Sunworks, Inc.

Sunworks reported Q3 2023 revenue of $28.7 million, down 29.5% year over year. Residential revenue was $20.3 million, down 44.5%, while commercial revenue was $8.3 million, more than double the prior year. Gross profit was $8.2 million, or 28.5% of sales, versus $19.5 million, or 47.9%, last year. Net loss was $36.4 million, or $0.84 per share, versus a loss of $5.4 million, or $0.16 per share, and adjusted EBITDA was a loss of $8.5 million. The quarter included a $26 million non-cash goodwill impairment, equal to $0.60 per share. Cash and cash equivalents were $2.4 million at September 30, and later Jason Bonfigt referred to ending cash at $2.5 million. For Q4, management said residential results will likely track the lower backlog, while commercial should operate at a better scale in coming quarters; they also said margin improvement in residential should be gradual, with some upside potential in commercial above 16% over the long term.

Mark Trout framed the quarter as one of industry-wide pressure, especially from higher rates and California’s NEM 3.0 transition, but said Sunworks is retrenching into markets where it can operate at scale. He emphasized cost-rightsizing, improved internal processes, and the view that residential solar and storage still have attractive long-term economics. On the commercial side, he sounded notably more optimistic, pointing to stronger demand, improved margins, EV charging opportunity, and tailwinds from the Inflation Reduction Act.

Jason Bonfigt focused on the financial deterioration in residential and the improving trajectory in commercial. He said gross margin was hit by lower residential utilization and a shift toward commercial, but noted commercial margin improved to about 16% from 1% and that the company reduced labor costs by approximately $6 million annually since the end of Q2. He also cited $2.5 million in cash at quarter-end, about $10 million of AR, $16 million of inventory, a factoring line of about $2.5 million that was about $1.5 million utilized, and said the company may expand that facility by $1 million to $2 million.

Analysts focused on liquidity, cash burn, backlog conversion, and the pace of recovery in California residential. Management said Q3 cash burn was the main driver of the decline from about $4 million in Q2 cash to $2.5 million at Q3-end, but pointed to commercial contract deposits, AR collection, and factoring as near-term sources of liquidity. On backlog, Jason said residential backlog fell to about $35 million and commercial backlog ended around $30 million, while Mark said California is now about 30% of business and that bookings should stabilize through Q4 and Q1 with a possible uptick in Q2 as TPO offerings increase and NEM 3.0 disruption normalizes.