Q2 2021 iSun Inc Earnings Call
[music].
Good morning, My name is Keith and I will be your conference operator today.
At this time I would like to welcome everyone to the ice sons earnings Conference call for the second quarter 2021.
All lines have been placed on mute to prevent any background noise. If you should need assistance during the call. Please press Star then zero and an operator will come back online to assist you.
I would now like to turn the call over to Tyler Barnes I SUNS Investor Relations consultant. Please go ahead.
Thank you and good morning, we're pleased to welcome you to <unk> Conference call, where we will discuss financial and operating results for the second quarter 2021, Jeffrey <unk>, Chairman and Chief Executive Officer will illustrate Iceland strategy in the context of its machining capabilities. Following Jeff's remarks, John Sullivan, Chief Financial Officer will provide an overview.
Second quarter 2021 financial results, Jeff will then return to provide an update on Iceland progress towards its growth plan and outlook for 2021 and beyond.
After our prepared remarks today, we will open the lines to address any of your questions. As a reminder, the earnings released an updated investor presentation, which can be found on <unk> website include financial disclosures and reconciliations for non-GAAP financial measures that should help you analyze the results.
Our comments and answers to 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 in the future.
Subject to risks and uncertainties that could cause actual results to differ from management's expectations with that I'll now turn the call over to our CEO Jeff <unk>.
Good morning, and thanks to everyone, who have dialed in today.
I'm excited to share with you the reasons why the solar industry presents such a remarkable growth opportunity as well as iphones mission.
And our strategy to accelerate the adoption of solar energy.
I'll, then turn the call over to John who will update you on our results for the quarter before returning with an update of our progress as a public company and how we plan to execute on the growth presented by the evolving energy market.
To that point, we are just beginning the electrification of everything.
We are seeing this transition happened before our eyes, specifically with investments in the auto industry and infrastructure.
The Senate recently passed their infrastructure, which includes a 60.
$65 billion investment upgrade transmission lines to facilitate renewable energy expansion.
A $7.5 billion.
To build a national network of electric vehicle Chargers to encourage the transition to electric vehicles.
This transition is accelerating there are currently 100 battery powered <unk> claimed by 2024.
And there are dozens of startup electric vehicle companies entering this space.
Most major auto companies have announced their plans to convert to Evs.
GM announced its opium battery platform to support their EDI expansion.
<unk> has launched the Mustang Mach E and announced the F 150, EV pickup for 2022.
The city has been backed by a $47 billion and funding is preparing for all evs by 2030.
<unk> has a goal of 300 evs or hybrid models by 2030.
And of course, Theres Tesla <unk>.
<unk> plans to open their supercharger network to other automakers.
All of this will accelerate the adoption of electric vehicles.
And for some context the <unk>.
Average electric vehicle requires 30.
<unk> 30 kilowatt hours to travel 100 miles essentially the same amount of electricity.
Used each day for the average American home.
Imagine the implications.
Overnight household electricity demand double or triple.
At the same time, there will be a retreat from coal and other fossil fuels.
According to EIA there.
There will be a need.
For more solar power installed each and every year between now and 2031.
It has been installed in the United States through 2020.
My son exist to accelerate the adoption of proven technological innovations capable of improving lives.
This is not a new concept for ice.
This has been our approach to business since $19.72.
From building semiconductor clean rooms to installing structured cabling and fiber optics.
Transitioning our focus on the solar industry we.
Have always embraced innovative ideas to best serve our customers.
Today, iPhone believes that clean renewable solar energy is the most important investment we can make.
And we are laser focused on using our capabilities to accelerate the transition from dirty to clean energy.
Iceland experience and capabilities perfectly positioned us to accelerate the transition in every sector of our industry.
Hi, son has unmatched experience and capabilities to develop and construct silver approached across every solar market sector.
We understand that specific customer needs and each solar sector.
How to add value in each sector.
And we are perfectly positioned to help each sector respond to and support this energy transition.
