Q1 2021 iSun Inc Earnings Call

1 line to assist you.

I would now like to turn the call over to Chase Jacobson and I sense of Investor Relations adviser and managing director with Vallum advisors.

Please go ahead.

Thank you and good morning.

Pleased to welcome you to Iceland Conference call, where we will discuss financial and operating results for the first quarter of 2021.

Jeffrey Peck, Chairman and Chief Executive Officer.

And provide an update on ISR and key highlights from the quarter and John Sullivan, Chief Financial Officer will provide an overview of the first quarter 2021 financial results.

In addition, manage the will provide the outlook for 2021 and beyond and discuss in more detail of Iceland unique position and the market and its long term growth strategy.

After our prepared remarks today, we will open the lines to address any of your questions.

As a reminder of the earnings release, which can be found on <unk> website includes financial disclosures and reconciliations for non-GAAP financial measures that should help you analyze the results comments and answers the questions. During the call will include forward looking statements that refer to management's expectations or future predictions.

These statements are made as of the date of this call and management is under no obligation to update these forward looking statements and the future there.

And they are subject to risks and uncertainties that could cause actual results to differ from management's expectations with that I'll now turn it over to our CEO Jeff pack.

Good morning, and thanks to everyone, who dialed in today and I'm happy to be speaking with you today to provide you an update on our first quarter results strategy and our 'twenty 'twenty 1 outlook.

We had a strong start for the year with record first quarter revenue and strong backlog growth.

Although our gross profit was impacted by Covid related shutdowns and of procurement issue that has now been addressed and.

Importantly, we continue to invest in the future with multiple strategic investments debt further establish iPhone.

As a leading player and the solar energy and E mobility markets.

Positioning us for robust growth in 2021 and beyond.

Our first quarter revenue grew 82% year over year, driven by the robust backlog growth that we experienced in 2020 and both of our traditional geographic markets and the northeastern United States.

As well as new geographic locations throughout the East coast.

Backlog grew to $81 million nearly doubling compared to the first quarter of 2020 and up 33% from the end of 2020.

Backlog growth was driven by New project awards, and our core commercial and industrial and when markets as well as our largest project win ever and Tennessee.

This $25 million projects, and Jackson, Tennessee, with northern reliability and community development of enterprises is currently the largest solar energy and storage micro grid project and the United States.

Importantly, this project combined expertise from our legacy EPC business.

And the isom deep relationships and the solar energy market.

Further working with community development Enterprises, whose mission is to provide green energy solutions and economic relief. The cities that have been hit by natural disaster of and economic challenges and.

The sizes of our commitment to the transition to clean energy.

From Dirty energy and.

And creating jobs and American cities.

We look forward to pursue and further opportunities we'd see day in the future.

For the broader operating environment is improving following the number of push outs and delays in 2020 due to the COVID-19 pandemic, we continue to experience the impact from the pandemic in the quarter.

With the safety of our employees and contractors and the top priority we experienced several COVID-19 related work stoppages.

1 of our largest projects during the quarter.

Driving higher costs and lower productivity.

Despite the work stoppages, we maintained our employee base and.

And they are now fully back to work. Additionally.

Additionally, we experienced a procurement issue on another project, which has now been addressed.

And work is progressing on schedule.

And the company grows and.

And we take on larger product, including projects, including a new states. We have taken action to reduce the similar issues going forward John will provide more details on the financial impact of these events.

As it stands today, we believe iPhone offers the most comprehensive package of services to the solar energy and E mobility infrastructure markets and.

And we're continuing to build on that including with multiple strategic investments during the quarter.

First to provide some perspective and refresh everyone and what we discussed and our last earnings call in January we acquired ISO energy LLC, a provider of innovative solar power and E mobility solutions and <unk>.

Subsequently rebranded the company under the ISO name.

While the core of our company has been and and the construction markets for over 50 years.

We are also a company that embraces innovation and new markets.

And some flagship solution as the Iceland energy and mobility hub.

And the electric vehicle carport charging system offering both grid connected and off grid battery backed solutions to charge of electric vehicles.

