Q4 2021 iSun Inc Earnings Call

April 18, 2022

Operator: Good afternoon, ladies and gentlemen, and thank you for your patience. The conference will begin shortly. Once again, thank you for your patience. The conference will begin shortly.

[music].

Operator: Good afternoon, ladies and gentlemen, and welcome to the iSun Energy fourth quarter and full year 2021 financial results.

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 Tyler Barnes, Head of Investor Relations. Sir, the floor is yours.

Tyler Barnes: Thank you and good afternoon. We are pleased to welcome you to iSun Conference call, where we will discuss financial and operating results for the fourth quarter and full year 2021. Jeffrey Peck, Chairman and Chief Executive Officer will provide an update on the deployment of items recently completed solar platform and illustrate how the platform both addresses opportunities within the solar marketplace and create value for shareholders. John Sullivan, Chief Financial Officer will provide an overview of the fourth quarter and full year 2021 financial results and operating performance. After our prepared remarks today, we will open the lines to address any of your questions. As a reminder, the earnings release and updated investor presentation, which can be found on iSun's 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.

and create value for shareholders. John Sullivan, Chief Financial Officer will provide an overview of the fourth quarter and full year 2021 financial results and operating performance. After our prepared remarks today, we will open the lines to address any of your questions. As a reminder, the earnings release and updated investor presentation, which can be found on iSun's 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.

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 of 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 Peck.

Jeffrey Peck: Thank you Tyler. Good afternoon, everyone.

It is my pleasure to be speaking with all of you today and I'm really excited about the progress iSun made in 2021 as we execute on our mission to accelerate the adoption of solar energy.

we execute on our mission to accelerate the adoption of solar energy.

Between climate-related and geopolitical events, we are reminded daily of the importance of our work and of our industry and we have never been more inspired to fulfill our mission or prouder of our progress.

2021 was a transformational year for iSun and I'd like to thank our entire team for their commitment, dedication and focus on executing on our strategy.

and I'd like to thank our entire team for their commitment, dedication and focus on executing on our strategy.

Despite COVID-related industry headwinds, we delivered on our promises. Specifically, we executed on our growth strategy, we transformed iSun into a solar company uniquely capable of accelerating the adoption of clean energy across all industry segments.

Specifically, we executed on our growth strategy, we transformed iSun into a solar company uniquely capable of accelerating the adoption of clean energy across all industry segments.

uniquely capable of accelerating the adoption of clean energy across all industry segments.

We did this by combining the strength of our traditional T&I business with an innovative solar carport in the EV infrastructure company.

Then, adding a world class team, providing solar development, design and engineering services to support utility scale project origination and EPC. And finally, adding a mission driven residential solar company to iSun's now full suite of services.

design and engineering services to support utility scale project origination and EPC. And finally, adding a mission driven residential solar company to iSun's now full suite of services.

And finally, adding a mission driven residential solar company to iSun's now full suite of services.

iSun's now full suite of services.

While building a solar company ready to meet and accelerate the demand of the solar industry in each segment, we remain focused on our promise to grow revenues. In 2021, iSun was able to exceed our guidance by more than doubling our 2020 revenues.

We also continue to serve our customers in growing our backlog. As we closed out 2021, we accumulated a backlog of contracted projects and generated new demand that supports our 2022 guidance and beyond.

As we closed out 2021, we accumulated a backlog of contracted projects and generated new demand that supports our 2022 guidance and beyond.

Additionally, our newly acquired solar development and engineering team has contracted with several solar asset owners to develop and engineer solar projects.

In just six months, we've built a pipeline of 550 megawatts of projects that we are moving through the development process and towards construction. These projects range in size from 500 kilowatts to over 100 megawatts.

These projects range in size from 500 kilowatts to over 100 megawatts.

As these projects achieve notice to proceed they will be added to our EPC backlog. This helps deliver on our promise to grow our backlog, expand geographically as well as providing iSun opportunities for asset ownership.

This helps deliver on our promise to grow our backlog, expand geographically as well as providing iSun opportunities for asset ownership.

With our expansion in the EV infrastructure, we delivered on our promise to accelerate the adoption of EVs.

I believe when we look back, 2021 will be the year when the transition to electric vehicles took hold.

The debate is over. The electrification of our auto fleet is upon us. The need to expand the infrastructure and improve the customer experience is happening now.

In Q4 2021, iSun signed a multi-year contract to design and provide 1,780 solar carports throughout the United States. This transition to electric vehicles will accelerate residential and commercial adoption of solar energy.

This transition to electric vehicles will accelerate residential and commercial adoption of solar energy.

As consumers transition to electric vehicles, they will often charge their vehicles at home or work. Residential and commercial customers will see their electric bills dramatically increase.

Residential and commercial customers will see their electric bills dramatically increase.

This will drive demand in both areas as consumers look to lower and future proof against rising electricity rates.

Our residential and small commercial brands, SunCommon has seen increasing customer demand, which we believe will accelerate in the coming years.

SunCommon was built to scale with their digital marketing, low customer acquisition costs and people first customer service.

low customer acquisition costs and people first customer service.

SunCommon will help us meet and accelerate the growing demand of residential and commercial customers.

Another quality of SunCommon that we admired was their status as a B Corp and their commitment to values driven business practices.

With the help of their team, iSun has engaged with our stakeholders to begin the process of formalizing our values in a comprehensive ESG policy.

iSun has made substantial progress throughout 2021 in executing on our growth strategy through acquisitions.

During the acquisition process, we placed a premium on leaders that were excellent operators and who shared our values and commitment to serving the communities in which we operate. I'd like to take a moment and recognize the leadership team we've assembled.

We are excited to welcome Daniel Dus, President of iSun Utility and James Moore, President of iSun Residential to the team.

Daniel previously led the US renewables business for the $100 billion Adani group, the largest solar company in the world in terms of the operating and contracted solar assets.

James cofounded SunCommon, serving as co-president, growing SunCommon to one of the largest residential solar companies in the northeast.

We appreciate the opportunity to learn from their years of experience and together with the Executive Vice President of Commercial and Industrial, Kip Myrick, our team will have an unparalleled wealth of experience in solar and the leadership required to execute on the solar industry's generational opportunity.

our team will have an unparalleled wealth of experience in solar and the leadership required to execute on the solar industry's generational opportunity.