We believe that the electric vehicle adoption will be the gateway to accelerating the renewable energy transition and each of these solar markets.
For most purchasing of electric vehicle will be the time that they really start thinking about where their power is coming from.
As people charge their electric vehicles at home.
And their energy and their electric bills rise there will be a growing desire to invest in solar energy for their home.
So they are charging their vehicle from a renewable source.
Increasing their carbon footprint.
While creating resiliency for their home and future proofing against increased power costs.
At the same time.
Susan institutions will also begin to transfer their fleets to evs.
And will naturally want to invest in store for both the environmental aspects as well as to utilize the tax credits the accelerated depreciation and to lower and stabilize their power costs.
Iceland is uniquely qualified.
To provide a customized solution to best fit their needs of their specific business.
Because we provide EV charging solutions, including our branded carports, which can also provide resiliency and serve as a visual representation.
Of an organization values we.
We can design and construct custom solar arrays for both their roofs and undergrounds.
And we help businesses and institutions structure and create power purchase agreements as needed.
Often times institutions don't have tax credits available to them or businesses have multiple entities for their real estate in businesses, where.
And we have experience in helping structure.
Structure these power purchase agreements.
Naturally this will also drive the industrial sector, specifically, the one megawatt to 50 megawatt sized systems that are built for independent power producers as well as solar asset owners, who create group net metering projects micro grids and community solar projects for iPhone.
A depth of experience and a robust recurring customer list.
Again this <unk>.
Increase in demand is coming at a time, when we will see a reduction in the use of coal and other fossil fuels.
Utilities throughout the country are just beginning to prepare for this transition.
And we'll continue to replace coal and other fossil fuels with solar power.
There is a $69 billion opportunity ahead, and the utility scale solar sector.
Iceland Streamlines development services.
For land origination.
Project site diligence.
We've got technical feasibility.
Execute internal engineering packages on a turnkey basis and run project finance processes, all to assist with the speed of transactions and to move quickly to construct the solar asset.
By serving every individual solar sector.
All of our customers will benefit from our shared services and economy of scale.
IPhone with its combination of capabilities and experience is uniquely capable of accelerating the transition required to meet our nation, increasing clean energy demands.
We combined the capabilities of a utility and industrial scale EPC with.
With those of our consumer facing residential and commercial EPC and in EV charging solutions providers.
These capabilities allow us to both enter new markets and scale within existing markets at a lower customer acquisition costs.
It allows us to leverage economies of scale and improved margin performance within each sector and capitalize on the increase in solar investments, resulting from the transition to electric vehicles.
Having discussed the scale of this opportunity and <unk> unique ability to capitalize I'd like to turn the conversation towards our progress thus far in 2021.
Our second.
This quarter has not been immune to market conditions.
While we remain 57% ahead of our prior year gross revenues for the quarter and 71% year to date.
Going industry challenges presented by Covid, specifically supply chain delays and labor availability slowed our progress in executing on our solar project backlog.
These delays ultimately resulted in non non.
Non linear cash flows.
And compressed margins.
Although delays due to the supply chain issues are.
Appreciable stable backlog of $76.8 million at the end of the second quarter means that the cash flow generation of the business will be substantial over several quarters and next year.
Simultaneously the strength of our balance sheet enables us to remain focused on our growth strategy for 2021 and beyond.
John will now share with you the details of these quarterly results.
After his remarks I'll return to discuss our growth plans.
And how we will execute on this once in a lifetime opportunity that exist in our industry.
Thank you Jeff.
As you May have seen on April 16, 2021, we announced that <unk> has successfully completed the destocking process.
The original 4.125 million public warrants issued as part of the Jensen acquisition Corp's original initial public offering.
$3 million 671236 warrants were exercised.
Converted to $1 million 835618 shares of common stock.
And the remaining 453764 public warrants were redeemed for one.
The exercise of the public warrants generated total net cash proceeds to the company of approximately $21 million.
I'll now turn to a discussion of our second quarter 2021 operating results before turning to an update on our balance sheet and liquidity position.