And also brought iPhone OS and operating system that provides owners the ability to monitor and analyze key metrics of their solar assets, allowing for more and more efficient operations and cost savings over time.

This acquisition was a Prime example of a 50 year old construction company embracing innovation and we are committed to building on that foundation.

And in March we announced 2 investments to enhance our already strong E mobility offerings.

We invested $1.5 million and Jim and I Electric Mobility Corporation.

Jim and I as in electric vehicle car sharing company for the gig driver.

Average for companies like Uber, Lyft door dash and many others.

Over the next several years, Jim and I will be building a network of electric vehicles.

First and in California, and then the other states.

Our investments position us well to participate and their network build out which will require a dedicated charging stations, which we believe we are well positioned to benefit from with the iPhone electric and mobility hub carport charging solution.

Secondly, we invested $1 million and amp up and our electric vehicle software company.

That improves charging efficiency for EV fleet operators.

This investment is complementary to the ice on the operating system and provides us another competitive advantage and we work to grow our presence and the E mobility market.

And early April April we expanded into the utility scale solar EPC market with the $2.7 million acquisition of the intellectual property of Oakwood construction services.

And with $1 billion due immediately and the remaining $1.7 million.

Due upon the achievement of certain milestones.

This acquisition significantly significantly expands our large project capabilities and materially grows our addressable market and.

There are currently of over 69 billion.

Of unconstructed utility scale solar projects that are already executed power purchases agreements.

And as part of this acquisition, we have the option to acquire all rights to provide EPC services for the heartfelt solar project, which is approximately $100 million solar development and Colorado.

So it's currently and early development.

And as it progresses, we will provide additional updates and our potential participation in this project.

Importantly, the acquisition of Ots also improved our position and other areas as we seek to work on larger commercial and industrial projects and and our partnership with Green Bond advisors, which continues to develop.

The pipeline of potential projects.

Green bond and its affiliates are working with the number of of solar energy developers.

And are reviewing our bidding on over 20 projects, representing 5500 megawatts of solar power.

Which combined with their financing commitments could lead to meaningful EPC projects and project ownership opportunities for iPhone in the near future.

With that I will turn the call over to John for disk.

First our financials and the quarter will be back to discuss our go forward strategy and our 2021 outlook.

Thank you Jeff.

As you have likely seen on April 12, the staff of the SEC issued a public statement regarding the treatment of accounting for public and private warrants issued by spec companies.

Meaning that these warrants should be accounted for at the liabilities as opposed to equity.

Since our acquisition by Janssen acquisition Corp, and.

2019, we are accounting for our warrants as equity and therefore had to restate our financials for prior periods.

The statement has no effect on our cash balances for adjusted EBITDA.

You can find more information on this and our 10-Q for the period ended March 31, 2021 filed with the SEC.

More importantly, all of our public warrants have been exercised per redeemed as of April 12, 2.

2021.

I will now turn to a discussion of first quarter 2021 operating results and I will give an update on our balance sheet and liquidity position.

<unk> reported record first quarter 2021 revenue of $7.3 million up 82% year over year.

Revenue growth was driven by strong project awards and the robust backlog growth, we experienced and the second half of 2020 and in early 2021, including multiple projects and new regions.

Gross profit and first quarter 2021 was <unk> 1 million or 1.6% of revenue down from $3 million or 7.9% of revenue and first quarter of 2020.

As Jeff mentioned gross margin and the quarter was impacted by 2 main factors.

First we had several COVID-19 related shutdown at 1 of our large projects and the quarter that impacted productivity and required additional overhead to meet previously agreed upon timelines.

Which importantly, we remain on track to move.

Secondly, we experienced the procurement issue on another project that required the purchase of additional equipment to meet the design requirements.

We moved the original purchased equipment and to inventory and expect to be able to use it on future projects.

Without these issues and we believe our gross margin would have been in line with our seasonal averages.

And a normalized environment based on our current mix of business. We continue to expect annual gross margins to be and the 17% to 19% range with seasonality related to volume and mix, causing first quarter to be lower than the annual rate.

Operating income was $2.6 million loss in the quarter compared to <unk> 5.

