RGS Energy (NASDAQ:RGSE), a residential and small commercial solar
company since 1978, reported results for its fourth quarter ended
December 31, 2016.
Capital Raising and Growth Strategy UpdateRGS
Energy’s goal of raising additional working capital was
achieved:
- In 2016, the company raised net proceeds totaling $16.5 million
from offerings of convertible notes, convertible preferred stock,
common stock and warrants.
- In February 2017, the company raised net proceeds of $16.1
million from offerings of common stock and warrants.
The funding has enabled the company to focus on its growth
strategy, which includes:
- Hiring and training for its homeowner sales, sales support and
in-house construction teams.
- Expanding its small commercial sales team.
- Expanding the marketing team and securing effective marketing
agreements for customer leads to support a larger sales
organization.
- Continue to reduce the cost of materials, which supports
stronger margins and more competitive pricing.
- Continue to focus on the company’s niche: consumers looking to
purchase solar systems with cash or third-party financing rather
than leasing.
Q4 2016 Financial SummaryGiven its improved
working capital position, the company more than doubled its revenue
sequentially to $5.1 million in the fourth quarter of 2016.
Gross margin percentage was 24.5% in the fourth quarter of 2016,
up from 4.8% in the previous quarter.
Net loss totaled $10.5 million in the fourth quarter of 2016 as
compared to $7.7 million in the previous quarter. The increase was
primarily due to non-cash charges to income totaling $8.3 million
for the change in derivative liabilities, net and loss on debt
extinguishment, with these charges representing more than 80% of
the loss for the quarter. The company does not expect to incur
similar non-cash charges of a material amount in 2017.
Cash was $2.9 million and stockholders’ equity totaled $5.0
million at December 31, 2016. Subsequent to the year-end, the
company’s cash and stockholder’s equity increased by $16.1 million
as a result of the February 2017 capital raises. The additional
capital has allowed the company to pay off and terminate its
revolving line of credit facility. As a result, the company is now
debt free.
Management Commentary“Our sales and
installation teams have been picking up the pace since we improved
our working capital position,” said Dennis Lacey, CEO of RGS
Energy. “Macroeconomic tailwinds are in our favor, including rising
electricity rates, declining cost of materials, and extension of
the investment tax credit for homeowners who purchase rather than
lease their solar systems. In 2017, we will invest in our sales and
construction teams, training programs, marketing spend, and
diversifying our product offerings, all with the goal of growing
top line revenue.”
Segment Results
| Residential
Segment:(000’s omitted) |
4th Quarter2016 |
|
3rd Quarter2016 |
|
4th Quarter2015 |
|
Revenue |
$ |
4,800 |
|
|
$ |
1,427 |
|
|
$ |
5,344 |
|
| Cost of goods
sold |
|
3,502 |
|
|
|
1,591 |
|
|
|
4,480 |
|
| Gross
margin |
|
1,298 |
|
|
|
(164 |
) |
|
|
864 |
|
| Gross
margin % |
|
27.04 |
% |
|
|
-11.49 |
% |
|
|
16.17 |
% |
| Operating
expenses |
|
1,128 |
|
|
|
1,235 |
|
|
|
2,101 |
|
| Operating
income(loss) |
|
170 |
|
|
|
(1,399 |
) |
|
|
(1,237 |
) |
|
Backlog |
$ |
5,934 |
|
|
$ |
9,722 |
|
|
$ |
9,503 |
|
The company installed solar equipment on 138 roofs in the fourth
quarter of 2016, compared to 54 installations in the previous
quarter and 151 installations in the fourth quarter of 2015.
Residential segment gross margin percentage in the fourth
quarter of 2016 was 27.04% versus a negative 11.49% in previous
quarter and up from positive 16.17% in year-ago quarter. The
sequential improvement was due to increased revenue and having
better pricing on materials with current vendors. Compared to the
year-ago quarter, the improvement reflects the reduced cost of
materials and process efficiencies of the company’s installation
crews.
Residential segment backlog decreased to $5.9 million at
December 31, 2016 from $9.7 million at September 30, 2016. New
sales orders decreased 55% to $2.5 million during the fourth
quarter of 2016 as compared to $5.6 million in the year-ago
quarter. Net cancellations decreased 33% to $1.8 million in the
fourth quarter of 2016 as compared to $2.6 million in the same
year-ago quarter.
| Sunetric
Segment:(000’s omitted) |
4th Quarter2016 |
|
3rd Quarter2016 |
|
4th Quarter2015 |
|
Revenue |
$ |
339 |
|
|
$ |
1,036 |
|
|
$ |
4,405 |
|
| Cost of goods
sold |
|
379 |
|
|
|
755 |
|
|
|
3,740 |
|
| Gross
margin |
|
(40 |
) |
|
|
281 |
|
|
|
665 |
|
| Gross
margin % |
|
-11.80 |
% |
|
|
27.12 |
% |
|
|
15.10 |
% |
| Operating
expenses |
|
438 |
|
|
|
381 |
|
|
|
810 |
|
| Operating
income (loss) |
|
(478 |
) |
|
|
(100 |
) |
|
|
(145 |
) |
|
Backlog |
$ |
2,448 |
|
|
$ |
2,871 |
|
|
$ |
7,195 |
|
Residential sales for Sunetric have been adversely impacted by
the regulations of the local utility and, in response, Sunetric is
building a sales organization around commercial sales.
