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Good afternoon. And welcome to Telkonet's Fourth Quarter and Year End Earnings Conference Call. As a reminder, today's conference is being recorded. Before I turn the call over to Jason Tienor, Telkonet's Chief Executive Officer, I would like to read the following statements.
Certain statements included in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties, such as competitive factors, technological development, market demand, and the company's ability to obtain new contracts and accurately estimate net revenues due to variability in size, scopes, and duration of projects, and internal issues and the sponsoring client.
Further information on potential factors that could affect the company's financial results can be found in the company's registration statement and on its reports on Forms 8-K filed with the Securities and Exchange Commission. Telkonet is under no obligation to update items discussed today to reflect subsequent developments.
Lastly, I like to remind everyone that this call will be recorded and it will be made available for replay via a link available in the Investor Relations section of Telkonet's Web site at www.telkonet.com.
With that, I would like to turn the conference over to Mr. Jason Tienor, Telkonet's President and CEO, to discuss the results. Mr. Tienor, you may begin.
Thank you. Good afternoon ladies and gentlemen thank you for joining us for this afternoon's 2018 year end earnings call. We understand that you've been waiting patiently for a summary of our 2018 full year performance as well as an update on our ongoing activities with ROTH Capital Partners. We appreciate your continued interest and support of Telkonet and are eager to share our progress with you this far.
I believe that we're all fully aware of many of the macroeconomic difficulties that businesses experienced throughout 2013 year. Closer to home Telkonet realized substantial impacts due to a number of these negative market forces. The implementation of Chinese tariffs throughout the year not only had a negative impact on overall revenue through delayed customer purchases caused by higher production costs, but also had a dramatic impact on our gross margin due to an inability to pass the increased costs onto our market.
While this is not unique to Telkonet as a small but growing technology company, these impacts take a toll on our fragile growth initiatives. 2018 also saw an industry-wide shortage of technology components with far reaching impacts across the manufacturing sector. Due to limited availability and increased pricing, our logistics required us to increase volume purchasing in order to lock-in product as well as pay the increased prices when necessary due to competitive pressures. This also saw product lead times for a long lead items reach as far out as 10 months requiring extensive planning and placing pressure on quarterly shipments. As of today, we've not seen signs of this pressure waning either.
Another impact of the full year performance was the difficulty in achieving peak operating capacity due to a shortage in the qualified workforce. While this also is not unique to Telkonet, it bears mentioning that we're currently in a period of rampant growth and this impact is felt on a daily basis everywhere from our production facility and logistics department to our operations personnel.
Lastly having undertaken a strategic industry review early in 2018 a significant amount of resources were spent on activities not involved with revenue generating projects. While this was taken on for valuable reasons, overall it continues to have an impact on the performance of the company. With all of this being said and while 2018 may not appear to have the growth year that it was through our financial filings, we truthfully experienced an enormous level of success throughout the year on a number of measures that positioned us firmly for a banner 2019.
Our early results in the first three months of the year have demonstrated our efforts success and we're excited about what it will mean for the full year of 2019. By 2018 revenues, we have shown a flat year-over-year performance, but our sales activity was anything, but while entering the year with less than $0.5 million in backlog resulted in sales of just over $8.4 million in minimal revenue growth. Our sales activity resulted in a record year of more than $10 million in new sales and carrying more than $4 million in backlog and an additional $1.7 million in verbal commitments into 2019.
This volume activity was driven by consistently rising quarter-over-quarter performance in 2018 that has continued into 2019 as well. Not only are we seeing trending record sales volumes and growth, but we're also seeing significant increases in recurring revenues with growth of 69% for 2018 over 2017. A large reason for the extensive sales growth in 2018 was the increase in activity of our channel partners.
With more than 69% of our annual sales performed by these channel partners, we're finally reaping the benefits of our sales and marketing efforts over the last several years to cultivate these sales channels. Additionally, another significant indicator of this valuable partner channel growth is that the increased growth in backlog is due to the large volume of partner projects initiated by existing relationships and providing early entry into new developments and early construction projects. This increased visibility into future periods as well as the entire company excited about the 2019 fiscal year.
2018 also saw the successful completion of several projects, several years in the making. The first of these was the award of the first of several potential residential projects being deployed across military bases. Working with one of the nation's largest ESCOs, Telkonet was able to market, sell engineering and deploy $1 million project that is one of the largest in the company's history and was the first of its kind in the residential market.
This project is also the first of several potential phases which provides ongoing revenue potential as well as expanded product and service sales to existing and new projects within this relationship. While minimal product had shipped during 2018, the first large tranche of products shipped recently in Q1 totaling more than 2800 units. Because of this first project a second project was recently awarded with the first product shipping within the first quarter as well. This relationship and the associated opportunities were developed over the last four years with the first responses to requests taking place in 2016 and the first award happening in 2018.
