Q3 2021 iSun Inc Earnings Call
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Okay.
Good morning, ladies and gentlemen, and welcome to the ice on third quarter 2021 earnings Conference call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host Taylor Barnes.
Floor is yours.
Thank you and good morning, we're pleased to welcome you to Iphones conference call, where we will discuss financial and operating results for the third quarter 2021.
GAAP pretax chairman and Chief Executive Officer will provide an update on <unk> progress towards the framework outlined in the last quarterly earnings call John Sullivan, Chief Financial Officer will provide an overview of the third quarter 2021 financial results, Jeff will provide some insight into how we plan to continue our growth strategy for the balance of 2021 and into 2022.
Finally management will provide our outlook for the remainder of 2021 and discuss in more detail <unk> unique position in the market as well as their long term growth strategy.
After our prepared remarks today, we will open the line to address any of your questions.
As a reminder, the earnings release and 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 results 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.
The date of this call and management is under no obligation to update these forward looking statements in the future. They are subject to risks and uncertainties that could cause actual results to differ from management's expectations with that I will now turn it over to our CEO Jeff Beck.
Thank you Tyler Hello, everyone.
It's a pleasure to be speaking with all of you today.
I'm excited to share with you all of the progress we've made.
And these last few months towards our vision of creating a solar energy platform capable of accelerating the transition to solar for all users.
I'll begin by discussing these accomplishments in the context of our mission.
We're discussing the specific progress we've made in the quarter.
I'll, then hand, the call over to iPhone CFO, John Sullivan, who will discuss our operating performance and I'll return with some closing remarks on how we will transition from building our platform towards its deployment.
Okay.
Seems that enabled silicon chip productions telecommunications installation services that connected industries and consumers to the internet.
Iceland has enabled the most important technological transformations of the last century.
All of the innovation that we helped advance none have provided as much opportunity to make a more meaningful impact.
And helping accelerate the nation adoption of solar.
Our vision is to create a platform capable of servicing customers at every scale within the marketplace.
We provide off grid and grid tied electric vehicle charging.
We provide services for residential commercial and municipal industrial and utility.
Across these segments. We also aim to offer a suite of services from early stage professional and development capabilities to operations and management services.
I'll start with this combination of capabilities and experience is uniquely capable of accelerating the transition from dirty to clean energy required to meet our nation's increasing energy demands.
We bring five decades of innovative electrical experience to an industry that is less than a decade.
And we combined the capabilities of an industrial and utility scale service provider to those of a consumer facing residential and commercial solar company.
And an on and off grid EV charging solutions provider.
This combination of experience and capabilities allow us to both enter new markets and scale within existing markets at a lower customer acquisition cost.
Customers and consumers navigate the complex and rapidly evolving regulatory landscape.
Leverage economies of scale to improve margin performance within each of those sectors.
We capitalized on the increase in solar investments required to meet the demand due to the transition to electric vehicles and reduction in energy supply, resulting from the ongoing decommissioning of legacy fossil fuel assets.
Perhaps most important our experienced and helping customers make the right investments for their energy needs has earned US the trust of some of the world's largest solar developers and helped us become one of the largest largest entrusted solar EPC in the United States.
Such trust has helped us build a remarkable values led business over the course of the last 50 years and will serve as a cornerstone of the business. We're building for the next 50 years.
After going public in 2019, we began making our vision a reality.
We began building a platform capable of servicing customers across each segment of the solar industry.
We've also developed a suite of services products and capabilities that carried across these segments, including off grid.
And grid tied solar electric vehicle charging and professional and development capabilities as well as operations and management services.
In our last call we identified how we deploy our three pronged strategy for growth to build both this platform and suite of services.
And residential and small commercial soar as an opportunity for further enhancement.
We also announced our intent to address this opportunity through accretive M&A, specifically, we communicated our goal of creating a division with a $75 million annual revenue run rate 75 megawatts of residential installations and approximately 7500 customers.
The exacting criteria for potential acquisition targets.
Food companies with between $550 million in revenue.