<unk> reported second quarter 2021 revenue of $4.3 million, representing a 57% increase over the same period in the prior year.
Year to date 2021 revenue was $11.6 million, representing a 71% increase over the same period in the prior year.
Revenue growth was driven by the continued execution of our project backlog, consisting primarily of projects awarded in previous years.
Geographic growth continued with project based throughout new England and mid Atlantic regions.
Gross profit in the second quarter was a negative.
6 million compared to breakeven during the second quarter in the prior year.
Year to date gross profit was a negative <unk> 5 million compared to a <unk> 3 million during the same period in the prior year.
We have seen industry wide material and component prices increased significantly.
We have also seen a labor shortage in all markets due to the ongoing carryover issues related to the COVID-19 pandemic.
As noted above many of our project contracts were entered into prior to the Covid pandemic with commitments on pricing made to our customers.
We value our long term relationships and honor the commitments made which came at the expense of our short term gross margin erosion.
We have adjusted our estimating process to account for the increase in material and labor cost moving forward and are confident that we have mitigated the short term margin deterioration.
However, we anticipate ongoing margin pressure related to material pricing and labor shortages on previously executed contract.
Operating income was $2.8 million loss in the second quarter, and a $5.4 million loss year to date compared to a $1 million loss in the second quarter.
$1.5 million loss in 2020.
The operating loss was mainly due to the margin challenges noted above.
In addition, we executed on several strategic opportunities that led to an increase in general and administrative expenses.
The acquisition of iPhone energy LLC and the acquisition of Oak Wood construction services highlight those strategic initiatives with anticipated future revenue streams materializing in the upcoming quarters.
<unk> reported a second quarter loss of $1.3 million or <unk> 15 per share compared to <unk> 8 million loss or <unk> 16 per share for the same period 2020.
Adjusted EBITDA for the quarter was a $1.8 million loss compared to a $1.1 million loss for the same period 2020.
Sun reported a year to date loss of $4.5 million or <unk> 53 per share compared to a loss of $1.6 million or <unk> 31 per share for the same period in 2020.
Now turning to the balance sheet.
Our balance sheet remains strong at the end of Q2 2021.
Total cash position was approximately $22 million at the end of the quarter.
Cash collections remained strong as our accounts receivable decreased approximately $2.2 million from year end. Despite the 71% increase in revenue for the six months ending June 32021.
How inventory is scheduled to be deployed to projects in the second half of the year, helping to protect against the margin erosion on select projects.
Total debt at the end of the second quarter was $5.3 million.
Total debt includes $3.5 million on our revolving line of credit used to support working capital and $1.8 million of long term debt that is supported by a recurring revenue stream generated by our solar assets.
Our strong cash position together with approximately $2.5 million of availability under our line of credit for operating activities is a significant capacity to support the execution of our $77 million backlog and to pursue strategic growth opportunities.
And with that I will turn the call back over to Jeff.
Thanks, John.
As we enter the second half of the year, our balance sheet and cash position remained strong.
This is important context as I shared with you our growth strategy for the balance of the year and beyond.
Before I do that I'd like to review, how we are executing on our growth strategy and highlight our accomplishments in our two year history as a public company.
Update you on our plans for explosive growth.
When we entered the public markets in 2019, we set out to create a solar energy platform.
To accelerate the transition to solar energy in every sector.
With that in mind, we introduced our three pronged growth strategy.
First is a C&I solar company, we were focused on organic growth throughout new England.
And then the East Coast just two years later, we've done just that.
We are executing projects in every state in new England, and our projects in our pipeline throughout the East coast.
Second as a company, we own solar arrays for recurring revenue, which increases net margins and we want to expand our ownership of these solar assets with that in mind, we made an investment in green seed investors in April of 2020.
We've seen significant progress in this investment.
Green seed has been reviewing over five gigawatts of utility scale projects.
Across the country.
That are now in due diligence stage for the acquisition of four utility scale projects. The details of these projects are currently confidential.