An entirely new product and application was developed specifically for this customer with the intentions for further development and integration and expanding the offering and support services extensively. Additional testing is currently taking place to expand the first deployment into phase two. Another example of the extensive effort deployed towards some of the company's largest wins is the recently announced Hilton Connected Room Initiative, is the first device certified to work within the connected room. We've been in development and testing with Hilton for more than two years. As one of only two providers certified to work within this franchise wide initiative. Telkonet is in the enviable position of participating in the deployment of this brand wide standard for more than 5000 properties over the next several years.
Through the close relationship developed and having been installed within the internal corporate demonstrations and several first trial properties, we also were able to recognize several valuable opportunities within the Hilton Connected Room program and engineer multiple products designed to fulfill those opportunities and create significant value within our target markets. Since that time we've been able to expand on the market potential for these new products and expect to see significant gain both in their offering and integration within our platform.
As you can see by the performance of 2018 from a sales perspective. The company is positioned for a banner year in early activity has already proved to be true. The longstanding efforts to win large projects and grow an unbelievable channel program have borne fruit and are successfully yielding results. Our ability to provide visibility to record backlog and a vibrant sales channel has positioned the company comfortably for meeting its forecasted goals for 2019 moving forward.
Now as our performance as demonstrated, Telkonet's technology and market penetration continue to strengthen our position as a leader in our target markets and our technology platform is a prominent stat for automation and IoT solutions. These developments have generated a growing level of interest in our marketing and sales activities as the industry interests and end user experience, energy savings and complete solutions expands, because we've witnessed the maturation of the IoT industry early on, we recognize that the opportunity -- to recognize more significant gains in both platform and revenue growth could be increased through evaluating available strategic market synergies.
Due to this, we evaluated a number of investment think partnerships and ultimately chose ROTH Capital Partners to provide a strategic market analysis of potential transactions that might increase Telkonet's shareholder value. Through this exercise, we've been introduced to a large number of interested parties and participated in numerous presentations and discussions that have yielded a variety of opportunities and early results.
In addition to executing a number of strategic partnerships through technology integrations and market opportunities, we've been participating in ongoing negotiations regarding a number of potential strategic transactions of various types. Obviously, Telkonet's strategic value in these conversations is a matter of substantial interest and the significance of Telkonet's position as a public company carries a variety of difficulties due to the requirement of receiving shareholder approval for any type of transaction.
As you can imagine moving through this process there are inherent difficulties for any interested party in negotiating a transaction that has no certainty until after Telkonet moves through a complete proxy process to gain shareholder approval. And working with ROTH, we continue to manage through this process and our ongoing discussions and look forward to having additional information to share very soon.
As we've just completed our 2019 first quarter yesterday with extremely positive results, we look forward to our upcoming Q1 earnings call on May 15 and soon after 2019 shareholder meeting on May 23. I would ask that you watch for your upcoming shareholder proxy for additional information regarding our ongoing negotiations and activities and make sure to vote your proxy in all items noted as well as encourage any fellow Telkonet's shareholders to do the same.
As I mentioned earlier, while 2018 financial performance may not portray the success that we saw throughout the year, its activities have positioned us for a successful 2019 and we've already experienced this traction in Q1. Based on our early success, a substantial backlog and expanding pipeline, our strong channel partner performance in our ongoing markets successes, we see the framework for a fantastic year and the expansion of the strategic opportunities currently ahead of us.
We truly appreciate your continued interest and look forward to answering any questions you might have.
With that, I'd like to hand the call over to Gene Mushrush, Telkonet's Chief Financial Officer for a review and the quarterly financial performance with you.
Thank you, Jason. Ladies and gentlemen good afternoon and welcome.
Today I will be presenting our 2018 year end financial summary. For the year ended December 31, 2018, total revenues grew approximately 2% to $8.4 million compared to last year. Recurring revenues grew 69% to approximately $816,000 during the current year. A decline in non-recurring educational revenues was offset by a similar increase in hospitality revenues. The majority of our revenues are transactional based which are influenced by circumstances such as scope, timing and budgets resulting in year-over-year variations.
You may recall on January 1, 2018, the company adopted Accounting Standards Codification topic 606, revenue from contracts with customers was superseded nearly all legacy revenue recognition guidance. ASC 606 outlined a revenue model based on when control of promised goods or services are transferred by an entity to a customer. The company concluded the most significant impact versus past guidance related to the timing of revenue recognition for contracts with single combined obligations. For these contracts revenues recognized at points in time in the past would not be recognized over a course of time based upon a percentage of completion metric.
