Greetings, welcome to Sunworks, Inc. Fourth Quarter and Full Year 2022 Results Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jason Bonfigt, Chief Financial Officer. Thank you. You may begin. Thank you, operator. I'm Jason Bonfigt, Chief Financial Officer of Sunworks. On behalf of our entire team, I'd like to welcome you to our Fourth Quarter and Full Year 2022 Results Conference Call. Leading the call with me today is our President and CEO, Gaylon Morris. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Following our prepared remarks, we'll open the line for questions. With that, I'd like to turn the call over to Gaylon. Thank you, Jason. Welcome to those joining us today. During 2022, we continued to build a leading integrated solar solutions platform across our core regional markets while continuing to advance our business transformation strategy. Last year, we continued to drive an improved velocity of installation, ensuring improved customer retention between project originations and installations. We continued to re-weight origination toward our direct sales channel, thereby reducing customer acquisition expense. We expanded our procurement relationships with an emphasis on increased access to domestically sourced materials. We moved further towards a centralized operating model, one that further positions us to move quickly in support of individual customer requirements. In summary, it was a year of significant organizational change and transformation, one that culminated in strong fourth quarter revenue growth of more than 70% versus the prior year period, given sustained market share gains across both our residential and commercial segments. Our residential solar segment, which represented 83% of total fourth quarter revenue, delivered strong year-over-year growth in revenue, new installations, originations, and backlog, as recent investments in our direct sales force have contributed to significant ongoing market share gains. Within residential, our direct sales channel represented a record 27% of fourth quarter revenue, up from 5% in the prior year period. Since the Solcius acquisition in 2021, we've increased our direct sales force to more than 600 representatives, positioning us to drive above-market originations growth. By the end of 2023, we expect our direct sales channel will represent approximately half of our annual sales. While the pace of revenue growth evidenced in the fourth quarter reflects robust demand for our solar solutions, a combination of rising interest rates and general economic uncertainty muted new originations in the period. While origination growth remained challenged into the first quarter of 2023, we have begun to see rebound recently with improving weather in our key markets. In response, we have taken targeted action to curb the impact of higher financing costs on the pace of solar adoption across our customer base. These actions include the addition of new loan providers together with solar power purchase agreement options, which will materially lower the total cost of ownership for consumers. While many Americans continue to face a rising cost of living, including rising monthly utility bills, we expect homeowners will continue to pursue solar power to reduce or eliminate their utility bills while becoming energy independent. Rising electricity prices continue to drive increased solar adoption, particularly in California, which represented more than 40% of total sales in 2022. Before I turn the call over to Jason for his remarks, allow me to provide a general outlook for our business entering 2023. We believe the recent passage of the Inflation Reduction Act will provide an important secular tailwind for the domestic solar industry beginning this year. As detailed in the legislation, the solar industry will have unprecedented access to both production and investment tax credits for domestic manufacturing across the solar supply chain over the next decade, providing significant incentives and visibility for consumers. We believe solar adoption rates will accelerate as the market is fully educated on the significant financial incentives afforded by the IRA. At the same time, we anticipate a higher interest rate environment could severely impact smaller competitors, positioning larger platforms such as Solcius to take market share during a period of competitive churn. As higher rates become the new normal, we think consumers will recalibrate to a slightly higher total cost of ownership, as is currently happening in the residential housing market. Over time, we see the potential for Sunworks to expand its project financing capabilities, providing customers with a more robust solution offering that makes solar adoption that much more accessible. This year, we have begun to aggressively pursue strategies to further enhance our value proposition with customers and sales channel partners. For example, we believe battery and electric vehicle charging adoption rates will grow rapidly over the next few years. With this in mind, we are actively pursuing these and related product adjacencies, given both their appeal to our customers as well as their attractive margin profile. On balance, I'm positive on the outlook for our businesses entering 2023. A combination of sustained market share gains, recent price actions, and favorable long-term demand fundamentals, particularly with the added benefit of the IRA, position us to move closer towards EBITDA breakeven. With that, I will hand the call over to Jason for a review of our fourth quarter results. Thank you, Gaylon. Beginning with a summary of our full-year financial performance. Sunworks generated