|
Corporate Segment & Other:(000’s
omitted) |
4th Quarter2016 |
|
3rd Quarter2016 |
|
4th Quarter2015 |
|
|
Corporate Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
$ |
1,257 |
|
|
$ |
1,268 |
|
|
$ |
1,866 |
|
|
Stock option compensation |
|
191 |
|
|
|
175 |
|
|
|
253 |
|
|
Litigation |
- |
|
|
|
- |
|
|
|
420 |
|
|
Depreciation & amortization |
|
103 |
|
|
|
96 |
|
|
|
99 |
|
|
Operating income (loss) |
$ |
(1,551 |
) |
|
$ |
(1,539 |
) |
|
$ |
(2,638 |
) |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
Other income and interest expense |
$ |
(596 |
) |
|
$ |
(1,330 |
) |
|
$ |
(101 |
) |
|
Change in derivative liabilities, net and loss on
debt extinguishment |
|
(8,296 |
) |
|
|
(3,366 |
) |
|
|
203 |
|
|
Income taxes |
|
- |
|
|
|
- |
|
|
|
31 |
|
|
Discontinued operations |
$ |
272 |
|
|
$ |
(1 |
) |
|
|
(260 |
) |
The net non-cash charge for change in derivative liabilities and
debt extinguishment increased sequentially as the convertible notes
were substantially converted to Class A common stock during the
fourth quarter of 2016. Additional paid-in capital was increased
for the debt extinguishment.
Conference Call RGS Energy will hold a
conference call to discuss its fourth quarter 2016 financial
results later today.
Date: Thursday, March 9, 2017Time: 4:30 p.m. Eastern time (2:30
p.m. Mountain time)Toll-free dial-in number:
1-800-239-9838International dial-in number:
1-913-312-1295Conference ID: 4013622Webcast:
http://public.viavid.com/index.php?id=123147
The conference call will be webcast live and available for
replay via the investor relations section of the company's website
at RGSEnergy.com.
Please call the conference telephone number five minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact CMA at 1-949-432-7566.
A replay of the call will be available after 7:30 p.m. Eastern
time on the same day through March 16, 2017.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 4013622
About RGS EnergyRGS Energy (NASDAQ:RGSE) is
America’s original solar company, installing more than 25,000
residential and commercial solar power systems since 1978. RGS
Energy makes it convenient for customers to save on their energy
bill by providing turnkey solar solutions - from system design,
construction planning, and customer financing assistance to
installation, interconnection and warranty.
For more information, go to RGSEnergy.com, or connect with the
company at www.facebook.com/rgsenergy or www.twitter.com/rgsenergy.
Information on such websites is not incorporated by reference into
this press release.
RGS Energy is the company’s registered trade name, and files
periodic and other reports with the Securities and Exchange
Commission under its corporate name, Real Goods Solar, Inc.
Forward-Looking Statements and Cautionary
Statements 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 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 “plan,” “expect,”
“future,” “may,” “will” and similar expressions as they relate to
us 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: the effect of electric
power generation industry regulations in the states where RGS
Energy operates, net electric power metering and related policies;
the effect of future changes to federal and state incentives for
renewables; the level of demand for RGS Energy’s solar energy
systems; the availability of a sufficient, timely, and
cost-effective supply of solar panels; RGS Energy’s ability to
implement its growth strategy, achieve its target level of sales,
and to generate cash flow from operations; RGS Energy’s ability to
achieve break-even and better results; the resolution of contract
disputes in its discontinued operations; future electricity rates;
the amount of any non-cash charges in future periods; and RGS
Energy’s ability to successfully expand its product offering to
include battery technology.
You should read the section entitled “Risk Factors” in our 2015
Annual Report on Form 10-K and in our Quarterly Reports on Form
10-Q, for 2016, each of which has been filed with the Securities
and Exchange Commission, which identify certain of these and
additional risks and uncertainties. Any forward-looking
statements made by us in this press release speak only as of the
date of this press release. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. We do not undertake any
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as may be required by law.
