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RGS Energy Issues Business Update – Net Sales Increase 3x

DENVER, July 17, 2017 (GLOBE NEWSWIRE) -- RGS Energy (NASDAQ:RGSE), the nation's original solar company since 1978, provided a business update on its progress during the second quarter, using its debt-free balance sheet, toward revenue growth and foundations for profitability.

Summary of Expectations Versus Results:

April Business

Update Expectation
2nd Quarter

Preliminary Results
Sales Growth Gross sales increased ≈2x

Net sales increased ≈3x
Revenue Lag a quarter Decreased ≈18%
Sales organization Growth Increased ≈40%
Cost effective marketing Cost effective Reduced ≈55%
Residential cycle time Reduce Reduced ≈30%
Cost of goods sold per watt Reduce Increased <1%
Cash flow Outflow until break-even Outflow

Management Commentary:

"Our performance this quarter was in-line with expectations we set in our last business update," said Dennis Lacey, CEO of RGS Energy. "We made progress on what we see are the foundations for profitability, such as lowering customer acquisition expense and residential cycle time. To grow sales and continue to lay the groundwork for profitability, we have been expending cash as expected. However, we believe that we have sufficient working capital to build a business that will operate profitably and generate positive cash flow in the future."

"With our last update, we advised that installation revenue would lag sales growth and that occurred this quarter," continued Lacey. "Our residential segment gross margin percentage reflecting only actual construction crew time was approximately 22%, less than our target of upper 20's because we cannot absorb well the fixed construction organization costs when our revenue is low. Further, we are maintaining a larger construction organization than we would need for our current backlog because we are confident we will grow sales and require a larger construction organization."

"We've said the process of achieving profitability will take some time," continued Lacey. "Given our $16 million capital raise in February, it is important to note that this is our first full quarter of operating with what we feel is appropriate working capital in place. As this is the first quarter on this basis, we are heartened by the positive trends."

Growing Sales for Future Revenue:

2nd Quarter

2017

(Preliminary)

1st Quarter

2017

(Reported*)

% change

from Q1


Building current backlog: (000's omitted)
Beginning backlog $7,392 $9,375 -21%
Gross sales:
Residential homeowners 4,871 2,848 71%
Small business commercial 1,531 111 1,281%
Sunetric (Hawaii) 1,003 82 1,124%
Total 7,405 3,035 144%
Cancellations 2,415 1,645 47%
Net sales 4,990 1,390 259%
Installation revenue 2,697 3,372 -20%
Ending backlog $9,685 $7,392 31%
Service and other revenue 308 281 10 %
Total reported revenue $3,006 $3,653 -18%
Building Future Backlog:
Awarded Community Solarize Programs:
Residents in awarded community solarize areas 34,735 -
Historical final close rate per resident 0.6% -
Historical average sales price ≈$27,000
Growth of Sales Organization:

(monthly average headcount during quarter)
Customer acquisition employees 63 45 39%
Direct sales representatives 40 27 49%
* reclassified

Foundation for Profitability, Residential Segment, Our Largest Segment:

2nd Quarter

2017

(Preliminary)

1st Quarter

2017

(Reported*)

% change

from Q1


Productivity of Sales Organization:
Number of sales 173 105 65%
Sales per direct salesperson (avg) 4.81 3.89 24%
Controlling Customer Acquisition Expense:
Per watt sold $0.62 $0.94 -34%
Ratio of expense to sales .27 .59 -55%
Increasing Installation Revenue Gross Margin Percentage:
Installation cycle time (avg) 111 161 -31%
COGS per watt 2.84 2.82 <1%
Gross margin % on actual installation time 22% 25% -11%
Gross margin % including idle time 6% 15% -59%
* reclassified

Financing in Place to Grow Sales:

Working Capital: June 30, 2017

(Preliminary)

March 31, 2017

(Actual*)

Cash $9,736

$14,077
All Other Assets 6,494 6,593
Total Current Assets 16,230 20,670
Current Liabilities 3,310 3,824
Working Capital $12,920 $16,846
* reclassified

Management Commentary:

Sales/Marketing: "We are excited to report progress in our growth strategy, our second quarter performance more than doubled gross sales," said Seth Wiggins, RGS Energy's vice president of sales. "We typically see an increase in the absolute number of cancellations when sales increase. Nonetheless, our net sales after cancellations more than tripled this quarter. Our small business commercial segment demonstrated especially strong growth as we increased our sales team to address this opportunity. Further, during the quarter we were awarded two solarize communities where we are selling to homeowners during the third quarter."

Wiggins went on to say: "For some time, we have discussed why we need to control customer acquisition expenses and our plans to reduce this cost by using digital marketing, cost effective lead programs and improve the productivity of our sales representatives with training. We are pleased to note the positive trends in reducing this requisite for profitability this quarter."

Construction/Operations: "We are excited to report that during the second quarter we have reduced our cycle time by 31%. As expected, until we could commence our growth plans, our backlog was at our lowest point at March 31st," said Brad Bentzen, RGS Energy's director of operations. "With our new capital during February, we began to grow our sales which allowed us to increase our...


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