RGS Energy Reports Second Quarter 2015 Results

Transcription

1 RGS Energy Reprts Secnd Quarter 2015 Results Cmpany Reprts Psitive Stckhlders Equity and Psitive Wrking Capital, and Reprts Q2 Net Incme f $1.4 Millin vs. Net Lss f $21.4 Millin in Prir Year LOUISVILLE, CO, August 10, 2015 RGS Energy (NASDAQ: RGSE), ne f the natin s leading rftp installers f slar equipment, has reprted results fr its secnd quarter ended June 30, The cmpany als filed tday its quarterly reprt n Frm 10-Q. During the secnd quarter, we made great strides twards turning arund ur business that resulted in several accmplishments, including ur return t psitive stckhlders equity and psitive wrking capital, stated RGS Energy CEO, Dennis Lacey. Since the end f the quarter, we have further reduced ur accunts payable, the aging f which was hindering ur business. We are nw pivting ur effrts tward revenue grwth by expanding ur sales and cnstructin capabilities. Summary Business Update The cmpany previusly reprted cmpleting a series f financial transactins that have strengthened its financial psitin, as well as actins taken t restructure its business peratins fr imprved perating results. These results during the quarter include reprting psitive stckhlders equity and psitive wrking capital, as well as cutting the perating lss in half cmpared t the first quarter f See further highlights regarding the cmpany s financial perfrmance in the table, belw. (in thusands, unaudited) Quarter Ended June March 30, , 2015 Balance Sheet Cash and cash equivalents $ 5,338 $ 992 Cash and available brrwings: Under Current Brrwing Base (see update belw) 6,058 2,765 Under Maximum allwed Brrwing Base 6,310 4,032 Line-f-credit Brrwing 4,028 1,960 Related Party Debt 0 3,150 Ttal Debt Outstanding 4,028 5,110 Wrking Capital (Deficit) - Current Assets less Current Liabilities 2,743 (7,568) Stckhlders' Equity (Deficit) 7,328 (11,614) Statement f Operatins Residential Segment: Revenue 11,110 6,857 Business Unit Cntributin (509) (2,469) Sunetric Segment: Revenue 3,617 3,753 Business Unit Cntributin 162 (313) 1

2 Selling, Operating and G&A Rati t Revenue 29% 53% Operating Lss (2,896) (5,147) Net Incme (Lss) $ 1,575 $ (3,552) Update n Cash and Available Brrwings: Under current brrwing base $ 1,325 Under maximum brrwing base 3,012 A rll frward f cash and available brrwing frm June 30, 2015 thrugh August 6, 2015 is: Cash and available at June 30, 2015 $ 6,058 Cllectins f stck subscriptins receivable 900 Pay-dwn line-f-credit (1,226) Pay-dwn f prir accunts payable and accrued expenses (2,466) Decline in size f brrwing base (1,232) Used in peratins (709) Cash and available at August 6, 2015 $ 1,325 Q Financial Summary In the secnd quarter f 2015, net revenue increased t $14.7 millin frm $10.6 millin in the previus quarter and decreased frm $19.6 millin in the secnd quarter f The cmpany did nt emphasize riginating new sales during 2015, as it fcused n cnverting its lng-standing backlg t revenue and achieving a better balance between sales and cnstructin. Nw that the cmpany has reduced its backlg and established a strnger financial psitin that the cmpany believes will supprt the expansin f its sales rganizatin, it is nw refcused n new sales rder generatin. Residential segment average selling price (ASP) n new sales rders decreased 0.5% frm the previus quarter and rse 5.4% frm the secnd quarter f Apprximately 25% f the cmpany s revenue fr the secnd quarter f 2014 was frm tw states, Missuri and Clrad, which previusly ffered attractive incentives t hmewners. With the repeal f thse incentives, the revenue frm these states in the secnd quarter f 2015 was apprximately 1% f revenue. The cmpany installed slar equipment n 438 rfs in the secnd quarter f 2015, as cmpared t 264 installatins in the previus quarter and 568 installatins in the secnd quarter f The sequential increase in rftp installatins is primarily due t the cmpany s imprved financial cnditin that prvided the ability t acquire slar panels and cmplete backlgged slar installatins. The decline in rftp installatins frm the secnd quarter f 2014 is due t the reductin in the Missuri, Clrad and Califrnia markets. In the secnd quarter f 2015, incme frm cntinuing peratins net f tax imprved t $1.6 millin frm a lss f $3.6 millin in the previus quarter, and declined frm $1.7 millin in the same year ag quarter. Grss margin fr the residential segment was 15.2% in the secnd quarter f 2015, which increased frm 10.3% in the previus quarter and declined frm 22.0% in the secnd quarter f The sequential increase primarily reflects the grss margin percentage increasing whenever there is an increase in revenue as there is a fixed cst element in the cst f gds 2