total revenue of $161.9 million in the full year 2022, an increase of 60% versus the prior year period, driven by increased contributions from our residential solar segment and a full year of benefit of the Solcius acquisition, which closed in April 2021. Commercial Solar energy revenue decreased $6.9 million compared to the prior year period, primarily driven by the timing of project start dates associated with the orders received in the current year. Total gross profit increased 75% versus the prior year to $71.3 million, supported by revenue growth and partially offset by labor and materials inflation. For the full year 2022, we reported a net loss of $28.2 million, or $0.86 per basic share, versus a net loss of $26.6 million in the prior year period, or $0.99 per basic share. Adjusted EBITDA was a loss of $20.7 million in 2022, compared to a loss of $13.3 million in the prior year. In the fourth quarter 2022, we generated total revenue of $53.6 million, an increase of 69% versus the prior year period, due mainly to higher installation volumes within our residential segment, together with higher order intakes from prior periods and elevated backlog within our commercial segment. During the fourth quarter, residential and commercial revenues represented approximately 83% and 17% of total revenue, respectively. Total gross profit increased to $22 million in the fourth quarter versus $13.7 million in the prior year period. The year-over-year variance was primarily attributable to increase in revenue in both segments, partially offset by margin degradation resulting from increased labor costs, together with jurisdictional permitting and weather delays. We reported a net loss of $7 million in the fourth quarter 2022, or $0.20 per basic share, versus a net loss of $13.5 million in the prior year period, or $0.47 per basic share. The year-over-year variance was primarily attributable to a $5.5 million goodwill impairment in the prior year quarter and due to the increases in revenue and gross profit in the current quarter. Adjusted EBITDA was a loss of $5.6 million in the fourth quarter compared to a loss of $4.4 million in the fourth quarter of 2021. Turning to a review of our residential solar segment, which is our Solcius business. Fourth quarter segment revenue increased 70% year-over-year to $44.4 million, driven by growth across all sales channels. Total residential watts installed increased 57% year-over-year in the fourth quarter. Direct sales represented approximately 28% of total revenue installed in the fourth quarter versus approximately 5% in the prior year period. Total residential backlog increased 38% on a year-over-year basis to $64.6 million as of December 31st, 2022, driven by growth in direct originations. Within our commercial segment, revenue increased 65% year-over-year to $9.2 million, and the commercial backlog increased by 50% on a year-over-year basis. Turning to our balance sheet. At the end of the fourth quarter, we had no debt and $7.8 million in cash to support the ongoing growth of the business. Earlier in the year, we wrestled with supply chain issues, particularly related to sourcing and availability of solar modules. These conditions improved materially as the year progressed, leading to increased availability of modules into 2023. Increased module availability coupled with moderating labor inflation are both positive margin tailwinds for Sunworks. Given the supply chain challenges, specifically with modules, we invested heavily into building inventory to support our growth. Exiting the year, we had several quarters of commercial modules and three to four months of residential modules on hand. As a result of this, our inventory increased by $16 million during the year. Operating working capital growth was approximately $5 million-$5.5 million as we realized improvements in DPO as well as deposits received from customers and/or lenders. As module conditions improve, we'll continue to scale back our inventory levels to more normalized levels, which should result in operating working capital tailwind throughout 2023. Operator, that concludes our prepared remarks. Please open the line for questions as we begin our question and answer session. Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Donovan Schafer with Northland Capital Markets. Please proceed with your question. Hey, guys. Thanks for taking the questions. You know, congratulations on the revenue numbers. Those are really fantastic. I think, you know, we, everyone kind of wants to see gross margin improvement. My first question is actually, you know, when I look, gross margins were down quarter-over-quarter and also year-over-year. You, you kinda gave some reasons for that. I know the way you do gross margins, you don't include the sales and marketing expense, which, you know, can be a pretty variable cost on customer originations. When I take gross profit and subtract, you know, sales and marketing, I'm doing this on a consolidated basis, so it's kind of a crude approach. When I do that to get a sort of, call it like an adjusted gross margin, or, you know, an after-sales cost gross margin, it actually looks like there was a year-over-year improvement. You know, when I do that, I get, like, a 14%, you know, that's like adjusted gross margin in the fourth quarter of this year versus 12% a year ago. Of course, there was cost inflation and other things. I'm just curious if you could talk through that at all, like what you're seeing if that, if that corresponds to what you're seeing, if once you talk about the shift, you include the shift to more direct sales, that's actually improving you, improving