But consistent with our previous communications iPhone will have the exclusive right to construct these projects through iPhone utility.
Iceland will also retained an ownership stake in these projects once in operation.
We also announced our intent to pursue accretive M&A.
Our M&A strategy will focus on strengthening and expanding our capabilities across all industry segments.
In January of this year, we acquired iPhone energy LLC for their branded carport in EV charging products and rebranded our company to Eisai, Inc.
We've seen immediate success from this acquisition.
We recently were awarded the contract to build 18 of our branded iPhone roam off grid solar carport in EV charging stations.
These will replace the trail.
For electric vehicle charging and remote areas.
We expect demand for our grid tied and off grid battery back silver charging stations to increase with EV adoption.
Next in April Iceland.
<unk> acquired the intellectual property of <unk> construction services and entered the utility scale solar business.
I assume utility delivers solar development and construction services to asset owners and developers.
<unk> targets build operate transfer projects directly for utilities.
Additionally, we provide development services to third parties early in the project lifecycle and game captive rights to constructing these projects.
We are focused on reducing costs and moving projects more quickly through the pipeline and providing value to our clients by in sourcing engineering.
We have seen the immediate benefits of this acquisition within 30 days of launch iPhone utility closed the development services agreement for eight project sites totaling 118 megawatts.
With an initial development services contract for $1 million to $5 million.
With these contracts. We also obtained the EPC rights for a potential of $120 million in future EPC contracts.
These potential EPC contracts. However are not included in our current pipeline.
We are also in the late stages of other development services and EPC agreements with several investors with over 800 megawatts in development.
We anticipate strong demand for our development services and associated EPC contracts going forward.
We are pleased with the progress we've made towards building out our solar energy platform and.
And executing on our three pronged approach to growth.
However, our work here is not done.
IPhone has installed nearly 3000 residential systems.
Moving forward, we will strengthen our presence in this sector.
So with that in mind I'd like to announce our M&A strategy to create a market leader with <unk> residential.
We have a very specific list of criteria, we're looking for as we execute this strategy.
These are companies with $5 million to $50 million in revenue and profitable.
Located in the eastern United States.
Who are our residential focused with commercial sales.
Outstanding operators with strong local brands and reputation.
Who have high.
Ultra high touch long term customer relationships.
And provide multiple services, including solar.
Storage O&M.
Community solar and others.
Okay.
They would also have expansion plans outside of their base territory.
And be market leaders within their territory, who complete compete with national companies and win.
On a regular basis, and who would benefit from scale.
Our goals related to this M&A strategy for 2022 include a $75 million rep.
Revenue run rate.
With 75 megawatts of residential installation and.
7500 customers.
We believe this highly segmented market sector will benefit from consolidation.
And that we will create a market leader in this space.
With that I'll turn to our outlook.
As John illustrated our second quarter results reflect our ability to execute against both our strategy and growth plan.
While we expect lumpy cash flow for the next few quarters, our backlog has remained resilient.
Well positioning us for multiple strong quarters into 2022.
Because non linear cash flow hasn't affected our balance sheet, we remain well positioned to aggressively pursue M&A opportunities.
We.
To anticipate doubling of revenues from 2020 to 2021.
And also expect improvements in gross margins and EBITDA performance.
Through the year, driven by improved project execution compared to the first half of 2021.
We expect our backlog to continue to grow.
As we see growth from our solar EV charging opportunities, our C&I business as well as development service contracts and our new utility Division.
We expect additional M&A activity in the second half of 2021. This activity will further enable <unk> to accelerate solar adoption across all sectors.
I have previously mentioned the magnitude of the opportunity our industry currently presents with electrification of everything and the increase in demand for that.
Clean energy creates what is truly a once in a lifetime opportunity.
Our nation Hasnt seen in energy transition of this magnitude since we stopped using whale oil to light our homes and we moved away from the horse buggy.
We believe iphones 50 year legacy of accelerating the adoption of advancements in electrification technology perfectly complements the market's increasing demand for solar energy.