3 sld. The year-ver-year decline reflects residential segment revenue declining by 30% and an apprximate three-fld increase in custmer cancellatins. The custmer cancellatins arse frm the cmpany s previus inability t make installatins at an apprpriate rate. Grss margin fr the Sunetric segment was 21% in the secnd quarter f 2015, which increased frm 5% in the first quarter f 2015 and decreased frm 26.3% in the secnd quarter f The sequential increase primarily reflects increased residential installatins, as well as the cmpany s refcus n its Hawaiian Island business fr cmmercial prjects. The Sunetric segment cntributed $160,000 in the secnd quarter f 2015, as cmpared t a lss f $150,000 in the same year-ag quarter. The increase was attributable t an increased level f residential apprval by the lcal utility and imprved integratin f business activities, including cst saving initiatives. Aggregate selling and perating and general and administrative expenses decreased $5.0 millin t $4.2 millin in the quarter versus the prir year quarter. The decrease in the selling and perating expenses was primarily attributable t a decrease in headcunt; general and administrative cst saving initiatives; the restructuring f the sales rganizatin and cmmissin plan; and reducing the cst f custmer leads. Since RGS Energy plans t increase the size f its sales rganizatin, it expects t incur up-frnt sales and marketing csts that will increase its ttal selling and perating expenses bth in dllar amunt and as a percentage f revenue fr the remainder f Derivative gain, net, was $4.5 millin fr the quarter versus $1.8 millin fr the previus quarter and $6.1 millin fr the secnd quarter f The change in derivative liability is principally due t the cmpany s market capitalizatin declining frm the same prir year quarter as well as the exercise f the remaining warrants frm the February 2015 ffering. During the quarter, the cmpany cmpleted a warrant exchange transactin that eliminated the majrity f the cmpany s derivative warrant liabilities. By remving the majrity f the utstanding derivative warrant liabilities, the cmpany s financial results will n lnger be subject t the same degree f material vlatility frm nn-cash charges t incme that result frm changes in the values f these derivative warrant liabilities in the past. Lss frm discntinued peratins, net f tax, was $0.1 millin, reflecting the winding dwn f the cmpany s Large Cmmercial segment. Fr the prir year quarter, discntinued peratins were a lss f $23 millin, underscring management s earlier annunced strategic decisin t exit the Large Cmmercial business in mainland U.S. Including bth cntinuing and nn-cntinuing peratins, the net incme fr the quarter ttaled $1.4 millin r $0.28 per share, as cmpared t a net lss f $21.4 millin r $(9.27) per share in the secnd quarter f Six Mnths Ended June 30, 2015 Net revenue decreased 24% t $25.3 millin versus the same year-ag perid. Slar system installatins n hmes and small businesses decreased 35.2% t 702 installatins in the perid frm 1,084 installatins in the same year-ag perid. Operating lss frm cntinuing peratins was $8.0 millin, as cmpared t $12.5 millin in the same year-ag perid. Lss frm discntinued peratins, net f tax, was $0.3 millin, as cmpared t a lss f $25.8 millin in the same year-ag perid. 3