Located in the eastern United States residential focused with commercial sales.
Our outstanding operators had a strong brands and great reputation.
That were ultra high touch and develop long term customer relationships, providing multiple services, including solar storage O&M.
Community solar and others.
We wanted them to have expansion plans outside of their base territory and be market leaders in their territory, who regularly take on national companies and win.
And who would benefit from scale.
Today I am proud to announce that we've already achieved these aims at the end of the third quarter, we entered into definitive agreement to acquire some common a.
A leading residential and commercial installation company with operations in New York's Hudson Valley, and <unk> home state of Vermont.
In addition to satisfying our exacting criteria. Some comment also maintained industry, leading customer acquisition costs of 36.
For what.
With this acquisition Iceland has realized this vision of creating a platform capable of serving solar energy customers in every scale within the marketplace.
Additionally, <unk> has developed a comprehensive suite of services that are addressing both immediate and emerging needs within each segment.
With these pieces in place we will begin transitioning from the development of our vision to the execution of our mission.
With that I'd like to hand things over to our CFO John Sullivan.
I will then conclude the call with some remarks about the implications of the shift on each of our segments and our outlook John.
Thank you Jeff.
We are very excited about the execution of our strategic initiatives throughout 2021.
As you are aware the company has closed several acquisitions through the end of the third quarter 2021.
<unk> diversified our revenue mix with the additions of electric vehicle infrastructure utility and residential products and services.
Beginning with the first quarter of 2022, we will provide segmented financial reporting to highlight the progress that is being made.
By our residential commercial industrial and utility divisions.
In addition, we will provide continued progress updates on the deployment and construction of our electric vehicle infrastructure that supports each of these divisions.
I'll now turn to a discussion of our third quarter operating results before turning to an update on our balance sheet and liquidity position.
<unk> reported third quarter 2021 revenue of $6 7 million, representing a $1 7 million or 34% increase over the same period in 2020.
Year to date revenue was $18 3 million, representing a $6 6 million or 56% increase over the same period in 2020.
Revenue growth was driven by the continued execution of our commercial and industrial project backlog the.
The addition of new professional services revenue stream and continued deployment of our EV infrastructure.
Gross profit in the third quarter was $1 3 million compared to 0.2 million during the third quarter in the same period 2020.
Year to date gross profit was 0.8 million compare to zero point $6 million in the same period in 2020.
As discussed in our second quarter call, we experienced industry wide material and component price increases as well as labor shortages that negatively impacted project margins through the first half of the year.
During the third quarter, our margins returned to normal pre COVID-19 levels as we began executing contracts entered into during 2021.
In addition, our margins are strengthened by our revenues generated by our owned solar assets during the peak production months of the third quarter.
Our new professional services revenue stream provides margin enhancement is not impacted by material pricing or labor constraints.
We are confident that we have moved past the challenges of the first half of the year and anticipate more consistent margins and improved cash flow through the end of the year.
Operating income was $1 $6 million loss in the third quarter, and a $7 million loss year to date compared to <unk> 6 million loss in the third quarter and $2 $2 million loss year to date in 2020.
We've continued to build out the necessary infrastructure required to support the revenue scale anticipated through the execution of our strategic plan.
<unk> reported a 0.6 million net loss or <unk>.
<unk> per share in the third quarter compared to a $1 $3 million net loss or <unk> 28 per share for the same period in 2020.
Year to date 2021, <unk> reported a $5 2 million net loss or <unk> 60 per share compared to a $3 2 million net loss or <unk> 56 per share for the same period in 2020.
Our commercial and industrial project backlog on September 32021, with $87 million, which does not include the additional commercial and industrial backlog of $9 6 million obtained with the acquisition of Sun comment.
Additionally, some common provides residential customer orders of $22 1 million.
The growth of our C&I project backlog.
Strong residential customer demand.
Ongoing utility project development and the government investment in EV infrastructure provides an optimistic outlook for 2022 revenue growth.
We will provide 2022 revenue guidance later this week.