And $5 million loss and the first quarter 2020.

The lower operating income was mainly the result of lower gross profit and higher general and administrative costs to support our growth initiatives, including the <unk> acquisition, which was completed in January 2021.

Our general and administrative costs are highly fixed and we will continue to pursue the acquisition of recurring revenue solar assets to offset the growth and our overhead.

<unk> reported a first quarter 2021, net loss of $3.1 million or <unk> 41.

<unk> per share.

Adjusted EBITDA and the quarter was of $1.4 million loss.

Now turning to the balance sheet.

We ended first quarter 2021, with a strong balance sheet.

The total cash was $20.2 million at the end of the quarter.

We received cash proceeds of approximately $17.4 million from the exercise of public warrants and an additional $9.6 million and from a registered direct offering and January 2021.

These proceeds were offset by a $6 million use of operating cash in the quarter driven by an increase in accounts receivable tops and excess of billings and inventory.

The use of cash was partially due to timing based on operational needs and we expect improved cash flow from operations over the next several quarters.

Total debt at the end of the first quarter was $5.6 million.

Total debt includes $3.7 million on our revolving line of credit that supports working capital and $1.9 million of long term debt that is supported by a recurring revenue stream and generated by our solar assets.

Our strong cash position together with approximately $2.3 million of availability under our line of credit because of.

The significant capacity to support the execution of our backlog and to pursue both organic and inorganic growth.

With that I will turn the call back over to Jeff.

Thank you John.

We are optimistic.

Domestic about the future of eyesight, we had isolated operating challenges that affected our earnings and the first quarter, but our strong revenue and backlog growth and a robust cash balance.

Positioning us well for significant growth in 2021 and beyond.

When we entered the public markets and 2019, we introduced a 3 pronged growth strategy, which we have actively been executing on and remain committed to going forward.

First we will continue to pursue organic growth opportunities across the northeastern United States and other key regional markets.

So you keep the wind projects with new customers as demand for solar energy and E mobility infrastructure continue to grow.

We had success with entering new markets this quarter with our large project wins to date, and Tennessee and are pursuing opportunities and other new markets as well.

Secondly, we will look to grow through accretive M&A and strategic investments.

Year to date, we completed the ice and energy acquisition in January and we have continued to expand our E mobility presence with the strategic investments and Gemini and the Amp up.

Further we completed the Ocs acquisition, which expanded our large project capabilities and provided entry into the underserved utility scale solar market.

We continue to seek opportunities to further establish iPhone as a leader and the solar market.

Through expanding our energy as a service offering for expanding our EPC services into new regions.

And service areas throughout the country.

With a much stronger balance sheet, we have the flexibility to act quickly on future growth opportunities.

Third we will continue to expand on our ownership of solar assets.

And by building solar assets to own as well as leveraging our green bond partnership to invest and solar assets.

This not only provides us with new EPC opportunities, but also provides a solid base on long term cash flows for the company and asset owners.

Turning to the 2021 outlook.

Trends and the solar energy market remains strong.

We continue to see record demand for our services and iPhone is committed to enabling the transition from dirty energy the clean energy and our comprehensive portfolio of services will allow us to meet the demands of the expanding solar market.

We ended the first quarter 2021, where the backlog of $81 million.

Which is work that we expect to be completed and the next 12 to 18 months.

We have a robust pipeline of future project opportunities many of.

Of which we expect to convert and the coming months and are pursuing larger opportunities such as the previously mentioned hartzell project as well as opportunities to our Green bond advisors relationship.

That could significantly grow our backlog.

Based on this we continue to expect at least a doubling of revenue and 2021 compared to 2020.

We expect improving gross margins and EBITDA performance throughout the year.

Driven by higher volume and improved project execution compared to the first quarter of 2021.

In conclusion, we are optimistic about the future of ice and we have 50 years of experience as an electrical and solar contractor and.

And are continuing to build on that experience and embrace innovation.

We have the most comprehensive portfolio service offerings to the solar market with the energy of the service E mobility.

And EPC.

And offer solutions from solar carports for EV charging up to the large utility scale solar projects.

We are committed to grow and our service offerings, expanding our geographic footprint and.

