Pineapple Energy (PEGY) - 2023 Q4 - Annual Results

Executive Summary & Business Overview This section provides an overview of Pineapple Energy's strategic direction, leadership commentary, and core business model, highlighting its focus on solar and storage expansion CEO & CFO Commentary Pineapple Energy's leadership highlighted resilience and positive adjusted EBITDA in FY2023 despite headwinds, focusing on cash flow and working capital funding - Pineapple Energy delivered a strong Q4 and full year 2023, generating $79.6 million in revenue, just shy of guidance, and achieving positive adjusted EBITDA for the full year, despite challenges from high interest rates, policy uncertainty, and consumer malaise[2] - The company anticipates interest rates to fall, hardware costs to decrease, and utility prices to increase in 2024, which is expected to improve the value proposition for rooftop solar and drive demand, paving the way for future acquisitions and organic expansion[2] - Pineapple achieved $1.2 million in positive pro forma adjusted EBITDA for the full year 2023, demonstrating successful cost control and operating leverage. The primary focus remains on generating positive EBITDA and cash flow from operations, alongside pursuing various funding sources for working capital[3] Company Overview Pineapple Energy expands local solar, storage, and energy services across the U.S., powering the energy transition - Pineapple Energy focuses on growing leading local and regional solar, storage, and energy services companies nationwide[22] - The company's vision is to power the energy transition through grassroots growth of solar electricity paired with battery storage[22] - Pineapple's brand portfolio includes SUNation, Hawaii Energy Connection, E-Gear, Sungevity, and Horizon Solar Power, providing end-to-end solar, battery storage, and grid services[22] GAAP Financial Results This section details Pineapple Energy's GAAP financial performance for Q4 and full-year 2023, covering revenue, gross profit, operating expenses, net loss, and balance sheet highlights Fourth Quarter 2023 GAAP Highlights Q4 2023 GAAP results showed significant improvements, including a 13% revenue increase, 10% gross profit rise, and reduced operating and net losses Q4 2023 GAAP Financial Highlights (YoY Change) | Metric | Change from Q4 2022 | | :-------------------------------- | :------------------ | | Revenue | Up 13% | | Gross profit | Up 10% | | Operating Expenses | Down 8% | | Operating Loss | Decreased 34% | | Net Loss from continuing operations | Decreased 91% | | Pro forma adjusted EBITDA | Up 222% | | Positive cash flow from operations | $157,937 | Full Year 2023 GAAP Results FY2023 GAAP results showed substantial revenue and gross profit growth, driven by acquisitions, with reduced net loss and improved diluted EPS Revenue Q4 2023 revenue increased 13% to $19.4 million, and FY2023 revenue surged 189% to $79.6 million, primarily due to the SUNation acquisition Revenue Performance (GAAP) | Period | 2023 Revenue | 2022 Revenue | YoY Change | | :---------------- | :------------- | :------------- | :--------- | | Fourth Quarter | $19,442,296 | $17,183,616 | +13% | | Full Year | $79,632,709 | $27,522,099 | +189% | - The increase in revenue for both periods was primarily due to the SUNation acquisition in Q4 2022[7] Gross Profit Q4 2023 gross profit rose 10% to $5.5 million, and FY2023 increased 275% to $27.7 million, driven by acquisitions and improved margins Gross Profit Performance (GAAP) | Period | 2023 Gross Profit | 2022 Gross Profit | YoY Change | | :---------------- | :------------------ | :------------------ | :--------- | | Fourth Quarter | $5,520,482 | $5,005,131 | +10% | | Full Year | $27,696,190 | $7,377,445 | +275% | - Gross profit margin improvements were due to the SUNation acquisition and an improvement in equipment costs and financing fees[8] Operating Expenses Q4 2023 operating expenses decreased 8% to $7.9 million, while FY2023 increased 97% to $35.2 million, influenced by acquisition-related costs Operating Expenses (GAAP) | Period | 2023 Operating Expenses | 2022 Operating Expenses | YoY Change | | :---------------- | :---------------------- | :---------------------- | :--------- | | Fourth Quarter | $7,858,152 | $8,550,236 | -8% | | Full Year | $35,163,055 | $17,826,124 | +97% | - Q4 2023 operating expenses included $1.1 million of amortization and depreciation, $246,131 of stock-based compensation, and a $190,000 unfavorable fair value remeasurement of earnout consideration[10] - Full-year 2023 operating expenses included $5.1 million of amortization and depreciation, $1.2 million of stock-based compensation, and a $1.35 million unfavorable fair value remeasurement of earnout consideration[11] Other Income (Expenses) Other income significantly decreased in Q4 and FY2023, primarily due to reduced CVR remeasurement, increased interest expense, and lower asset sale gains Other Income (GAAP) | Period | 2023 Other Income | 2022 Other Income | YoY Change | | :---------------- | :------------------ | :------------------ | :--------- | | Fourth Quarter | $780,884 | $3,017,849 | -$2.2M | | Full Year | $646,149 | $7,182,860 | -$6.5M | - Q4 2023 decrease in other income was primarily due to a $1.8 million decrease in favorable fair value remeasurement of contingent value rights and an increase in interest expense[12] - Full-year 2023 decrease in other income was due to a $4.68 million favorable fair value remeasurement of earnout consideration in 2022 and a decrease in gain on sale of assets in 2023[12] Net Loss and EPS Net loss from continuing operations significantly improved in Q4 2023 to $1.7 million and in FY2023 to $6.9 million, with corresponding EPS improvements Net Loss and Diluted EPS (GAAP) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | Net Loss from continuing operations | ($1,677,358) | ($17,403,394) | ($6,939,892) | ($20,141,948) | | Diluted Loss per Share | ($0.16) | ($2.58) | ($0.69) | ($2.99) | - The net loss figures for 2022 include the effect of $16.9 million in deemed dividends attributable to shareholders[6][13] Consolidated Balance Sheets Total assets decreased to $58.2 million by Dec 31, 2023, from $74.7 million in 2022, driven by reductions in current assets, liabilities, and equity Consolidated Balance Sheet Highlights | Metric | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :------------- | :------------- | | Total Assets | $58,172,811 | $74,695,487 | | Total Liabilities | $37,736,022 | $47,473,195 | | Total Stockholders' Equity (Deficit) | $20,436,789 | $27,222,292 | | Cash and cash equivalents | $3,575,283 | $2,187,540 | | Restricted cash and cash equivalents | $1,821,060 | $3,068,938 | | Investments | — | $2,666,766 | | Goodwill | $20,545,850 | $20,545,850 | | Intangible assets, net | $15,808,333 | $20,546,810 | - As of December 31, 2023, cash, cash equivalents, and restricted cash totaled $5.4 million, with $1.8 million earmarked for Contingent Value Rights (CVRs) related to the legacy CSI business[14] Consolidated Statements of Operations and Comprehensive Loss FY2023 consolidated operations show significant revenue and gross profit growth, largely acquisition-driven, with increased operating expenses but a substantially reduced net loss Consolidated Statements of Operations and Comprehensive Loss (FY2023 vs FY2022) | Metric | 2023 | 2022 | | :------------------------------------------------ | :------------- | :------------- | | Sales | $79,632,709 | $27,522,099 | | Cost of sales | $51,936,519 | $20,144,654 | | Gross profit | $27,696,190 | $7,377,445 | | Total operating expenses | $35,163,055 | $17,826,124 | | Operating loss from continuing operations | ($7,466,865) | ($10,448,679) | | Other income, net | $646,149 | $7,182,860 | | Net loss from continuing operations | ($6,939,892) | ($3,278,056) | | Net loss | ($8,132,167) | ($10,352,240) | | Net loss attributable to common shareholders | ($8,132,167) | ($27,216,132) | | Basic net loss per share (Continuing operations) | ($0.69) | ($2.99) | | Diluted net loss per share (Continuing operations) | ($0.69) | ($2.99) | Pro Forma Financial Analysis This section presents Pineapple Energy's pro forma operating metrics and financial results, including adjusted EBITDA, providing a normalized view of performance post-acquisitions Pro Forma Operating Metrics Q4 2023 pro forma operating metrics showed decreased residential kW installed but increased kW sold and battery attachment rate, with mixed results for FY2023 Pro Forma Operating Metrics (Q4 2023 vs Q4 2022) | Metric | Q4 2023 vs Q4 2022 Change | | :-------------------------- | :------------------------ | | Residential kW installed | Down 17% | | Residential kW sold | Up 2% | | Residential battery attachment rate | Up to 38% (from 28%) | | Backlog (as of Dec 31, 2023) | Declined to $36M (from $39M as of Oct 31, 2023) | Pro Forma Operating Metrics (FY 2023 vs FY 2022) | Metric | 2023 vs 2022 Change | | :-------------------------- | :------------------ | | Residential kW installed | Up 8% | | Residential kW sold | Down 1% | | Residential battery attachment rate | Up 3% to 40% (from 37%) | Pro Forma Financial Results Pro forma results show Q4 2023 revenue and gross profit decline, but FY2023 increases, with significant adjusted EBITDA growth for both periods due to improved operating leverage Pro Forma Financial Results (Q4 & FY) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :---------------- | :---------- | :---------- | :---------- | :---------- | | Revenue | $19,442,296 | $23,537,582 | $79,632,709 | $73,990,209 | | Gross Profit | $5,520,482 | $7,710,730 | $27,696,190 | $23,788,906 | | Net (Loss) Income | ($1,677,358) | $1,005,577 | ($6,937,872) | ($357,441) | | Adjusted EBITDA* | $207,947 | ($170,536) | $1,236,048 | ($3,311,746) | Revenue Q4 pro forma revenue declined 17% due to decreased residential kW installed and commercial revenue, while FY pro forma revenue increased 8% from growth across segments - Fourth quarter pro forma revenue declined 17% compared to the prior year, driven by a 17% decrease in residential kW installed and a 6% decrease in commercial revenue, partially offset by a 6% increase in service and other revenue[16] - Full year pro forma revenue increased 8% compared to the prior year, driven by an 8% increase in residential kW installed, a 4% increase in commercial