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Sunworks, Inc. (SUNW)·Q3 2022 Earnings Summary

Executive Summary

  • Q3 2022 delivered accelerating topline momentum with revenue up 30.4% year over year to $40.7M, gross profit up 49.3% to $19.5M, and narrowing net loss to $5.4M (-$0.16 EPS), driven by strength in Residential Solar and strategic price actions .
  • Residential revenue rose 57% to $36.7M while Commercial revenue declined 48% to $4.1M; backlog climbed 116% year over year to $110M, with management expecting improved margin realization in Q4 as higher-priced backlog converts .
  • Liquidity improved during the quarter: $7.3M was raised via ATM, quarter-end cash was ~$14.5M and management reported no debt, supporting execution amid supply chain tightness and inventory builds to $26.9M .
  • Wall Street consensus (S&P Global) EPS and revenue estimates were unavailable for SUNW; third-party sources indicate EPS of -$0.16 missed versus -$0.14 expectations (non-SPGI) — implying a modest miss on profitability while revenue trajectory was favorable .

What Went Well and What Went Wrong

What Went Well

  • Residential demand and execution: Residential Solar revenue +57% YoY to $36.7M; direct sales force expansion to >600 agents in 14 metro markets drove originations and 24% of segment revenue versus <4% prior year .
    • “Our direct sales force… represented 24% of total Residential Solar segment revenue… versus less than 4%… in the prior-year period.” — CEO Gaylon Morris .
  • Backlog and pricing power: Backlog rose to $110M with management citing price actions and stronger demand, estimating improved backlog margins to be realized next quarter .
  • Margin trajectory: Gross profit increased to $19.5M (+49.3% YoY), with commentary tying gains to improved estimating/quoting accuracy and execution, plus strategic pricing to offset inflation .

What Went Wrong

  • Commercial softness: Commercial Solar Energy revenue fell 48% YoY to $4.1M, attributed to lower prior-period order intake despite improved Q3 orders ($8.2M) .
  • Profitability still negative: Adjusted EBITDA loss of $3.7M (vs $3.3M loss prior year) and net loss of $5.4M persist, impacted by inflationary pressures and growth investments .
  • Financing cost headwinds: Management noted higher customer financing costs alongside rising rates, an ongoing affordability headwind despite strong residential value proposition .

Financial Results

MetricQ1 2022Q2 2022Q3 2022
Revenue ($USD Millions)$31.196 $36.397 $40.713
Gross Profit ($USD Millions)$14.032 $16.865 $19.509
Gross Profit Margin (%)44.9% (computed from revenue and GP) 46.4% (computed from revenue and GP) 48.0% (computed from revenue and GP)
Operating Income ($USD Millions)-$8.201 -$7.661 -$5.402
Net Income - (IS) ($USD Millions)-$8.207 -$7.585 -$5.393
Diluted EPS ($USD)-$0.28 -$0.23 -$0.16
Adjusted EBITDA ($USD Millions)-$5.632 -$5.749 -$3.747
Cash And Equivalents ($USD Millions)$19.455 $12.067 $14.273

Segment breakdown:

Segment Revenue ($USD Millions)Q1 2022Q2 2022Q3 2022
Residential Solar$26.4 $32.5 $36.7
Commercial Solar Energy$4.8 $3.9 $4.1
Mix (% of Total)87% / 13% 91% / 9% 92% / 8%

KPIs:

KPIQ1 2022Q2 2022Q3 2022
Backlog ($USD Millions)$63 $96.9 $110
Residential originations growth (YoY)N/A+70% YoY +48% YoY
Direct sales contribution10% of watts installed ~15% of installation revenue 24% of Residential revenue
Commercial orders ($USD Millions)N/A$23.7 $8.2
Inventory ($USD Millions)$14.1 $18.8 $26.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Margin realizationH2 2022Expect improved margins in H2 vs H1 2022 Expect improved margin realization in Q4 vs first nine months 2022; backlog price actions to flow through Maintained with greater specificity
Pricing actions2022Programmatic price increases to offset inflation; benefits from Q3 onward Price actions improved backlog margins to be realized next quarter Maintained
Sourcing strategyThrough YE 2024Shift toward OEMs; relief from AD/CVD suspension expected late 2022 Intend to source significant share of panels/components from U.S.-based producers by YE 2024 (currently none domestic) New specific target
Installation velocityOngoingDecentralization pilot reduced time-to-install; mapping for scale Decentralized design/permits/scheduling across local/regional teams; lean practices to improve timelines Maintained/expanded rollout
Liquidity actions2022Sold 2.8M shares via ATM for $7.8M in Q1 Raised $7.3M via ATM in Q3; no debt; ~$14.5M cash at quarter end Incremental raise; balance sheet strengthened
Inventory strategy2022Built inventory above historical to mitigate supply risk Inventory grew $8.1M sequentially to $26.9M to support backlog and availability Increased investment