Iphones capability.
As an EV charging solutions provider and EPC capable of executing projects across the scale and spectrum.
And a services provider is unique in the marketplace and perfectly positioned <unk> to capitalize on this once in a lifetime opportunity.
These capabilities will propel our growth and drive value for our shareholders.
With that we will now open the line for questions and answers.
Operator.
Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask that if you are listening via speakerphone. Please pick up your handset for optimum sound quality. Once again, if you have any questions or comments. Please press.
Star one on your phone now please.
Please hold a moment, while we poll for questions.
Our first question today is coming from Jeffrey Campbell at Alliance Global Partners Youre.
Your line is live you may begin.
Good morning.
And Brian just to your margins in.
In reference to your margin commentary. This morning can you articulate what proportion of backlog represents those pre COVID-19 commitments that presumably youre not in power.
Cost inflation passes as opposed.
Those projects that will allow you to better address market conditions.
Yes estimate approximately 10% to 15% of the existing backlog or contracts previously signed that would be impacted.
Okay. That's very helpful. Thank you.
Historically residential solar is tended to be more labor intensive and lower margin than utility scale solar installations.
Wondering what.
If there are primary reasons I was wondering what.
Changed to motivate the creation of <unk> residential.
Yes, we view the <unk>.
<unk> the adoption of the lease and the increase in demand.
In residential.
Energy.
Hey.
A major driver for people to embrace solar I think theres, a harris pull out recently that said that 70% of of new residential solar installations.
Our approach from an investor point of view and we think that if we can drive lower customer acquisition costs with.
Some white glove Ultra high touch service with those customers.
Have the ability to resell cross selling upsell each one of these customers to generate a long term customer.
We can continue to go back to and service over time.
No. That's helpful. I was also wondering if the decision to embrace embrace residential might represent.
Sort of a hedge.
Expose yourself and distributed energy.
In addition to grid solar.
And here I'm thinking about something in your neighborhood, which is the continued struggles that yesterday any CEC revenue in Maine.
It seems like no matter, how much people like clean energy Theres still a high voltage power lines.
Yes, certainly.
The large scale solar projects are not immune to the NUMMI factory that exists there.
I wouldn't necessarily call. It a hedge I think what we're seeing is a massive transition in the way that we're going to be consuming electricity in the future and a lot of that it will have happened at home.
With batteries.
Software and the.
The transition to Evs, there's going to be this evolving opportunities that will exist and we think it's really important for a company like ours as were building this platform out to really be touching each one of those different sectors and serving each one of those customers.
It was better understand both the industry and the customer needs and then how to look ahead and better serve our customers.
And I'll ask one last one then ill turn the turn it over.
I thought while the off grid solar carport.
<unk> is an interesting niche.
I wanted to ask about the continued efforts to develop my son with commercial customers.
Included in any of the solar projects in your backlog.
And also for an update regarding the acquisitions and you've made earlier this year with the iPhone carports and mind thinking about software acquisitions.
Yes, absolutely.
So we view the carports and certainly the off grid.
Massive opportunity.
As EV adoption accelerates.
I think every TV driver will tell you that there is always this ranging 90 that exist.
And having the ability to have resiliency.
Available for grid interruptions.
Or natural disasters or even in remote areas for the EV driver I think is incredibly important and I also think that this will translate well to the.
Commercial and business markets.
And as these.
<unk> and institutions transition their fleets to Evs is naturally going to be this desire to reinvest in.
Solar energy and stabilize their costs and software will be a big component of that and how we use the batteries in the future and how we transition to those so.
Obviously with that in mind.
Our investment in Amp up, which just had a follow on investment from Goodyear tire that was important for us that we were.
Making sure that we're innovative and providing solutions to our customers as they made this transition.
So that was a big part of those decisions.
Okay, great. Thanks, very much for the color.
Thanks, Jeff.
Thank you. Our next question today is coming from Noel Parks at Tuohy Brothers. Your line is live you may begin.
