Q4 2019 Earnings Call
[music].
Greetings and welcome to the parent company Holdings 2019 annual results call at this time all participants on the listen only mode. A question and answer session will follow the formal presentation.
But you require operator assistance during the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded.
I'd now like to turn the conference over to your host Mr. Stephen Hart Hayden IR. Thank you you may begin.
Thank you operator, good afternoon, everyone and welcome to the Tech Company Holdings, you're at 29 <unk> earnings Conference call.
By now everyone cutbacks have access to tell me personally because this it earlier today after the market.
[laughter] four o'clock eastern time.
This call. It was also being webcast is available for replay.
You know remarks today. We will include statements that are considered forward looking within the meaning of the securities laws, including forward looking statements about future results of operations business strategies and plans.
Our relationships with our customers market potential growth opportunities. In addition management may make additional collaborations statements in response to your questions. [laughter] forward looking statements are based on managements current knowledge expectations as of today, that's subject to certain risks and uncertainties and may cause actual results.
For materially from a forward looking statements [laughter], you've dealt with scholarships as well and that's certainly as are contained in the most recent form 10-Q form 10-K, the other reports filed with the FCC.
Comping undertakes no obligation to update any forward looking statements.
On this call we will refer to some non-GAAP that as well.
Combination with GAAP results provide us with additional analytical tools to understand how operations.
We have provided reconciliations most directly comparable GAAP financial measures in our earnings press release.
Which will also be posted on the Investor section about website.
And with that I'll now hand, the call over to the Tech Company Holdings, Chief Executive Officer Jeffrey Pack.
Thank you Steven and good afternoon, everybody. We appreciate you joining us on today's call.
I will provide a recap of highlights for 2019, followed by our CFO John Sullivan.
In summary of our 2019 financials.
Then or head of corporate and business development Michael Tomorrow.
Provide insights into some of our strategic initiatives.
And with our outlook for continued growth and profitability for 2020 and beyond.
Are there plans to increase our shareholder awareness and visibility.
Well then open the call for live questions and answers.
2019 was a tremendous year for our business as demonstrated by our strong 77% revenue growth and continued profitability.
We continue to retain our business from referrals customers and partners.
And that's been very little money on sales and marketing efforts.
The company was awarded a very high percentage of the projects we reviewed for construction.
And in 2019, we completely totaling 25 solar projects I, just getting more than 35 megawatts.
Ranging from a 44.4 kw do you see roof mounted solar Ray.
She was 7.1 megawatt ground so you're right.
We also commenced and additional growth strategy of acquiring solar raised to resell or operate with recurring revenue.
Yes, we execute executing.
One megawatt agreement with a customer.
Also had substantial backlog of solar projects and the development phase.
Our entire team's hard work and success paid off by the name to solar power worlds.
Talk sort of contractors list.
Most recognized annual listing of the top U.S. or contractors working in utility commercial and residential markets.
We're also ranked number one solar EGPC in Vermont.
We are strategically position geographically as one of the largest commercial solar he be season the northeast.
Historically, we have opera exclusively in Vermont.
Which is one of the most attractive states for investment storage.
In fact much of the northeast region of the country is ranked in the top 10 markets based on return metrics for the solar array owner.
The world recognizes the need to transition to reliable renewable energy grid in the next 50 years.
Vermont and Hawaii are leading the way in the United States with renewable energy goals of 75% by 2032.
And 100% by 2045, respectively, California committed to 100% carbon free energy like 2045.
The majority of United States in the U.S. also have renewable energy goals.
Industry reports forecast, a sharp acceleration in solar installations through.
2015, and the U.S. Energy Information Association noted in its 2019 outlook I didn't expect solar energy production to reach 48% will be overall mix of renewable energy.
Production by 27.
I'm just 13% in 2018.
The drivers of this acceleration include the declining cost of solar equipment, a heightened focus on clean renewable energy production.
And the consistent increase in demand of electrical energy.
The company holdings is uniquely positioned to benefit from this rapid escalation and solar array installation.
In our 48 year history, as a full service electrical contractor and our existing highly scalable and profitable solar installation business in Vermont.
After installing more than 125 megawatt megawatts of solar energy, we believe that we are positioned <unk>.
<unk>, we believe will be the coming Revolution, Twitter renewable energy economy.
We now have a platform that will support our expected growth from our existing business partners New strategic partners.
And financial partners.
[laughter].
It was also a transformational year for us for our company.
As we became a publicly traded with a NASDAQ listing.
Our desire to be public was driven by improved access to capital to grow our business and that central ability to utilize our stock that's christie.
For acquisitions.
I'd now like to pass the call over to John Sullivan, our cheap funding, our chief financial officer to discuss our year end 2019 financial performance.
Thank you Jeff.
We're extremely pleased with our continued growth and profitability in 2019.
Revenue for the year ended December 31st 2019 was 28.2 million, an increase of 12.3 million or 77% compared to 15.9 billion. The year ended December 31st 2018.
The increase in revenue was primarily due to an increase in the number of projects and megawatts completed.