Now turning to the balance sheet.
Our balance sheet remains strong at the end of Q3 2021.
Total cash position was $27 $5 million on September 32021, which was strengthened by cash collections evidenced by a decrease in accounts receivable from year end, while revenue increased $6 6 million over the prior year.
Panel inventory has remained unchanged from the previous quarter. However, approximately 80% of those panels have been deployed to projects under construction at this time.
Total debt increased to $13 9 million at the end of the third quarter 2021.
Total debt includes $2 million on our revolving line of credit used to support working capital $1 9 million of long term debt that is supported by recurring revenue generated by our solar assets as well as $10 million in long term debt that supports this uncommon acquisition.
With that I will turn the call back over to Jeff.
Thanks, John with the pieces of our platform complete we will now begin to execute against our mission to accelerate the adoption of solar across all segments of the marketplace.
And our timing couldn't be better.
The electrification of everything is already upon us.
Impact consumer behaviors.
Demand on these segments is staggering.
Consider the adoption of electric vehicles by 2035, it will be difficult if not outright impossible to purchase a new ice vehicle.
As wide spread EV adoption accelerates so will demand for household solar solutions.
Consumers will look for ways to both increase their impact and to reduce and future proof their electric bills.
Although consumer behavior may change with EV adoption expectations won't consumers will still expect there'll be able to recharge their cars quickly and easily at places they most often frequent.
This will turn prompt commercial enterprises.
Small and large to also look for ways to manage such expectations at reasonable cost.
Expectations will be even greater destination locations, such as hotels municipal facilities.
In remote locations such as trailhead their parks.
Asset owners are municipalities to explore a scalable solution that may not be able to be addressed onsite and.
Of course.
All of this activity will in turn be met with an increase in electricity demand, prompting utilities to begin exploring ways to rapidly increase their capacity.
Iceland recognize these adoptions won't occur in a vacuum would affect one second.
The acquisition of Iceland energy LLC in January enabled our entry into the EV charging segment.
We are seeing growing demand for our roam off grid solar carport, and EV charging as well as our palm grid tied silver carport solution.
As businesses and government fleets transition to electric vehicles are trusted services will be useful in assisting our clients transition to electric vehicles.
With Suncor and our residential platform and brand we are laser focused on organic growth throughout the northeastern United States and in addition, we will continue to look for accretive M&A targets that meet the criteria previously discussed to achieve the scale necessary necessary to internalize financing options for our red.
<unk> and small commercial customers.
In our legacy C&I business, we will continue to grow organically and to help meet the tremendous demand for solar assets by working with our long term customers and expanding our outreach we will continue to expand throughout new England and the eastern United States.
We are uniquely qualified to assist these project asset owners with professional and development services.
Project acquisition at various stages.
<unk>, an ongoing O&M services.
Our acquisition of <unk> construction services created our professional services and utility scaled Division Isa.
<unk> utility.
This acquisition gives us a team to provide professional professional and development services.
So both lower internal cost.
As well as provide those services to others.
This allows us to engage with our customers at the early stages of a project.
Which often give us EPC rights on the project as they achieve notice to proceed and permits are.
Our deep knowledge of these projects give us both a competitive advantage and provides us with opportunities to acquire projects one for recurring revenue.
Or to construct and sell two financing partners.
As utilities decommission their dirty assets in transition.
Owning and operating large scale solar energy assets, we will be active in the development of assets to build and transfer to utilities.
<unk> or renewable energy asset owners.
Since this acquisition in April of 2021, we received over $30 million of professional service contracts and have over 800 megawatts under development.
As these projects achieve permits.
We will construct these assets further fueling our revenue growth.
And we will provide us additional opportunities to own and operate these assets for our recurring revenue.
Additionally, ice has a suite of services and products that are agnostic to scale.
And that will ultimately be required across all of these segments. These include storage EV infrastructure professional services and O&M.
Iceland is to realize its mission of accelerating the adoption of solar.
The world is going to obtain the benefit that solar energy provides each of these segments needs will need to be met.
