Greetings, and welcome to Sunworks' third quarter 2023 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 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 third quarter results of 2023 conference call. Leading the call with me today is our President and CEO, Mark Trout. 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 up our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to Mark. Thank you, Jason, and welcome to those joining us today. As detailed in our third quarter earnings release issued earlier today, the last several months have continued to be a challenging period for both Sunworks and the residential solar industry at large. We continue to believe in the long-term economics of residential solar and storage, particularly as the demands of a growing population weigh on our nation's aging electricity infrastructure, which we believe will result in structurally higher utility rates for customers over time. During the third quarter, the combination of higher interest rates, less favorable residential solar economics in California following the NEM 3.0 transition, continued to weigh on us and the industry at large, resulting in lower new installation activity and reduced fixed cost absorption in the period. During a transitional period for our residential business, we've maintained an opportunistic pricing strategy in accordance with current demand conditions. At the same time, we've taken decisive action to further right-size our cost structure, including several rounds of reductions in force. We have retrenched and focused on markets where we believe we have volume and efficiencies to stabilize and maintain an appropriate cost structure. We continue to improve our internal processes with significant focus on customer cycle time improvement, installation, crew efficiency, and cost management. We are seeing improved conditions in supply chain availability and material pricing, which we anticipate continuing into the next quarter or two. Turning now to a discussion on our commercial solar energy business. Our commercial business had an outstanding third quarter as revenue more than doubled on a year-over-year basis, while gross profit margin rate increased to more than 16% in the period. Customers in the commercial and industrial space, as well as the municipal markets, continue to seek out EPCs who have deep industry expertise and who have the capacity to install. This sector should continue to grow throughout 2024 and into 2025 as the economics of solar and storage in C&I space continue to improve. The growth in the EV charging sector continues to grow, and Sunworks is positioned to capitalize on that growth. This market has been a strategic focus for us at Sunworks, and we are gaining traction as a significant EPC in commercial EV charging solutions. Looking ahead, we will remain focused on our strategic growth priorities, building regional market-leading positions while implementing market-based pricing coupled with targeted cost reductions that put us closer toward achieving a positive EBITDA consistent with our long-term objectives. Given the tailwinds of the Inflation Reduction Act as well as the increased demand in the commercial space, we anticipate being well positioned to capture the momentum in our business entering into 2024. As before, the market opportunity for solar remains significant across our geographic footprint, positioning Sunworks to play a leading role in the transition toward affordable, clean, and independent energy production. With that, I'll hand the call over to Jason for his remarks. Thank you, Mark. Beginning with a summary of our third quarter financial performance, Sunworks generated total revenue of $28.7 million in the third quarter of 2023, a decline of 29.5% versus the prior year period. As positive momentum within our commercial segment was more than offset given the ongoing market challenges within our residential segment, which Mark referenced earlier. While higher interest rates have increased the total cost of rooftop solar for homeowners, we continue to believe the long-term macro trends of solar to be favorable to consumers and businesses. Similar to last quarter, higher rates remain a headwind for our business. As a result, residential segment revenue was $20.3 million, a 44.5% year-over-year decline. Within our commercial solar segment, we continue to execute on the strategy to diversify our customer base and operate at scale. Revenue increased to $8.3 million, over double the prior year. Total gross profit was $8.2 million, or 28.5% of sales, compared to $19.5 million or 47.9% in the prior year quarter. Several factors contributed to the reduction in gross margin. First, approximately 28% of our revenue was derived from our commercial segment, versus approximately 10% in the prior year. The commercial segment's model is less focused on sales and marketing, and as a result, has a lower gross margin profile. Additionally, gross margin within the commercial segment improved from 1% in the prior year quarter to approximately 16% in the current year quarter, due to improved operational execution and higher volume. Offsetting this improvement was under absorption of labor costs in our residential business, as lowered originations led to underutilized labor capacity. Throughout Q3 and into Q4, we took action to strategically reduce markets that are not operating at scale. This strategy will allow us to focus our sales and marketing in key markets with favorable economics and the ability to scale operations. Since the end of Q2, we have reduced our labor costs by approximately $6 million annually. During Q3, we identified triggering events within our residential segment, including the negative impact of rising interest rates and due to our market capitalization. As a result, we incurred a $26 million non-cash impairment charge to the goodwill associated with the Solcius acquisition. We generated a net loss of $36.4 million in the third quarter of 2023, or $0.84 per share, versus a net loss of $5.4 million in the prior year period, or $0.16 per share. Included in the net loss in the quarter is the goodwill impairment, which represented $0.60 per share. Adjusted EBITDA was a loss of $8.5 million during the quarter. As of September 30, 2023, the company had cash and cash equivalents of $2.4 million. 