margins if you're thinking about, you know, customer acquisition costs, and that you have seen even this quarter an improvement there? You know, are there actually some more kinks to work out where just increasing percents of direct sales is actually misleading on that front or maybe my math is wrong or something. Can you just talk through that? Good morning, Donovan. It's Jason. I think you're thinking about that right. It's important to look at it on a segment basis rather than consolidated because the different segments have, you know, varying margin profiles. I think you're trying to get at residential and dig into that a little bit more. On the first point, on the sequential basis, we did have a one-time accounting adjustment in the prior quarter. That was 300 or 400 basis points of a difference. I think when you look at it sequentially without that one-time benefit, there wasn't a significant change. We do look at gross margin less our sales and marketing costs as a reflection of the margin profile of the business and are we bringing on accreted solutions. I think you're thinking about that right. We did have a lot of challenges in Q4 with weather, specifically in residential in California and a couple other markets that just led to just delays and inefficiencies. We'd like to see, you know, over the course of, you know, Q1 is certainly gonna continue to be a little challenged given the weather events across the country, but we'd expect that to increase throughout the year. As we think about our direct sales platform, we've been making quite a few investments in that sales force to onboard that. As we get leverage, we are expecting the percent after you take gross margin minus your sales and marketing expense to gradually improve as well because we're onboarding more direct, and it's into higher percentage of our overall population. Okay. That's helpful. Kinda on the same theme, you know, I think as in the deck or the release, you said, you know, you have a target of getting to 50% of sales coming from your direct channel. I believe it was by year-end 2023, maybe it was year-end 2024. You know, you can correct me on that. The question is, have you done anything in terms of kinda like modeling or translating that into, you know, a financial metric or something we'd see in the statements in terms of, like, what that would mean? I mean, I could kinda figure it out where at least in the past you said, and this is another area where, you know, correct me if I'm wrong, but I believe in the past you said customer acquisition costs for the direct channel are about 2/3 of what they are for third-party channels. You know, with that I could kind of model out, you know, what's the implication of if you get to 50% sales from direct channel. Either, you know, if you've already worked out some numbers or if you can kinda steer me one direction or another based on that kinda 2/3 if I'm right or wrong on that. Just trying to get at what would the implication be of 50% from direct sales channel? If you look at, let's just call the gross margin minus our sales and marketing expense as a company, let's just call that net margin, for example. Mm-hmm. Q4, we were right around 9 percentage points. That's the blend of the dealer channel, telesales, and direct sales. You know, we, you know, as you can see, if you look back at the historical financials of Solcius prior to the acquisition, that number was, you know, in the upper to mid-teens. You know, that is, that is where we're targeting this business to get to, especially as we grow our direct sales channel. I think the 2 number, I would challenge that the cost of that, of that organization of the direct organization is not that much less than other dealer channels. Ultimately, we have to be competitive to bring on these other even third parties that come into our direct sales organization. We need to be competitive from a cost standpoint so that we can generate sales and we're still cost competitive to the homeowners. I think as you're modeling it, I wouldn't be modeling it as aggressive as that. Okay. If I could get another one in. I'm just curious in terms of, you mentioned, fourth quarter originations being down, you know, like the fourth quarter installations are great, sales are fantastic, originations are down a bit. Interest rates and seasonality, you know, are big drivers in that. I'm curious, I guess, the first part of the question would be, you know, was there any kind of potential like a pull forward from Q1 2023, you know, given the lower originations? I mean, were you doing, for instance, you know, perhaps were you doing like promotions in the third quarter and so that drives, you know, higher third quarter originations and then higher fourth quarter installations, but then if the promotion goes away, you get lower fourth quarter originations? I mean, were there any other dynamics like that beyond just seasonality and originations? That's like the first part. The other one would just be, you know, the interest rates part certainly makes sense. For weather or seasonality, you know, I've always known seasonality can have a big impact on installations, but I guess it wouldn't have really occurred to me for originations. In the past, I think you could actually do really well with originations in the fourth quarter, but a lot of times that was maybe also because of an ITC expiration or an ITC step down. There was this, you know, sense of urgency where you could convince customers, you know, do it now or the credits are going away. Can you just kinda course correct me on that in terms of what the seasonality would be on a normalized basis for