The fourth quarter of 2021 provided our first option to see our team work together in a collaborative manner,

and we are thrilled with the results. We're excited to grow these synergies and drive efficiencies through our development, design and engineering services, our supply chain, and our proven installation expertise to new and existing customers and to see what we can accomplish with our platform in a full calendar year.

and to see what we can accomplish with our platform in a full calendar year.

iSun's mission is to accelerate the adoption of proven technological innovations capable of improving lives.

This has been our approach to the business for the last 50 years. From the clean rooms that enabled silicon chip production to the telecommunications installation services that connected industries and consumers to the internet, iSun has enabled the most important technological transformations over the last century.

For all of the innovations we've helped advance, none have provided as much of an opportunity to make more meaningful impact than the current duration of our mission, helping accelerate the nation's adoption of solar energy. This is a generational opportunity.

This is a generational opportunity.

Decarbonization and EV adoption are projected to drive electricity demand.

Current projections by the US Department of Energy suggests that solar deployment will shoulder a significant share of this increase in demand.

In 2021 solar served between 3% and 4% of US electricity demand. And even by most conservative estimates the US Department of Energy projects that this figure will increase to 37% to 42% by 2035, an increase of over 1100%.

And even by most conservative estimates the US Department of Energy projects that this figure will increase to 37% to 42% by 2035, an increase of over 1100%.

iSun is uniquely positioned to meet this demand as it arises in each segment of the solar energy industry.

Over the last year iSun has assembled a platform capable of addressing this generational opportunity presented by decarbonization in EV adoption. Now that it is complete, iSun can serve each segment of the solar marketplace - residential, commercial, industrial and utility with a comprehensive suite of services and comes in each stage of the solar development process.

of the solar development process.

By serving each segment, iSun's combination of skills will drive and grow our backlog, generate new demand and create efficiencies throughout the organization.

As I stated earlier, our development and engineering team works directly with customers who want to invest in solar assets. On a fee for service basis, we guide them through the entire development process. From land origination and control, rapidly diligence, project sites, getting technical feasibility, executing internal engineering packages

and negotiating PPAs and running with the finance process. This creates immediate development services revenues and provides iSun with EPC rights as projects achieved noticed to proceed while maximizing the value of the solar asset for our customer.

while maximizing the value of the solar asset for our customer.

Being involved throughout the entire process provides us with a differentiating advantage over our competition.

Another example of driving efficiencies is our combination of skill sets. SunCommon's digital marketing gets created low customer acquisition costs.

SunCommon's digital marketing gets created low customer acquisition costs.

We often come across residential and commercial customers who want renewable solar energy, but are unable to have solar where they live or work.

iSun, with our combined internal skills can now convert that lost customer to a community solar customer.

Our development and engineering team working closely with solar asset owners can develop community solar projects. SunCommon can provide those customers to the community solar asset and our industrial group will provide the EPC work.

The buying power created by our utility group will assist by providing internal savings on the equipment and materials to construct this asset. Additionally, our participation early and throughout the process will help us more efficiently manage the labor needs of the project.

As our team works collectively and collaboratively, we can drive down the total cost in solar assets, protect our margin and accelerate the transition to solar energy.

our margin and accelerate the transition to solar energy.

As we know, it isn't always sunny in the solar industry. And while the overall macro opportunity remains strong there are some headwinds and challenges for the industry.

And while the overall macro opportunity remains strong there are some headwinds and challenges for the industry.

there are some headwinds and challenges for the industry.

Recently, the US Department of Commerce initiated an investigation for circumvention tariffs on solar products from Cambodia, Malaysia, Thailand and Vietnam.

circumvention tariffs on solar products from Cambodia, Malaysia, Thailand and Vietnam.

This in addition to commodity inflation, supply chain constraints and rising interest rates has created some uncertainty in the industry.

These headwinds are the exact reason we built iSun as a multisegmented full service solar company.

The combination of skills and services will allow us to drive total project cost down and to serve this segment with the most market demand.

2022 marks iSun's 15th year of business. In that time, we have been through many industry and economic headwinds.

We believe these capabilities afford us a unique position in the marketplace and represents a tremendous opportunity for shareholders.

We are monitoring each of these developments closely and will continue to evaluate the impact they will have on each of our divisions and our forecast for 2022.

With that I'd like to hand things over to our CFO John Sullivan.

As John will illustrate, we're encouraged by the initial operating performance of our platform and are excited to deploy these capabilities across the full calendar year. John .

and are excited to deploy these capabilities across the full calendar year.

John .

John Sullivan: Thank you Jeff.

2021 was an exceptional and impactful year for iSun. We successfully dispatched. We expanded our geographic footprint with services provided in 13 states, successfully completed four acquisitions and expanded our capabilities to serve the residential, commercial, industrial and utility segments.

successfully completed four acquisitions and expanded our capabilities to serve the residential, commercial, industrial and utility segments.

I'll focus our discussion on our full year results, but we'll also discuss our fourth quarter results as well.

The fourth quarter provided us the first opportunity to fully evaluate the impact resulting from the execution of our strategic plan.

iSun reported full year 2021 revenue of $45.3 million, representing a $24.3 million or 115% increase over 2020.

Revenue growth was driven by the continued execution of our large commercial and industrial backlog, which accounted for 49% of that growth, development and professional services contracts, which accounted for 7% of that growth, and residential installations, which accounted for 60% of that growth.

development and professional services contracts, which accounted for 7% of that growth,

and residential installations, which accounted for 60% of that growth.

In the fourth quarter, we reported revenue of $27 million, representing a $17.7 million or 190% increase over the same period in the prior year.

Gross profit for the year was $6.4 million, representing a $4 million or 173% increase over 2020.

Gross margin for the year was 14.1% compared to 11.1% in 2020.

Gross profit for the fourth quarter was $5.6 million, representing a $3.8 million or 214% increase over 2020.

Gross margin for the quarter was 20.7% compared to 19.1% in 2020.

As noted in previous calls, we experienced some margin contraction at the beginning of 2021 due to material and commodity pricing, as well as inefficiencies resulting from labor shortages.

Our margins began to improve in the third quarter as operations returned to a more normal pre COVID environment.