We built a platform that does exactly that.
Full service solar platform that addresses the needs that will arise from the electrification of everything across each segment of the solar industry.
To conclude I said with its combination of capabilities and experience is uniquely positioned to respond to these changes into the address the resulting needs of each of our customers.
In fact, we may be the only solar company capable of addressing each of these customer segments needs.
We are excited about <unk> prospects for future growth.
We'd love to invite you members of the investment community to join US as we accelerate the adoption of solar energy across each segment of the marketplace.
We look forward to sharing with you our outlook for organizations growth trajectory and a separate communication scheduled for Thursday November 18th.
Thank you.
With that I'll open the line for questions.
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 about posting a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone. Please hold while we poll for questions.
Your first question is coming from Jeffrey Campbell from Alliance Global Partners. Your line is live.
Good morning, Jeff and John wanted congratulation on weathering, the first half 'twenty, one industry challenges and pretty good margins.
Third quarter 'twenty. One then also looking forward to to increase segment disclosure to come from first quarter clients right.
Good morning, Thanks, Jeff.
Yes to begin.
What's the expected timeline to revenues for the Sun common.
Commercial and industrial backlog.
The residential customer orders of $22 1 million.
As far as in the press release.
Okay.
Debbie the timelines on the small commercial and residential scale business is shorter than what we've seen in the industrial scale. So we anticipate.
The push through of that revenue in the next four to six months.
Obviously a little.
Little.
Faster on the <unk> side and.
A little longer on the commercial side.
Okay, great. Thank you.
The press release noted that third quarter 'twenty, one revenue contributions.
From the development and professional services I've said to you quick ones. One is just referencing.
7 million contract with years and renewable announce September 20 <unk>.
And can you suggest the timeline.
The full monetization of that contract.
Yes, absolutely yes.
We did recognize revenues from that contract we will continue to.
Work with them and we would anticipate that all of the revenue.
From the development services agreement that we've had with them will be recognized.
Throughout this year and 2022.
Okay.
EBIT infrastructure was also called out as a revenue contributor I was just wondering about the nature of those escalations, particularly if they were off grid grid connected or if there was a mix.
Yes, so those development services agreements.
Our design and engineering land control interconnection work.
All of those services that we perform for companies for a fee and then with that agreement.
We have the ability to run the process and constructive that puts in the backend. So all of those would be.
More of your traditional either utility scale.
Large commercial or industrial scale projects currently although I will say that.
We are.
Design services and professional services segment will have.
Some involvement in helping too.
Increased deduction of Evs EV charging some of their design services and development services as well.
Thank you.
Thought I'd ask if theres any updates on the three Alabama projects connected to the 448 megawatts with fusion that are also connected to the development contract.
Nothing nothing new to report.
To report other than what was previously reported.
There are three interconnection three separate interconnections each one of those will be working through the process.
I think we've previously reported that I would anticipate.
The first interconnection agreement being signed in 2022 pardon.
Pardon me the interconnection agreement.
NTP being hit in 2022.
Okay, and then finally, you referenced potential M&A in your prepared remarks today I'm just wondering is there.
With the Commonwealth.
Very obvious that you wanted to expand <unk> reach and residential solar I was just wondering is there a specific sector within the portfolio now that is most likely the bigger target for expansion through acquisitions.
Yes, we continue to want to build a super regional East coast presence on the residential and commercial side. So a company that have met the criteria that we've laid out in the past.
It will be important.
And so we'll continue to look there, but also I think there is an opportunity for us too.
Find sort of the traditional electrical contractor.
May not have.
Exposure to the solar industry and will trade it.
And a much more reasonable.
Multiple of revenue or nearing.
That we could use our development services and our developer network to acquire and add the additional.
Silver division to their business, so that would be an additional acquisition candidates.
What sort of being great.
That area.
Okay I appreciate the answers and congratulations on the quarter.
Thanks, Jeff.
Thank you. Your next question is coming from Noel Parks from Tuohy Brothers. Your line is live.
