OneRoof Energy Group, Inc. ("OneRoof Energy" or the "Company") (TSXV:ON) today announced financial and operational results for the third quarter ended September 30, 2014.
Q3 2014 Operating Highlights
Reduced overhead expenses by approximately 25% in September
Deployed 0.74 megawatts during the third quarter; cumulative for the nine months ending September 30 was 2.4 megawatts
Installed solar equipment on 119 rooftops in the third quarter; cumulative installs for the previous nine months was 378
Total cumulative megawatts deployed reached 10 megawatts
Gross bookings totaled 555 systems during the quarter, an increase of 36% year-over-year
Average project cycle times reduced by 19.5% from 103 days to 80 days;
California project cycle times decreased 26% from 101 days to 74 days
Q3 2014 Income Statement
Reduced overhead expenses by approximately 25% in September due to a reduction in the direct sales force and increased sales activity via third party sales affiliates. This expense reduction was made possible by the launch of the new $58 million residential solar financing fund completed in August 2014.
For the third quarter of 2014, core operating lease revenue was $267,000, up 9% from $240,000 in the third quarter of 2013, continuing the trend of increased cumulative operating lease megawatts deployed.
Sold system revenue for the third quarter of 2014 was $1.2 million, compared to zero in the third quarter of 2013. Total revenue for the third quarter 2014 increased to $1.9 million from $249,000 in Q3 2013.
Gross profit margin on held leases was 24.6% in the third quarter; gross profit margin on sold systems was less than one percent in the third quarter. Consolidated gross profit (loss) margin was (9.5%).
Total operating expenses were $9.4 million for the third quarter of 2014 as compared to $7.6 million in the third quarter of 2013. Headcount increased year-over-year as operations expanded into Massachusetts and New York during 2014. In addition, the increase in marketing and advertising costs year-over-year was due primarily to our investment in lead generation during the first half of 2014. In the third quarter, we scaled back our lead purchasing program to focus on lead generation programs with the highest rate of return on our investment.
Loss from operations in the third quarter of 2014 was unchanged at $9.6 million as compared to $9.6 million in the third quarter of 2013.
IFRS net loss attributable to stockholders per basic and diluted share was $(0.21) for the third quarter of 2014 compared to $(3.41) per share for the third quarter of 2013.
Financing Capacity
During the third quarter, the Company announced that New Resource Bank provided approximately $2 million in debt financing which lowers the cost of funds on a pool of existing projects and provides additional working capital for the Company.
In addition, an agreement was reached in August 2014 with an unrelated third party to secure equity for a $58 million capacity residential solar financing fund which, when combined with debt, will support an estimated portfolio of more than 2,000 residential solar power purchase agreements to be originated initially in California, Hawaii, Massachusetts and New York. This partnership expects to recognize investment tax credits under the American Recovery and Reinvestment Act of 2009.
Further, as announced on November 24, 2014, Black Coral Capital LLC and the Company have entered into a non-binding term sheet for a financing designed to provide the Company with an additional $15 million of capital from Black Coral and other investors in the form of secured convertible promissory notes with a maturity date of 12 months from issuance. It is anticipated this funding will (1) provide an additional $8 million of new funding; and (2) replace approximately $7 million of remaining aggregate funding capacity under the existing sponsor equity and working capital facilities announced in October 2014. Amounts outstanding under the working capital facility currently mature at December 31, 2014, and Black Coral has indicated its intent to roll over amounts outstanding under the working capital facility into this new facility thereby extending the maturity date for these funds. Hanwha Holdings (USA) remains a significant shareholder of the Company. This transaction is subject to the preparation of mutually-acceptable documentation, TSX Venture Exchange approval and other conditions.
The Company continues to build upon its project tax equity fund base with additional funds under negotiation.
Management Comments
"Strong operational and sales trends in the third quarter have provided us with excellent momentum leading us toward the end of the year," commented David Field, President and Chief Executive Officer. "As we began the third quarter, we picked up speed by transitioning our sales strategy from a direct channel model to driving sales through third party channels including a number of home services partnerships. This, combined with our ongoing efforts to integrate sales and operations for the purpose of reducing cycle times, has begun to result in improvements demonstrated by reduced cycle times on projects."
"The operational efficiencies that we have seen this quarter, including the reduction of installation cycle times, is a result of continuously adding qualified installation partners across multiple markets, as well as aggressively and deliberately examining all aspects of our operations. We have successfully outsourced project site surveys while integrating the process into the sales cycle resulting in control of all key variables including project design and permitting, reduced installation cycle times, customer service improvements and significant reductions in cancellation rates. Through the culmination of operational and sales improvements, we are driving down one of the key components to reaching profitability – the cost of customer acquisition. In fact, our cycle times continue to improve and during the past month we have decreased cycle times from an average of 80 days at the end of the third quarter to our current cycle time of 45-60 days."
"The launch of the new $58 million residential solar financing fund has been a game-changer for our business. One of the many benefits of this new solar fund is attracting additional sales channel partners by providing new sources of capital and increasing their sales capacity. In addition, the new fund has allowed us to expand into new high-growth markets more rapidly, and offer more efficient sales and installation processes while simplifying the financial and equipment requirements. We continue to focus on improving organizational efficiencies, reducing customer acquisition costs and cancellations, and installing more systems. We firmly believe this new residential solar fund will drive many of these efficiencies while realizing better contribution margins on the systems transferred to the fund."
"When finalized, the recently announced facility with Black Coral Capital LLC will enable management to focus upon its forward business strategy and its short-term operating goals by leveraging our third party transactional platform, enabling dedicated sales channel partners, and rolling out our proprietary direct-to-consumer technology."
"In summary, many of the changes implemented during the third quarter are showing signs of improvement, but are not reflected in the Q3 numbers. We anticipate that during the fourth quarter 2014 and first quarter 2015, our efforts will flow through to the corporate results," added Field.