In the fourth quarter, we experienced an overall margin improvement due to the diversification of our revenue streams, which reduced our concentrations into one segment and insulated our margin from abnormal fluctuations.

We anticipate this trend continuing as our revenue mix continues to evolve over a full year in 2022.

Operating income for 2021 was a loss of $10.6 million compared to a loss of $1.7 million in 2020.

In 2021, our focus was on constructing our platform capable of providing our full suite of services across the solar marketplace. We are poised to capitalize on that transformation in 2022.

We are poised to capitalize on that transformation in 2022.

iSun reported a net loss of $6.2 million or 67 cents per share for 2021 compared to a net loss of $1 million or 24 cents per share in 2020.

EBITDA for 2021 was a loss of $5.3 million compared to an EBITDA of $0.4 million in 2020.

After adjustments for one time expenses incurred during 2021, adjusted EBITDA was a loss of $3.9 million.

As noted above, the fourth quarter was our first opportunity to measure the performance as a combined company.

EBITDA for the fourth quarter of 2021 was a loss of $0.5 million.

More importantly, when adjusted for onetime expenses related to M&A transactions, our adjusted EBITDA was $0.9 million.

We are excited to see the continued results from the deployment of our platform in 2022.

The demand for solar and electric vehicle infrastructure continues to increase across all customer groups.

Our residential division has customer orders of approximately $19.2 million expected to be completed within four to six months.

Our commercial division has a contracted backlog of approximately $9.3 million expected to be completed within 6 to 8 months.

Our industrial division has a contracted backlog of approximately $73.8 million expected to be completed within 12 to 18 months. And our utility division has 550 megawatts of projects currently under development with an estimated commencement date late in the third quarter of 2022.

with an estimated commencement date late in the third quarter of 2022.

Now turning to the balance sheet. With the execution of a significant transaction in Q4 of 2021, the company deployed a significant amount of cash to close the acquisition of SunCommon.

With the execution of a significant transaction in Q4 of 2021, the company deployed a significant amount of cash to close the acquisition of SunCommon.

Overall, the balance sheet remains healthy and increased total assets at December 31, 2021 to $103.7 million compared to $19.6 million at December 31, 2020.

Current assets increased to $24.1 million at December 31, 2021 compared to $8.5 million at December 31, 2020.

Receivables increased to $14.3 million, which is supported by the $27 million fourth quarter revenue.

Collections remain strong with on hand cash of $2.2 million at December 31, 2021.

Total liabilities increased to $43.9 million at December 31, 2021, compared to $11.7 million at December 31, 2020.

Stockholders' equity increased to $59.9 million at December 31, 2021, compared to $7.9 million at December 31, 2020.

Included in our liabilities at December 31, 2021 is a short term bridge loan of approximately $6 million that was utilized as part of the SunCommon transaction.

As previously announced, that loan was paid in full on March 14th.

With the positive results experienced in Q4, the increase in overall demand for solar solutions, we are confident that the company has built a platform capable of addressing the generational opportunity presented by decarbonization and EV adoption.

Thank you. And with that I'll open the line for questions. Operator.

And with that I'll open the line for questions. Operator.

Operator.

Operator: Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press *1 on your phone at this time. We do ask that while posing your question, please pick up 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 *1 on your phone. Please hold while we poll for questions.

Once again, if you have any questions or comments please press *1 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.

Jeffrey Campbell: Good afternoon and first, congratulations on the strong finish to 2021.

John Sullivan: Good afternoon. Thanks, Jeff.

Jeffrey Campbell: I'll ask more questions today. First can you talk a little bit about the large solar canopy order?

First can you talk a little bit about the large solar canopy order?

First, why does the client prefer the canopies versus the iSun Mobility Hub solution and second, how did this morph into this large multiyear win that you ultimately arrived at?

Jeffrey Peck: Sure, I can take that.

Yes.

Their preference was really based on user experience and part of the way consumers operate now. We all have their favorite gas stations where we go and fill up and as companies are out building their brand and their EV network, I think a lot of them have realized that the user experience will be incredibly important. And so providing a canopy for them that met those needs was important.

the way consumers operate now. We all have their favorite gas stations where we go and fill up and as companies are out building their brand and their EV network, I think a lot of them have realized that the user experience will be incredibly important. And so providing a canopy for them that met those needs was important.

We all have their favorite gas stations where we go and fill up and as companies are out building their brand and their EV network, I think a lot of them have realized that the user experience will be incredibly important. And so providing a canopy for them that met those needs was important.

I think a lot of them have realized that the user experience will be incredibly important. And so providing a canopy for them that met those needs was important.

And so providing a canopy for them that met those needs was important.

canopy for them that met those needs was important.

And that as we were working with that customer to help with their needs and focus really on the customer and the customer experience, it turned into a large multiyear order that will be rolled out through 2022, 2023 and 2024.

their needs and focus really on the customer and the customer experience, it turned into a large multiyear order that will be rolled out through 2022, 2023 and 2024.

2022, 2023 and 2024.

Yes.

Jeffrey Campbell: Okay. Thank you.

The press release noted the first utility project from the greater than 550 megawatts in development is expected to commence late third quarter 2022. I wanted to ask was this progression already anticipated in current 2022 guidance?

late third quarter 2022. I wanted to ask was this progression already anticipated in current 2022 guidance?

I wanted to ask was this progression already anticipated in current 2022 guidance?

Jeffrey Peck: Yes. So our current guidance is that we will have a utility scale project out of our pipeline that totals 550 megawatts. It's interesting one of those will enter notice to proceed and have permits and begin the construction process late in Q3 or Q4.

550 megawatts.

It's interesting one of those will enter notice to proceed and have permits and begin the construction process late in Q3 or Q4.

notice to proceed and have permits and begin the construction process late in Q3 or Q4.

and have permits and begin the construction process late in Q3 or Q4.

and begin the construction process late in Q3 or Q4.

Jeffrey Campbell: Okay. Okay, great I appreciate that clarity.

Okay, great I appreciate that clarity.

