Sunworks Announces Third Quarter Financial Results

Rhea-AI Summary

Sunworks, Inc. (NASDAQ:SUNW) reported its Q3 2021 results, showcasing a revenue increase to $31.2 million from $7.3 million in Q3 2020, primarily due to the Solcius acquisition. Gross margin improved to 46.2%. However, the company faced a net loss of $6.5 million or $0.24 per share, worsening from $2.9 million in the prior year. They are proactively building inventory to address supply chain challenges. Looking ahead, Sunworks plans to expand its sales channels and residential markets, leveraging Solcius for growth.

Positive

• Revenue increased to $31.2 million, reflecting a significant contribution from the Solcius acquisition.
• Gross margin improved to 46.2%, indicating operational enhancements.
• Strategic building of inventory to mitigate supply chain issues and meet demand.

Negative

• Net loss of $6.5 million, compared to a net loss of $2.9 million in Q3 2020.
• Increased operating expenses totaling $20.9 million, up from $4.3 million in the prior year.

Strategic Initiatives and Investments to Support 2022 Growth;

Builds Inventory to Meet Demand and Mitigate Supply Chain Challenges

PROVO, UT / ACCESSWIRE / November 11, 2021 / Sunworks, Inc. (NASDAQ:SUNW), a provider of solar power and battery storage solutions for residential, agriculture, commercial, industrial, and public works markets, today announced financial results for the third quarter ended September 30, 2021. The financial results for the third quarter of 2021 include the operating results of Solcius, acquired on April 8, 2021, with no corresponding contribution in the year-ago period.

"We are making steady progress scaling our operations for sustainable profitability," commented Gaylon Morris, Chief Executive Officer of Sunworks. "The Solcius acquisition has stabilized and bolstered our residential offering, giving us a strong platform of proven success to facilitate growth in multiple regions, and a clear path to expand into new markets. Simultaneously, we are building our team, especially in sales and marketing, to expand lead generation efforts and improve brand recognition. The net result will be a strategy for profitable growth, in an expanding industry, led by a team of experienced and proven professionals."

"Over the past few quarters, we have driven meaningful margin expansion in our commercial and industrial business, as we continue to focus on commercial and operational execution," continued Morris. "I am encouraged by our progress to date in these critical areas, as well as the pipeline of new opportunities in these markets. In addition to these improvements, we expect that proposed incentives, which are currently being considered by the US Congress, would provide a meaningful, long term positive impact in our end markets."

"Well-documented supply chain challenges are impacting the industry significantly, especially related to batteries, inverters, and modules," added Morris. "With the strength of our balance sheet and liquidity, we have responded by proactively building inventory levels to improve our ability to meet market demand well into 2022."

"As we look into 2022, we anticipate building our indirect sales channel, including adding additional partners in key geographies, and building a more robust direct sales organization," concluded Morris. "Simultaneously, we expect to add several new markets for Solcius, expanding our residential footprint and increasing Sunworks brand awareness with commercial and industrial customers. Solcius brings a differentiated offering based on proven, integrated sales and operational support platforms. Our expanding scale enables us to effectively leverage our marketing across a larger footprint, giving us a durable competitive advantage as we enter new markets."

Third Quarter 2021 Highlights:

• Cash balance as of September 30, 2021 was $11.2 million versus $39.0 million at December 31, 2020. The decrease in the cash balance for the third quarter of 2021 is partially the result of the $51.8 million Sunworks paid to acquire Solcius. During the quarter ending September 30, 2021, the company invested approximately $11.0 million in operating working capital, to take advantage of purchase discounts for materials and secure key materials to proactively address industry-wide supply chain challenges.
• Total backlog of projects as of September 30, 2021 was $51 million, compared to $64 million as of June 30, 2021. The sequential decline was primarily due to project timing in commercial and industrial markets.
• Revenue was $31.2 million compared to $7.3 million in the third quarter of last year, reflecting the contribution of $23.3 million in revenue from Solcius.
• Selling and marketing expenses were $10.1 million, or 32% of revenue, compared to $1.1 million, or 14.6% of revenue, in the third quarter of last year, reflecting the Solcius residential marketing model and an expansion of the Sunworks marketing function to bolster lead generation and build brand equity.
• General and administrative expenses were $7.7 million, or 24.5% of revenue, in the third quarter compared to $3.2 million, or 43.3% of revenue in the third quarter of last year, reflecting greater operational efficiency, partially offset by investments to support a growing platform.
• Net loss was $6.5 million, or $0.24 per share, compared to a net loss of $2.9 million, or $0.17 per share, in the third quarter last year.
• Adjusted EBITDA was a loss of $3.3 million for the third quarter compared to an adjusted EBITDA loss of $2.6 million for the third quarter of last year.

