RGS Energy, Inc. (NASDAQ:RGSE) Q3 2016 Earnings Conference Call November 9, 2016 4:30 PM ET
Dennis Lacey – Chief Executive Officer
Good afternoon and thank you for joining us today to discuss RGS Energy’s Third Quarter Ended September 30, 2016. With us today is the company’s Chief Executive Officer, Dennis Lacey. Before the conclusion of today’s call, I’ll provide the necessary cautions regarding forward-looking statements made by management during this call. We would like to remind everyone that this call is available for replay through November 15th, starting this afternoon. A webcast replay will also be available via the link provided in today’s press release, as well as available on the company’s website at rgsenergy.com.
Now, I would like to turn the call over to the Chief Executive Officer of RGS Energy, Mr. Dennis Lacey. Please go ahead, sir.
Good afternoon everyone, and thank you for joining today’s call. First off, as we have previously discussed, our strategy has been to reduce the cost to operate RGS so that our required level of fails is also reduced, making it such that once we are better capitalized, we could execute our plans to grow revenue and initially achieve breakeven results and thereafter profitability. As such, the missing ingredient, if you will, has been capital. Unfortunately, we did not receive the proceeds from the convertible preferred offering until September 14, 2016 and additional cash releases from the restricted cash account for the April notes until October. This presented challenges for us and made it such that we cannot grow our revenue hence, the disappointing financial performance for the last two quarters. Our team believes we can do much better than this when we have necessary capital to grow our revenue.
As such, the last six months have been focused on obtaining this capital and unfortunately not on growing revenue. Although the revenue for the quarter was disappointing as I explained, we were very successful executing our strategy to reduce the operating cost of the company. This is an important goal because the reducing our fixed cost structure, we have lowered our future quarter’s revenue target for breakeven operation. To the amount that the company has achieved in the past and if we achieve such revenue targets again in the future, it should create a profitable result as the cost have been reduced. This is illustrated in our investor presentation posted to the Investor Relations section of our website. In fact, when comparing the net cash outflow from operation for the first nine months of 2016 compared to the same period for 2015, we improved the cash flow by approximately $8 million, a material amount.
We believe until we begin to fully receive the cash from our capitalizing activity, we will not be able to fully execute our business turnaround. We discussed in last quarter’s call that we are intently focused on raising capital and I believe we have been successful in arranging for new capital that we expect to be able to deploy in the coming month. The financial capital we have arranged our complex financial instrument for which the applicable accounting rules required us to show some items of fair value and significant non-cash items are recorded. For the third quarter, we reported $4.6 million of such charges. So 60% of our net loss is from this accounting. Included in the press release is a schedule of our comparable results from quarter-to-quarter without such non-cash item.
On that basis, our comparable net loss this quarter is roughly the same as it was for last quarter. Although our revenue has suffered from the lack of access to the capital we need to grow, we mitigated this by reducing our cost and this is why the comparable net loss is relatively constant for recent periods. Reducing our cost also has the dual benefit of reducing the amount of future sales and installation revenue required to breakeven results and better results in the future.
As detailed in today’s press release, we received net proceeds of $3.8 million from stock and warrant from our September convertible preferred offering. We also received $5.1 million in cash during October from our April convertible note offering and we expect to receive an additional $3.1 million during the remainder of 2016. I’m very glad to be able to say that we have been successful with our capital raising effort. These funds will allow us to pursue our strategy of growing revenue and achieving our goal of breakeven and better results.
We previously disclosed that we are working on meeting NASDAQ’s requirement for the amount of minimum shareholders’ equity and also that we have a meeting scheduled with NASDAQ to discuss our situation on December 15, 2016. Please understand that we continue to be listed on NASDAQ. So we have made progress on our efforts to arrange with the additional financial capital which is necessary for executing our business turnaround strategy. We must be very transparent to investors about our turnaround strategy, the elements of that strategy to achieve breakeven results or better results and the level of revenue necessary to achieve future breakeven results.
As I mentioned earlier, in the Investor Relations section of our website is our most recent investor presentation and a review of that document will provide you with much more information about our business and plans that are conveyed during this call. Our team has been together for some time now. We know what we need to do and we are confident that we have the right strategy with our focus on cash sales as opposed to leasing. We are very optimistic about our future prospects now that we have arranged for additional capital that we expect to become available during the coming months. We will not – a dime, we plan to extend our sales force and train our new salesperson, something we have done before and spend money for marketing, generate new sales and grow our backlog that will subsequently be converted to revenue upon installation.
To recap, we are optimistic about future prospect adding a range for additional capital that we expect to be deploying during the coming months. Thank you all for joining us today and we look forward to updating you on our project in the future.
Operator, please go ahead and wrap up the call.
Thank you. Before we end today’s presentation, I would like to take a moment to read the company’s Safe Harbor statement that provides important cautions regarding forward-looking statements.
Today’s communication includes forward-looking statements that involve risks and uncertainties. Forward-looking statements that are neither historical facts nor assurances of future performance, instead they provide RGS Energy’s current beliefs, expectations, assumptions and forecasts about future events and includes statements regarding its future results of operations and financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations.
The words anticipate, believe, plan, expect, strive, future, intend, may, will and similar expressions as they relate to RGS Energy are intended to identify such forward-looking statements. Because forward-looking statements relate to the future, they’re subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside the company’s control. RGS Energy’s actual results and financial conditions may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.
Important factors that could cause RGS Energy’s actual results and financial conditions to differ materially from those indicated in the forward-looking statements include without limitation, the following; access to and availability of capital to fund planned expansion of marketing, sales and installation capabilities, and to pay past due amounts to vendors, suppliers, and others, ability to satisfy conditions to drawn on funds from our own convertible notes offering held in restricted cash accounts, ability to regain compliance with the NASDAQ stockholders’ equity requirement and to remain listed on NASDAQ, ability to expand marketing, sales and installation capabilities and financing sources, ability to increase installations, ability to achieve operation and installation efficiencies, ability to reduce cost and improve cash flow and operating results, ability to successfully expand into new states, ability to achieve breakeven and profitability, ability to convert backlog to revenue and grow sales and revenues, ability to meet obligations, ability to successfully create alliances and partnerships to increase sales and provide value to customers, competition and such other risk factors as discussed throughout Part I, Item 1A risk factors and Part II, Item 7, management’s discussion and analysis of financial conditions and results of operations of its annual report on Form 10-K of the year ended December 31, 2015 and Part I, Item 2, management’s discussion and analysis of financial conditions and results of operations and Part II, Item 1A risk factors included in its quarterly reports on Form 10-Q.
Any forward-looking statements made by RGS Energy in this communication is based only on information currently available to the company and speaks only as of the date on which it is made. RGS Energy undertakes no obligations to publicly update any forward-looking statements whether written or oral that may be made from time-to-time, whether as a result of new information, future developments or otherwise.
I would like to remind everyone that this call will be available for replay through November 15th. Please refer to today’s press release for dial-in replay instructions. A webcast replay will be available via the company’s website at rgsengery.com. Thank you for joining us for today’s presentation. This concludes today’s call. You may now disconnect.