I noticed that year over year, the solar assets on the balance sheet increased modestly in value. I wondered if the current effort with green seed investors and solar project partners remains the primary way iSun will acquire equity interest in future solar projects or if you have other avenues that you can consider. I guess that I'm sort of thinking about the development approach professional services effort.

increased modestly in value. I wondered if the current effort with green seed investors and solar project partners remains the primary way iSun will acquire equity interest in future solar projects or if you have other avenues that you can consider. I guess that I'm sort of thinking about the development approach professional services effort.

iSun will acquire equity interest in future solar projects or if you have other avenues that you can consider. I guess that I'm sort of thinking about the development approach professional services effort.

development approach professional services.

Yes, yes, absolutely there are multiple ways that we can add to our solar assets on the balance sheet. One of those is through green bonds relationship that we have. The others could be through other partners who are looking to own assets and that were developing assets and as we develop those we'll look at ones that we want to put on balance sheet and we can also develop some separately for our balance sheet as well. Often times we'll meet a good customer who doesn't want to own the asset, but wants to use renewable energy and save some money on their electric bill so that would be an opportunity for us to unbalance sheet that generate that recurring revenue as well.

add to our solar assets on the balance sheet. One of those is through green bonds relationship that we have. The others could be through other partners who are looking to own assets and that were developing assets and as we develop those we'll look at ones that we want to put on balance sheet and we can also develop some separately for our balance sheet as well. Often times we'll meet a good customer who doesn't want to own the asset, but wants to use renewable energy and save some money on their electric bill so that would be an opportunity for us to unbalance sheet that generate that recurring revenue as well.

green bonds relationship that we have. The others could be through other partners who are looking to own assets and that were developing assets and as we develop those we'll look at ones that we want to put on balance sheet and we can also develop some separately for our balance sheet as well. Often times we'll meet a good customer who doesn't want to own the asset, but wants to use renewable energy and save some money on their electric bill so that would be an opportunity for us to unbalance sheet that generate that recurring revenue as well.

No.

look at ones that we want to put on balance sheet and we can also develop some separately for our balance sheet as well. Often times we'll meet a good customer who doesn't want to own the asset, but wants to use renewable energy and save some money on their electric bill so that would be an opportunity for us to unbalance sheet that generate that recurring revenue as well.

good customer who doesn't want to own the asset, but wants to use renewable energy and save some money on their electric bill so that would be an opportunity for us to unbalance sheet that generate that recurring revenue as well.

that would be an opportunity for us to unbalance sheet that generate that recurring revenue as well.

Jeffrey Campbell: Okay and finally, now that iSun has full exposure to the entirety of the TV solar project development type, does iSun still have an appetite for M&A and if so, what part of your business would you most like to accelerate through acquisition?

now that iSun has full exposure to the entirety of the TV

solar project development type, does iSun still have an appetite for M&A and if so, what part of your business would you most like to accelerate through acquisition?

development type, does iSun still have an appetite for M&A and if so, what part of your business would you most like to accelerate through acquisition?

type, does iSun still have an appetite for M&A and if so, what part of your business would you most like to accelerate through acquisition?

still have an appetite for M&A and if so, what part of your business would you most like to accelerate through acquisition?

and if so, what part of your business would you most like to accelerate through acquisition?

what part of your business would you most like to accelerate through acquisition?

Jeffrey Peck: Yes, there's a couple of acquisition candidates that we would be targeting.

acquisition candidates that we would be targeting.

Smaller solar companies looking to grow their business in areas that are ripe for expansion that are run by grid operators, where we can use the platform that SunCommon has built and expand on it and grow in new territories and then the other one would be the traditional electrical contractor that hasn't had a lot of exposure to solar, doesn't have a lot of solar customers, but operate in an area where building, commercial and industrial and utility scale solar projects will be happening.

areas that are ripe for expansion that are run by grid operators, where we can use the platform that SunCommon has built and expand on it and grow in new territories and then the other one would be the traditional electrical contractor that hasn't had a lot of exposure to solar, doesn't have a lot of solar customers, but operate in an area where building, commercial and industrial and utility scale solar projects will be happening.

that are run by grid operators, where we can use the platform that SunCommon has built and expand on it and grow in new territories and then the other one would be the traditional electrical contractor that hasn't had a lot of exposure to solar, doesn't have a lot of solar customers, but operate in an area where building, commercial and industrial and utility scale solar projects will be happening.

that hasn't had a lot of exposure to solar, doesn't have a lot of solar customers, but operate in an area where building, commercial and industrial and utility scale solar projects will be happening.

where building, commercial and industrial and utility scale solar projects will be happening.

commercial and industrial and utility scale solar projects will be happening.

And that may not have a transition plan for the business as it moves forward. So those would be the two key areas we'll be focused on.

a transition plan for the business as it moves forward. So those would be the two key areas we'll be focused on.

two key areas we'll be focused on.

Jeffrey Campbell: Okay. Thanks again. I appreciate the answers.

Thanks again. I appreciate the answers.

Jeffrey Peck: Yes. Thank you. Thank you very much Jeff.

Operator: Thank you. Your next question is coming from Justin Clare from Roth Capital Partners. Your line is live.

Justin Clare: Hi, guys. Thanks for taking our questions.

Jeffrey Peck: Sure. Hey Justin, how are you?

Justin Clare: I'm good. So I guess, first off here for the 2022 guide it looks like you're not making any changes, but I wanted to get a sense for the risk here related to the anticircumvention case and the module supply. So I'm just wondering could you talk about how much of the planned volume in 2022 already has modules delivered or secure versus how much of the volume this year do you still need to procure when looking at the modules and then just how difficult is it right now to put in new orders given the challenge with the imports these days?

first off here for the 2022 guide it looks like you're not making any changes, but I wanted to get a sense for the risk here related to the anticircumvention case and the module supply. So I'm just wondering could you talk about how much of the planned volume in 2022 already has modules delivered or secure versus how much of the volume this year do you still need to procure when looking at the modules and then just how difficult is it right now to put in new orders given the challenge with the imports these days?

already has modules delivered or secure versus how much of the volume this year do you still need to procure when looking at the modules and then just how difficult is it right now to put in new orders given the challenge with the imports these days?

delivered or secure versus how much of the volume this year do you still need to procure when looking at the modules and then just how difficult is it right now to put in new orders given the challenge with the imports these days?

do you still need to procure when looking at the modules and then just how difficult is it right now to put in new orders given the challenge with the imports these days?