originations? How weather impacts an origination? Is it just it's raining, so if it's raining, you don't wanna be door-knocking? I mean, does that make sense? I can start and then I'll hand it off to Gaylon for the second part of the question. Seasonality certainly was at play. We weren't marketing to consumers or homeowners any different way in Q4. Typically there is a seasonality impact. I think as we look at Benchmark and other third-party providers of data that showed what's happening with permits in Q4, you really saw a drop in the growth rate and a reduction in Q4. And we think it's a lot of that is driven by the sort of all the effects throughout the year with interest rate increases, dealer fees, changing on loan products, and then all the inflationary pressures that came in. Certainly we felt some pressure in Q4 and into early Q1. What are we doing about that? We're, you know, we have onboarded one new loan provider that has materially lower rates than our existing base. We are also at the same time looking at and we'll be onboarding several new PPA options as well, and we're seeing that growth. I think those changes and those tweaks that we're making in the business are starting to help originations in late February and March, and we're seeing a recovery there. Okay. That's helpful. Yeah, Gaylon, or you can talk about the way that weather or, you know, seasonality and weather impacts originations. Right, 'cause again, it's pretty straightforward, like it's easy to understand if you're climbing up on a roof and doing an installation, it's a lot harder to do if the weather is not favorable. Does, I guess, is it weather seasonality or is it just a different kind of seasonality so that the different channels that lead to originations, whether it's telemarketing or door-knocking, I mean, is it a holidays thing or what is it that causes originations to be lower in the fourth quarter on a more normalized seasonal basis? Sure. Hey, Donovan, this is Gaylon. The seasonality hits us in a number of different ways. First of all, you know, you lose almost a week in November for Thanksgiving. You lose roughly two weeks in December for the holidays. Right off the bat, you're muted originations based on that. With the weather that took place in a lot of California, and when we saw some of these effects in Q1 as we alluded to in the comments and the press release, I think also, you know, it's very hard for the 70%+ of our business that is door-knock origination, for them to get somebody's attention when they knock on the door if there's a serious weather event going on simultaneously. You just, you know, you just don't see them being able to set appointments and being able to have those appointments when the weather is so frightful, if you will. Of course, part of our business is up in the Central United States, in Minnesota and Wisconsin. That part of our business really both originations and installations tail off in the winter because a lot of them don't run electricity for heat, so it's a lower time of year for electrical costs. The same thing, it's just difficult for people to knock on doors and get people's attention when there's other things going on. Okay. Well, as a Los Angeles resident, I will, even though I sounded a bit confused, I will also readily admit that I know that when it rains, everyone in California panics, and we all just hunker down. I think it's raining today. Yeah, I get it. At least that part, it does make sense that we just don't like rain and traffic will shut down. Yeah. We haven't seen anything. Our telesales group is holding great and making sales. We haven't really seen much of a change in the origination there other than what Jason was talking about with regards to inflation. You know, there's still a bit of a sentiment out there that if I'd have bought this a year ago, it would have been a lot cheaper. People are just adjusting to the new reality that it's not going to be cheaper again for a while. Even though the modules have come down some, the loans are so much more expensive than they used to be. Leases are better, but it's still not what they were a year and a half ago. I think there's still some amount of consumer adjustment. There's some amount of sales channel partner adjustment. They're not able to bring in quite the commissions they were able to bring in before, which has created some additional churn in the workforce. It's kind of a perfect storm. I mean, you know, I listen to, I read the, you know, what's going on in my industry. It doesn't seem like this is an isolated challenge that we're in a vacuum in. Yeah. Yeah. No, definitely. Okay, well, I'll get back in the queue. I guess, or, you know, Operator, if there is anyone else, otherwise, I could ask another question, but Operator, is there anyone else in the queue? Yes, there is. Okay. Yes. I will jump back in line. Thank you guys. Our next question comes from the line of Philip Shen with Roth Capital Partners. Please proceed with your question. You guys, thanks for taking the questions. I had a follow-up on the originations theme. You guys talked about some recovery thus far this year. I think, Jason, you were just talking about the new loan provider and the onboarding of new PP options as a reason. Was wondering if you could quantify the recovery thus far. On your slide deck here, you know, you see this drop-off in Q4. You know, we were writing about the recovery in January and February as well, and wanna get a sense from you what the magnitude of that recovery is, and if you could kinda split it up between California recovery or growth versus non-California. Thanks. Let's break the quarter into. I I