revenue, and a 15% increase in service and other revenue[16] Gross Profit Q4 pro forma gross profit decreased 28% due to lower revenue and increased costs, while FY pro forma gross profit increased 16% from higher revenue and improved margins - Fourth quarter pro forma gross profit decreased 28% from the prior year due to a decrease in revenue, change in revenue mix, and an increase in indirect costs[17] - Full year pro forma gross profit increased 16% from the prior year due to an increase in revenue and margin improvement on reduced equipment costs and financing fees[17] Net (Loss) Income Q4 pro forma net loss increased by $2.7 million due to lower gross profit and reduced CVR remeasurement, while FY pro forma net loss increased by $6.6 million from various factors - Fourth quarter pro forma net loss increased by $2.7 million from the prior year due to the decrease in gross profit and a $1.8 million decrease in favorable fair value remeasurement of contingent value rights[18] - Full year pro forma net loss increased $6.6 million from the prior year, primarily due to a $4.7 million decrease in gain on fair value remeasurement of merger earnout consideration in 2022, a $1.9 million decrease in an employee retention credit, and a $1.7 million increase in interest expense[18] Adjusted EBITDA Q4 pro forma adjusted EBITDA increased 222% to $378,483 due to operating leverage and cost control, with FY adjusted EBITDA increasing 135% to $4.7 million - Fourth quarter pro forma adjusted EBITDA increased 222%, or $378,483, driven by increased operating leverage by controlling costs at SUNation, HEC (Hawaii Energy Connection) and Corporate[19] - Full year pro forma adjusted EBITDA increased 135%, or $4.7 million, from the prior year[19] Non-GAAP Financial Measures Explanation and Reconciliation This section explains unaudited pro forma financial information and non-GAAP Adjusted EBITDA, detailing its calculation and limitations as an operating performance indicator - Unaudited pro forma financial information represents results as if the CSI merger, HEC and E-Gear asset acquisitions, and SUNation acquisition occurred as of January 1, 2022, and is not necessarily indicative of future results[29] - Adjusted EBITDA is a non-GAAP financial measure calculated as pro forma net loss, adjusted for interest, income taxes, depreciation, amortization, stock compensation, gain on sale of assets, and non-cash fair value remeasurement adjustments[31] Reconciliation of Pro Forma Net Loss to Pro Forma Adjusted EBITDA | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :------------------------------------ | :---------- | :---------- | :---------- | :---------- | | Pro Forma Net Loss | ($1,677,358) | $1,005,577 | ($6,937,872) | ($357,441) | | Interest expense | $789,940 | $353,961 | $2,657,517 | $1,065,945 | | Interest income | ($21,619) | ($6,459) | ($139,560) | ($23,188) | | Income taxes | $120,572 | ($5,182) | $119,176 | $204,453 | | Depreciation | $95,099 | $70,421 | $397,943 | $317,300 | | Amortization | $1,038,382 | $1,216,698 | $4,738,477 | $4,866,793 | | Impairment loss | - | $250,000 | - | $250,000 | | Stock compensation | $246,131 | $285,707 | $1,212,956 | $309,205 | | Gain on sale of assets | - | ($750) | ($437,116) | ($1,229,883) | | FV remeasurement of contingent value rights | ($1,522,693) | ($3,340,509) | ($2,674,966) | ($2,125,949) | | FV remeasurement of earnout consideration | $190,000 | - | $1,350,000 | ($4,684,000) | | Legacy CSI receivables write off | $949,493 | - | $949,493 | - | | Employee retention credit | - | - | - | ($1,904,981) | | Pro Forma Adjusted EBITDA | $207,947 | ($170,536) | $1,236,048 | ($3,311,746) | Other Information This section covers additional disclosures including the status of contingent value rights, forward-looking statements, and key company contacts Status of Contingent Value Rights As of December 31, 2023, the Contingent Value Rights (CVR) liability was estimated at $1.7 million, representing the fair value of legacy CSI assets - The CVR liability as of December 31, 2023, was estimated at $1.7 million[21] - This liability represents the estimated fair value of legacy CSI assets to be distributed to CVR holders[21] Forward-Looking Statements This section outlines forward-looking statements regarding future financial performance, growth, and operations, noting they are subject to uncertainties and risks - The press release contains forward-looking statements concerning future financial performance, growth, opportunities, cost reductions, acquisitions, cash flows, and earnings[23] - These statements are based on current expectations and are subject to uncertainty and changes in circumstances, with actual results potentially varying materially due to economic, business, competitive, or regulatory factors and other risks[23][24] Contacts Contact information for Pineapple Energy's CEO, Kyle Udseth, and CFO, Eric Ingvaldson, is provided for inquiries - Kyle Udseth, Chief Executive Officer, can be reached at +1 (952) 996-1674 or Kyle.Udseth@pineappleenergy.com[25] - Eric Ingvaldson, Chief Financial Officer, can be reached at +1 (952) 996-1674 or Eric.Ingvaldson@pineappleenergy.com[25]