Jeffrey Peck: Yes. So on the residential side, we've got a pretty good access to panels and equipment. Industrial side and commercial, most of that is either pre-purchased by us or partners. The utility scale is a little different. We are I mean, we do have projects that will need some panels on that side and we do have areas that we're looking at outside of the circumvention areas.

So on the residential side, we've got a pretty good access to panel and equipment. Industrial side and commercial, most of that is either pre-purchased by us or partners. The utility scale is a little different. We are I mean, we do have projects that will need some panels on that side and we do have areas that we're looking at outside of the circumvention areas.

equipment. Industrial side and commercial, most of that is either pre-purchased by us or partners. The utility scale is a little different. We are I mean, we do have projects that will need some panels on that side and we do have areas that we're looking at outside of the circumvention areas.

projects that will need some panels on that side and we do have areas that we're looking at outside of the circumvention areas.

that will need some panels on that side and we do have areas that we're looking at outside of the circumvention areas.

on that side and we do have areas that we're looking at outside of the circumvention areas.

circumvention areas.

Justin Clare: Okay. So I understand correctly, so for the utility scale project that you are planning to start in Q3, you don't yet have modules procured. If it is challenging to get those modules, could we see a delay there or would you anticipate starting on the construction that you are able to do without modules? Is that a possibility?

So.

So I understand correctly, so for the utility scale project that you are planning to start in Q3, you don't yet have modules procured. If it is challenging to get those modules, could we see a delay there or would you anticipate starting on the construction that you are able to do without modules? Is that a possibility?

Is it.

If it is challenging to get those modules, could we see a delay there or would you anticipate starting on the construction that you are able to do without modules?

or would you anticipate starting on the construction that you are able to do without modules?

Is that a possibility?

Jeffrey Peck: Hard to speculate what would happen if we are unable to get modules.

We'll continue to assess the situation. We'll continue to drive the projects forward. I think that there is a desire to get projects moving and keep them moving.

I think that there is desire to get projects get projects moving and keep them moving.

So, hard to speculate exactly what we'd do if we couldn't get any modules, but like I said, we're out in the market, we're talking to a lot of suppliers outside of the tariff area and we'll continue to monitor that and update the market as we have something more definitive.

hard to speculate exactly what we'd do if we couldn't get any modules, but like I said, we're out in the market, we're talking to a lot of suppliers outside of the tariff area and we'll continue to monitor that and update the market as we have something more definitive.

we'll continue to monitor that and update the market as we have something more definitive.

Justin Clare: Okay, Okay great.

And then just considering the cost inflation that we've seen across the supply chain, it sounds like module prices are going a bit higher as a result of the anticircumvention case. Can you just talk through the potential impact to margins here or is there a risk to the downside for margins or are you pretty comfortable with how things are evolving?

it sounds like module prices are going a bit higher.

Okay.

as a result of the anticircumvention case.

Can you just talk through

the potential impact to margins here or is there a risk to the downside for margins or are you pretty comfortable with how things are evolving?

how things are evolving?

Jeffrey Peck: Yes, right now, we're pretty comfortable with how things are evolving. There is all of the items that I talked about with headwinds. We specifically have a multi-segment company to address that. We want to meet demand where it comes first.

There is all of the items that I talked about with headwinds. We specifically have a multi-segment company to address that. We want to meet demand where it comes first.

all of the items that I talked about with headwinds.

We specifically have a multi-segment company to address that. We want to meet demand where it comes first.

specifically have a multi-segment company to address that. We want to meet demand where it comes first.

company to address that. We want to meet demand where it comes first.

We've got panels in place on the resident and commercial side, a lot has been pre-purchased for industrial projects over the years. Other commodities are a much smaller part of the overall project.

Other commodities are a much smaller part of the overall project.

So we think we can also utilize labor efficiencies and then by shifting people to projects as the demand arises there.

utilize labor efficiencies and then by shifting people to projects as the demand arises there.

and then by shifting people to projects as the demand arises there.

Justin Clare: Okay. It sounds good and then just one more for me.

With the equity that you've raised from the ATM over the past couple of quarters, just wondering could you talk about your capital needs going forward here. Do you anticipate needing any more equity in the near term? You already repaid the bridge loan here, so it seems like you're in a decent spot, but just wondering if you could talk through equity needs and maybe also any plans that you might have for debt restructuring.

just wondering could you talk about your capital needs going forward here. Do you anticipate needing any more equity in the near term?

You already repaid the bridge loan here, so it seems like you're in a decent spot, but just wondering if you could talk through equity needs and maybe also any plans that you might have for debt restructuring.

bridge loan here, so it seems like you're in a decent spot, but just wondering if you could talk through equity needs and maybe also any plans that you might have for debt restructuring.

equity needs and maybe also any plans that you might have for debt restructuring.

maybe also any plans that you might have for debt restructuring.

any plans that you might have for debt restructuring.

Yeah.

John Sullivan: Hi there Justin. I'll jump in here. This is John.

in here. This is John .

So, we are currently in active discussions with various partners to restructure our debt portfolio. When we conducted and completed the acquisitions throughout 2021, we were not actually able to bring in the collateral assets with each of those partners into our existing line of credit with our banking partners. So we're in active discussions to restructure that short term line of credit and once that is restructured that provides us with the working capital needs that can help fuel the growth for the 2022 guidance.

various partners to restructure our debt portfolio. When we conducted and completed the acquisitions throughout 2021, we were not actually able to bring in the collateral assets with each of those partners into our existing line of credit with our banking partners. So we're in active discussions to restructure that short term line of credit and once that is restructured that provides us with the working capital needs that can help fuel the growth for the 2022 guidance.

conducted and completed the acquisitions throughout 2021, we were not actually able to bring in the collateral assets with each of those partners into our existing line of credit with our banking partners. So we're in active discussions to restructure that short term line of credit and once that is restructured that provides us with the working capital needs that can help fuel the growth for the 2022 guidance.

we were not actually able to bring in the collateral assets with each of those partners into our existing line of credit with our banking partners. So we're in active discussions to restructure that short term line of credit and once that is restructured that provides us with the working capital needs that can help fuel the growth for the 2022 guidance.

line of credit with our banking partners. So we're in active discussions to restructure that short term line of credit and once that is restructured that provides us with the working capital needs that can help fuel the growth for the 2022 guidance.

that short term line of credit and once that is restructured that provides us with the working capital needs that can help fuel the growth for the 2022 guidance.

that can help fuel the growth for the 2022 guidance.

fuel the growth for the 2022 guidance.

