RGS Energy Issues Business Update – Net Sales Up 59%, Installation Revenue Increases 36%
Summary of Expectations Versus Results:
|July 17, 2017 Business
Preliminary Results versus Q2
|Sales||Growth||Gross sales increased ≈33%
Net sales increased ≈59%
|Installation Revenue||Growth||Increased ≈36%|
|Sales organization||Growth||Increased ≈15%|
|Customer acquisition expense||Cost effective||Decreased ≈5%|
|Residential cycle time||Reduce||Reduced ≈11%|
|Cost of goods sold per watt||Reduce||Decreased ≈19%|
|Cash flow||Outflow until break-even||Outflow|
“Beyond the progress on our revenue growth plan, on
Growing Sales for Future Revenue:
| 2nd Quarter
| % change
|Building current backlog:(000’s omitted)|
|Small business commercial||520||1,531||-66||%|
|Service and other revenue||332||289||15||%|
|Growth of Sales Organization:
(monthly average headcount during quarter)
|Customer acquisition employees||71||62||15||%|
|Direct sales representatives||49||41||20||%|
Foundations for Profitability for our Residential Segment, RGS Energy’s Largest Segment:
|Productivity of Sales Organization:|
|Number of sales||284||173||64||%|
|Sales per direct salesperson (avg)||43||36||18||%|
|Controlling Customer Acquisition Expense:|
|Per gross watt sold||$||0.68||$||0.62||11||%|
|Ratio of expense to net sales||0.25||0.26||-5||%|
|Increasing Installation Revenue Gross Margin Percentage:|
|Installation cycle time (avg days)||99||111||-11||%|
|COGS per watt||$||2.43||$||3.01||-19||%|
|Gross margin % on actual installation time||30%||16%||87||%|
|Gross margin % including idle time||17%||4%||276||%|
Financing in Place to Grow Sales:
|Working Capital: (000’s omitted)||Sept 30, 2017
|June 30, 2017
|Other Current Assets||6,634||6,516|
|Total Current Assets||11,292||16,261|
|Accrued License Fee Payable||1,000||0|
|Total Current Liabilities||4,715||3,518|
Solar Division: “We are hitting on all cylinders during the first six months of our revenue growth strategy,” said
The overall average sales price per watt for the residential segment in the third quarter was
Wiggins continued: “We continue to innovate; for example, as planned, we commenced beta testing of our new customer centric software, which sets up a portal for our customers. In addition, we announced a smart battery storage program and we are also working towards launching a home energy score program, which we expect will generate leads and reduce our future acquisition expense.”
“Our strategy has been to expend cash, investing it in manner expected to allow us to meet and exceed our quarterly break-even results during 2018,” continued Fine. “Further, we expect to expend cash during the fourth quarter of 2017 and, if we, as projected, achieve revenue to operate profitably during the second quarter of 2018, our business will thereafter begin to operate on a positive cash flow basis. To achieve this outcome, we have been investing cash in our sales organization, marketing and a larger inventory of equipment for future installation. We project our cash balance at
The company recorded a non-current asset of
Fine continued: “Following our announcement of our exclusive license for POWERHOUSE™, we received approximately
Rhode Island National Grid Renewable Energy Growth Program:
Targets and Expectations for RGS Energy’s Solar Division and Corporate Segments:
- Achieve break-even revenue in the second quarter of 2018.
- Steady and improving progress in sales for the remainder of 2017, with installation revenue growth delayed a quarter.
- Digital and content marketing, not vendor lead programs, to become the principal source of customer sourcing.
- Introduce new products and services, such as battery storage and energy audits.
- Cash outflow from operations until break-even results are achieved.
Business Segments – The Solar Division consists of RGS Energy’s Residential and Sunetric business segments. The Corporate segment includes administrative costs associated with administrative services, legal settlements, legal, information systems, and accounting and finance. Commencing
Gross Sales – The contract value of contracts signed by customers.
Cancellations – The reduction in backlog from customers canceling contracts; customer deposits retained by the company are recognized as revenue at cancellation. Customers may cancel contracts during statutory rescission periods or for other reasons such as accepting a competitor’s offer or following final site evaluation, a customer determining the solar system will not meet expectations.
Installation and Service Revenue – The company recognizes revenue on residential and small business commercial projects at the time of substantial completion of construction, and on large commercial projects on a percentage of completion basis. Service revenue is recognized as earned.
