Nov. 6, 2013 - Real Goods Solar reported results for the third quarter ended September 30, 2013.
Q3 2013 Highlights
Achieved substantial improvements in top and bottom line performance: Net revenue increased 64% to $34 million from $20.7 million in the previous quarter and up 29% from $26.4 million in the same year-ago quarter. Adjusted EBITDA loss narrowed to $0.6 million from $5.1 million in the year-ago quarter.
Deployed solar energy systems totaling 10.7 megawatts (MW) bringing the cumulative total deployed in the first nine months of 2013 to 21 MWs. The company has now installed more than 16,000 solar power systems to-date.
Improved productivity and reduced costs: Operating expenses decreased from $11.1 million or 42% of revenues in the third quarter of 2012 to $8.1 million or 24% of revenues in the current quarter.
Acquired and initiated the integration of Syndicated Solar, with regional offices in Grand Junction, Colorado, and in the St. Louis, Missouri, and San Jose, California metro areas. The acquisition, effective August 9, 2013, expanded Real Goods Solar's residential sales capabilities, adding more than 40 employees and highly-capable senior management. The company achieved record residential backlog at the end of the third quarter.
Signed a definitive agreement to acquire Mercury Energy in a merger transaction, one of the leading installers of solar energy solutions on the East Coast. Mercury's assets include approximately $10 million of cash, and has no debt. Upon closing, Mercury will bring nearly 50 employees to Real Goods Solar. The transaction is subject to Real Goods Solar and Mercury shareholder approval.
Q3 2013 and First Nine Months 2013 Financial Results
Net revenue for the third quarter of 2013 was $34.0 million, up 29% from $26.4 million in the same year-ago quarter. For the first nine months of 2013, net revenue was $71.4 million, up 8% compared to $66.1 million in the same year-ago period. The improvement in both periods reflects an increase in the number of solar systems deployed as well as a greater proportion of revenue attributable to residential system deployments. Residential systems typically have a higher sales price per watt than commercial systems.
Gross profit was $7.3 million or 21.4% of net revenue in the third quarter of 2013, compared to $5.7 million or 21.8% of net revenue in the quarter last year. The increase in gross profit for the third quarter reflects the increase in revenue. For the first nine months of 2013, gross profit was $16.6 million or 23.3% of net revenue, compared to $17.5 million or 26.5% of net revenue in the same year-ago period. The decrease in gross profit for the nine month period is primarily attributable to lower average sales prices compared to the same year-ago period.
Total expenses were $8.7 million for the third quarter of 2013, including one-time charges of $0.6 million for acquisition related costs incurred in conjunction with the completed acquisition of Syndicated and the pending acquisition of Mercury. This compares to total expenses in the third quarter of 2012 of $33.2 million, including a one-time charge of $22 million related to the impairment of goodwill. For the first nine months of 2013, total expenses were $24.6 million, including the one-time charges of $0.6 million, which compares to $51.9 million in the same year-ago period (which included a one-time charge of $22 million related to the impairment of goodwill). The decrease in operating expenses in both periods is primarily attributable to improved productivity, cost management and cost control.
Loss from operations in the third quarter of 2013 declined to $1.4 million from $27.4 million in the same year-ago quarter. For the first nine months of 2013, loss from operations declined to $8.0 million from $34.4 million in the same year-ago period.
Net loss for the third quarter of 2013 was $2.1 million or $(0.07) per share, improving from a net loss of $39.0 million or $(1.46) per share in the same quarter last year. The decrease in net loss reflects higher revenue and gross profit as well as lower operating expenses. The net loss for third quarter 2012 also included the charge related to the impairment of goodwill as well as income tax expense of $11.5 million. For the first nine months of 2013, net loss was $8.8 million or $(0.31) per share, improving from $43.4 million or $(1.63) in the same year-ago period.
Adjusted EBITDA was a loss of $0.6 million in the third quarter of 2013 versus a loss of $5.1 million in the third quarter of 2012. For the first nine months of 2013, adjusted EBITDA was a loss of $6.4 million versus a loss of $11.1 million in the same year-ago period. The company defines adjusted EBITDA as income or loss from operations before interest, depreciation, taxes, non-cash stock-based compensation and the one-time charges described above. See "About Presentation of Adjusted EBITDA" below for the definition of adjusted EBITDA, a non-GAAP financial metric, and an important discussion about the use of this metric and its reconciliation to GAAP net income, the most directly comparable GAAP financial measure.
Cash totaled $2.3 million at September 30, 2013, as compared to $6.9 million at June 30, 2013. The company had no outstanding borrowings under its $6.5 million revolving line of credit with Silicon Valley Bank (SVB) at September 30, 2013. Subsequent to the end of the quarter, total credit line capacity with SVB increased by $2 million to total $8.5 million to fund the early payoff of loans from the company's former largest shareholder, Gaiam. As of today, there is approximately $2 million borrowed under the SVB line of credit. The anticipated closing of the Mercury acquisition is expected to add approximately $10 million in cash.
"In the third quarter of 2013, our continued focus on growth, productivity, and cost management resulted in dramatic top and bottom line improvements sequentially and year-over-year," said Real Goods Solar CEO Kam Mofid. "The integration of Syndicated has substantially increased our capabilities, resulting in record backlog of residential projects as we began the final quarter of the year. The strong continued growth in sales and installation backlog has created some short-term capacity constraints, particularly in engineering and construction. While this is expected to affect revenue growth in the fourth quarter, it leaves us strongly positioned as we enter 2014."
Tony Dipaolo, CFO of Real Goods Solar, commented: "We have made substantial improvements in all facets of the business in the past 12 months and especially in the third quarter, as demonstrated by our strong top and bottom line results. Yesterday we also reported the payoff of $2.6 million owed to Gaiam, which represents a major milestone for us. To fund the repayment, we obtained additional financing from Silicon Valley Bank under better terms, which we believe represents a strong vote of confidence in our management and the progress we have made. In conjunction with the repayment, we also terminated legacy agreements which provided certain special rights to Gaiam. Altogether, these changes vastly simplify our ownership structure and reduces risk for our shareholders, and we realize a $300,000 discount by repaying the debt early."
The company expects fourth quarter 2013 revenue to be between $34 million and $39 million or between $105 million and $110 million for the year excluding Mercury. The company believes that it will be adjusted EBITDA positive in the fourth quarter of 2013. Revenue for Mercury is expected to be $17 million to $20 million for the year ended 2013.