Sunworks, Inc., a provider of solar power solutions for commercial and residential markets, today announced financial results for the quarter and six months ended June 30, 2016, and increased its full-year guidance.
Q2 2016 Highlights:
- Record total revenue of $31.5 million, up 186% year-over-year due primarily to acquisition of Elite Solar and organic growth; 59% sequential revenue growth
- Gross Margins at 29.4% despite higher commercial business mix in the quarter
- Net income increased to $744,000, compared to loss of $122,000 in the second quarter of 2015
- Backlog of $43.5 million as of June 30, 2016, up 192% compared to the second quarter of 2015
- Adjusted EBITDA increased $2.7 million to $2.9 million compared to $215,000 in the second quarter of 2015.
“We continue to build on the sales momentum that began in 2015 and delivered record revenues that are nearly 60% higher than our previous record,” said Jim Nelson, Chief Executive Officer of Sunworks. “During the second quarter, growth of our commercial business outpaced residential. We expect this trend to continue in the near term as we capitalize on the growing momentum we are driving in the commercial market. Looking forward, we believe that the initiatives we have in place to accelerate residential sales will scale and that the distribution of revenues between our business lines will return to more historical levels in 2017.”
“The Sunworks brand is becoming more widely accepted as an industry leader and we are capturing a larger share of a rapidly growing market,” Mr. Nelson added. “We continue to prudently explore strategic acquisitions and expand our sales organization to further enhance our growth trajectory. Investing in our business to support expansion, whether within our existing footprint or in additional geographies, remains a priority.”
“With a backlog of $43.5 million at the end of the second quarter, we have increasing visibility into our business,” Mr. Nelson concluded. “This contracted business, coupled with our growing pipeline of opportunities, provides us with the confidence to increase our full year guidance by at least 10%. We now expect revenue growth of at least 105% compared to 2015, with a significant increase in profitability.”
2016 Guidance
The company increased its revenue guidance for the full year ending December 31, 2016. Management now expects revenues in the range of $110 to $115 million, up from the previously issued guidance of $100 million. Management continues to expect consistent profitability.
Second Quarter 2016 Summary
Revenue for the three months ended June 30, 2016 increased to $31.5 million compared to $11.0 million in the three months ended June 30, 2015. The increase was primarily a result of the inclusion of Elite Solar’s operations and strong commercial sales and continued growth in residential installations. Sales to the commercial and agricultural markets represented approximately 80% of total revenue with the residential market at 20% in the second quarter.
Gross profit was $9.2 million, or 29.4% of revenue for the three months ended June 30, 2016 compared to $3.4 million, or 31.4% of revenue, in the quarter ended June 30, 2015. The lower gross margin percentage was primarily due to a higher mix of commercial and agricultural business.
Net income of $744,000, or $0.04 per basic and $0.03 per diluted share for the three months ended June 30, 2016 as compared to a net loss of $(123,000) or $(0.01) per basic and diluted shares for the corresponding quarter of 2015.
Adjusted EBITDA for the three months ended June 30, 2016 was $2.9 million, inclusive of $1.8 million in non-cash, non-operational accounting charges related to the issuance of stock-based compensation. This compares to $190,000 in the corresponding period in 2015.
Year-to-Date 2016 Summary
Revenue for the six months ended June 30, 2016 increased to $51 million, compared to $16.7 million in the six months ended June 30, 2015. The increase was due primarily to the inclusion of Elite Solar’s operations as well as strong organic growth in commercial and agricultural markets.
Gross Profit was $15.1 million for the six month period ended June 30, 2016 as compared to $5.4 million in the six month period ended June 30, 2015. Gross margins remained strong at 29.6% of revenue despite the overweight in commercial and agricultural business for the period compared to 32.4% for the corresponding quarter of 2015.
First half 2016 net income was $366,000, or $0.02 per basic and diluted shares as compared to a loss of $1.5 million in six months ended June 30, 2015 or $0.09 per basic and diluted shares.
Adjusted EBITDA for the six months ended June 30, 2016 was $2.9 million, inclusive of $1.9 million in non-cash, non-operational accounting charges related to the issuance of stock-based compensation in the second quarter. This compares to a negative Adjusted EBITDA of $780,000 in the corresponding period in 2015.
Balance Sheet
- The Company had $7.7 million in cash and cash equivalents as of June 30, 2016
- As of June 30, 2016, the Company had $236,000 of debt outstanding, exclusive of convertible debt of $1,140
- Stockholder’s equity was $26.8 million as of June 30, 2016.
Backlog
Order backlog on June 30, 2016 was $43.5 million, up nearly 200% from the corresponding quarter in 2015. Backlog is based on signed orders.
| Q2-2015 | Q2-2016 | % Change | |
| Beginning sales backlog – $M | $14.7 | $39.8 | 271% |
| Total new sales – $M | 19.0 | 35.2 | 185% |
| Total Earned Revenue – $M | 11.0 | 31.5 | 286% |
| Ending Backlog – $M | 22.7 | 43.5 | 192% |
| Beginning Backlog – MW | 4.6 | 13.0 | 282% |
| Total new – MW Sold | 6.3 | 14.0 | 222% |
| Total – MW Installed | 3.7 | 12.5 | 338% |
| Ending Back Log – MW | 7.2 | 14.2 | 197% |
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-GAAP financial measure that the Company believes is an important supplemental measure of operating performance.
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period.
The following is a non-GAAP measure of cash flow, or adjusted EBITDA, which adds back non-cash items including gains on change in fair value of derivative liabilities, stock based compensation, interest expense depreciation and taxes.
| Adjusted EBITDA | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| 2nd Quarter ended | 6 months ended | ||||||||||||||||
| Jun-16 | Jun-15 | Jun-16 | Jun-15 | ||||||||||||||
| Net Income/(Loss) | $ | 744 | $ | (122 | ) | $ | 366 | $ | (1,526 | ) | |||||||
| (Gain)/Loss on change in fair value of derivative liability | – | $ | – | $ | – | $ | (68 | ) | |||||||||
| Non-cash Stock based compensation | 1,834 | $ | 35 | $ | 1,863 | $ | 75 | ||||||||||
| Depreciation | 47 | $ | 11 | $ | 113 | $ | 16 | ||||||||||
| Interest | 289 | $ | 266 | $ | 554 | $ | 723 | ||||||||||
| Adjusted Net Income/(Loss) – EBITDA | $ | 2,914 | $ | 190 | $ | 2,896 | $ | (780 | ) | ||||||||
Conference Call Details
Management will host a conference call to discuss these results today, Wednesday, August 10, 2016 at 10:00 a.m. ET. To access the call, please dial 1-800-901-2731 (toll free) or 1-785-424-1096 (international). The conference call will also be broadcast live over the Internet, which can be accessed via the Investor Relations section of Sunworks’ web site at http://ir.sunworksusa.com. All participants should call or access the website approximately 5 minutes before the conference begins.
The webcast will be available for replay for at least 90 days. A telephonic replay of this conference call will also be available by dialing 1-877-481-4010 (toll free) or 1-919-882-2331 (International) using Replay ID 10066, until 11:59 p.m. ET on September 10, 2016.
