Executive Summary

Q3 2023 revenue was $18.29M, up 211% year over year, with gross profit up 401%; GAAP diluted loss per share was ($0.23). Sequentially, revenue declined vs Q2 ($19.84M) and Q1 ($22.07M) as management emphasized focusing on gross margin dollars amid falling equipment and financing costs .
Pro forma adjusted EBITDA turned positive again at $0.34M, marking a third consecutive quarter of positive adjusted EBITDA; operating cash flow was positive at $0.87M, supported by working capital improvements .
Guidance maintained: 2023 revenue $80–$85M, positive adjusted EBITDA, and positive cash flow from operations; backlog increased to ~$41M as of quarter end, adding visibility into Q4 .
Management highlighted margin expansion from lower equipment prices and dealer fees, while noting macro headwinds from higher-for-longer rates; NY time-of-day rates in 2024 are a potential battery attach tailwind (HEC battery attach ~90% vs SUNation ~3% in Q3) .
Wall Street consensus (S&P Global) estimates were not available for PEGY; therefore, beats/misses vs estimates cannot be assessed and should be treated as unavailable (S&P Global data unavailable due to CIQ mapping) [GetEstimates error]*.

What Went Well and What Went Wrong

What Went Well

Third consecutive quarter of positive adjusted EBITDA and positive operating cash flow: pro forma adjusted EBITDA $0.34M and cash flow from operations $869,851 in Q3, driven by margin improvements and operating discipline .
Gross profit up 401% YoY with margin expansion from lower equipment and financing costs; New York gross profit dollars grew YoY despite revenue pressure, and Hawaii gross profit rose ~40% with battery attach ~90% .
Backlog rose to ~$41M (vs ~$38M in Q2), supporting unchanged full-year guidance; CEO emphasized focus on “gross margin dollars” to optimize pricing and volume in a declining cost environment .

What Went Wrong

Pro forma revenue declined 10% YoY, driven by lower residential kilowatts installed (-10%) and battery attachment rate decline to 37% (vs 47% prior year), partially offset by +3% service/other and +1% commercial .
Other expenses increased significantly (+$650K YoY) primarily from higher interest expense tied to Q2 debt financings and CVR fair value remeasurement, keeping GAAP net loss at ($2.33M) .
Sequential revenue decreased Q1→Q2→Q3 (Q1 $22.07M; Q2 $19.84M; Q3 $18.29M), reflecting normalization after Q1’s idiosyncratic push-outs and broader industry headwinds from rates; battery attach declined sequentially to 37% from 42% .

Financial Results

Metric	Q3 2022	Q1 2023	Q2 2023	Q3 2023
Revenue ($USD)	$5,888,162	$22,065,424	$19,836,291	$18,288,697
Gross Profit ($USD)	$1,404,173	$8,006,315	$7,136,934	$7,032,458
Operating Loss ($USD)	($2,423,771)	($2,149,526)	($1,415,320)	($1,564,350)
Net Loss – Continuing Ops ($USD)	($2,542,788)	($2,599,672)	($333,810)	($2,329,053)
Diluted EPS – Continuing Ops ($USD)	($0.34)	($0.26)	($0.03)	($0.23)

Pro forma (select metrics):

Metric	Q3 2022	Q3 2023
Pro Forma Revenue ($USD)	$20,289,487	$18,288,697
Pro Forma Gross Profit ($USD)	$6,453,090	$7,032,458
Pro Forma Adjusted EBITDA ($USD)	($601,932)	$336,297

KPIs and operating metrics:

KPI	Q2 2023	Q3 2023
Backlog ($USD)	$38M	$41M
Residential kW Installed (seq %)	—	+10% (Q3 vs Q2)
Residential kW Sold (seq %)	—	+14% (Q3 vs Q2)
Battery Attach Rate (overall)	42%	37%
Battery Attach Rate (HEC/Hawaii)	89–90%	~90%
Battery Attach Rate (SUNation/NY)	5%	3%
Operating Cash Flow ($USD)	—	$869,851

Segment/pro forma mix (YoY, Q3 2023 vs Q3 2022):

Segment	YoY Change
Residential Revenue	-12%
Commercial Revenue	+1%
Service & Other Revenue	+3%
Residential kW Installed	-10%
Battery Attachment Rate	37% vs 47% prior year