mean, it's still playing out, we'll break it into two portions of the quarter. I'd say the first six weeks of the quarter it felt a lot like what the, you know, challenges that we had in November and December. That was frankly across many markets. You know, we've been marketing pretty aggressively in California, talking about, you know, how NEM 3.0 changes the economics for some homeowners. We were expecting there to be a lift. That really didn't start to play out until the second half of the quarter here. The second half of the quarter, the originations, you know, just in general terms are much closer to what we're seeing, what we saw in Q3. Now, we have a few more weeks to go, but we have felt encouraged on some of the changes that we're seeing in the business in originations. At the same time, one of our strategies is we have an excellent direct sales force of over 600 people that are very, very well connected in the industry. What they are, we're actually, they're actually promoting Solcius on a broader level to dealers as well to come on to their organization. We're seeing some lift from that as well. I think that's also catapulting us into Q towards the end of Q1, feeling a lot better about the state of originations. I would say California is, without giving specifics, California, was 30%-35% of our business last year, for residential, and we're continuing to see originations be really healthy in California. Great. Thanks, Jason. One of the things we were writing about was potential for the NEM 3.0 transition to cause a huge pull-in so that you have strength in Q1, Q2, and possibly even Q3. With the weaker first six weeks, you know, we think it's probably less likely that we get as much strength in Q3 before a step down in California as a result of NEM 3.0. Do you think, does that kinda mesh with what you see? Do you expect that? 'Cause the applications have to be due by April 13th. My sense is there's gonna be a rush of applications, but then that carries into Q2. Do you think there's some strength given the originations you see now that could serve, you know, Q3 volume in California so that we don't see an inflation drop in Q3, but rather more in Q4? Do you actually see the drop in Q3 now? Thanks. I think it's a little early to tell. You know, California has been strong. We're starting to book out production slots or install slots into Q2. If we continue to see the strength that we have seen over the last several weeks, you know, I wouldn't expect a significant drop-off in Q3. At the same time, I just wanna focus on, you know, we're continuing to bring on new dealers and expand this direct sales. You know, our mindset is if California weakens in the back half of the year, we're aggressively going after other markets that solar is still very economical. Right. That brings up the next thread, which is, you know, you've seen some strengths in California. Have you seen a similar type of recovery in non-California states? We're seeing that in the conversations we're having and the data that we're seeing or accessing. Just curious if, you know, if you guys are seeing the same thing. If so, you know, on a year-over-year basis, would you expect your megawatts, for example, in resi to be flat year-over-year, maybe a little bit down or even slightly up? Phil, I'm gonna stay away from the guidance question right now. Other markets that we're pretty strong in, you know, I think Texas, as you probably saw in other research that was been published, Texas was, you know, a down quarter for new permits applications. We're seeing a little bit of a recovery there. We're seeing the same thing in Arizona and New Mexico, which are strong markets for us. We're bringing on additional support and sales forces in Utah as well. There is some strength there. We'll see how the year plays out and until we can get a little more comfortable with giving guidance. Great. In terms of loan versus lease or PPA, that mix, can you share what it was in Q4 and maybe even 2022 overall, and then what your expectations are for 2023, especially as you bring on some new PPA providers? Sure. Less than 10% in 2022 was PPA. I think we've talked about this in the past, Solcius, even prior to the acquisition, sort of moved with the market and adapted in the past. At one point, they were nearly 100% PPA, and that eventually shifted into loans. That's at the acquisition, it was predominantly loans, loan products. What we're seeing in Q1 so far is it's shifting to be probably up to 20% of PPAs. Again, we're bringing on more PPA products. As we do that, I'd expect this to even move closer to... I think we're targeting being in the 40%-50% range by the end of the year. California, it looks like, you know, with battery options, the PPA option can save money to the homeowner on day one, which is a key selling point. Given that that's 30% of our business, I might have just talked myself out of being at 40%-50% by the end of the year. It might happen quicker than that. Got it. Good. you're seeing a steady mix there or a mix shift, if you will. I know, you haven't provided guidance per se, but, you know, was wondering if you could just give a little bit of color on maybe Q1 or Q2. Sorry if I missed it, but, you know, from, you know, relative to, you know, would originations kinda be the best way to think about what the shape of Q1 revenue might look like, you know, with the Q4 originations there? Of course, commercial could contribute, but typically seasonally it's a weaker quarter. Just curious if you can give a little bit of color on revenue margins as we either get into Q1 or even through the year. Do you see some... It sounds like you