SUNation Energy, Inc. Q2 FY2023 earnings call

• Kyle Udseth highlighted strong operational and financial results, with Hawaii continuing great sales and installation momentum, New York showing strong year-over-year growth, and corporate office containing overhead costs while building shared services. - Mentioned the closure of debt financing with Decathlon Capital Partners, which retired the SUNation short-term sellers note and allowed integration of SUNation. - Completed the sale of legacy subsidiaries JDL Technologies and Ecessa Corporation, moving forward as solely a solar company. - Emphasized continuous improvement, focus on execution, and progress in M&A pipeline with filling and diligencing of opportunities.

In the second quarter, the Hawaii business continued its strong sales and installation momentum, exceeding prior year and internal plans. The New York business showed strong year-over-year growth. Total revenue in Q2 2023 was $19.8 million, a significant increase from $4.2 million in Q2 2022. Pro forma revenue in Q2 2023 was up 23% from $16.1 million in 2022, with HEC up 55% and SUNation up 12%. Battery attached rate in Hawaii was outstanding at 89% in Q2, while New York had a 5% battery attached rate in the quarter. Revenue contribution from Hawaii and New York segments was driven by their respective growth and performance.

• Stated full year revenue range of $80 million to $85 million. - Continued to guide for positive adjusted EBITDA for full year 2023. - Confidence in sustaining performance with data-driven metrics and continued growth through acquisitions and operational excellence.

• Impact of wildfires in Hawaii, although operations are on Oahu and no direct impact, but underscores importance of their work. - Effect of rising interest rates on other markets and potential impact on M&A opportunities and customer decision-making. - Potential challenges in M&A integration, including finding the right fit in terms of culture, financials, and growth potential.

Q: About the wildfires in Hawaii, how does it impact demand?

A: Kyle Udseth mentioned no direct impact on operations, but severe weather events underscore the importance of their work, and while it's hard to tie specific events to immediate demand uptick, it reinforces the mission.

Q: Comment on sequential revenue decline and market weakness?

A: Kyle Udseth said sequential decline was due to delayed projects in prior quarters being recognized in Q1, demand in Hawaii remains strong, and rising interest rates impact but not directly affecting their markets. Eric Ingvaldson added pro forma numbers show underlying operating performance growth.

Q: Impact of market weakness on M&A deal flow and pricing?

A: Kyle Udseth said more opportunities from struggling companies, but focus on fit in terms of financial health, culture, and growth potential. Multiples have come down, but looking for right fit companies.

Q: Update on storage product in Hawaii and New York?

A: Kyle Udseth said Franklin Whole Home battery system is a great product, they are hardware agnostic focusing on reliable products, and innovating with new products in different markets.

Q: Sustainability of gross margins and margin impact of batteries in New York?

A: Eric Ingvaldson said gross margins are sustainable due to better buying power and normalized supply chain. On New York batteries, battery attach rates are expected to rise with time of use rates, but margin impact not yet forecasted in detail.

Q: Update on Florida expansion?

A: Eric Ingvaldson said Florida is a test with lease signed, lead-gen and sales efforts starting, using test and learn approach.