Good morning.
Good morning, all.
Okay.
I had just a few things.
For the supply chain issues.
But you've seen a lot of the industry has seen I'm just curious.
When you're you're communicating with the vendors.
Generally if there.
Letting you know that there will be a delay of some sort.
Do they generally.
Come through on the revised dates they give you or is it more a matter of them sort of pushing off a little pushing off a little bit and sort of slide in slide I don't know if its possible to characterize it across all your vendors, but I was just curious.
How that's unfolding.
Yeah, I think it is a challenge we are seeing.
Different approaches by different vendors.
I think what we've seen recently.
Are the dates slipping dates slipped a little bit on delivery timelines.
And I think thats, primarily due to maybe there was some over promising and under delivering earlier on in the pandemic and now we feel like we're getting a more accurate representation of actual delivery dates as.
As we move forward this.
This may be certainly it maybe from the vendors not knowing being.
Being aware of their specific timelines and have now taken out.
I'd call it a much more conservative approach on how their estimate their delivery schedules.
Okay, great Thanks and.
You've mentioned, Jeff I think when you were on the topic of utility scale projects that you had a focus on reducing costs and moving projects more quickly since the pipeline I'm. Just wondering what are the main steps that you need to go through in order to accomplish that.
Yes, so we will provide land origination and developed sites that technical feasibility is quickly.
Provide engineering packages.
And in source engineering.
As well to assist developers.
Asset owners through that process as they have.
Bandwidth issues and problems.
Pushing projects as quickly as they would like to to be ready to build so we are there to provide those services.
Really with the approach to constructing these assets once they're through those.
On the services.
Got you thanks.
I was wondering also on the commercial side.
You of course have.
Profit of early adopters, who has probably been thinking about in the past I think solar for some time I'm just curious about the customers Youre seeing now who are maybe just now getting serious about solar just wondering who they are they from particular industries.
I'm curious about what those conversations are like.
Yes, absolutely yes.
Yes, I think we're seeing a renewed embracing.
Solar power.
By our customers I think for a couple of reasons number one the environmental aspect and how it represents their brand.
Europe business out there and your consumers are coming to you.
Having renewable energy and being able to point towards that as part of your ears.
Your values.
I think it's helpful.
In your brand and.
How company. They are represented in the marketplace. So we're seeing a lot of that in addition.
It's about making these investments and getting return on that investment and really future proofing against.
Liquidity com.
So we're seeing that as well.
Okay great.
Are there any implications.
Again, if you get some of the.
The guidance, we're just now coming to the table are there any implications for your your sales cycle.
Hum.
The companies that are just coming to the table now do they need more handholding.
And I was wondering is that something you're thinking about when you are forecasting your customer acquisition costs going forward.
Yes, one of the reasons why we are.
Unlike the residential market and the commercial market is does that ultra high touch customer interaction and when Europe business and youre going to spend hundreds of thousands of dollars.
And then investment to stabilize your your energy costs in the future than ultra high touch.
Matters.
The residential and small commercial companies really have that down and we want to be able to take what they've learned.
In the residential market and apply that to the commercial market. So we can help.
These companies make the decisions quickly no that there.
Contracted with a company that will do quality work and allow their asset in their investment to stand the test of time.
And so yes, I think as people are transitioning their fleets and thinking about renewable energy and looking to make that investment.
I do believe that ultra high touch customer interaction is going to be incredibly important in the commercial market and so our reach into the residential and small commercial market to build.
Our strength there I think is incredibly important.
Great. Thanks, a lot that's all for me.
Thank you.
Thank you.
No further questions in the queue. At this time do you have any closing remarks, you'd like to finish with.
Yes, I'd like to thank everybody for hopping on the call today and it's been too.
Quarterly report.
And hearing about our goals for 2000, and the rest of 2021 and beyond.
And we look forward to updating you on our progress in the future.
Thank you.
Thank you ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day. Thank you for your participation.
Okay.