Executive Summary

Q2 2014 net sales were $6.33M, up 50.8% year over year and up 75.2% sequentially; net loss narrowed to $1.34M and EPS improved to ($0.01), reflecting cost discipline despite continued negative margins .
Operating expenses fell sharply to $1.15M versus $7.44M in Q2 2013, aiding sequential margin improvement; however gross margin was 8.9% vs 21.9% a year ago, indicating ongoing pricing/mix pressure .
Balance sheet/liquidity improved: cash rose to $5.85M at 6/30/14 (from $0.27M at 3/31/14), supported by a completed $21.75M private placement and an additional $25.0M agreement; an $11M zero-coupon convertible bond was issued, recognizing a $10.3M beneficial conversion feature and driving $0.7M interest expense in Q2 .
Wall Street consensus estimates via S&P Global were unavailable for SPI; focus near term is on capital raises and project pipeline monetization (China 50MW Fenyi build-and-transfer; 21MW Jiangxi; UK JV with WIRCON) as key stock catalysts .

What Went Well and What Went Wrong

What Went Well

Revenue growth and cost control: net sales rose to $6.33M (+50.8% YoY; +75.2% QoQ) with operating expenses down to $1.15M from $7.44M YoY, narrowing operating loss to $(0.59)M .
Liquidity strengthened: cash increased to $5.85M at quarter end, and management completed a $21.75M private placement and entered into a $25.0M purchase agreement to bolster the balance sheet .
Strategic momentum: JV in the UK with WIRCON, China pipeline additions and asset transfer (50MW Fenyi), 21MW Jiangxi; “Yes! Solar” residential kits showcased at Intersolar NA 2014. Quote: “These placements will dramatically improve our financial position...to support our ambitious global growth strategy” — Chairman Xiaofeng Peng .

What Went Wrong

Margins remain weak: gross margin compressed YoY (8.9% vs 21.9%), EBIT margin was -9.3%, and net margin -21.2%, indicating sustained profitability challenges .
Financing costs: interest expense of $1.07M in Q2 (including amortization from the convertible bond), weighing on net results despite OpEx cuts .
Related-party payables remain elevated: accounts payable to related party were $38.67M at 6/30/14 (though down from $50.90M at 3/31/14), underscoring balance sheet risk and intercompany dependency .

Financial Results

Income Statement Summary and EPS

Metric ($USD Millions unless noted)	Q2 2013	Q1 2014	Q2 2014
Net Sales	$4.199	$3.613	$6.329
Gross Profit	$0.920	$0.197	$0.560
Operating Expenses	$7.439	$1.287	$1.150
Operating Income (Loss)	($6.519)	($1.090)	($0.590)
Interest Expense	($1.008)	($0.122)	($1.072)
Net Income (Loss)	($6.833)	($0.832)	($1.340)
Diluted EPS	($0.03)	($0.00)	($0.01)
Consensus EPS (S&P Global)	N/A	N/A	N/A

Margins

Margin (%)	Q2 2013	Q1 2014	Q2 2014
Gross Margin %	21.9%	5.5%	8.9%
EBIT Margin %	-155.4%	-30.2%	-9.3%
Net Income Margin %	-162.8%	-23.0%	-21.2%

Balance Sheet and KPIs

KPI ($USD Millions unless noted)	Q2 2013 (6/30/13)	Q1 2014 (3/31/14)	Q2 2014 (6/30/14)
Cash & Cash Equivalents	$1.031	$0.272	$5.854
Total Current Assets	$24.127	$22.676	$17.243
Total Current Liabilities	$60.679	$60.076	$44.097
Accounts Payable – Related Party	$50.907	$50.904	$38.665
Total Assets	$70.964	$69.507	$72.848
Stockholders’ Equity (Deficit)	($2.867)	($3.628)	$15.990

Notes:

Q2 2014 financing actions included an $11M zero-coupon convertible bond (with $10.3M beneficial conversion feature and $0.7M interest recorded in Q2) and equity private placements totaling $21.75M completed and $25.0M additional agreement entered post-quarter .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q3-Q4 2014	N/A	N/A	No formal guidance provided in press releases
Gross Margin %	FY/Q3-Q4 2014	N/A	N/A	No formal guidance provided
OpEx	FY/Q3-Q4 2014	N/A	N/A	No formal guidance provided
OI&E	FY/Q3-Q4 2014	N/A	N/A	No formal guidance provided
Tax Rate	FY/Q3-Q4 2014	N/A	N/A	No formal guidance provided
Segment/Regional	FY/Q3-Q4 2014	N/A	N/A	No formal guidance provided
Dividends	FY/Q3-Q4 2014	N/A	N/A	No guidance/dividends discussed

Earnings Call Themes & Trends

Note: No earnings call transcript was available in filings or document catalog for Q2 2014; themes below reflect press releases across Q4 2013, Q1 2014, Q2 2014 .

Topic	Previous Mentions (Q4 2013, Q1 2014)	Current Period (Q2 2014)	Trend
Financing & Capital Structure	Imclone financing; resolving Cathay Bank; 2013 one-time charges; Q1: $21.75M private placement announced	$21.75M completed; $25.0M additional agreement; issued $11M zero-coupon convertible (beneficial conversion $10.3M)	Improving liquidity and equity base; added convertible debt
China Residential “Yes! Solar”	Introduced strategy to enter China residential market via Yes! brand	Showcased Yes! Solar kits at Intersolar NA 2014	Gradual rollout and marketing momentum
Project Pipeline (China/US/UK)	Q4: KDC Mountain Creek JV; EPC funding progress; Q1: progress NJ, HI, CA	50MW Fenyi build-transfer; 21MW Jiangxi; JV with WIRCON in UK	Expanding pipeline and monetization (sale/transfer)
Related-Party/Shareholder	LDK Solar (major shareholder) liquidation plans disclosed; impact unknown	Not updated in Q1 release	Not updated in Q2 release
Cost Structure/OpEx	Elevated OpEx in Q4 2013; Q1: meaningful reduction	Further OpEx reduction to $1.15M	Positive cost discipline trend

Management Commentary

“These placements will dramatically improve our financial position and balance sheet to support our ambitious global growth strategy... we continued to work toward resuming growth of our global pipeline... targeting the high-growth residential segment.” — Xiaofeng Peng, Chairman .
“We are pleased with the significant progress... improving SPI Solar’s balance sheet... appointments of key executives... should strengthen our strategy... Yes! solar initiative... harness growth prospects in the residential solar sector in China.” — Min Xiahou, Global CEO (Q1 release) .
“We are confident that SPI’s positioning in the downstream business is a right choice... focus on our EPC specialties... balance sheet position will allow us to effectively resolve the note from Cathay Bank.” — Charlotte Xi (Q4 2013 release) .

Q&A Highlights

No Q2 2014 earnings call transcript was found in filings; key clarifications were provided via press releases: financing actions, pipeline updates, and residential strategy progression .

Estimates Context

Wall Street consensus (EPS, revenue) via S&P Global for SPI was unavailable; as a result, versus-estimate comparisons could not be made for Q2 2014 .

Key Takeaways for Investors

Sequential improvement: revenue up 75% QoQ and EBIT margin improved to -9.3%; cost discipline evident with OpEx down to $1.15M; watch for sustainability as pipeline scales .
Liquidity inflection: cash rose to $5.85M, supported by $21.75M completed and $25.0M pending private placements; expect capital structure developments to drive near-term sentiment .
Financing trade-offs: $11M zero-coupon convertible with $10.3M beneficial conversion boosts equity but adds non-cash interest amortization; monitor dilution/convert dynamics and interest expense trajectory .
Margin pressure persists: gross margin 8.9% vs 21.9% YoY; improving QoQ but still constrained by pricing/mix; execution on EPC and asset sale/transfer model is critical to restore profitability .
Pipeline catalysts: UK JV (WIRCON), China 50MW/21MW projects and asset transfer agreements can unlock revenue/working capital; track conversion to cash and project-level margins .
Related-party liabilities remain a risk: related-party payables large but declining ($38.67M vs $50.90M QoQ); balance sheet normalization is a medium-term thesis driver .
Without consensus estimates, trade setup leans event-driven (capital raises, project sales, funding milestones) rather than beat/miss narratives; focus on liquidity, backlog conversion, and gross margin mix .

SPI Energy Co., Ltd. (SPI)·Q2 2014 Earnings Summary