4 Net lss was $2.3 millin r $(0.58) per share, as cmpared t a lss f $36.2 millin r $(16.32) per share in the same year-ag perid. The imprvement frm the prir year is primarily attributable t management s decisin t exit the Large Cmmercial segment in mainland U.S. and actins t reduce perating csts. Backlg and Net Sales Orders Backlg is increased fr transactins frm acquired cmpanies at the date f acquisitin and thereafter fr net sales rders (representing newly signed cntracts with custmers, net f cntract cancellatins r hlds), and decreased fr installatins, which are reflected in revenue. Backlg decreased 38.8% t $30.2 millin at June 30, 2015, as cmpared t a backlg f $49.3 millin at June 30, Residential backlg decreased 40.5% t $17.6 millin at June 30, 2015 versus $29.5 millin at June 30, As discussed abve, the cmpany did nt fcus n new sales rder generatin during the first half f 2015, as it had t first btain the necessary financing t cnvert the backlg, and then wrk-ff its lng standing backlg, which als declined due t custmer cancelatins arising frm the backlg nt being installed at a faster rate. As such, new sales rders fr ur residential segment declined by $19.8 millin and net cancellatins increased by $3.8 millin versus the secnd quarter f Backlg decreased 34% t $30.2 millin at June 30, 2015 versus $45.7 millin at March 31, Sunetric s backlg declined 23.4% t $12.6 millin at June 30, 2015 versus $16.5 millin at March 31, The decline was due t increased level f residential installatin apprvals by the lcal utility. Residential segment backlg declined 40% t $17.6 millin at June 30, 2015 versus $29.2 millin at March 31, The decline was primarily due t installatins f apprximately $11 millin. New sales rders and cancellatins were apprximately the same during the secnd quarter f Q Financing Capacity Highlights Cash and cash equivalents were $5.3 millin at June 30, 2015 versus $1.9 millin at December 31, Fr installatins during the quarter, 43% were paid fr in-cash by custmers, 44% used third-party lan prgrams, and 13% utilized cmpany and third-party lease prgrams. Warrant hlders exercised Series B warrants int 1.6 millin shares f Class A cmmn stck prviding net prceeds f mre than $4 millin. As previusly reprted, the cmpany arranged fr additinal capital with net prceeds f $4.4 millin. As previusly reprted, RGS Energy s largest sharehlder cnverted $4.2 millin f debt and accrued interest t equity. Management Cmmentary During the quarter, we cut ur perating lss, which included apprximately $800,000 f litigatin and restructuring charges during the quarter, nearly in half cmpared t the first quarter f 2015, said Dennis Lacey, RGS Energy s CEO. We als reprted psitive net incme. Since this was primarily the result f a derivative gain, a nn-cash item that we d nt expect t recur at this level, we will cntinue striving t imprve results at the perating incme line. We intend t achieve this by expanding ur sales and cnstructin capabilities, all with the gal f 2016 being a grwth year fr the cmpany. 4

5 During the remainder f 2015, we will incur csts t expand ur sales and cnstructin capabilities as we psitin the cmpany fr revenue grwth in Thse csts, alng with ur current rate f installatins after past cancellatins and nt being subject t the same level f derivative warrant incme ging frward, are such that we d nt expect t reprt net incme fr the remaining quarters f We already have a natinal ftprint we are in all the key slar states and perate with a blend f bth cmpany field sales and ur e-sales call center alng with in-huse cnstructin crews and alliance partners fr cnstructin. The recently cmpleted series f financial transactins have strengthened ur financial psitin and prvided us with wrking capital t further reduce ur accunts payable and supprt ur current peratins. We als plan t apply this wrking capital t expand ur sales and cnstructin capabilities, as well as ur presence in new states. These expansins represent the next step in ur turnarund plan. RGS Energy Natinal Ftprint RGS Energy is ne f the natin s leading rftp installers f slar equipment, serving residential and small business custmers in eight mainland U.S. states and Hawaii. The cmpany markets its slar pwer systems thrugh a mix f field sales teams and e-sales call center apprach, as well as installs its systems using in-huse and third-party integratrs. Fr East Cast peratins, the cmpany primarily utilizes field sales thrugh slarize prgrams and in-huse cnstructin crews. In Califrnia and Clrad, the cmpany markets slely thrugh its e- sales, call center-based apprach and installs nly thrugh its authrized third-party integratrs. RGS Energy Natinal Ftprint Sunetric Segment Residential Segment RGS Future Pacific MidAtlantic New England West Cast Ttal States States f Operatin HI NY NJ CT MA VT RI CA CO(HQ) 9 TBD Custmers Served Residential * * * * * * * * * 9 * Small Cmmercial * * * * * * * * * 9 TBD Large Cmmercial * 1 Cmpany Field Sales Teams Cmpany Cnstructin Teams * * * * * * * 7 TBD * * * * * 5 TBD Call Center Sales * * * * * * * * 1 * Authrized 3rd Party Integratrs Number f Offices/Warehuses Cnference Call * * * * * * * * 8 * TBD RGS Energy will hld a cnference call t discuss its secnd quarter 2015 financial results later tday. Management will hst the presentatin, fllwed by a questin and answer perid. 5