Proximately, 77% of the revenue in the year ended December 31st 2019 was from solar installations compared to 62% of revenues and the year ended December 31st 2018.
Gross profit for the year ended December 31st 2019 was 4.2 million, an increase of 1 billion or 33% compared to 3.1 million for the year ended December 31 2018.
The resulting gross margin was 14.8% for the year ended December 31st 2019 compared to 19.8% for the year ended December 31st 2018.
Gross margins for the year ended December 31st 2019 were lower as a result of acquiring projects directly from our development partners at the notice to proceed states.
This strategy resulted an increase in revenue and gross profit, but does erode the gross margin.
The company will continue to deploy this strategy to gain control of projects at an earlier stage and increase the predictability of its revenue stream.
General and administrative expenses for the year ended December 30, Onest 2019 were 2.3 million, an increase of 1.1 million or 89% compared to 1.2 million. The year ended December 30, Onest 2018.
Operating income for the year ended December 30, Onest 2019 was 1 million a decrease of <unk> point 2 million or 17% compared to 1.2 million for the year ended December 31st 2018.
The decrease in operating income was primarily due to the costs associated with being a public company.
<unk> expenses for accounting legal and professional services increased significantly in the year ended December 31st 2019 compared to the year ended December 31st 2018.
Depreciation expenses for the year ended December 31st 2019, or point Sixmillion, an increase of 8.1 million or 16% compared 2.5 million for the year ended December 30, Onest 2018.
Depreciation expenses increased primarily due to a full year of service affects the solar array assets.
Interest expense for the year ended December 30, Onest 2000, 19.3 million, an increase of point 2 million or up 132% compared to 1 million for the year ended December 30, Onest 2018.
Interest expenses increased primarily due to increased utilization of text line of credit to support the growth trajectory.
Net loss for the year ended December 30, Onest 2019 was point 4 million compared to a net income of 1.1 million for the year ended December 31st 2018.
Net loss for the year ended December 31st 2019 was primarily due to a 1.1 million provision for income taxes compared to nail for the year ended December 31st 2018.
Oh form a net income excluding such a provision for income taxes, but taking into effect a normalized tax rate for the year ended December 31st 2000, 19.5 million compared to a net income of point 8 million for the year ended December 31st 2018.
Yes.
The resulting pro forma earnings per share for the year ended December 31st 2019 was 11 cents.
Our diluted share compared to 33 cents per diluted share for the year ended December 31st 2018.
Adjusted EBITDA for the year ended December 30, Onest 2019 was 1.9 million an increase of point 2 million or 12% compared to 1.7 billion for the year ended December 31st 2018.
I would now like to introduce Mike will be about though our head of corporate and business development insights into some of our strategic initiatives that we expect will contribute to our growth.
Thank you John.
Our strategic areas for growth include one organic growth by leveraging existing relationships to expand across the north east to accretive mergers and acquisitions of other profitable, but bids profitable businesses to expand geographic footprint capabilities, and Cashwell and three investment and.
Two new solar arrays that produce a steady stream of recurring revenue.
Organic growth from our existing customers will come from national developers requesting TPC services for the project sizes ranging from residential to utility scale. Our ideal project size range is from 100 kilowatts to 10 megawatts, which is considered commercial to small utility scale well.
We believe the margins and risks are optimized.
In addition, we can remain opportunistic or small residential projects, where marketing costs are minimize or for larger utility scale projects, where margins can be a preserved.
Accretive acquisitions and mergers activity in the isn't important focus for the company in order to accelerate revenue growth and cash flow.
All geographic expansion is prioritized for the northeast prudent acquisitions in other geographies will also be considered depending on the strategic fit and the profitability characteristics.
Please stay tuned for more updates about this topic.
The goal of the solar array asset investments for US is for long term recurring revenue from the sale of power produced by the array asset.
Our APC capabilities provide the company with a unique investment opportunity and the renewable energy space, because we can enter the solar array value chain at any stage along the way for example.
De risked fully operational solar array with reliable off takers can be purchased by us and operated by us.
We believe that at this end stage and I are are probably achievable around nine 9% to 13%.
However, higher returns up to 20% IR, maybe achieved with prudent investments in development projects with permitting and off takers that only require the construction by APC our capability.
Further returns, maybe 20% IR more maybe achieved if we develop targeted projects internally with low risk and long term off takers.
What's important here is that our core solar MPC capabilities allow us to strategically enter the value chain at any point.
Currently we own three megawatts of operating solar arrays operating under long term power purchase agreements that enjoy the robot reliability of these long term recurring revenue streams. Our goal here is to acquire enough solar assets with recurring revenue offset our corporate overhead, thereby moving our gross.
Margins down to net margins.
I'll now hand, the call back to Jeffery pack for closing remarks.
Thank you Michael.
Unfortunately, our nation, I mean entire world or having to confront this global.
Corona virus pandemic.
As witnessed by the latest weeks unprecedented 3.3 million.
Jobless claims in the U.S.
Power sector leaders are pushing Congress to address hits to the industry that stimulus package.
Renewable and transmission build outs could be the first jobs to start hiring.
