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PE

Pineapple Energy Inc. (PEGY)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $19.44M, up 13% y/y, but below public consensus ($20.40M), while diluted EPS was ($0.16); pro forma adjusted EBITDA turned positive at $0.21M and operating cash flow was $0.16M .
  • Gross margin compressed sequentially to 28.4% from 38.5% on higher indirect cost allocations (rent, insurance, overhead), not equipment or direct labor, per management’s clarification .
  • Full-year revenue of $79.63M landed just shy of the $80–$85M guidance, while the company delivered positive pro forma adjusted EBITDA for the year ($1.24M) and reiterated cash generation focus .
  • Management withheld 2024 guidance pending better visibility, citing macro uncertainty and plans to revisit next quarter; they are actively pursuing funding sources for working capital and obligations in 2024 .
  • Stock reaction catalysts: revenue miss vs consensus and margin compression (negative), offset by sustained positive adjusted EBITDA and positive operating cash flow (positive) .

What Went Well and What Went Wrong

What Went Well

  • Full-year execution: “We came in just shy of our revenue guidance range, generating $79.6 million, and more importantly were able to deliver positive adjusted EBITDA over the full year,” per CEO Kyle Udseth .
  • Cost discipline and operating leverage: Pro forma adjusted EBITDA improved to $0.21M in Q4 (up 222% y/y) and $1.24M for FY23, as teams “rallied” through macro headwinds and contained costs .
  • Positive operating cash flow: Q4 cash from operations of ~$0.16M, despite industry adversity; CFO emphasized focus on EBITDA and operating cash generation .

What Went Wrong

  • Consensus miss and margin compression: Revenue missed public consensus ($19.44M vs $20.40M) and gross margin fell to 28.4% from 38.5% sequentially due to indirect cost allocations rising (rent, insurance, overhead) .
  • Top-line mix pressure: Q4 pro forma revenue declined 17% y/y on residential kW installed down 17% and commercial down 6%, partially offset by service/other +6% .
  • Legacy item and financing costs: ~$0.95M legacy CSI receivables write-off impacted non-GAAP reconciliation; higher interest expense from 2023 debt tightened “Other income” vs prior periods .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$19.84 $18.29 $19.44
Gross Profit ($USD Millions)$7.14 $7.03 $5.52
Gross Margin %—38.5% 28.4%
Total Operating Expenses ($USD Millions)$8.55 $8.60 $7.86
Operating Loss ($USD Millions)($1.42) ($1.56) ($2.34)
Diluted EPS - Continuing Ops ($USD)($0.03) ($0.23) ($0.16)
Net Loss - Continuing Ops ($USD Millions)($0.33) ($2.33) ($1.68)
Cash from Operations ($USD)—$0.87M $0.16M

Segment/mix (pro forma YoY):

Segment/Mix MetricQ3 2023 (YoY)Q4 2023 (YoY)
Residential revenue growth (%)-12% -20%
Commercial revenue growth (%)+1% -6%
Service & Other revenue growth (%)+3% +6%

KPIs

KPIQ2 2023Q3 2023Q4 2023
Residential kW installed (YoY/Seq)+29% YoY +10% Seq -17% YoY
Battery attachment rate (%)43% 37% 38%
Backlog ($USD Millions, period-end)$42 $41 $36
Pro forma Adjusted EBITDA ($USD)$0.32M $0.34M $0.21M

Vs Estimates (non-S&P sources; S&P Global consensus unavailable)

MetricQ4 2023 ActualQ4 2023 ConsensusSurprise
Revenue ($USD Millions)$19.44 $20.40 -4.7%
Diluted EPS ($USD)($0.16) ($0.08) Miss (non-S&P source)