Justin Clare: Okay, great. I will pass it on. Thank you.

Operator: Thank you. Your next question is coming from Noel Parks from Tuohy Brothers. Your line is live.

Noel Parks: Hi, good afternoon.

Jeffrey Peck: Good afternoon. Hello.

Noel Parks: I just had a few things. Sorry, if you touched on this already and I missed it, but could you talk about the labor market, labor availability, both in house and among partners? Is there competition, sort of poaching going on among vendors?

Sorry, if you touched on this already and I missed it, but could you talk about the labor market, labor availability, both in house and among partners? Is there competition, sort of poaching going on among vendors?

labor market, labor availability, both in house and among partners? Is there competition, sort of poaching going on among vendors?

competition, sort of poaching going on among vendors?

And I was just curious. I saw also in the 10-K, it mentioned that about $1.2 million of the year's G&A was acquisition related and I wonder if there is any retention compensation in G&A from the acquisition.

I was just curious. I saw also in the 10-K, it mentioned that about $1.2 million of the year's G&A was acquisition related and I wonder if there is any retention compensation in G&A from the acquisition.

G&A from the acquisition.

Jeffrey Peck: Let me address the labor market. The labor market's been tight. It continues to be tight coming off from COVID. We've got longstanding employees, a lot of employees and a lot of partners, who we worked with in the past. So we haven't seen a lot of poaching. We haven't seen partners unavailable to work.

market's been tight. It continues to be tight coming off from COVID. We've got longstanding employees, a lot of employees and a lot of partners, who we worked with in the past. So we haven't seen a lot of poaching. We haven't seen partners unavailable to work.

longstanding employees, a lot of employees and a lot of partners, who we worked with in the past. So we haven't seen a lot of poaching. We haven't seen partners unavailable to work.

a lot of employees and a lot of partners, who we worked with in the past. So we haven't seen a lot of poaching. We haven't seen partners unavailable to work.

partners unavailable to work.

And also being serving multi-segments, we can shift employees from one project to another to meet the demand and meet schedules as they arise and so we think the platform that we've developed to help us smooth out some of the labor challenges. It also will help us become the employer of choice for people who want to work in the industry. and have exposure to the different segments.

serving multi-segments, we can shift employees from one project to another to meet the demand and meet schedules as they arise and so we think the platform that we've developed to help us smooth out some of the labor challenges. It also will help us become the employer of choice for people who want to work in the industry. and have exposure to the different segments.

It also will help us become the employer of choice for people who want to work in the industry. and have exposure to the different segments.

help us become the employer of choice for people who want to work in the industry. and have exposure to the different segments.

for people who want to work in the industry. and have exposure to the different segments.

and have exposure to the different segments.

Noel Parks: Great. And the G&A, I just wondered if there had been zero retention compensation in there this year.

And the G&A, I just wondered if there had been zero retention compensation in there this year.

Jeffrey Peck: So there were some small retention compensation that was included in the 2021 numbers.

Noel Parks: Okay. Okay great.

Okay great.

I was also wondering by the different segments; residential, commercial, et cetera.. just wondering if you saw any relative changes in the different business lines in terms of sales cycles or decisiveness among customers.

was also

wondering by the different segments; residential, commercial, et cetera.. just wondering if you saw any relative changes in the different business lines in terms of sales cycles or decisiveness among customers.

residential, commercial, et cetera.. just wondering if you saw any relative changes in the different business lines in terms of sales cycles or decisiveness among customers.

just wondering if you saw any relative changes in the different business lines in terms of sales cycles or decisiveness among customers.

decisiveness among customers.

Any of them excitement is getting more aggressive? Any of them hanging back now? Since you preannounced and gave guidance of course, we've had a lot of global turmoil. It sort of shifted so I'm thinking about I guess, overall energy capital investments. So just any trends you can tease out there?

excitement is getting more aggressive? Any of them hanging back now? Since you preannounced and gave guidance of course, we've had a lot of global turmoil. It sort of shifted so I'm thinking about I guess, overall energy capital investments. So just any trends you can tease out there?

Since you preannounced and gave guidance of course, we've had a lot of global turmoil. It sort of shifted so I'm thinking about I guess, overall energy capital investments. So just any trends you can tease out there?

global turmoil. It sort of shifted so I'm thinking about I guess, overall energy capital investments. So just any trends you can tease out there?

shifted so I'm thinking about I guess, overall energy capital investments. So just any trends you can tease out there?

Jeffrey Peck: Yes, we've certainly seen on the residential side additional demand as their electricity prices are fluctuating, changing from month to month and some of the utilities as we've seen some of that. The other products are sort of longer timeline projects, which aren't going to tend to be as reactive to short term issues.

additional demand as their electricity prices are fluctuating, changing from month to month and some of the utilities as we've seen some of that. The other products are sort of longer timeline projects, which aren't going to tend to be as reactive to short term issues.

are fluctuating, changing from month to month and some of the utilities as we've seen some of that. The other products are sort of longer timeline projects, which aren't going to tend to be as reactive to short term issues.

we've seen some of that. The other products are sort of longer timeline projects, which aren't going to tend to be as reactive to short term issues.

aren't going to tend to be as reactive to short term issues.

short term issues.

issues.

So we haven't seen demand slow down there. One of the good indicators for us is the number of projects that we're looking at for others in design and engineering services and that's really the future demand that will drive into the company as we're developing those projects and that demand is strong as well. I think what people are realizing is that oil prices are probably higher for longer and the shift to renewables will probably accelerate here as well as the demand for energy. So one of the ways to meet that and one of the things that we believe in is transitioning as much energy as we can to clean, renewable energy with solar and battery backup.

looking at for others in design and engineering services and that's really the future demand that will drive into the company as we're developing those projects and that demand is strong as well. I think what people are realizing is that oil prices are probably higher for longer

and the shift to renewables will probably accelerate here as well as the demand for energy. So one of the ways to meet that and one of the things that we believe in is transitioning as much energy as we can to clean, renewable energy with solar and battery backup.

as much energy as we can to clean, renewable energy with solar and battery backup.