Third Quarter Financial Summary

Total revenue for the third quarter of 2021 was $31.2 million compared to $7.3 million in the same period last year. Third quarter 2021 revenue included $23.3 million in residential revenue from Solcius.

Gross margin for the third quarter of 2021 was 46.2% compared to 22.4% for the third quarter of last year, reflecting the positive contribution from Solcius' business model and operational improvements throughout the business, including increased focus on accuracy in estimating, quoting and improved execution.

Operating expenses for the third quarter of 2021 were $20.9 million, compared to $4.3 million in the third quarter of last year, reflecting the addition of the Solcius business model and $3.1 million of non-cash expenses primarily related to stock compensation and amortization expense.

Net loss for the third quarter of 2021 was ($6.5) million, or $0.24 per basic and diluted share, compared to net loss of ($2.9) million or ($0.17) per basic and diluted share in the third quarter of 2020.

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.

		Three Months Ended								Nine Months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Reconciliation of Net Loss to Adjusted EBITDA
Net Loss		$	(6,460	)		$	(2,852	)		$	(13,140	)		$	(11,059	)
PPP Loan Forgiveness			0				0				(2,881	)			0
Stock-based compensation			1,206				16				2,470				137
Depreciation and amortization			1,930				82				3,900				246
Impairment			0				0				0				4,000
Interest expense		-	10				159				40				555
Acquisition Transaction Expenses			25				0				775				0
Adjusted EBITDA		$	(3,289	)		$	(2,595	)		$	(8,836	)		$	(6,121	)

About Sunworks, Inc.

Sunworks, Inc. (NASDAQ:SUNW) is a premier provider of high performance solar power systems. Sunworks is committed to quality business practices that exceed industry standards and uphold its ideals of ethics and safety. Sunworks continues to grow its presence, expanding nationally with regional and local offices. The company strives to consistently deliver high quality, performance-oriented solutions for customers in a wide range of industries including residential, commercial, industrial, agricultural, federal, and public works. Sunworks' diverse, seasoned workforce includes distinguished veterans who bring a sense of pride, discipline, and professionalism to their interaction with customers. All Sunworks' employees uphold its guiding principles each day. Sunworks is a member of the Solar Energy Industries Association (SEIA) and is a proud advocate for the advancement of solar power. For more information, visit www.sunworksusa.com and http://www.solcius.com

Safe Harbor Statement

Matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "will," "may," "intend," "expect" and similar expressions identify such forward-looking statements. Forward-looking statements include all statements other than statements of historical fact contained in this press release, including statements regarding the Company's future revenue, operating income, demand for solar power systems, ability to grow and expand its operations and sales channels, ability to achieve sustainable profitability and Sunworks' ability to continue to satisfy backlog. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based largely on the expectations of the company and are subject to a number of risks and uncertainties. These risks include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive, regulatory, environmental and other factors affecting Sunworks and its operations, markets and products; the impact of COVID-19 and the related federal, state and local restrictions on Sunworks' operations and workforce, the impact of COVID-19 and such restrictions on Sunworks' customers, and the impact of COVID-19 on Sunworks' supply chain and availability of shipping and distribution; the availability of government support and incentives; the prospects for sales, lower revenues, failure to earn profit, higher costs than expected, potential operating losses, ownership dilution, inability to repay debt, the inability to complete projects within anticipated timeframes and costs, the inability to improve efficiency or complete strategic investments, the impact of tariffs imposed by governmental bodies, the impact on the national and local economies resulting from terrorist actions; and other factors detailed in reports filed by Sunworks. You should also review the risks described in "Risk Factors" in Part I, Item 1A of Sunworks, Inc.'s Annual Report on Form 10-K and in the other reports and documents Sunworks files with the Securities and Exchange Commission from time to time.

Any forward-looking statement made by Sunworks in this press release is based only on information currently available to Sunworks and reflects only as of the date on which it is made. Sunworks 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.