Good morning.
Good morning Noel.
Just had a few things.
The.
Rebound in margins.
Was.
Certainly welcome and.
You mentioned, a few things on the release that contributed to it.
And I guess I got the sense that maybe you sort of turn the corner on the worst of.
The worst of it.
Sort of Covid era effects.
Going forward do you do you sort of see.
Things.
Keeping fairly stable with margins or do you think there is.
A chance of some more variability ahead.
As you can tell here.
Yes, no we're feeling.
Feeling like things are beginning to move back to normal some of the supply chains now are starting to loosen up or at least getting accurate information, which allows us to scale our labor.
More effectively so I would say that we'll return to a more traditional margins.
See you in the past.
Oh great.
That's interesting about.
Finally quality of information improving and.
Thinking about the G&A.
Of course, then Disney with acquisitions and I was just wondering looking at the quarter.
Sequentially versus second quarter.
Any items in there that are essentially one time that got booked into into G&A there.
Not so likely to occur or is most of that just sort of.
I expect to be permanent staff additions and so on.
I don't know this is John Sullivan so we.
With the acquisition activity that we've had throughout the year. There are some one time expenses related to legal due diligence that are impacted general and administrative expenses. During Q3. In addition, with the acquisition of iPhone energy LLC and the expansion of the <unk>.
Infrastructure Department as well as the acquisition of Oakwood construction services in April that led to the expansion of our utility division. So.
Each of those components led to an increase in the G&A expense.
Remember 30th.
Okay and.
Any sense of.
How much of that might have been.
One time or not really a material part of the.
The increase.
Not necessarily a material part of the increase.
I'd say the majority of the impact is to build out the infrastructure that is needed to support the company and the growth initiatives that we have moving forward for 2022.
Fair enough and I just wanted to get your thoughts on that.
The infrastructure Bill that was just passed.
Some of the more.
I guess parts that have received more attention.
Particularly <unk>.
The charging infrastructure parts of I, just wondered if you.
We had identified.
Anything maybe.
Not so obvious and I was thinking about maybe.
Grid improvements and whether that might represent in funding that.
Might have an impact on on your.
Utility scale business.
Yes, certainly at the utility and industrial scale some of the money set aside for grid improvement will be helpful.
In and allowing projects to get to NTP.
Those funds are set aside for the grid improvements it also make them.
Potentially more economical.
<unk>.
That would've been borne by the ratepayer and utility.
It's being paid for through the infrastructure Bill.
Certainly I think there'll be a lot of opportunity in building out the various.
In the networks.
Both for commercial companies, where we will be focused in.
Other infrastructure throughout the.
The country really as people transition.
I think you'll hear from EV drivers that their main concerns always range anxiety.
Sure the larger and more complete the infrastructure is.
We'll help people.
You get over that regions and move quickly to the adoption of electric vehicles.
Sure yet will be will be will definitely be ingrained in the.
That infrastructure build outs.
Okay, great. Thanks, and just the last one.
As you.
You keep looking at.
M&A candidates I'm just curious.
Especially as you're looking at different parts of the.
East Coast region.
What's the sentiment like among sellers or are they or potential sellers potential targets are they.
Particularly concerned about sort of a valuation above everything else.
Or more sort of.
Soft tissue is sort of like.
Being able to control or have a say in it.
Retaining their personnel and so forth.
Curious what are.
What are the main negotiation points that.
Are on their minds these days.
Yes.
Mix, we're really focused on finding really good operators.
Who share in our beliefs.
Wanted to help grow on our platform so.
Really that's where we begin in the evaluation.
Oftentimes, we're finding for.
For the sellers has to do with where they partnered with.
And how can they take care of their employees.
And make sure that the people that help them build their business.
We're around to help.
All of US continue to build ours and can be involved.
And ownership moving forward. So we've seen a lot of that from the companies.
Sure.
Having conversations with people and moving forward really we want to make sure that they share our values and so we've seen a lot of that from the conversations that we're having and really on the valuation side Theres a lot of.