And now we're seeing utilities in commercial companies and residential consumers all sort of moving in that direction. And I think with global turmoil and high oil prices, we think we'll see that continue to accelerate.

commercial companies and residential consumers all sort of moving in that direction.

residential consumers all sort of moving in that direction.

sort of moving in that direction.

And I think with global turmoil and high oil prices, we think we'll see that continue to accelerate.

global turmoil and high oil prices, we think we'll see that continue to accelerate.

Noel Parks: Right right. I think you might have just touched on this, but do you have any thoughts or insights just on the role of, is there increasing expenditure you're seeing in terms of storage? Sort of, alongside solar installations people looking to invest more in their storage capacity, either in terms of to give themselves extra flexibility or just sort of share volume that they're looking at, or in terms of hours. They're looking to you to just give some extra resiliency.

is there increasing expenditure you're seeing in terms of storage

in terms of storage

Sort of, alongside solar installations people looking to invest more in their storage capacity, either in terms of to give themselves extra flexibility or just sort of share volume.

alongside solar installations people looking to invest more in their storage capacity, either in terms of to give themselves extra flexibility or just sort of share volume.

looking to invest more in their storage capacity, either in terms of to give themselves extra flexibility or just sort of share volume.

storage capacity, either in terms of to give themselves extra flexibility or just sort of share volume.

to give themselves extra flexibility or just sort of share volume.

that they're looking at, or in terms of hours. They're looking to you to just give some extra resiliency.

In terms of hours Theyre looking to.

you to just give some extra resiliency.

resiliency.

Jeffrey Peck: Certainly on the residential side, we're seeing steady demand there. I think our attachment rate is between 30% and 35% on storage. On the residential side, we're seeing projects continue to consider adding storage and I think that as the time of use rates spread and in amounts throughout the country, I think we'll see a serge in storage for those projects as well.

we're seeing projects continue to consider adding storage and I think that as the time of use rates spread and

consider adding storage and I think that as the time of use rates spread and

adding storage and I think that as the time of use rates spread and

spread and

in amounts throughout the country, I think we'll see a serge in storage for those projects as well.

serge in storage for those projects as well.

in storage for those projects as well.

Noel Parks: And could you sort of characterize? Is everyone just heading down to the pretty traditional battery type paths or are they looking into some of the more capital intensive, but many more flexible other methods, things like gravity based storage et cetera? some of the more capital intensive, but many more flexible other methods, things like gravity based storage et cetera?

pretty traditional battery type paths or are they looking into some of the more capital intensive, but many more flexible other methods, things like gravity based storage et cetera? some of the more capital intensive, but many more flexible other methods, things like gravity based storage et cetera?

some of the more capital intensive, but many more flexible other methods, things like gravity based storage et cetera?

Yes.

more capital intensive, but many more flexible other methods, things like gravity based storage et cetera?

Jeffrey Peck: No, we've seen traditional storage mostly. Traditional battery storage.

Traditional battery storage.

Noel Parks: Okay great. Thanks, a lot.

Jeffrey Peck: Thank you.

Operator: Thank you. Your next question is coming from Joseph Osha from Guggenheim Partners. Your line is live.

Joseph Osha: Hello, gentlemen. Thanks for the call.

Multiple speakers: Yeah. Thanks for jumping on. Yes. I wanted to return to the residential business here a bit and you alluded to lead times in the sort of four to six month range. So two questions there. First are those lead times still going out on you and then secondly, are you encountering any point at which customers begin to push back if the lead time's out past six months, they say call me later or are people willing to accept longer lead times at this point?

Joseph Osha: Yes. I wanted to return to the residential business here a bit and you alluded to lead times in the

I wanted to return to the residential business here a bit and you alluded to lead times in the

return to the residential business here a bit and you alluded to lead times in the

you alluded to lead times in the

sort of four to six month range. So two questions there. First are those lead times still going out on you and then secondly, are you encountering any point at which customers begin to push back if the lead time's out past six months, they say call me later or are people willing to accept longer lead times at this point?

customers begin to push back if the lead time's out past six months, they say call me later or are people willing to accept longer lead times at this point?

Jeffrey Peck: We're not seeing the lead times stretch beyond those times four to six months. Yes, I think six months is, as you get longer than six months I think you start to see displeasure and unhappiness among customers if you extend past that. I also think that customers understand the difficulties in supply chain related to every industry. And so, once they're in the queue and once they have somebody selected and they've made the decision to go to solar we haven't seen people canceling in greater numbers than typical, based on some of these longer lead times.

<unk>.

times four to six months. Yes, I think six months is, as you get longer than six months I think you start to see displeasure and unhappiness among customers if you extend past that. I also think that customers understand the difficulties in supply chain related to every industry. And so, once they're in the queue and once they have somebody selected and they've made the decision to go to solar we haven't seen people canceling in greater numbers than typical, based on some of these longer lead times.

as you get longer than six months I think you start to see displeasure and unhappiness among customers if you extend past that. I also think that customers understand the difficulties in supply chain related to every industry. And so, once they're in the queue and once they have somebody selected and they've made the decision to go to solar we haven't seen people canceling in greater numbers than typical, based on some of these longer lead times.

customers understand the difficulties in supply chain related to every industry. And so, once they're in the queue and once they have somebody selected and they've made the decision to go to solar we haven't seen people canceling in greater numbers than typical, based on some of these longer lead times.

difficulties in supply chain related to every industry. And so, once they're in the queue and once they have somebody selected and they've made the decision to go to solar we haven't seen people canceling in greater numbers than typical, based on some of these longer lead times.

And so,

once they're in the queue and once they have somebody selected and they've made the decision to go to solar we haven't seen people canceling in greater numbers than typical, based on some of these longer lead times.

Sure.

we haven't seen people canceling in greater numbers than typical, based on some of these longer lead times.

Multiple speakers: I don't, I don't really. That's interesting.

Okay.

Joseph Osha: It kind of sounds like you're saying past six months is kind of the point where people start to get exasperated.

Jeffrey Peck: Exactly.