do see some expansion for margins, but you were talking about that revenue plus, sorry, the gross profit less the, sales and marketing. Anyway, I'm saying a lot here, but to what degree, to the degree that you can provide color, we would appreciate it. Thank you. Sure. Sure. Look, I'll cover it at a high level. That, that slope that you saw for originations, when you think about the timeline it takes to apply for permits, work with the jurisdictions, work with the customers to get installed, you know, that can be anywhere from, you know, 30 - 90 days by the time you recognize that revenue. That, that downward slope that we saw in originations certainly plays out in Q1, and I think it will be further impacted by the weather events. You know, we talk about install slots, and we lost a higher percent of install slots than we traditionally have in the past in January and February. That certainly impacted us. That was really in Texas, that was in Colorado, in California as well. We had pretty severe impacts. As I look at the year, we would like to see Q1 be the low point, and we build off of that. With the lower revenue levels will likely lead to some margin pressures in Q1. We'd look for that to expand throughout the year as volume improves and as we have more direct revenue, direct sales revenue as well. In our commercial business, the pipeline, I'd say the backlog is we have about $33 million in our backlog today. We'd expect our backlog to grow in Q1 based on recent order activity and conversations with customers. We're, you know, we're anticipating revenue growth throughout the year in our, in our commercial business. again, Q1 is gonna be a little light because, again, revenue was impacted and delivery dates were impacted by the weather in California. Great. That's very helpful color. Thanks for taking all the questions. I'll pass it on. Sure. Our next question comes from the line of Tim Moore with EF Hutton. Please proceed with your question. Thanks. Congratulations on the impressive beat for sales growth. It was nice to see the step up in growth. On the commercial side, which is actually one of my questions, you know, historically the commercial gross margin is a lot lower than residential. Did that help explain some of the gross margin difference in the quarter, you know, besides labor and the weather is a mix effect? We had excellent point. You know, gross margin residential segment is, you know, 47% during the quarter. In the commercial business it's significantly less than that. The, the variations that you see in revenue, between quarters in each of the segments really will drive our consolidated margin. No, that makes sense. you know, I know that Donovan was trying to maybe ask this as part of his set of questions. You just gave some color on the first quarter and weather, but I just wanna make sure that, you know, the sales beat, which was pretty strong, didn't pull forward a lot from the March quarter, you know, given the backlog came down and originations were a little bit soft because of the door-to-door knocking. you know, just wondering, were there any kind of big commercial orders or residential orders that might have gotten done at the end of the quarter that you thought you were probably gonna do in January? The short answer is no. We had some pull forward in our commercial business of some revenue being completed earlier, we're talking $1 million-$1.5 million pull forward, but nothing significant for the financials. Okay. That's helpful to hear. I know that you gave the comment earlier on this in your opening remarks, which was nice to hear the direct sales team and residential, you know, getting eventually to a run rate maybe of half the sales. Just to clarify, was that the goal, you know, maybe an exit run rate for, you know, December or the end of this year? Or was that more of a 2024 goal, the 50%? Our goal is to be at 50% when we finish Q2, and it may happen earlier than that. again... Good ... we're thinking about this from a perspective of we wanna build all sales channels. We see value there in growth. We wanna make sure the economics of the various deals make sense for both the sales channel and for us. We will continue to negotiate and go down both paths. Again, we do like the direct sales part of the organization. We have some more control over the sales process and all the benefits that come with that. That's why we keep talking about, you know, why it's so important to Sunworks. Good. Again, I just had a related question to that. You know, obviously it's a lower customer acquisition cost and, you know, higher, you know, contribution margin from the direct side. Are you seeing your direct sales team as they've ramped up on productivity, are they triggering more, you know, system upgrades or insurance products or any other type of ancillary products over the last couple of months? We will call them adders. Those adders could be the. It could be a battery being added or EV or an insurance product like you mentioned, and we do see that. We do see a higher attachment rate on those specific adders, which, you know, just because I think it's just a different sales process and they're working through how do we, you know, optimize every sale that we have with a homeowner and provide the best service at the same time. Good. I know you alluded to this earlier on in one of your comments was, you know, it sounds like the cross-selling starting, you know, with the power storage systems and EV charging stations, residential. Are you starting to see inroads for commercial customers for those type of products already? Yeah. We absolutely are. We hired a business