And capitalizing on strong market trends as we seek to become a premier player and the solar energy market.

With that we will now open the line for questions and answers.

Operator.

Thank you at this time of the conducting a question and answer session. If you'd like to ask a question. Please press star 1 on your telephone keypad.

Confirmation tone will indicate your line is and the question queue.

And you May press star 2 if you'd like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Our first question comes from the line of Jeffrey Campbell with Alliance Global Partners. Please proceed with your question.

Yes.

Good morning, and congratulations on the increase and the backlog.

Good morning, Thank you and I wanted to I wanted to ask regarding John <unk>.

California is a very competitive market for anything renewable I was just wondering what particular advantages.

U.

CGM not possessing but it's going to.

Enhance their plans to expand the rideshare and network, which you referenced in your opening remarks.

Yes.

Jim and I have.

The founders of the long history of working with the gig operators, Uber and Lyft and others.

Coming out of the.

For the early adopters in our business model to allow the gig drivers of platform to enter the EDI Merck.

Access Evs quickly I think will flow.

And allow them to build on this and scale pretty quickly.

Okay and.

Similarly could you expand on the Amp up acquisition my impression was and ice on software at the time of the acquisition was considered and important assets. So I was wondering how you see ample.

Amp up by expanding on that capability.

Absolutely.

And we're pretty focused on fleets and we think as.

Our customers begin the transition from through the energy to clean energy, we will see that through.

The operation of their fleets converting from ice vehicles for Evs.

And working and having an investment and the amp up the will allow us some.

And some competitive advantages and customizing software to help fleet owners manage.

The transition of their vehicles.

Overtime.

Okay and finally.

Assuming a successful what's the reasonable timeline for green bonds to consummate the project and when might such of when they come and opportunity for ISR sort of.

Try and get a timeline on when this becomes something thats material.

Yes, so we initiated our green bond partnership.

A year ago now the.

The projects sizes that they are involved and our larger and.

And do take a little more kind of to get from development to execution. So I would anticipate them having.

Projects to execute on within the next 6 months.

Okay, great. Thanks, I appreciate the color.

Youre welcome.

Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star 1 on your telephone keypad and our next question comes from the line of Chris Souther with B Riley of Securities. Please proceed with your question.

Hey, guys. Thanks for taking my question here I just wanted to see if we could talk a little bit about all of the backlog and maybe break that down between carport EV charging.

Commercial solar at the C and some of the other projects that you guys typically would be doing I think that would be helpful.

Yes the.

The substantial part of our business, probably 80% is solar EPC work.

So the.

EV charging portion and the carport portion of that might be.

The 5% range, we do expect to see.

The growth in that area.

Continue and.

And.

Probably grow and faster base being.

And of our revenue mix.

Seeing the new market for us.

Understood and maybe just walk through some of the puts and takes between some of the different segments from a margin front I think would be would be helpful as well.

Sure. So on the commercial and industrial projects were typically seeing margins in that 15% to 17% range of.

On the car parts, we are seeing a significantly higher margin which helps.

Allow us to improve our overall gross margin into the the 17% and 19% range.

Okay. That's helpful. And then you mentioned about 6 months to start to.

See some of the projects.

For the green bonds there.

Maybe just talk about the timeline for when do you think projects would start to get onto your balance sheet and the kind of completed just wanted to understand what kind of timelines we are talking about there.

And if that recurring revenue.

The revenue EBITDA and you've talked about.

Sure.

So if a project for executing the next 6 months utility scale project is typically up to a year or 2.

Construct and complete.

And be recognizing those construction revenues over that time.

And then have and ownership.

The minority ownership stake and that recurring revenue so I.

I would say somewhere between.

18 months 12 to 18 months, we should start seeing.

Recurring revenue from their projects depending on the the size.

And the execution speed.

Project comes off.

Perfect well I appreciate you guys, taking the questions here I hope in the queue.

Thank you. Thank you.

Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. <unk> for any final comments.

Thank you everyone for joining us today, we look forward to providing you with future updates on the execution of our growth strategies.

And our operation and performance.

Thank you.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.