Sunworks Inc. (NASDAQ:SUNW) Q2 2023 Results Conference Call August 14, 2023 1:00 PM ET

Company Participants

Jason Bonfigt - CFO

Gaylon Morris - CEO

Conference Call Participants

Philip Shen - Roth MKM

Donovan Schafer - Northland Capital Markets

Operator

Greetings. Welcome to Sunwork's Second Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Jason Bonfigt, Chief Financial Officer. Thank you. You may begin.

Jason Bonfigt

Thank you, operator. I'm Jason Bonfigt, Chief Financial Officer of Sunworks. On behalf of our entire team, I'd like to welcome you to our second quarter results of 2023 conference call.

Leading the call with me today is our President and CEO, Gaylon Morris. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from these -- from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our peer act reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Following our prepared remarks, we will open the line for questions.

With that, I'd like to turn the call over to Gaylon.

Gaylon Morris

Thank you, Jason, and welcome to those joining us today. As detailed in our second quarter earnings release issued earlier today, the last several months have been a challenging period for both Sunworks and the residential solar industry at large. Even so, we believe the long-term economics of solar remain highly attractive, particularly as the demands of a growing population weigh on our nation's aging electricity infrastructure resulting in structurally higher utility rates for customers over time.

During the second quarter, the combination of higher interest rates, less favorable residential solar economics in California following the NEM 3.0 transition together with utility permitting delays resulted in lower installation activity and reduced fixed cost absorption in the period. During a transitional period for our residential business, we've maintained an opportunistic pricing strategy in accordance with current demand conditions. At the same time, we've taken decisive action to further rightsize our cost structure, including a reduction in force beginning in the third quarter 2023.

Since launching our direct sales initiative in the fourth quarter of 2021, we've continued to gain significant traction in the market. Recall that customer acquisition costs within the direct sales channel are materially less than through our third-party agency channel. To that end, direct sales represented 45% of all originations in the second quarter versus 23% in the prior year period.