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PE

Pineapple Energy Inc. (PEGY)·Q2 2023 Earnings Summary

Executive Summary

  • Q2 2023 delivered strong top-line growth and margin expansion versus prior year: revenue $19.84M (+370% YoY), gross profit $7.14M (+691% YoY), and consolidated gross margin ~36% (vs ~21% in Q2 2022), driven by the SUNation acquisition and Hawaii organic growth .
  • Sequentially, revenue declined from Q1’s strong $22.07M due to pull-forward of delayed installs into Q1 and seasonality, while adjusted EBITDA remained positive on a pro forma basis ($0.32M) .
  • Guidance maintained: FY2023 revenue $80–$85M, positive adjusted EBITDA, and positive cash flow from operations—underscoring confidence in backlog and execution; backlog rose to $42M as of June from $38M in March .
  • Management highlighted operational execution against an industry backdrop of weaker peer results, supply chain normalization, and improving vendor pricing; battery attach rate remains a strategic differentiator (HEC ~89%) with Long Island poised for a step-up in 2024 under time-of-day rates .
  • S&P Global consensus estimates were unavailable for PEGY in Q2 2023; therefore, estimate comparisons cannot be made at this time (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Gross margin expansion and another quarter of positive adjusted EBITDA (pro forma): gross profit +691% YoY with margin improvement from supply chain normalization and better buying power; pro forma adjusted EBITDA improved to $0.32M from $(1.65)M .
  • Operational momentum and market execution: residential kW installed +29% YoY; consolidated battery attach rate improved to 43% with HEC at 89% attach—“This was a monster quarter” in Hawaii per CEO .
  • Backlog strength and capital actions: backlog increased to $42M as of June (from $38M in March), $7.5M debt financing to retire seller note (no equity dilution), and sale of legacy assets to focus solely on solar .

Management quotes:

  • “We were able to deliver an excellent second quarter…counter to the weak results turned in by many of our larger public peers.”
  • “Gross profit margins increased due to the SUNation acquisition, normalization of the supply chain and our ability to buy better as a larger organization.”
  • “Kilowatts installed [Hawaii] were up 36% year-over-year…Battery attachment rate in Hawaii remained outstanding at 89%.”

What Went Wrong

  • Sequential revenue decline vs Q1 due to timing effects (pull-forward from delayed Q4 installs into Q1) and typical seasonality; management noted this was expected and not a demand weakness .
  • Net loss from continuing operations of $(0.33)M vs prior year income $1.69M, driven by lower other income (absence of large fair value remeasurement and gain on sale recorded in Q2 2022) .
  • New York battery attach rate remained low at 5% (market structural factors), though expected to improve with 2024 time-of-day rates; near-term margin uplift from batteries in NY not yet quantified .

Financial Results

MetricQ2 2022Q1 2023Q2 2023
Revenue ($USD)$4,218,453 $22,065,424 $19,836,291
Gross Profit ($USD)$902,443 $8,006,315 $7,136,934
Operating Expenses ($USD)$3,848,226 $10,155,841 $8,552,254
Operating Income (Loss) ($USD)$(2,945,783) $(2,149,526) $(1,415,320)
Other Income (Expense), net ($USD)$4,639,554 $(444,414) $1,078,616
Net Income (Loss) – Continuing Ops ($USD)$1,693,771 $(2,599,672) $(333,810)
Diluted EPS – Continuing Ops ($)$0.17 $(0.26) $(0.03)
Margin MetricQ2 2022Q1 2023Q2 2023
Gross Profit Margin %21.4% 36.3% 36.0%
EBIT Margin %(69.8%) (9.7%) (7.1%)
Net Income Margin % (Cont. Ops)40.1% (11.8%) (1.7%)
Pro Forma MetricQ2 2022Q2 2023Change
Revenue ($USD)$16,125,345 $19,836,291 +23% YoY
Adjusted EBITDA ($USD)$(1,650,881) $319,001 +$1.97M YoY

Segment/YTD and KPIs:

  • Segment mix (YoY, pro forma): Residential revenue +31%, Service & Other +31%, Commercial −3% (timing of projects) .
  • KPIs and operating metrics:
KPIQ2 2023Prior Periods
Battery Attachment Rate (Consolidated, pro forma)43% 38% in Q2 2022
Battery Attachment Rate – Hawaii89% —
Battery Attachment Rate – New York5% —
Residential kW Installed YoY (pro forma)+29% —
Backlog$42M as of June 2023 $38M as of March 2023; ~$38M at quarter-end
Debt Financing$7.5M Decathlon Capital Partners closed —

