Business Acquisition and Strategy - The Company closed an Asset Purchase Agreement on October 25, 2024, acquiring assets for a total purchase price of $4 million in cash and 6,206,897 shares of Class A Common Stock[193]. - The Business Combination resulted in the Sellers owning 83.8% of the equity of the Company immediately following the transaction[206]. - The Business Combination was accounted for as a reverse recapitalization, treating ESGEN as the acquired company[202]. - The Company has focused on a capital-light business strategy, minimizing inventory by drop-shipping most equipment directly to installation sites[190]. - The company may need to raise additional capital through debt or equity financing if proceeds from the Business Combination are insufficient to support business needs[253]. Sales and Market Expansion - As of September 30, 2024, the Company utilized approximately 180 sales agents and 22 independent sales dealers to generate a growing sales pipeline[190]. - The Company plans to enter new markets selectively where solar penetration is below 7% of the addressable residential market, focusing on states with favorable net metering policies[191]. - The company plans to expand its roofing business, having sold over $2.5 million in roofing replacements in 2024 to facilitate solar installations[219]. - The company intends 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[220]. - The company aims to expand its product offerings and services in residential markets across Florida, Texas, Arkansas, and Missouri to drive future revenue growth[218]. Financial Performance - Revenue, net for the three months ended September 30, 2024, decreased by approximately $18.2 million, or 48.1%, compared to the same period in 2023, primarily due to higher interest rates affecting consumer financing[235]. - Revenue decreased by approximately $32.1 million, or 37.0%, from $86.7 million for the nine months ended September 30, 2023, to $54.6 million for the same period in 2024[242]. - Gross profit for the three months ended September 30, 2024, was $9.6 million, with a gross margin of 48.8%, compared to a gross profit of $17.4 million and a gross margin of 45.8% in the same period of 2023[212]. - Adjusted EBITDA for the three months ended September 30, 2024, was $(980,000), with an adjusted EBITDA margin of (5.0)%, compared to $4.5 million and 11.9% in Q3 2023[212]. - Adjusted EBITDA for the nine months ended September 30, 2024, reflects a significant decline due to decreased revenue and increased operational costs[264]. Cost Management - Cost of goods sold decreased by $10.7 million, resulting in an improvement in the cost of goods sold as a percentage of revenue from 55.0% in Q3 2023 to 51.2% in Q3 2024[237]. - The cost of goods sold decreased by $18.4 million, or 37.4%, from $49.2 million in 2023 to $30.8 million in 2024, maintaining a consistent percentage of revenue at 57.2%[244]. - General and administrative expenses increased by 66.2% to $7.2 million in Q3 2024, compared to $4.3 million in Q3 2023, reflecting higher costs associated with being a publicly traded company[235]. - General and administrative expenses increased by $6.2 million, or 63.6%, from $9.7 million in 2023 to $15.9 million in 2024, primarily due to stock compensation and increased headcount[246]. - Sales and marketing expenses decreased by $3.6 million, or 18.3%, from $19.8 million in 2023 to $16.2 million in 2024, attributed to reduced costs from fewer sales personnel[247]. Operational Challenges - The company is experiencing increased costs due to inflation, particularly in labor and raw materials, which may pressure operating margins[221]. - Interest rate increases have negatively impacted customer financing, slowing sales of solar systems, as higher rates lead to increased monthly costs for customers[222]. - Net cash used in operating activities was approximately $12.2 million for the nine months ended September 30, 2024, compared to a net cash provided of approximately $5.8 million in 2023, a decrease of $17.9 million[256]. - Cash and cash equivalents decreased from approximately $8.0 million as of December 31, 2023, to approximately $4.3 million as of September 30, 2024[251]. Loss and Impairment - For the three months ended September 30, 2024, the company reported a net loss of $2,872,424, compared to a net income of $4,000,047 for the same period in 2023[266]. - For the nine months ended September 30, 2024, the company reported a net loss of $8,736,845, compared to a net income of $6,441,842 for the same period in 2023[266]. - The net loss income margin for the three months ended September 30, 2024, was (14.6)%, down from 10.6% in the same period last year[266]. - The company incurred interest expenses of $209,227 for the three months ended September 30, 2024, compared to $10,396 in the same period in 2023[266]. - Stock compensation expenses for the nine months ended September 30, 2024, totaled $7,101,818, indicating a significant increase compared to the previous year[266]. Accounting and Valuation - The company has not recorded any goodwill impairment for the three and nine months ended September 30, 2024, and 2023[271]. - No impairment charges were recorded for intangible assets for the three and nine months ended September 30, 2024, and 2023[273]. - The company evaluates its accounting policies and estimates on an ongoing basis, which may lead to material differences in reported financial results under different conditions[268]. - The company recognizes and measures assets acquired in business combinations based on their estimated fair values at the acquisition date, which involves significant judgment and estimation[269].
ESGEN Acquisition (ESAC) - 2024 Q3 - Quarterly Report