Substantial Completion – The solar power system is fully operational and capable of generating energy, but has not yet received permission to operate from the utility.
Backlog – Represents the dollar amount of revenue that may be recognized in the future from signed contracts to install solar energy systems that have not yet been installed without taking into account possible future cancellations. Backlog is not a measure defined by generally accepted accounting principles, and is not a measure of contract profitability. The company’s methodology for determining backlog may not be comparable to methodologies used by other companies in determining their backlog amounts. The backlog amounts we disclose are net of cancellations received and include anticipated revenues associated with (i) the original contract amounts, and (ii) change orders for which we have received written confirmations from customers. Backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers.
Customer Acquisition Expense per Watt – Customer acquisition expenses represent the aggregate compensation of the sales and marketing organizations and the cost of acquiring customers leads such as purchasing paid leads, the cost of digital marketing, and other marketing campaigns to acquire customers. Customer acquisition per watt represents the customer acquisition expense incurred during the period divided by the watts on solar systems sold during the period. The company internally measures cost of customer acquisition using several methods and principally as a percentage of revenue. The company presents certain metrics on a per watt basis as it believes this is a typical reporting convention for the solar installation industry.
Cycle Time - Number of days from signing of customer contracts until substantial completion.
About RGS Energy
RGS Energy (Nasdaq:RGSE) is America’s
For more information, visit RGSEnergy.com, RGSPOWERHOUSE.com, on
RGS Energy is the Company’s registered trade name. The Company files periodic and other reports with the
Forward-Looking Statements and Cautionary Statements
The preliminary financial data discussed above consists of estimates derived from RGS Energy’s internal books and records and has been prepared by, and are the responsibility of, the company’s management. The preliminary estimates discussed above are subject to the completion of financial closing procedures, final adjustments and other developments that may arise between now and the time the financial results for the third quarter ended
This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including statements regarding the RGS Energy’s results of operations and financial positions, and RGS Energy’s business and financial strategies. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they provide our current beliefs, expectations, assumptions, forecasts, and hypothetical constructs about future events, and include statements regarding our future results of operations and financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words “forecast,” “project,” “expect,” “plan,” “future,” “believe,” “may,” “hypothetical,” “will,” “estimate,” “target,” “anticipate” and similar expressions as they relate to RGS Energy or Dow are intended to identify such forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. Forward looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Therefore, RGS Energy cautions you against relying on any of these forward-looking statements.
Key risks and uncertainties that may cause a change in any forward-looking statement or that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include: rules, regulations and policies pertaining to electricity pricing and technical interconnection of customer-owned electricity generation such as net energy metering; the continuation and level of government subsidies and incentives for solar energy; the continuation and level of utility and state incentives for solar energy; RGS Energy’s ability to successfully implement its revenue growth strategy, achieve its target level of sales, generate cash flow from operations, achieve break-even and better results for its solar division, expand its sales and installation teams and marketing, decrease its customer acquisition cost, develop and implement new products and services, and expand into new states; RGS Energy’s current capital resources being sufficient to implement its revenue growth strategy; the ability to successfully and timely commercialize POWERHOUSE™ 3.0 to homeowners and new home builders; the ability to obtain requisite certification of POWERHOUSE™ 3.0; the adequacy of, and access to, necessary capital to commercialize POWERHOUSE™ 3.0; the satisfaction of other conditions to the POWERHOUSE™ 3.0 license agreement; RGS Energy’s ability to manage supply chain in order to have production levels and pricing of the POWERHOUSE™ 3.0 shingles to be competitive; the ability of RGS Energy to successfully expand its operations and employees and realize profitable revenue growth from the sale and installation of POWERHOUSE™ 3.0, and to the extent, anticipated; the potential impact of the announcement of RGS Energy’s expansion into the POWERHOUSE™ 3.0 business with employees, suppliers, customers and competitors; RGS Energy’s ability to successfully and timely expand its POWERHOUSE™ 3.0 business outside of
You should read the section entitled “Risk Factors” in our 2016 Annual Report on Form 10-K, as amended, and in our Quarterly Report on Form 10-Q/A for the quarter ended
POWERHOUSE™ is a trademark of
Investor Relations Contact
Ron BothManaging Partner, CMA Tel 1-949-432-7566 RGSE@cma.team