Note: Wall Street consensus (S&P Global) for PEGY was unavailable; estimate comparisons cannot be provided (see Estimates Context) [GetEstimates error]*.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2023	$80–$85M (Q1 reiteration)	$80–$85M	Maintained
Adjusted EBITDA	FY 2023	Positive (Q1 reiteration)	Positive	Maintained
Cash Flow from Operations	FY 2023	Positive (Q2 reiteration)	Positive	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2023)	Previous Mentions (Q2 2023)	Current Period (Q3 2023)	Trend
Interest rates & financing fees	Early headwinds noted; focus on cash flow and discipline	Margin sustainability supported by better vendor pricing and normalized supply chains	Dealer fees declining; margin expansion; caution on pricing vs elasticity	Improving margin tailwinds, cautious pricing
Equipment pricing & supply chain	Expect panel cost stability/declines	Better buying power and normalizing supply chain driving margins	Lower equipment costs contributed to gross margin gains	Continued cost declines
Battery attachment	HEC 85% attach; NY low-single-digit; rising policy tailwinds	HEC 89% attach; NY 5% attach; expect NY lift with time-of-day rates	Overall 37%; HEC ~90%; NY ~3%; expect NY attach to rise in 2024	Hawaii stable high; NY poised to increase in 2024
Backlog & revenue visibility	~$38M backlog supports full-year confidence	~$38M backlog as of Q2	~$40.7M–$41M backlog; supports guidance	Building
M&A pipeline & funding	Evaluating debt/equity; prefer debt given stock price	—	Pipeline “healthiest” with valuation resets; focus on debt-financed accretive deals	Constructive environment
Regional dynamics (NY time-of-day rates)	Anticipated future battery economics improvement	Expect NY attach increase with 2024 time-of-day	Rollout details; all 750k ratepayers opt-out by early 2025	Regulatory tailwind forming

Management Commentary

“We were able to rally our Pineapple teams to deliver another quarter of positive adjusted EBITDA… both our Hawaii Energy Connection and SUNation businesses were able to grow gross profit dollars year-over-year in Q3” — CEO Kyle Udseth .
“Gross profit margins increased due to lower equipment prices and financing fees… resulting in positive cash flow from operations for the quarter and our third consecutive quarter of positive adjusted EBITDA” — CFO Eric Ingvaldson .
“Backlog… ~$40.7M… gives us continued confidence in our stated full year revenue range of $80M to $85M… continuing to guide to positive adjusted EBITDA” — CEO Kyle Udseth .
“We’re trying to form up a perspective on what we actually want the gross margin percentage to be in 2024… how that allows us to get 10%+ EBITDA margin at each operating business” — CEO Kyle Udseth .
“Our pipeline is… the healthiest it’s ever been… a good time to be buying… prefer debt over equity given current stock price” — CEO Kyle Udseth .

Q&A Highlights

NY time-of-day rates: Rollout begins Jan 1 for new meters, staged in batches through 2024; goal is all ~750k ratepayers on time-of-day by early 2025, expected to lift NY battery attachment and support pricing strategy upgrades .
Sequential revenue and Q4 confidence: Visibility driven by backlog, CRM install calendars, and C&I pipeline; management emphasized focusing on gross margin dollars amid declining equipment costs .
Margin trajectory: Potential room to optimize pricing given competitive position; continued cost reductions expected, but mindful of elasticity vs volume trade-offs .
M&A strategy: Valuation expectations have reset; multiple consideration tools (cash, seller notes, earnouts) and preference for debt financing to avoid dilution; aiming for accretive, culturally aligned targets .
Operating cash flow: Net cash generated from operating activities was ~$870K in Q3, driven by working capital improvements (AP and customer deposits) .

Estimates Context

S&P Global Wall Street consensus estimates for PEGY were unavailable at the time of this analysis due to missing Capital IQ (CIQ) mapping, so beats/misses cannot be assessed. Management maintained full-year guidance; investors should rely on company-provided outlook while monitoring any future estimate publications [GetEstimates error]* .

Key Takeaways for Investors

Margin expansion continues despite macro headwinds, supported by declining equipment and dealer fee costs; prioritize gross margin dollars over headline revenue growth in a falling price environment .
Backlog (~$41M) plus positive Q3 operating cash flow and third consecutive quarter of positive adjusted EBITDA underpin confidence in maintained full-year guidance ($80–$85M revenue; positive adjusted EBITDA) .
Hawaii remains a profit engine (battery attach ~90%); NY battery attach (3%) should improve with 2024 time-of-day rates—watch for mix shift benefits and potential cross-selling of storage solutions .
Sequential revenue normalization reflects Q1 push-outs and macro conditions; monitor Q4 conversion of backlog and working capital dynamics for cash flow continuity .
M&A optionality remains robust with valuation resets; debt-financed, accretive deals are the likely path—near-term catalyst could be a transaction announcement .
With estimates unavailable, anchor positioning on company guidance and execution metrics (gross profit growth, adjusted EBITDA, cash flow) until third-party coverage improves [GetEstimates error]*.
Tactical trading: Potential near-term catalysts include NY regulatory rollout details, backlog conversion pace, and any acquisition updates; medium-term thesis revolves around consolidation strategy and storage-led margin resilience .

*Estimates retrieved from S&P Global were unavailable due to CIQ mapping; no consensus values could be provided.

Pineapple Energy Inc. (PEGY)·Q3 2023 Earnings Summary