Note: S&P Global consensus estimates were unavailable for PEGY via our tool. Revenue/EPS consensus above sourced from public outlets as cited.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/OutcomeChange
RevenueFY 2023$80–$85M Actual $79.63M Slight miss
Adjusted EBITDAFY 2023Positive Actual Positive ($1.24M pro forma) Achieved
FY 2024 Revenue/EBITDAFY 2024n/aNo guidance provided; revisit next quarter Withheld
Working capital/funding2024n/aPursuing funding sources to meet obligations New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Interest rates & utility ratesHigher-for-longer rates; declining equipment/dealer fees; positive EBITDA despite macro Rates still high; expect cuts in H2’24; utilities continue double-digit rate hikes underpinning value proposition Macro headwinds persisting; medium-term constructive
Gross margin driversMargin expansion from lower equipment/dealer fees Sequential compression to 28.4% driven by indirect cost allocations (rent, insurance, overhead), not direct costs Near-term pressure
Regional dynamics (HI, NY)HI strong gross profit; NY gross profit up 1% with lower dealer fees; battery attach HI high, NY low pre-TOU HI Battery Bonus ended; BYOD successor less lucrative; NY TOU rollout delayed, expected to drive batteries; both markets “holding up” HI demand normalization; NY battery opportunity building
Funding & liquidity$7.5M Decathlon debt closed; operating cash flow positive Active fundraising to ensure obligations met in 2024; $3.6M cash for operations; $1.8M restricted cash Focused on liquidity
M&A strategyActive pipeline; roll-up strategy; valuations more attractive; debt favored over equity at current stock price Continued focus; accretive deals targeted; consolidator opportunity in stress Opportunity-rich, funding-dependent
CVRs & legacy itemsCVR fair value movements affecting “Other income” CVR liability estimated ~$1.7M; legacy receivable written off, would benefit CVR holders if collected Ongoing non-operational noise

Management Commentary

  • CEO Kyle Udseth: “We came in just shy of our revenue guidance range, generating $79.6 million, and more importantly were able to deliver positive adjusted EBITDA over the full year... we are optimistic that the back half of 2024 will shape up to be a period of accelerating growth” .
  • CFO Eric Ingvaldson: “Achieving $1.2 million in positive pro forma adjusted EBITDA for the full year shows that we were able to successfully control costs and gain operating leverage... Our number one focus will continue to be generating positive EBITDA and cash flow from operations” .
  • Indirect costs clarified: The sequential gross margin decline was “related to... indirect costs that are allocated into gross margin... rent, indirect labor and insurance... not... equipment costs or direct labor” .

Q&A Highlights

  • Gross margin sequential decline: Driven by higher indirect cost allocations (rent, insurance, overhead), not direct inputs; methodology standardized across company .
  • Regional updates: HI strong Q4 supported by Battery Bonus Program (ended); successor BYOD tariff less attractive; NY TOU rate rollout delayed but expected to drive battery attachment in 2024 .
  • Guidance posture: No 2024 guidance this quarter; management to revisit next quarter after internal deliberation and Board input .
  • Legacy CSI receivable: ~$1.0M write-off reflected in reconciliation; if collected, proceeds would go to CVR holders; accounting guidance kept it in continuing ops .

Estimates Context

  • S&P Global consensus estimates were unavailable for PEGY via our tool at the time of analysis.
  • Public sources indicate Q4 revenue consensus at ~$20.40M vs actual $19.44M (miss ~4.7%). EPS actual ($0.16); non-S&P sources vary on EPS consensus (e.g., -$0.08), implying a miss, but reliability is lower than SPGI. Treat revenue miss as more credible given multiple outlets citing it .

Key Takeaways for Investors

  • Near-term pressure: Sequential gross margin compression tied to indirect cost allocations and a revenue miss vs consensus are near-term negatives; monitor cost allocation discipline and indirect cost trajectory .
  • Cash discipline intact: Positive adjusted EBITDA (Q4 and FY) and positive Q4 operating cash flow bolster liquidity narrative amid fundraising needs for 2024 obligations .
  • Mix and demand: Residential volumes under pressure y/y in Q4, but battery attachment rates improved; service/other revenue grew; demand poised to benefit from utility rate hikes and expected interest rate declines in H2’24 .
  • Regional catalysts: NY TOU rollout should lift battery attach through 2024; HI tariff transition may temper incentives but market “holding up” per management .
  • M&A optionality: Valuations are attractive; accretive deals feasible if funding secured (likely via debt), offering potential scale and EBITDA uplift .
  • Estimates implications: Expect street models to trim near-term margins and top-line given sequential GM compression and Q4 revenue miss; offsetting adjustments for indirect cost normalization and battery attach improvements may limit downside into H2’24 .
  • Trading lens: Watch for updates on 2024 guidance next quarter, fundraising progress, and evidence of margin stabilization; narrative inflection likely tied to NY battery uptake and any announced accretive M&A .