6 Date: Mnday, August 10, 2015 Time: 4:30 p.m. Eastern time (2:30 p.m. Muntain time) Tll-free dial-in number: Internatinal dial-in number: Cnference ID: Webcast: The cnference call will be webcast live and available fr replay via the investr relatins sectin f the cmpany's website at RGSEnergy.cm. Please call the cnference telephne number five minutes prir t the start time. An peratr will register yur name and rganizatin. If yu have any difficulty cnnecting with the cnference call, please cntact Lilis Grup at A replay f the call will be available after 7:30 p.m. Eastern time n the same day thrugh August 17, Tll-free replay number: Internatinal replay number: Replay ID: Abut RGS Energy RGS Energy (NASDAQ: RGSE) is ne f the natin s leading rftp installers f slar equipment, serving residential and small business custmers in the mainland U.S. and Hawaii. Beginning with ne f the very first phtvltaic panels sld in 1978, the cmpany has installed tens f thusands slar pwer systems. RGS Energy makes it pssible fr custmers t save n their energy bill by prviding a cmprehensive slar slutin, frm design, financing, permitting and installatin t nging mnitring, maintenance and supprt. Fr mre infrmatin, visit RGSEnergy.cm, n Facebk at and n Twitter at RGS Energy is a trade name and RGS Energy makes filings with the Securities and Exchange Cmmissin under its fficial name Real Gds Slar, Inc. Fr mre infrmatin abut the cmpany, visit Frward-Lking Statements and Cautinary Statements This press release may cntain frward-lking statements that invlve risks and uncertainties. Frward-lking statements are neither histrical facts nr assurances f future perfrmance. Instead, they prvide ur current beliefs, expectatins, assumptins and frecasts abut future events, and include statements regarding ur future results f peratins and financial psitin, business strategy, budgets, prjected csts, plans and bjectives f management fr future peratins. The wrds anticipate, believe, plan, estimate, expect, strive, future, intend, may, will and similar expressins as they relate t us are intended t identify such frwardlking statements. Because frward-lking statements relate t the future, they are subject t inherent uncertainties, risks and changes in circumstances that are difficult t predict and many f which are utside f ur cntrl. Our actual results and financial cnditin may differ materially frm thse indicated in the frward-lking statements. Therefre, yu shuld nt rely n any f these frward-lking statements. Imprtant factrs that culd cause ur actual results and financial cnditin t differ materially frm thse indicated in the frwardlking statements include, withut limitatin, the fllwing: the cntinuatin and level f gvernment subsidies and incentives fr slar energy, the impacts f wrsening ecnmic cnditins n hmewners and small cmmercial peratin that may limit their ability and desire t invest in slar systems, changing and updating technlgies and the issues presented by these new technlgies related t custmer demand and ur prduct ffering, the rates charged by electric utilities that may impact the desirability f ur prduct t custmers, ur success in implementing ur plans t increase future sales and revenue by expanding ur sales and cnstructin rganizatin and expanding int new states f peratins, the impact f a drp in the price f cnventinal energy 6