There's a lot of activity in the solar.
Industry and what we're seeing is.
Companies are being selective on who they want to partner with and who they want to be a part of what do we think it's an advantage for us because as they hear our story, what we are building out and what we wanted to do.
50 years.
Uh huh.
History, and really that we're building.
That company for the next 50 years, I think that resonates with people, who have built their own business and they want to be part of something bigger.
And so I think that gives us an advantage in the marketplace.
Great. Thanks, a lot.
Yes.
Thank you.
Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press star one on your phone at this time.
Your next question is coming from Chris Souther from B Riley Your line is live.
Hey, guys. Thanks for taking my question here.
So.
I'd like to see plans for increased segment breakdown going forward here could you talk a little bit about how meaningful EV charging looks today in the backlog versus maybe how it looks within the pipeline of projects that you'd be going after.
We haven't broken out our revenue.
Yet there.
We've got our historical industrial Division.
I would say the lion's share of our revenue.
Certainly.
EV is meaningful and what we know is it's going to be a growth area for us in the future.
From an opportunity.
Point of view, we're seeing.
Certainly a surge in opportunities in that sector.
I think that our skill set makes it.
Is uniquely qualified to execute on a lot of these opportunities.
Got it okay that makes sense.
The majority of activity on the charging side coming from commercial vehicle charging like the recent project announced in Wisconsin are there kind of other segments like public charging or any residential type stuff that you guys are looking to kind of enter as well.
Yeah, really we're seeing across the entire spectrum.
All scale.
I think thats what.
Part of building out the platform that we have and so that we can execute it.
At each level and where that customer wants to be met and so we're seeing grew.
Growing interest and activity.
Within every segment.
Okay.
Yeah.
Obviously, though okay. Good.
The growth was started.
In the residential areas.
Customers transition, they're going to want that charging their home.
And then that infrastructure is built out by commercial operators industrial companies state and local governments transition their fleets, where we will see a continued.
See there, but now.
Now as the tenants to begin to build out that infrastructure because people are going to want that infrastructure in place as they transition.
Yes, no that makes sense.
Are you guys seeing opportunities for balance sheet type projects on the charging side or do you think mostly that will still be kind of some of the solar stuff going forward.
Yeah.
We have a couple of interesting opportunities in the balance sheet side for Evs.
Certainly that we would want to.
If we were to invest in an easy asset.
On balance sheet, we would want to make sure. It was a high use situations, where there would be constant.
Constant chronic charging.
And so that so there will be ample revenues to support that investment. So otherwise we would typically are looking at.
More traditional solar projects, but.
For example, our drive high investment.
The high use.
Hi use case type of.
Investment were big drivers are.
Transition to Evs.
Typically those gig drivers.
Live in areas, where there may not be a full EV infrastructure built out.
And there'll be need to be areas, where the vehicles are used in those peak operations around.
Suburbs metropolitan areas, where they would be delivering.
Airports.
They'll need to be a build out there and so certainly we could be involved in projects that got to own an on balance sheet, where they'll be.
Drivers, who are constantly changing the vehicles at the assets that we built out unknown.
Okay, and then last one maybe we could just.
Talk a little bit about.
The different breakeven profitability levels.
With some of the acquisitions in the mix now.
Is there a revenue run rate target that we're going to start to see leverage in the model and timing for EBIT positive would love to hear about that.
Yes.
On Thursday November 18th we'll be releasing some further guidance on where we see 2022 revenue and margin targets and so we will provide.
We will provide.
Additional color then on those numbers.
Understood. Thanks, Scott.
Thank you Chris.
Thank you there are no further questions in the queue I will now hand, the conference back to management for closing remarks. Please go ahead.
Thanks, I'd like to thank everyone for joining us today, we're really excited about the progress we've made a little over two years of the public company.
When we look forward to sharing with all of you our plans going forward for growth.
And provide you with guidance on November 18th.
2021.
Thanks for joining us.
Yes.
Thank you ladies and gentlemen. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.