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, we will now 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. So I first just want to ask if you can give us any color on what you are expecting currently for the fourth quarter. You know, do you think you would be just sort of directionally up sequentially, down sequentially? And if you could break it out by residential versus C&I, that would be great. Thank you. Morning, Donovan, it's Jason. Yeah, I think we're still- the backlog in our residential business has declined to about $35 million at the end of the quarter. So that- the business in Q4 will coincide with the likely with the backlog reduction year-over-year. Within our commercial business, we've been building throughout the year the backlog and the business, the backlog did end the quarter at about $30 million. million. But that's giving us nice visibility into the next several quarters. And I would say that we're still very optimistic about the pipeline of opportunities that we're -- and the award of contracts that we're looking to close here in the next one to two months. We think that that business is going to be operating at a better scale in the coming quarters. Okay. And then, as a follow-up question, if we're talking about, you know, I appreciate the update on the cash position. Could you talk us through, maybe in the next few quarters, how you think about managing sort of overall, you know, working capital, like liquidity position? If you've got, you know, a certain goal or target, around what kind of cash burn rate you might have, again, over the next few quarters, kind of how you navigate and manage that, that would be great. Yeah, I think we have a few levers when it comes to cash. You know, the first positive lever is, you know, a lot of the times when we're signing contracts on these large commercial contracts, those will come with deposits. That could be anywhere from, you know, 5%-15% of the contract value. So that could be material for us. But that's again, those tend to be lumpy and that would likely be over the next one to two quarters. Within our residential business, you actually have the benefit of working capital improvements or benefits as your business declines because you're still collecting on contracts from customers that you recognized revenue in previous quarters. So that's certainly an option for us as well, and one that we're actively managing. Okay, and then with the, I guess, for the, the backlog conversion rate, I mean, you talked about it coming down for residential. It does look like, you know, if I look back a year ago, you could kind of take the prior quarter's backlog and figure that, something like 60%-70% of that, talking about residential, would convert in the next quarter. But, you know, this quarter it looks like it's down to about 40% of converting the backlog. Is that kind of a new run rate that we're at with the way the market is right now? Or, is that something we should expect to, you know, rebound and, head back up towards the 60%-70%? And if so, you know, over what time period? Yeah, I think there were some anomalies over the course of the next year with many of the challenges that we had in California with utilities and jurisdictional approvals post NEM 3.0. So I think we're still managing through that period. You know, we're seeing the approval queues shrink dramatically and reverting back to historical norms. So I think as you look at our backlog and the conversion, that should revert to historical norms as well. Okay. If I could squeeze one more in, I just, it caught my eye, the mention of IPP customers in the C&I space. Can we just get an update and maybe some more color there in terms of you know, what the opportunity is? How big projects are you potentially in a position to potentially win there? I mean, are you talking about 100+ MW projects or just any color there would be great? Donovan, this is Mark. Right. I can probably take this one, Jason, but I think you know, when you think about it, our sweet spot is probably not quite up to 100 MW yet. So we're seeing some of those come through. But as we look to expand and also diversify in some of the markets there, you know, we're definitely trying to stay in the flow of deals and where the EPC demands are coming from. So that's not off the table by any means, but our sweet spot seems to be just under that. Okay. Thank you. I'll take the rest of my questions offline. Our next question comes from the line of Philip Shen with Roth Capital Partners. Please proceed with your questions. Hey, guys. Thanks for taking my questions. I wanted to follow up on the liquidity and cash flow question. Specifically, can you talk about what the cash burn was for Q3? You didn't have financial statements with your release. And then what do you expect it to be for Q4? And then I didn't hear the cash position, so what was it at the end of Q3? And how do you expect that to trend as we go through Q4? Jason, you were talking about working capital improvements, so was wondering if you could quantify, you know, what the inventory and AR positions were at the end of Q3, and how much that could translate to cash as well in Q4? Sure. We ended the quarter at $2.5 million of cash. I believe our Q2 was right around $4 million. We did have a capital raise in that quarter, and we also had proceeds from our ATM that's on file at the SEC as well. So that was a positive from a cash flow perspective. So the delta is the cash burn in the business. Working capital was relatively flat, and the EBITDA loss was about $8.5 million. As we believe that many of the actions that we've taken from a headcount perspective and consolidating some of these markets will reduce this cash burn. And then as well as the commercial business, the revenues are growing and we're approaching positive EBITDA in that business, so that's going to be a tailwind for us as well. And we did have in our filing that inventory. We still have about $10 million of AR. And I would say there's a couple opportunities in there. We have older accounts that we're just working to clean up so that we can get to PTO with our residential business. There's several million dollars in that category that we're actively targeting to bring in cash. And then we have a effectively an underutilized factoring line right now that we're looking to expand or to add more customers into that population. That will allow us to free up some cash flow as well. Inventory during the quarter was about $16 million. Again, we have quite a few of the modules that are available for our commercial business, so we're not having to make those purchases right now. So that's going to be a benefit to working capital as well. And then within our residential business, we are still you know, managing sort of just in time when it comes to inverters and module purchases. So there's not a lot of opportunity, frankly, in our residential inventory, but