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2023$80–$85M $80–$85M Maintained
Adjusted EBITDAFY 2023Positive Positive Maintained
Cash Flow from OperationsFY 2023Positive Positive Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2022, Q1 2023)Current Period (Q2 2023)Trend
Supply chain and pricingHardware issues in Hawaii; outlook for flat-to-lower panel costs Supply chain normalized; distributors negotiating; improved buying power Improving
Battery attach ratesHEC ~88%; consolidated 40%; Long Island shift to time-of-use expected HEC ~89%, NY ~5%; TOU in Long Island expected to lift attach rates in 2024 Rising in NY (2024)
BacklogPending installs $47M at YE 2022 ~$38M at quarter-end; $42M by June Solid/increasing
M&A pipelineRobust pipeline; aim for multiple deals in 2023 Environment “ripe for consolidation”; multiples down; cultural fit emphasized Active
Interest rates/macroRising utility rates supportive; seasonality cadence Sequential decline explained (timing/seasonality), rates likely peaking Manageable headwind
TechnologyE-Gear EMC licensing to Eguana; Franklin Whole Home adoption Franklin praised; SPAN panels, EV charging; multi-vendor strategy Expanding
Geographic expansionFlorida office opened (Q4/Q1) Early-stage test; lease, lead-gen begun Early execution

Management Commentary

  • CEO, on outperforming peers: “We were able to deliver an excellent second quarter…counter to the weak results turned in by many of our larger public peers.”
  • CFO, on margin sustainability: “Supply chain has normalized…as a larger organization…we just continue to gain leverage in buying power against our vendors.”
  • CEO, on Hawaii performance: “Kilowatts installed…up 36% year-over-year…Battery attachment rate in Hawaii remained outstanding at 89%.”
  • CFO, on pro forma growth drivers: Residential revenue +31%, service & other +31%, commercial −3%; attach rate improved from 38% to 43% .
  • CEO, on strategy: “This environment in our industry is ripe for consolidation, and I believe in our ability to find the right companies…” .

Q&A Highlights

  • Wildfires and backup power demand: Management noted tragedies in Maui did not directly impact operations (HEC is on Oahu) but underscored resilience value; extreme events tend to correlate with increased top-of-funnel demand for backup power .
  • Sequential revenue decline: Driven by Q4 delays completed in Q1 and seasonality; not evidence of demand weakness; expect attach rate step-up in NY with TOU .
  • Margin sustainability: Gross margins seen as sustainable amid normalized supply chain and increased vendor leverage; continued innovation and IRA-driven capacity cited .
  • Battery economics in NY: Contribution margin effect not yet forecast; near-term pricing approach will be thoughtful; batteries historically resilience-driven vs pure ROI in NY .
  • Florida expansion: Early-stage test; lease signed, lead-gen/sales underway; capital-light “test-and-learn” approach .

Estimates Context

  • S&P Global consensus estimates for PEGY Q2 2023 were unavailable; we cannot compare reported results to Wall Street estimates at this time (Values from S&P Global were unavailable).

Key Takeaways for Investors

  • Consolidated gross margin expanded to ~36% with supply chain normalization and better buying power—supporting positive pro forma adjusted EBITDA; focus on maintaining margin discipline .
  • Backlog and sequential execution underpin maintained FY2023 guidance ($80–$85M revenue, positive adjusted EBITDA and operating cash flow); backlog increased to $42M by June .
  • Battery leadership in Hawaii (89% attach) positions PEGY to benefit as Long Island shifts to time-of-day rates in 2024, likely boosting attach and blended margins .
  • Operating leverage opportunity from SUNation integration and corporate shared services; continued consolidation strategy in a buyer-friendly environment (multiples lower), emphasizing cultural fit and referral-driven growth .
  • Near-term trading implications: Without Street estimates, catalysts center on margin durability, backlog conversion, and evidence of NY battery attach rate uplift; any acquisitions or additional financing at favorable terms could be incremental catalysts .
  • Medium-term thesis: A “super-local” roll-up with strong customer experience metrics and grid-services/IP exposure (E-Gear licensing) offers multi-pronged growth vectors across installs, storage, and potential recurring revenue streams .

Bolded potential surprises/catalysts:

  • Maintained FY2023 guidance despite industry headwinds and sequential revenue dip .
  • Positive pro forma adjusted EBITDA for the second straight quarter amid supply chain normalization and cost control .
  • Backlog growth to $42M into Q3 supports revenue visibility and confidence in guidance .