Joseph Osha: Okay. And then just returned it to storage and kind of to echo Justin's line of inquiry on the module side. I mean, how are you finding procuring cells here, especially given some of the more recent disruptions out of Asia, how is that impacting your ability to get cells?

And then just returned to storage and kind of.

echo Justin's line of inquiry on the module side. I mean, how are you finding procuring sells here, especially given some of the more recent disruptions out of Asia, how is that impacting your ability to get sales?

more recent disruptions out of Asia, how is that impacting your ability to get sales?

Jeffrey Peck: Well, we've been in the business for awhile. We have a lot of relationships that we're leveraging. We haven't seen projects cancelled thus far due to lack of modules.

Sure.

We have sufficient supply for resin commercial. Most of the industrial credits we do, they've prepurchase those for tax equity.

credits we do, they've prepurchase those for tax equity.

they've prepurchase those for tax equity.

Joseph Osha: Well I was referring to batteries, not source. I should have been more clear. I was referring to batteries.

I should have been more clear. I was referring to batteries.

Jeffrey Peck: Yes, no we haven't seen any disruption in our battery supplies. Thus far, good availability for what we need for residential or typical I should say.

seen any disruption in our battery supplies.

Thus far, good availability for what we need for residential or typical I should say.

Good.

good availability for what we need for residential.

or typical I should say.

Joseph Osha: Okay

I heard from another vendor recently that the new order times for batteries - sorry I should have said batteries instead of cells, a little confusing -

Yes far out kind of 35-40 weeks. Would that be a fair characterization as to what lead times look for you guys on batteries at this point?

Jeffrey Peck: We haven't seen them out that far, but I think it probably depends on where they're sourcing those and the vendors, the relationships with those vendors so we haven't seen them out 35 weeks now.

Okay.

The relationships with those vendors so we havent seen them out 35 weeks now.

Joseph Osha: Okay and then my last question and I'll go away, I promise. We're hearing a lot of discussion out there right now, given higher input costs and you know what's happening in financing side about price discovery and what that's going to look like. What would you say in particular on the residential, and then also sort of the C&I side, what's been the willingness of customers to absorb higher pricing at this point?

discussion out there right now, given higher input costs and you know what's happening in financing side about price discovery and what that's going to look like. What would you say in particular on the residential, and then also sort of the C&I side.

you know what's happening in financing side about price discovery and what that's going to look like. What would you say in particular on the residential, and then also sort of the C&I side.

what's happening in financing side about price discovery and what that's going to look like. What would you say in particular on the residential, and then also sort of the C&I side.

in particular on the residential, and then also sort of the C&I side.

what's been the willingness of customers to absorb higher pricing at this point?

Jeffrey Peck: Yes, so far we haven't seen a drop in demand based on some higher pricing. Certainly the higher comparable energy costs helps offset that and as that higher energy cost sort of seeps into the utility pricing, I think that the consumer will look at potentially higher prices in solar and still realize it still provides a great value.

Certainly the higher comparable energy costs helps offset that and as that higher energy cost sort of seeps into the utility pricing, I think that the consumer will look at potentially higher prices in solar and still realize it still provides a great value.

into the utility pricing, I think that the consumer will look at potentially higher prices in solar and still realize it still provides a great value.

the consumer will look at potentially higher prices in solar and still realize it still provides a great value.

Sure.

it still provides a great value.

Joseph Osha: Okay would you be willing if I asked you to choose a generic residential customer or a generic C&I customer and say where is pricing relative to, where it was a year ago in percentage terms. Is there a marker you could put out there for us?

where is pricing relative to, where it was a year ago in percentage terms.

Is there a marker you could put out there for us?

Jeffrey Peck: Not sure I understood that question.

Joseph Osha: Sorry, that's me asking a simple question in a complicated way. What does pricing look like year on year for you guys?

a simple question in a complicated way.

What does pricing look like year on year for you guys?

Jeffrey Peck: Oh. Yes, I think it depends on the segment. We have seen pricing increases comparable as inflationary pressures. I guess, that's how I would categorize it. We haven't seen thus far in some of the industrial projects our PPA adjustments yet. I anticipate moving forward, we will see PPA adjustments, which will make some of those larger scale projects more easily dope as the cost to enter the supply chain the cost in utility I think will be adjusted as we move forward.

Yes, I think it depends on the segment. We have seen pricing increases comparable as inflationary pressures. I guess, that's how I would categorize it. We haven't seen thus far in some of the industrial projects our PPA adjustments yet. I anticipate moving forward, we will see PPA adjustments, which will make some of those larger scale projects more easily dope.

Yes.

We have seen pricing increases comparable as inflationary pressures. I guess, that's how I would categorize it. We haven't seen thus far in some of the industrial projects our PPA adjustments yet. I anticipate moving forward, we will see PPA adjustments, which will make some of those larger scale projects more easily dope.

pricing increases comparable as inflationary pressures. I guess, that's how I would categorize it. We haven't seen thus far in some of the industrial projects our PPA adjustments yet. I anticipate moving forward, we will see PPA adjustments, which will make some of those larger scale projects more easily dope.

I guess, that's how I would categorize it. We haven't seen thus far in some of the industrial projects our PPA adjustments yet. I anticipate moving forward, we will see PPA adjustments, which will make some of those larger scale projects more easily dope.

I anticipate moving forward, we will see PPA adjustments, which will make some of those larger scale projects more easily dope.

some of those larger scale projects more easily dope.

more easily dope.

as the cost to enter the supply chain the cost in utility I think will be adjusted as we move forward.

the cost in utility I think will be adjusted as we move forward.

cost in utility I think will be adjusted as we move forward.

Joseph Osha: Okay. Thanks, very much. I appreciate your answers.

Thanks, very much. I appreciate your answers.

Jeffrey Peck: Good, Thank you.

Operator: Thank you. That concludes our Q&A session. I will now hand the conference back to management for closing remarks. Please go ahead.

Jeffrey Peck: Thank you. I'd like to thank everybody for joining us on the call today, and we look forward to providing the investment community with updates in further calls. Thank you very much for joining us. Bye.

in further calls. Thank you very much for joining us. Bye.

Bye.

Operator: 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.

Q4 2021 iSun Inc Earnings Call

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