Sunworks, Inc. (NASDAQ:SUNW) Q1 2022 Results Earnings Conference Call May 16, 2022 1:00 PM ET

Company Participants

Jason Bonfigt - Chief Financial Officer & Treasurer

Gaylon Morris - President and Chief Executive Officer

Conference Call Participants

Donovan Schafer - Northland Capital Markets

Operator

Greetings. Welcome to the Sunworks First Quarter 2022 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'll now turn the conference over to your host, CFO, Jason Bonfigt. 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 first quarter 2022 results 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 those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions.

With that, I'd like to [turn] over to Gaylon.

Gaylon Morris

Thank you, Jason. And welcome to those joining us today for our first quarter results conference call. Before we move into a discussion of our first quarter results, I'd like to begin with a high level overview of the progress we're making to advance Sunworks' ongoing business transformation, together with those key areas of strategic focus that our team has prioritized. Demand within our residential end markets exceeded our expectations during the first quarter as recent investments in marketing and business development capabilities resulted in strong new project originations, particularly in the West and Midwest regions. Demand within our commercial end markets took a pause in the first quarter as several customers deferred projects due to uncertainty related to NEM 3.0. Importantly, early in the second quarter commercial activity has accelerated meaningfully while our pipeline of new project opportunities remains healthy.

On balance, we anticipate an acceleration in quoting, bookings and backlog across the business in the second quarter that should exceed both prior quarter and prior year levels.

While the revenue story was positive in the first quarter, our margin capture was impacted by upfront investments in labor, together with component cost inflation. In response to rising labor and supply chain costs, we introduced a series of price increases in the first quarter and are introducing additional increases in the second quarter. These price increases, together with a continued focus on reduced lead times, improved closure rates and disciplined expense management, are expected to help offset many of the inflationary headwinds evident across the market. Although inflationary pressures exist in the solar industry, we believe that customers will continue to pursue solar investments in the face of rising utility rates.