Business Overview - Zeo Energy Corp. is focused on accelerating the transition to renewable energy, providing residential solar energy systems and related services in Florida, Texas, Arkansas, and Missouri[143]. - The business combination with ESGEN resulted in the company changing its name to Zeo Energy Corp., with the transaction treated as a reverse recapitalization[151][159]. - Following the business combination, the primary sellers retained 83.8% ownership of the company, indicating no change in control[163]. - The management team remains unchanged post-business combination, ensuring continuity in leadership[165]. Market and Sales Strategy - As of June 30, 2024, the company has approximately 170 sales agents and 27 independent sales dealers, contributing to a growing sales pipeline[146]. - The company aims to expand selectively into new markets where favorable net metering policies exist[148]. - The company plans to double its in-house sales force and external sales dealers in 2024 to target new customers in the Southern U.S. regional residential markets[176]. - The company has launched a leasing program for residential solar energy systems, catering to homeowners in a higher interest rate environment[149]. - The solar energy market in the U.S. is expected to grow due to government policy support and rising conventional utility costs, with the company targeting markets with solar penetration below 7%[148]. Financial Performance - Revenue decreased by approximately $15.4 million, from $30.1 million in Q2 2023 to $14.7 million in Q2 2024, representing a decline of 51.1%[188]. - Revenue decreased by approximately $14.2 million, from $48.8 million for the six months ended June 30, 2023 to $34.6 million for the six months ended June 30, 2024, representing a decline of 29.2%[196]. - Adjusted EBITDA for Q2 2024 was $679,000, compared to $1.3 million in Q2 2023, with an adjusted EBITDA margin of 4.6%[170]. - Adjusted EBITDA for the six months ended June 30, 2024 was $(3.0) million, compared to $3.4 million for the same period in 2023, reflecting a significant decline in operational performance[212]. - The company reported a net loss of $3.3 million before taxes for the six months ended June 30, 2024, compared to a net income of $2.4 million for the same period in 2023, a decline of 236.8%[196]. Cost Management - Cost of goods sold decreased by $14.1 million, improving to 70% of revenue in 2024 from 81% in 2023, driven by lower material costs and labor efficiencies[190]. - Cost of goods sold decreased by $11.6 million, maintaining a consistent percentage of revenue at 80%[198]. - General and administrative expenses increased by $2.1 million, from $3.8 million in Q2 2023 to $5.9 million in Q2 2024, primarily due to $2.4 million in stock compensation recognized in 2024[192]. - General and administrative expenses increased by $4.4 million, from $5.2 million to $9.6 million, primarily due to a $2.9 million increase in stock compensation and increased headcount[198]. - Sales and marketing expenses decreased by $0.7 million, from $1.0 million to $0.3 million, due to reduced costs associated with fewer sales personnel[199]. Cash Flow and Liquidity - Net cash used in operating activities was approximately $12.3 million for the six months ended June 30, 2024, compared to a net cash provided of approximately $1.8 million for the same period in 2023, a decrease of $14.2 million[205]. - Net cash provided by financing activities was approximately $10.0 million for the six months ended June 30, 2024, primarily from the issuance of convertible preferred stock[207]. - As of June 30, 2024, the company's cash and cash equivalents were approximately $5.3 million, down from $8.0 million as of December 31, 2023[202]. Operational Challenges - Inflation and supply chain challenges are impacting operating margins and increasing costs, with raw material costs and labor rising due to higher inflation rates[176][178]. - Interest rate increases have resulted in higher monthly costs for customers, slowing financing-related sales of solar systems[177]. - The company expects to incur substantial additional expenses for compliance and reporting requirements following the business combination[168]. Other Financial Information - The Class A Common Stock and public warrants of Zeo Energy Corp. are traded on Nasdaq under the ticker symbols "ZEO" and "ZEOWW," respectively[158]. - The change in fair value of warrant liabilities contributed $690,000 to other income, net, improving from a net expense of $(41,712) to income of $669,534[200]. - No goodwill impairment was recorded for the three months ended June 30, 2024 and 2023[220]. - Intangible assets are subject to amortization on a straight-line basis over their estimated period of benefit[221]. - No impairment charges were recorded for intangible assets for the three months ended June 30, 2024 and 2023[222].
ESGEN Acquisition (ESAC) - 2024 Q2 - Quarterly Report