Read on who served on President Obamas transition team is now founder and CEO of the coalition for Green capital.
Leaves that as the economy bases, what could be the fastest increased unemployment history. The power sector has a critical role to play in employment with the greatest opportunity even communications.
Transportation and electricity infrastructure.
We recognize that the krona virus epidemic has disrupted the economy and is creating a lot of uncertainty.
Well, we have not any projects or contracts canceled due to this global pandemic. We do believe that some are likely to have their timing pushback.
As the U.S. figures out went to open the country backup for business again, and we gain normalcy.
We do remain very optimistic for 2020 and beyond.
[laughter], we do remain optimistic for 2020 and beyond with our multi pronged growth strategy of or.
Organic growth by leveraging existing relationships to expand across the northeast accretive M&A profitable businesses businesses to expand.
Geographic footprint capabilities in cash flow and acquisition of solar arrays to construct and resell or to hold for recurring revenue.
The sum of pets backlog projects currently under construction and anticipated contracts to date are already near $30 million.
That is not typically bidding competitively competitively for these projects, but instead engaging with its customers over the long term basis to develop projects.
Project designs and help customers reduce project costs.
Historically Peck has been awarded at very high percentage of these projects. It is reviewed for construction.
In addition pack is engaged engaging existing customers and new partners outside of Vermont, just part of its planned 2020 expansion across the northeast.
That is already identified over $20 million, but opportunities in other states that could add to our 2020 and 2021 projections.
Additionally for 2020.
We will be raising our visibility within the investment community by strengthening our relationships.
And increasing awareness with the goal of enhancing shareholder value.
Recently hired Hayden IR, a highly regarded investor relations firm known for its ability to connect.
Under followed an undervalued emerging growth companies.
Instigated institutional investors.
Buyside and sell side analysts.
Retail brokerage firms and accredited investor credited individual investors.
Leveraging decades of cumulative experience Hayden IR developed strategies to help clients effectively communicate with the investment community and works to increase their exposure through targeted outreach and transparent positioning.
Overtime Hayden IR helps its clients navigate up the wall street value chain and help them secure a reasonable valuation by broadening their audience.
[noise] expanding institutional ownership.
And ensuring clear consistent communication with the public.
We're glad to have Hayden IR support and get exposure.
Since we believe Peck isn't undiscovered packages undiscovered and certainly undervalued.
In closing I.
I want to thank all of our customers and all of our employees for their hard work and dedication.
And their trust insured enthusiasm and commitment for the renewable solar energy.
So I want to thank our shareholders for their confidence in us to deliver long term shareholder value.
Thank you again for joining us on todays call.
We look forward to communicating our progress in coming quarters in years, and we are grateful for your interest in are growing business.
Thank you.
This time will be conducting question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation Todd will indicate your line is and the question Q.
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Our participants you think speaker equipment, it may be necessary to pick up your handset before passing the starkey.
I'm pleased to only poll for questions.
Once again, ladies and gentlemen is star one to ask a question at this time.
Thank you. Our first question comes from line of Andrew Scott I think equity. Please proceed with your question.
Hi, everybody congrats on the a very good quarter.
The backlog looks very good I think you addressed a everything as best as you, possibly could during the conference call.
I did have a question I know your earnings would have been a lot higher.
If you Didnt have all the publicly traded expenses factored in there, but you're still able to generate a million an operating income, which I thought it was very good but going forward I know the backlog is good talking about other growth factors. You mentioned you identified opportunities outside the state of Vermont, and you're talking about potential <unk> acquisitions.
So.
Can you give us an idea on you know what types of acquisitions you'd be looking at are they in state or the out of state can you define that criteria a little bit more for us.
Yeah, absolutely everything thanks for the question.
Our initial plans or grow throughout the northeast or looking at Maine, New Hampshire, and what we're looking for an acquisition is Oh, let's go contractors that may have been much like we were years ago.
Who we can acquire.
Bringing their local workforce and their skill set.
At our LOE <unk> and our.
Solar customer base.
Do what they already happened and help them help grow that part of our business in those new territories.
Great and how are you going to finance the acquisitions are gonna do was stock that have you thought about that.
Hi, there John building on the big jump in here and then take this one or so so we have given a lot of consideration to how we withdraw funds those acquisitions.
As Jeff alluded to the the type of acquisition that we're looking for is.
Typically a long term electrical contractor that has been into business, but may not have a succession plan in place, but does want to keep the business continuing forward. So.
From that perspective were looking at potential for an earn out.
That would utilize or some combination of cash and debt and potential equity to fund it given the size of the organization.
But ideally we would look to transition those business as a with a earnout provision.
Right, Okay. Thank you and congrats again.
Thank you Andrew.
Thank you Mr. pack there are no further questions at this time I'll turn the floor back to you for any final comments.
Thanks, everyone for your support and joining us on the call today.
For our year end 2019 conference call.
We look forward to speaking to you again in May when we report our first quarter 2020 results.
Thank you.
Thank you, ladies and gentlemen that concludes our question our call for today. Thank you for your participation you may now disconnect your lines.