The impact of new standard had on current year-to-date revenues when compared to prior guidance was a decrease of approximately $820,000. Please refer to our Form 10-K for expanded disclosures on this topic. Gross profits were relatively unchanged at $3.8 million, while the gross margin percentage dropped 1% to 45%.
As mentioned during our second quarter earnings call, the U.S. federal government began imposing tariffs on a large number of products imported from China in July 2018. Our core products are manufactured in China and are subject to said tariffs. During the year additional tariffs of approximately $260,000 were imposed representing an adverse impact on gross margins of approximately 3%. This impact was softened by the growth in recurring revenues. Telkonet incurred year-to-date operating expenses of $6.8 million compared to $7.3 million for the same period prior year a decrease of 7%. Non-recurring expenses related to the 2017 sale of the company's wholly-owned subsidiary where the primary components for the year-over-year decrease.
Sales, general and administrative expenses fell to 57% of revenues compared to 67% for the same period prior year. We incurred operating losses from continuing operations of $3 million and $3.5 million for the years ended December 31, 2018 and 2017 respectively. We reported a net loss of $3 million compared to net income of $3.7 million for the fiscal years ended 2018 and 2017 respectively.
The gain on the sale of the wholly-owned subsidiary was approximately $6.6 million in 2017. Negative EBITDA is a non-GAAP measurement of $2.9 million and $3 million were recorded for the years ended December 31, 2018 and 2017 respectively. We reported approximately $4.7 million in cash and equivalents at December 31, 2018, compared to $8.4 million last year. The outstanding balance on our credit facility was approximately $121,000 and $680,000 and available capacity was approximately $500,000 and $200,000 at December 31, 2018 and 2017 respectively.
Cash used in operating activities of continuing operations during the year was $3.9 million compared to $3.1 million last year. We reported working capital surpluses measured as current assets less current liabilities of $6.2 million and $9.5 million at December 31, 2018 and 2017 respectively.
Our current ratio was 3.8 compared to 4.5 at this time last year. Our average daily sales outstanding improved 18% to 48 days compared to 59 last year. Our cash conversion cycle an indicator of the company's efficiencies and managing working capital assets and liquidity increased to 170 days from 97 at this time last year. A shorter cycle means greater liquidity which translates into less need to borrow, more opportunity to leverage spend via cash discounts in an increased capacity to fund the expansion of the business into new product lines and markets.
In closing, thank you for your interest and to our shareholders specifically. Thank you for your continued support. I'll now turn the call back to Telkonet's President and Chief Executive Officer, Jason Tienor.
Thank you, Gene.
With that, I'd like to hand the call back to the operator to accept any questions you might have. Operator?
Thank you. [Operator Instructions] Our first question comes from the line of [Ed Stein] [ph] a private investor. Please proceed with your question.
Hi Jason. It sounds like it's been a challenging year but you all were up to the challenge. Question, a few years ago, we had an initiative with Trane where you trained a lot of their people to be able to do the installations without a whole lot of effort from us. And then, if I remember correctly you put the instructions on how to do the installs on the Internet, so people could go to that and again less involvement with our crews. Can you tell me where that stands now? Can we handle a whole bunch of orders because we don't need to use all of our personnel for all of the installations?
We do, Ed. It's a great question. We actually have the majority of our installations taken care of by third party integration and contract services legitimately as part of our operations group. We have three different teams. We have our support team, our project management team and our project development team. The fourth team would be our installation team. We only have two full time direct staff members as part of that installation team and those gentlemen are used largely for onsite oversight of large projects. So we don't do much for staffing for full time services for installation because we have so many partners that provide their own installation resources like that.
Perfect example of the results of that -- are that our growth in channel partner sales and deployment has moved from just four years ago, we did less than 20% of our annual sales through partner channels to last year we were just under 70% through those very same partner channels. And in your mentioning of Trane, our three largest partners where the bulk of all of our channel partners sales move through, are Onity, Trane and Johnson Controls.
What was the first?
Onity, it's a subsidiary, it's a large hospitality security provider, it's a subsidiary of UTC.
Okay. Thank you.
Absolutely.
[Operator Instructions] At this time, there are no further questions over the audio portion of the conference. I would like to turn the conference back over to management for closing remarks.
Thank you, Operator. Once again as we shared earlier our Q1 earnings call will be coming up on May 15th and following very closely thereafter May 23rd, we will be having our annual shareholder meeting. Please look for your proxy review all apparent notes on the proxy, contact us, the company with any questions and make sure you and anybody else that you may know as a Telkonet's shareholder returns the proxy for it results.
With that everyone, I thank you for your attention and your interest in Telkonet and wish you a great afternoon.
This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful rest of your day.