I think there is in our commercial business. Got it. Thanks for the detail. Then as it relates to that factoring line, you said it's underutilized. Can you talk through how much capacity there might be, and then how much more you might want to expand that by? We have a—our factoring line is about $2.5 million. I don't have the number in front of me at what it was utilized at the end of, at the end of Q3. I believe it was $1.5 million, but I, I could be, I'll have to follow up with you if that's not the correct number, but it will be stated in our Q. We think there's opportunity to expand that facility by, you know, $1 million-$2 million. And certainly, I think the business levels that we're going to be operating at could support that. So we're targeting that as well. Okay. Thank you. And then looking at margins for Q4, I heard the commercial margins for Q3. You improved year-over-year, I think from 1% to 16%, but I didn't hear the resi margins for Q3. Can you share what they were, and then, what you expect both segments to be in Q4? Thanks. Q3 gross margin in our residential business was about 33.7%. You know, that is down historically, just driven by the fact that we've had many of these markets that have been underutilized, and we have underutilized crew capacity. We've made, as we mentioned on the call, in our prepared remarks, we've made many reductions over $6 million in the past four to five months. That's going to help us drive margin improvement within the residential business. And then we're starting to see some lower cost procurement and materials coming through as well. So that will give us a little bit of lift here, probably at the end of Q4. But again, I think we're making a lot of these changes in some of these markets, and not all of the benefits will be baked in in Q4. So I think this is a gradual recovery into next year. Okay. So, margins in Q4 could be similar to what you saw in Q3. Is that a fair way of thinking about it? Within our commercial business, I think there might be a little bit of upside there, relative to the 16%. You know, we're targeting when we're quoting with our customers and holding our operations teams accountable, to manage above 20%. So, over the long term, we'd like to see some improvements there. And then in our residential business, I think there'll be some lift in Q4, but not materially. Right. Okay, great. You talked about exiting a few markets. Can you talk about which ones you left, and then of the remaining revenue mix on a go-forward basis expected, what's the mix of California for your business going forward for the resi business only? So the California resi mix versus the next biggest one. Thanks. Hey, Phil, it's Mark. You know, in terms of some of the markets, what we did is we closed down a couple that were underperforming, underutilized. We had a shift in a few of our dealers, as a result of the NEM 3 change in California. And so I think what you're seeing is kind of that transition that you're probably seeing across the industry, back from loans to more of a TPO kind of model in California, and we're going through that just like everybody else. So California, as we shift back over to probably more TPO, is gonna probably come back, we're expecting, maybe not to its pre-NEM 3 levels quite this year, but we do expect that to come back. California, we are still active in, we're gonna remain active there. And then really, some of the markets that we've exited have been where they've been less focused from our direct sales team and more focused from dealers. And as dealers have lost some of their volume, we've chosen to reduce our EPC footprint. I think there's a list of those in the earnings announcement. A list of the markets you exited? A list of the ones we're staying in. Staying in. Okay. So is California about 50% of your business still, or, or is it a little bit less or more? It's actually less of our business right now. We're seeing actually a shift in some of the other markets have really come on strong, and that's probably due to AR focus as well as there was a lot of backlog, frankly, I think that all of us felt in the lead up to NEM 3.0. We've been working down that backlog. It kind of created a normal slowing right after NEM 3.0, and so that's just kind of bouncing back. Right. So we're probably about 30% California right now, if I do some quick math. Okay. So given your commitment to staying in California, and given the transition to NEM 3.0 and storage... What's your bookings momentum currently? Is it still down on a year-over-year basis? When do you expect your originations to perhaps be up year-over-year? Sunrun has talked about, you know, maybe breakeven near term, but I know others are having trouble or a harder time. So just curious, do you see that in Q2 of next year, maybe Q3, or could it be sooner? Thanks. Yeah. So I think what we're looking at right now is our falloff has stabilized, and we're actually operating on a month-over-month that seems pretty consistent. So I would assume, you know, and I don't wanna bring weather into the occasion here, but I would assume that we see stable through the rest of Q4 with maybe a little bit of uptick as we add some more TPO offerings. And then I think Q1 will kind of be stable in California, and we'll see something tick up in Q2. A lot of that is due to, I think, the rush to get signatures before NEM 3 came out is over, of course, and now the consumers are back to normal, so to speak. We saw some of this in the NEM 1 to NEM 2 transition, where it took a couple of quarters for, frankly, the consumers to return to normal, and that's what we're seeing right now. Got it. And storage attach rates for the originations you have today, are you at that 85% level, or do you think it's more like 30%? Is storage basically their ticket to these originations now? In California, that's gonna continue. So we are looking at- Yeah. Yeah, for California, that's pretty normal. Okay, great. I could keep on going, guys. I know I've monopolized a lot of the time. Hopefully, it's helpful for people and for you guys. I'll pass it on, but I have a few others. If there's nobody else, I might jump back in. Thanks. There are no other questions in the queue. I'd like to hand the call back to Mark Trout for closing comments. Great. Well, thanks, everybody. And once again, thanks for joining the call today. Should you have any questions, please feel free to contact us. Our email address is ir@sunworksusa.com. A member of our team will follow up with you, and this will conclude our call today. You may now disconnect. 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.