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Supply chain & sourcingBuilt inventory above historical levels; expanded supplier relationships; anticipated relief from AD/CVD suspension late 2022 Inventory +$8.1M seq to $26.9M; plan to source significant share domestically by YE 2024 Improving supply surety; strategic shift to domestic OEMs
Pricing & marginsProgrammatic price increases to offset inflation; expect H2 margin improvement Estimate improved backlog margins realized in Q4; gross profit up 49% YoY Margin trajectory improving as pricing flows through
Residential demand & direct salesDirect sales force expanding; 10% of watts (Q1), ~15% of revenue (Q2) >600 agents; 24% of Residential revenue; watts installed +50% YoY Strong adoption; scaling direct channel
Commercial end-marketPause amid policy uncertainty; bookings ~$9M in Q2 pipeline CSE orders $8.2M; revenue down YoY; demand improving sequentially Early recovery; revenue lagging order intake
Customer financing & ratesNoted inflationary pressures and cost environment Higher financing costs noted but value proposition remains compelling Financing costs rising; demand resilient

Management Commentary

  • “Order rates for new residential rooftop solar installations accelerated on a year over year basis… contributing to robust year-over-year revenue growth.” — CEO Gaylon Morris .
  • “Our direct sales force… represented 24% of total Residential Solar segment revenue… versus less than 4%… in the prior-year period.” — CEO Gaylon Morris .
  • “We believe investment in critical componentry remains a prudent allocation of capital… positioning us to capitalize on favorable demand conditions, while mitigating materials sourcing risk.” — CFO Jason Bonfigt .
  • “We estimate that our backlog has improved margins, which will be realized next quarter.” — CEO Gaylon Morris .
  • “By year-end 2024, the Company intends to source a significant share of its panel and component inventory from U.S. based producers, whereas no materials are currently sourced domestically.” .

Q&A Highlights

  • Lease financing expansion: Management indicated plans to add one to two more lease partners in coming months to broaden financing options for customers (Q&A discussion) .
  • Demand drivers: Commentary emphasized value of solar to offset rising utility costs rather than purely “green” signaling — highlighting cost-savings as the core adoption driver (Q&A discussion) .
  • Clarifications on margin trajectory: Management reiterated backlog pricing improvement should show up in Q4 margin realization .
  • Tone: Confident on residential growth and operational improvements; cautious but constructive on commercial recovery and financing cost environment .

Estimates Context

  • S&P Global consensus estimates for SUNW (EPS, revenue) for Q3 2022 were unavailable due to missing mapping.
  • Third-party context: Reported EPS of -$0.16 versus expectations of -$0.14 (non-SPGI) suggests a modest EPS miss; revenue consensus not cited by third-party source .
  • Given the strong revenue ramp and margin guidance, we expect sell-side models to adjust for improved Q4 margin realization and higher Residential throughput.
MetricQ3 2022 ActualWall St Cons (SPGI)Third-Party Cons
EPS ($USD)-$0.16 N/A (Unavailable)-$0.14 (non-SPGI)
Revenue ($USD Millions)$40.713 N/A (Unavailable)N/A

Key Takeaways for Investors

  • Residential engine is scaling with a maturing direct sales model, driving faster originations and higher mix — a key structural lever for margin and growth .
  • Pricing actions and backlog composition point to visible margin improvement in Q4; monitor gross margin progression and operating leverage as backlog converts .
  • Commercial segment is showing order momentum but revenue lags; watch conversion of CSE orders and policy backdrop for cadence .
  • Proactive inventory build and planned domestic sourcing reduce supply risk and could support cycle times and margin in 2023–2024 .
  • Liquidity strengthened (ATM raise, no debt); supports continued investment in sales, operations, and inventory amid macro rate headwinds .
  • Near-term trading: Narrative centers on Q4 margin delivery and residential execution; any confirmation of margin step-up could be a positive catalyst.
  • Medium-term thesis: Scale benefits from direct sales, installation velocity, and domestic sourcing underpin a path to sustained margin expansion and improved profitability if commercial recovery continues .

References:

  • Q3 2022 8-K and Exhibit 99.1 press release, Sunworks Reports Third Quarter 2022 Results .
  • Q2 2022 8-K and Exhibit 99.1 press release .
  • Q1 2022 8-K and Exhibit 99.1 press release .
  • Q3 2022 earnings call transcript (third-party platforms) .
  • Q3 2022 call and webcast announcement (press) .