Business Focus and Strategy - 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[160]. - The company has a capital-light business strategy, relying on drop-shipped equipment to minimize inventory[163]. - The company intends to expand its product offerings and services in residential markets across additional states to drive future revenue growth[194]. - The company plans to expand its workforce by hiring and training more skilled technicians to ensure high standards for quality and safety[165]. - 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[196]. Sales and Revenue 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%[212]. - Revenue decreased by approximately $14.2 million, or 29.2%, from $48.8 million in the six months ended June 30, 2023 to $34.6 million in the same period of 2024[220]. - Most sales were generated in Florida and Ohio, with plans to enter new markets where solar penetration is below 7% of the addressable residential market[165]. - The company has sold over $2.1 million in roofing replacements in 2024 to facilitate solar installations and plans to expand its roofing business in future markets[195]. Financial Metrics - Adjusted EBITDA for Q2 2024 was $679,000, compared to $1.3 million in Q2 2023, reflecting a margin of 4.6%[189]. - Adjusted EBITDA for the six months ended June 30, 2024 was $(3,033,683), compared to $3,364,064 for the same period in 2023[241]. - Adjusted EBITDA margin for the six months ended June 30, 2024 was (8.8)%, compared to 6.9% for the same period in 2023[244]. - Gross profit for Q2 2024 was $3.9 million, with a gross margin of 26.7%, up from 17.1% in Q2 2023[189]. Costs and Expenses - Cost of goods sold decreased by $14.1 million, improving as a percentage of revenue to 70% in 2024 from 81% in 2023[214]. - Cost of goods sold decreased by $11.6 million, or 29.5%, maintaining a consistent percentage of revenue at 80%[222]. - 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[216]. - General and administrative expenses increased by $4.4 million, or 86.0%, from $5.2 million to $9.6 million, primarily due to increased stock compensation and headcount[223]. - Sales and marketing expenses decreased by $0.7 million, or 67.9%, from $1.0 million to $0.3 million, reflecting reduced support for fewer sales personnel[224]. Cash Flow and Financing - Net cash used in operating activities was approximately $12.3 million for the six months ended June 30, 2024, compared to net cash provided of approximately $1.8 million in the same period of 2023, a decrease of $14.2 million[233]. - 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[235]. - As of June 30, 2024, cash and cash equivalents were approximately $5.3 million, down from $8.0 million as of December 31, 2023[228]. - Interest rate increases have resulted in higher monthly costs for customers, slowing financing-related sales of solar systems[198]. Business Combination and Ownership - Following the Business Combination, the Primary Sellers own 83.8% of the equity of the company, retaining majority control[181]. - The Business Combination was accounted for as a reverse recapitalization, treating ESGEN as the acquired company[176]. - The Class A Common Stock and public warrants are traded on Nasdaq under the ticker symbols "ZEO" and "ZEOWW" respectively[175]. Impairment and Fair Value - Goodwill is recognized as the excess of acquisition-date consideration over the net identifiable assets acquired[248]. - The company conducts annual goodwill impairment tests on December 31, with no impairment recorded for the three months ended June 30, 2024 and 2023[249]. - Intangible assets, including tradenames and customer lists, are amortized on a straight-line basis over their estimated useful life[250]. - No impairment charges for intangible assets were recorded for the three months ended June 30, 2024 and 2023[251]. - Fair value determinations for business combinations are based on estimated fair values at acquisition date, using income and market approaches[247].
Zeo Energy Corporation(ZEO) - 2024 Q2 - Quarterly Report