to garner the attention of large commercial organizations, including several independent power producers, many of whom have multiple installations across the United States that represents promising new entry points for us. Our ability to deliver a turnkey project on schedule and at or below budget is a key point of differentiation for us in the markets we serve, one that resonates with our customers. Our inbound indications of interest and commercial project awards that are waiting for utility approvals and studies have increased materially in recent months, both in reference to our traditional solar market installations, but also in battery storage systems and EV installations, which represent new areas of opportunity for us. In response, we've onboarded new creative financing options to secure the business while building a pipeline of opportunities supportive of future backlog growth. Looking ahead, we intend to stay on course for our strategic growth priorities, building market-leading positions in regional centers while driving programmatic cost reductions that reduce our cash burn and put us closer toward achieving positive EBITDA consistent with our long-term objectives. Given the strength in our backlog, together with ongoing development activities, we anticipate our financial performance in the second half of 2023 will be stronger than the first half of the year, positioning us to rebuild momentum in our business entering 2024. As before, the market opportunity for solar remains significant across our geographic footprint, positioning Sunworks to play a leading role in the transition towards affordable, clean, and independent energy production. With that, I'll hand the call over to Jason for his remarks.