director, business development director at the middle of last year, solely focused on fleet and commercial EV charging. We're now appending to or adding to, you know, virtually every proposal that we send out the option for EV charging. Where it makes sense for the customer, we do offer and install a number of energy storage solutions for the commercial side. That's great to hear. My last question, if I recall, I don't remember, sometime last year you added an internal chief legal officer for local permitting oversight. How's that panning out? Do you think that'll give you know, more speed in these other markets that you were, you know, talking about where you're seeing, you know, Arizona and New Mexico and some other good growth expansion opportunities? I will say that the CLO hire that we made is one of the best hires I've made at this company. He's tireless and his team has improved and increased our professionalism and timeliness in everything that we do that they touch. Really just a running endorsement for that leader and his group. And I must say that, you know, they are not only addressing, you know, permitting and licensing challenges and things like that, but also in those instances where a customer decides he or she may not wanna continue the customer journey to installation, they get involved and they're helpful. There's many times where they've convinced the customer to continue and approve it makes sense. They're touching more areas of the value stream than I had expected, and they're doing a great job. Terrific. Well, thanks Gaylon, Jason for answering those questions. That's it for my questions. Next question is a follow-up question from Donovan Schafer. Please proceed with your question. Hey, guys. Thanks for taking my follow-up questions. I know I can get a bit greedy on asking questions, but, you know, if the opportunity is there, I'll take it. I wanna ask for C&I, you know, gross margins. You mentioned that there was a mix impact on C&I gross margins in the quarter, in fourth quarter. I'm just curious, what is it from a mix standpoint? Is it certain types of projects, like maybe EV charging versus solar versus storage? Or is it the size, you know? Is it, yeah, disproportionately larger projects versus disproportionately smaller ones to get... You know, what are the different buckets there where you had a higher mix of it in the fourth quarter? Yeah. The couple things there. One, the public works projects are, competitive is the wrong word, but they tend to be larger, and they tend to as in correlation, with most construction projects, the bigger they get, the lower the margin percentage. The public works group had a significant contribution, as Jason mentioned, to the Q4 revenue and that contribution comes at a slightly lower margin. What also is important is the timing. You know, we don't necessarily recognize full profitability on every milestone on the commercial construction project. It's pretty typical in construction to take most of the margin at the end, and really just to have your revenue recognition be very closely related to costs as your milestones along the way. Unlike residential, where we take the entire revenue at the end, in the commercial project, we usually between five and nine discrete milestones and really the only margin flow through is the last couple of miles. Okay, that's really helpful. Then so for the C&I backlog, you know, at year-end, 2021, you had $18 million in C&I backlog, and then you did I think $21 million in C&I revenue in 2022. You know, now you have $32 million in backlog at the end of this year. I'm wondering, you know, do you expect all of that to fall, you know, all of that C&I backlog to become revenue in 2023? Or maybe even some, you know, that you might end up somewhere north of that just 'cause, you know, that would be the best revenue year in C&I for you guys since, you know, 2019, I think before Gaylon, you know, that came down a bit because you were trying to rework the process and make sure that it was profitable. You know, it gets us back to those, you know, those higher revenue levels. It'd just be great to get a handle on whether, you know, that $32 million is a good sort of floor for 2023 or if there actually maybe is a chunk for 2024, so we can't really kinda make that type of inference. Yes, we have $33 million of backlog at 12/31. I did mention that we're going to see a backlog increase when we report our Q1 numbers in early May. There will be some bleed over into 2024. At the same time, we're also working through negotiating and finalizing contracts that could be supportive of additional 2023 revenue. We are while we're cautious, we do see that there could be some upside throughout the year, but again we need to execute on executing contracts and the sales organization executing. We really are pushing this business to be in excess of $50 million of revenue on an annual basis or at least on a run rate basis. That once we're into that $50 million-$60 million range, we're starting to think about being positive EBITDA as a segment. Okay. Okay. Fantastic. Awesome. Thank you, guys. really appreciate taking all the questions. I'll take any of the other ones offline. Have a good one. Thank you. Thank you. There are no further questions in the queue. I'd like to hand the call back to management for closing remarks. Once again, thank you everybody for joining our call. Should you have any questions, please feel free to contact us at ir@sunworksusa.com, and a member of our team will follow up with you. This concludes our call for today. You may now disconnect. Again, thank you. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.