7 n demand fr slar energy systems, new regulatins impacting slar installatins including electric cdes, access t electric grids, the willingness f electric utilities t allw intercnnectins and ther regulatins effecting energy cnsumptin by cnsumers, factrs impacting the timely installatins f slar systems, seasnality and adverse weather cnditins inhibiting ur ability t install slar systems, ur inability t maintain effective disclsure cntrls and prcedures and internal cntrl ver financial reprting, ur ability t perate with ur existing financial resurces and capital available under ur debt facility, the impact f ur current indebtedness n ur financial health, ur ability t cntinue t btain access t financing and financial cncessins when needed frm financiers, lss f key persnnel and ability t attract necessary persnnel, ur histry f perating lsses, ur failure t realize cst savings frm restructuring and ptimizatin, gegraphic cncentratin f revenue frm the sale f slar energy systems in east cast states, Hawaii and Califrnia, ur failure t timely r accurately cmplete financing paperwrk behalf f custmers, adverse utcmes arising frm litigatin and cntract disputes, disruptin f ur supply chain frm equipment manufacturers, cnstructin risks and csts, cmpetitin, cntinued access t cmpetitive third party financiers t finance custmer slar installatins, failure by manufacturers f third party installers t perfrm under their warranties t us, failure f custmers t pay per cntractual terms, ptential shrtages f supplies fr slar energy systems, cnditins affecting internatinal trade having an adverse effect n the supply f slar phtvltaic mdules, delays r cancellatins fr system installatins dne n a percentage-f-cmpletin, nn-cmpliance with NASDAQ cntinued listing standards, changing reprting requirements which require significant cmpliance effrts and resurces, vlatile market price f ur Class A cmmn stck, lack f cverage f ur Class A cmmn stck by securities analysts, the lw likelihd that we will pay any cash dividends n ur Class A cmmn stck fr the freseeable future, pssibility f future dilutive issuances f securities, anti-takever prvisins in ut rganizatinal dcuments, the significant wnership and vting pwer f ur Class A cmmns stck held by Riverside Renewable Energy Investments, LLC, the ptential impact f the U.S. Security and Exchange Cmmissin s investigatin, and such ther factrs as discussed thrughut Part I, Item 1A, Risk Factrs and Part II, Item 7, Management s Discussin and Analysis f Financial Cnditins and Results f Operatins f ur Annual Reprt n Frm 10-K fr the year ended December 31, 2014 and Part I, Item 2, Management s Discussin and Analysis f Financial Cnditin and Results f Operatins and Part II, Item 1A, Risk Factrs included f ur Quarterly Reprts n Frm 10-Q fr the quarter ended June 30, Any frward-lking statement made by us in this press release is based nly n infrmatin currently available t us and speaks nly as f the date n which it is made. We undertake n bligatin t publicly update any frwardlking statement, whether written r ral, that may be made frm time t time, whether as a result f new infrmatin, future develpments r therwise. These dcuments are available n bth the EDGAR sectin f the SEC's website at and the Investr Relatins sectin f the cmpany's website at 7

8 RGS Energy Cndensed Cnslidated Balance Sheets (in thusands, except per share amunts - unaudited) June December 30, , 2014 Cash & cash equivalents $5,338 $ 1,947 Accunts Receivable 9,326 8,293 Inventry 3,146 4,639 Other Current Assets 6,886 5,847 Assets f Discntinued Operatins 3,346 8,427 Ttal Current Assets 28,042 29,153 Gdwill and Intangibles 1,338 1,338 Other Assets 3,612 3,533 Assets f Discntinued Operatins 937 1,082 Ttal Assets $ 33,929 $ 35,106 Line f Credit and Term Lan $4,028 $ 4,350 Related Party Debt - 3,150 Accunts Payable 9,712 13,398 Other Current Liabilities 6,247 8,575 Liabilities f Discntinued Operatins 5,312 7,984 Ttal Current Liabilities 25,299 37,457 Cmmn stck warrant liability 1,002 2,491 Other Liabilities Liabilities f Discntinued Operatins Ttal Liabilities 26,601 40,407 Stckhlder s Equity (deficit) 7,328 (5,301) Liabilities and Stckhlders' Equity $ 33,929 $ 35,106 8