| |
|
RGSE EnergyCondensed Consolidated Balance
Sheets(in thousands) |
| |
|
|
|
|
|
|
|
|
December 31, 2016 |
|
December 31, 2015 |
| Cash |
$ |
2,940 |
|
$ |
594 |
|
| Restricted cash |
|
173 |
|
|
- |
|
| Accounts
receivable |
|
3,002 |
|
|
4,374 |
|
| Inventory |
|
1,502 |
|
|
2,051 |
|
| Other current
assets |
|
1,329 |
|
|
2,527 |
|
| Assets of discontinued
operations |
|
909 |
|
|
2,853 |
|
|
Total current assets |
|
9,855 |
|
|
12,399 |
|
| Goodwill |
|
1,338 |
|
|
1,338 |
|
| Other assets |
|
1,928 |
|
|
2,420 |
|
| Assets of discontinued
operations |
|
1,252 |
|
|
878 |
|
|
Total assets |
$ |
14,373 |
|
$ |
17,035 |
|
| |
|
|
|
|
|
|
| Line of credit |
$ |
663 |
|
$ |
774 |
|
| Convertible debt |
|
124 |
|
|
- |
|
| Accounts payable |
|
2,555 |
|
|
9,121 |
|
| Other current
liabilities |
|
2,470 |
|
|
3,054 |
|
| Liabilities of
discontinued operations |
|
1,457 |
|
|
4,510 |
|
|
Total current liabilities |
|
7,269 |
|
|
17,459 |
|
| Derivative
liability |
|
137 |
|
|
342 |
|
| Other liabilities |
|
1,764 |
|
|
22 |
|
| Liabilities of
discontinued operations |
|
225 |
|
|
225 |
|
|
Total liabilities |
|
9,395 |
|
|
18,048 |
|
| Stockholder’s equity
(deficit) |
|
4,978 |
|
|
(1,013 |
) |
| Liabilities and
stockholders' deficit |
$ |
14,373 |
|
$ |
17,035 |
|
|
|
|
RGS EnergyConsolidated Summary Statements
of Operations(in thousands, except per share amounts) |
| |
|
|
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
| |
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
| Net revenue |
$ |
5,139 |
|
|
$ |
9,749 |
|
|
$ |
17,425 |
|
|
$ |
45,527 |
|
| Cost of goods sold |
|
3,881 |
|
|
|
8,220 |
|
|
|
15,550 |
|
|
|
39,091 |
|
|
Gross margin |
|
1,258 |
|
|
|
1,529 |
|
|
|
1,875 |
|
|
|
6,436 |
|
| Gross
margin (%) |
|
24.48 |
% |
|
|
15.68 |
% |
|
|
10.76 |
% |
|
|
14.14 |
% |
| Selling and
operating |
|
1,502 |
|
|
|
3,507 |
|
|
|
7,006 |
|
|
|
13,924 |
|
| General and
administrative |
|
1,314 |
|
|
|
1,443 |
|
|
|
5,250 |
|
|
|
5,818 |
|
| Stock option
compensation |
|
191 |
|
|
|
253 |
|
|
|
708 |
|
|
|
784 |
|
| Restructuring
costs |
|
2 |
|
|
|
(177 |
) |
|
|
39 |
|
|
|
247 |
|
| Litigation |
|
- |
|
|
|
420 |
|
|
|
24 |
|
|
|
2,004 |
|
| Depreciation and
amortization |
|
108 |
|
|
|
108 |
|
|
|
424 |
|
|
|
484 |
|
|
Total expenses |
|
3,117 |
|
|
|
5,554 |
|
|
|
13,451 |
|
|
|
23,261 |
|
| Operating loss
from continuing operations |
|
(1,859 |
) |
|
|
(4,025 |
) |
|
|
(11,576 |
) |
|
|
(16,825 |
) |
| Other income |
|
(38 |
) |
|
|
(36 |
) |
|
|
(21 |
) |
|
|
386 |
|
| Interest expense |
|
(558 |
) |
|
|
(65 |
) |
|
|
(2,811 |
) |
|
|
(487 |
) |
| Change in derivative
liabilities, net and loss on debt extinguishment |
|
(8,296 |
) |
|
|
203 |
|
|
|
(11,395 |
) |
|
|
7,127 |
|
| Income tax
expense/(benefit) |
|
- |
|
|
|
31 |
|
|
|
27 |
|
|
|
9 |
|
|
Income/(loss) from continuing operations, net of
tax |
|
(10,751 |
) |
|
|
(3,954 |
) |
|
|
(25,830 |
) |
|
|
(9,808 |
) |
|
Income/(loss) from discontinued operations, net of tax |
|
272 |
|
|
|
(260 |
) |
|
|
502 |
|
|
|
(972 |
) |
| Net
income/(loss) |
$ |
(10,479 |
) |
|
$ |
(4,214 |
) |
|
$ |
(25,328 |
) |
|
$ |
(10,780 |
) |
| Earnings per share |
$ |
(24.95 |
) |
|
$ |
(200.67 |
) |
|
$ |
(183.54 |
) |
|
$ |
(770.00 |
) |
| Weighted average shares
outstanding |
|
420 |
|
|
|
21 |
|
|
|
138 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Relations Contact
Ron Both
Managing Partner, CMA
Tel 1-949-432-7566
RGSE@cma.team