RGS Energy (RGSE) Misses Q4 EPS by 11c

RGS Energy (NASDAQ: RGSE) reported Q4 EPS of ($0.31), $0.11 worse than the analyst estimate of ($0.20). Revenue for the quarter came in at $18.4 million versus the consensus estimate of $21.9 million.

Restructuring, Business Climate and Impact on 4th Quarter Results

As previously announced, RGS made the strategic decision to exit its Large Commercial business segment. The results of the segment for all periods are presented as discontinued operations, while the company's continuing operations are primarily composed of its residential and Sunetric business segments. As previously announced, during the fourth quarter, the company divested its retail and catalog business which is included in continuing operations for the quarter.

During 2014, the company devoted significant resources to sales and marketing to drive sales. The company was not successful in growing its sales in California, due to the competitive landscape and high cost per acquisition of its field sales teams. However, the company was successful in increasing sales in the East Coast and E-sales, which increased the residential backlog by 40% to $39.7 million, sufficient to supplant the impact from exiting the Colorado and Missouri markets. Unfortunately, the increased backlog could not be fully converted to revenue due to the sales growth outpaced the total construction and integrator installation availability, inclement weather on the East Coast, and vendors' terms limited access to solar panels as a result of the company's historical operating and cash losses. These conditions will also adversely affect the first quarter of 2015 operating results.

The reduction in revenue had an adverse impact on the gross margin percentage due to the fixed costs of maintaining its construction operation infrastructure. To address these circumstances, the company announced on March 2, 2015, the closing of its California offices. To continue to service the California market, the company will draw on its core strengths, including engineering, E-Sales, operations management and leasing capabilities. The company will continue to maintain a field sales organization and its in-house construction organization on the East Coast.

RGS Energy's restructuring activities, which began to be implemented half-way through the third quarter of 2014, have been designed to reduce its operating cash outflow. As a result of the restructuring, the company's quarterly cash inflow (outflow) from operations in 2014 were the following:

For earnings history and earnings-related data on RGS Energy (RGSE) click here.

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