Investor Relations Contact:

Rob Fink
FNK IR
646.809.4048
rob@fnkir.com

SUNWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(in thousands, except share and per share data)

		September 30, 2021				December 31, 2020
		(Unaudited)
Assets
Current Assets:
Cash and cash equivalents		$	11,219			$	38,991
Restricted cash			348				348
Accounts receivable, net			5,561				2,890
Inventory			10,712				1,179
Contract assets			12,418				2,397
Other current assets			3,816				137
Total Current Assets			44,074				45,942
Property and equipment, net			3,415				198
Finance lease right-of-use assets, net			1,223				-
Operating lease right-of-use assets			2,446				694
Deposits			135				47
Intangible assets, net			9,340				-
Goodwill			37,654				5,464
Total Assets		$	98,287			$	52,345
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities		$	9,610			$	7,356
Contract liabilities			11,883				6,260
Finance lease liability, current portion			452				-
Operating lease liability, current portion			918				649
Paycheck Protection Program loan payable, current portion			-				787
Total Current Liabilities			22,863				15,052
Long-Term Liabilities:
Finance lease liability, net of current portion			430				-
Operating lease liability, net of current portion			1,528				45
Paycheck Protection Program loan payable, net of current portion			-				2,060
Warranty liability			1,221				1,131
Total Long-Term Liabilities			3,179				3,236
Total Liabilities			26,042				18,288
Commitments and contingencies			-				-
Shareholders' Equity:
Preferred stock Series B, $0.001 par value, 5,000,000 authorized shares; no shares issued and outstanding			-				-
Common stock, $0.001 par value; 50,000,000 authorized shares; 27,049,274 and 23,835,258 shares issued and outstanding, at September 30, 2021 and December 31, 2020, respectively			27				24
Additional paid-in capital			173,993				122,668
Accumulated deficit			(101,775	)			(88,635	)
Total Shareholders' Equity			72,245				34,057
Total Liabilities and Shareholders' Equity		$	98,287			$	52,345

SUNWORKS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in thousands, except share and per share data)

		Three Months Ended								Nine months ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Revenue, net		$	31,220			$	7,304			$	69,480			$	29,335
Cost of Goods Sold			16,804				5,670				39,836				23,468
Gross Profit			14,416				1,634				29,644				5,867
Operating Expenses:
Selling and marketing			10,072				1,069				21,468				3,864
General and administrative			7,663				3,161				17,853				8,135
Goodwill impairment			-				-				-				4,000
Stock-based compensation			1,206				16				2,470				137
Depreciation and amortization			1,930				82				3,900				246
Total Operating Expenses			20,871				4,328				45,691				16,382
Operating Loss			(6,455	)			(2,694	)			(16,047	)			(10,515	)
Other Income (Expense)
Other income, net			5				1				2,896				11
Interest expense			(10	)			(159	)			(40	)			(555	)
Gain on disposal of property and equipment			-				-				51				-
Total Other Income (Expense), net			(5	)			(158	)			2,907				(544	)
Loss before Income Taxes			(6,460	)			(2,852	)			(13,140	)			(11,059	)
Income Tax Expense			-				-				-				-
Net Loss		$	(6,460	)		$	(2,852	)		$	(13,140	)		$	(11,059	)
LOSS PER SHARE:
Basic		$	(0.24	)		$	(0.17	)		$	(0.50	)		$	(0.75	)
Diluted		$	(0.24	)		$	(0.17	)		$	(0.50	)		$	(0.75	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic			27,047,960				16,628,992				26,449,743				14,813,944
Diluted			27,047,960				16,628,992				26,449,743				14,813,944

SOURCE: Sunworks, Inc.

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FAQ

What were Sunworks' revenue figures for Q3 2021?

Sunworks reported revenue of $31.2 million for Q3 2021, a significant increase from $7.3 million in Q3 2020.

How much net loss did Sunworks incur in Q3 2021?

The net loss for Sunworks in Q3 2021 was $6.5 million, or $0.24 per share.

What impact did the Solcius acquisition have on Sunworks' financials?

The Solcius acquisition contributed $23.3 million in revenue, significantly boosting Sunworks' overall financial performance.

What is the outlook for Sunworks in 2022?

Sunworks plans to expand its indirect sales channel, add new markets for Solcius, and continue building its inventory to improve market responsiveness.