SUNation Energy, Inc. Q3 FY2023 earnings call

• Third quarter saw positive adjusted EBITDA despite macro challenges. - HEC and SUNation businesses grew gross profit dollars year-over-year. - HEC team delivered excellent results with high referral rate and strong battery attach rate. - SUNation managed to grow gross profit dollars in challenging interest rate environment with changes in financing partners and product costs. - Focus on disciplined execution, cost containment, and building shared services capabilities. - Broader vision of rolling up local and regional solar companies with steady progress made.

In Hawaii, Hawaii Energy Connection (HEC) had Q3 revenue up 6% year-over-year, with gross profit increasing 40% year-over-year due to holding the line on pricing and significant decreases in procurement cost. Battery attach rate remained at 90%, and 79% of systems sold came via customer referrals. In New York, SUNation had Q3 revenue down 16% year-over-year, but managed to grow gross profit dollars by 1% due to changes in financing partners and product costs. Battery attach rate in New York was 3% in the quarter, and 40% of New York sales came from customer referrals. As of quarter end, there was an estimated $40.7 million of probability-weighted installation backlog.

• Stated full year revenue range of $80 million to $85 million. - Continue to guide positive adjusted EBITDA for full year 2023. - In 2024 budgeting, aim to form perspective on gross margin percentage, OpEx, and achieve 10% or higher EBITDA margin at operating businesses, which is also a benchmark for acquiring new companies.

• Macro challenges and headwinds in the industry. - Interest rate environment impact on business. - Market competition and uncertainty in acquisitions.

Q: Regarding Long Island time of use billing, any leading indicators and impact on 2024?

A: January 1st rollout slightly delayed for IT issues from utility, with new customers auto-enrolled in time of day rates, and chunks of customers to be rolled out throughout the year. Company plans to prepare analytics, sales leadership, pricing, and training to present solar plus battery storage offering effectively.

Q: Concern about sequential revenue decline in Q2 and Q3, what gives confidence in Q4?

A: Have backlog with visibility in CRMs and project management systems, and activity in C&I pipeline. Focus on gross profit dollars and working through 2024 budgeting to consider pricing elasticity and volume impact.

Q: Margin performance, any room for growth?

A: Continued room to drive cost out of business and lower cost basis. Need to balance pricing and elasticity to determine desired gross margin percentage in 2024 and align OpEx to achieve EBITDA margin targets for operating businesses and acquisitions.

Q: M&A activity, market opportunity and execution?

A: Pipeline is healthy with active diligence on potential acquisitions. Good time to be buying due to private company valuation drop from public equity trends. Using debt as tool for acquisitions, with focus on identifying right fit companies and fundraising.