9 RGS Energy Cnslidated Summary Statements f Operatins (in thusands, except per share amunts - unaudited) Three Mnths Ended June 30, Six Mnths Ended June 30, Net Revenue $ 14,727 $ 19,636 $ 25,337 $ 33,403 Cst f Gds Sld 12,278 15,133 21,991 26,089 Grss Margin 2,449 4,503 3,346 7,314 Grss Margin (%) 16.63% 22.93% 13.21% 21.90% Selling and Operating 2,916 6,914 6,987 12,850 General and Administrative 1,313 2,300 2,870 4,372 Stck ptin cmpensatin Acquisitin-related Csts - (304) Restructuring Csts Litigatin ,185 Depreciatin and amrtizatin Asset Impairment Ttal Expenses 5,345 9,881 11,389 19,833 Operating Lss frm Cntinuing Operatins (2,896) (5,378) (8,043) (12,519) Other Incme Interest Expense (144) (234) (369) (456) Derivative Gain, Net 4,509 6,082 6,264 1,415 Incme Tax (Expense)/Benefit (41) 1, ,208 Incme/(Lss) frm Cntinuing Operatins, net f tax 1,575 1,684 (1,977) (10,352) (Lss) Frm Discntinued Operatins, net f tax (133) (23,039) (315) (25,831) Net Incme/(Lss) $ 1,442 $ (21,355) $ (2,292) $ (36,183) Earnings per share $ 0.28 $ (9.27) $ (0.58) $ (16.32) Weighted average shares utstanding 5,011 2,304 3,947 2,217 9

10 RGS Energy Segment Results (in thusands - unaudited) Secnd quarter Results YTD Results Residential: Revenue $ 11,110 $ 15,943 $ 17,967 $ 29,217 COGS 9,422 12,429 15,570 23,045 Grss Margin 1,688 3,514 2,397 6,172 GM% 15.19% 22.04% 13.34% 21.12% Operating Expenses 2,197 5,285 5,375 10,124 Business Unit Cntributin $ (509) $ (1,771) $ (2,978) $ (3,952) Sunetric: Revenue $ 3,617 $ 3,071 $ 7,370 $ 3,071 COGS 2,856 2,264 6,421 2,264 Grss Margin GM% 21.04% 26.28% 12.88% 26.28% Operating Expenses , Business Unit Cntributin $ 162 $ (149) $ (151) $ (149) Rftp Installatins: Secnd quarter Results RGS Energy Supplemental Infrmatin YTD Results Residential ,042 Sunetric Ttal ,084 kw Installed: Residential 2,604 4,154 4,261 7,797 Sunetric , Ttal 3,497 4,819 6,058 8,462 Net Orders (dllars in thusands): Residential $ (636) $ 5,717 $ (4,447) $ 7,324 Sunetric $ (190) $ 2,263 $ (1,772) $ 2,263 Ttal $ (826) $ 7,980 $ (6,219) $ 9,587 Net Orders (kw): Residential (191) 22,944 (1,145) 30,710 Sunetric 27 8,554 (336) 8,554 Ttal (164) 31,498 (1,481) 39,264 10

11 Backlg Infrmatin As f June Backlg Rftps Backlg Value ($'000's) Residential 488 $ 17,553 Sunetric 114 $ 12,624 Ttal 602 $ 30,177 RGS Energy Stck Capitalizatin Table Ttal shares issued and utstanding as f: 6/24/2015 7/15/2015 Beginning Shares utstanding prir t June transactins 5,935,735 5,935,735 Shares issued in June transactins: Subrdinated Debt Cnversin t Equity 1,288,156 Class A & C Warrant Exchanges 1,328,004 Public ffering 4,021,884 Ttal shares utstanding 5,935,735 12,573,779 Additinal pssible future shares issuable frm: Optins t purchase cmmn stck 148, ,040 Warrants t purchase cmmn stck 2,252,956 1,330,247 Other cntracts and agreements 22,631 22,631 Ttal shares issued r issuable in the future 8,359,362 14,074,697 Investr Relatins Cntact Rn Bth, Senir Managing Directr Lilis Grup, Inc. Tel RGSE@lilis.cm 11