Q1 2024 Pineapple Energy Inc Earnings Call
Operator: Good afternoon, and welcome to Pineapple Hldg's first quarter 2024 conference call. As a reminder, today's call is being recorded. All participants are in a listen-only mode. For opening remarks and introductions, I would like to turn the call over to Eric Ingvaldson, CFO of Pineapple Energy. Mr. Ingvaldson, please go ahead.
Good afternoon, and welcome to buy an Apple Energy's first quarter 2024 conference calls.
As a reminder, today's call is being recorded all.
All participants are in a listen only mode.
Speaker Change: For opening remarks, and introductions I would like to turn the call over to Eric and Sun.
Eric: I mean Apple energy.
Eric: Mr At Ingalls and please go ahead.
Eric: Thank you Benjamin.
Eric Ingvaldson: Good afternoon, and welcome to Pineapple Energy's conference call to discuss results for the first quarter of 2024. With me today is Kyle Udseth, our Chief Executive Officer.
Good afternoon, and welcome to Pineapple Energy's conference call to discuss results for the first quarter of 2024.
Eric: With me today is Kyle upset our Chief Executive Officer.
Eric Ingvaldson: Our call this afternoon will include statements that speak to the company's expectations, outlook, and predictions of the future, which are considered forward-looking statements. These forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements. We are not obliged to revise or update any forward-looking statements, except as may be required by law.
Kyle: Our call. This afternoon will include statements that speak to the company's expectations outlook and predictions of the future which are considered forward looking statements.
Kyle: These forward looking statements are subject to risks and uncertainties many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements.
Kyle: We are not obliged to revise or update any forward looking statements, except as may be required by law. Please.
Eric Ingvaldson: Please refer to our disclosures regarding risk factors and forward-looking statements in today's earnings release and other SEC filings. A copy of our press release has been posted on the investor relations page of our website for reference. The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP equivalent, and can be found in the press release that we issued yesterday. With that, I will turn the call over to our CEO, Kyle Udseth. Kyle, go ahead.
Kyle: Please refer to our disclosures regarding risk factors and forward looking statements in today's earnings release and other SEC filings.
Kyle: A copy of our press release has been posted to the Investor Relations page of our website for reference.
Kyle: The non-GAAP financial measures discussed in this call are reconciled to the U S GAAP equivalent.
Kyle: And B can be found in the press release that we issued yesterday with that I will turn the call over to our CEO Kyle.
Kyle: Kyle go ahead.
Kyle Udseth: Thanks, Eric, and thank you to everyone for joining us on the call. The tone of today's call is going to be a bit different from prior quarters, although I would also say that one quarter of underperformance doesn't knock us off the longer-term path or fundamentally change our positioning in the market. But if you go back and review the transcripts from all of our 2023 earnings calls, I've always tried to start and end with profitability.
Kyle: Thanks, Eric and thank you everyone for joining us on the call. This morning.
Kyle: The tone of todays call is going to be a bit different from prior quarters. Although I would also say that one quarter of underperformance it doesn't knock us off the longer term path or fundamentally change our positioning in the marketplace.
Kyle: But if you go back and review the transcript from all of our 2023 earnings calls I've always tried to start and end with profitability.
Kyle Udseth: Generating positive EBITDA has been our North Star because we wanted to differentiate ourselves from other larger public peers with hard-to-parse financial statements and bespoke metrics and run a business with a strong top line, healthy gross margin, and discipline on OPEX. However, unlike in each of the four quarters in 2023, we were not able to deliver a positive EBITDA in Q1 2024. It is a frustrating result in spite of a lot of effort from our teams in Hawaii, New York, and the corporate team in Minnesota, but what I can say is that we are committed to getting profitability back on track in Q2 and beyond.
Kyle: Generating positive EBITDA has been our north star because we wanted to differentiate ourselves from other larger public tiers with hard to pars financial statements and bespoke metrics.
Kyle: And run a business with a strong topline healthy gross margin and disciplined on opex to produce profit margin and operating cash generation.
Kyle: Unlike in each of the four quarters in 2023, we were not able to deliver positive EBITDA in Q1 2024.
Kyle: It is a frustrating result in spite of a lot of effort from our teams in Hawaii, New York and the corporate team in Minnesota, but what I can say is that we are committed to getting profitability back on track in Q2 and beyond.
Kyle Udseth: As Eric will share more in his section, Q1 of 2023 was a bit of an outlier for us due to the timing of projects we'd originally expected to hit in Q4 of 2020. So the year-over-year comps look worse.
Kyle: As Eric will share more in his section Q1 of 2023 was a bit of an outlier for us due to the timing of projects. We had originally expected to hit in Q4 of 2022.
So the year over year comps look worse and it is not uncommon at all for rooftop solar businesses that negative EBITDA in Q1 due to timing and seasonality.
Kyle Udseth: And it is not uncommon at all for rooftop solar businesses to have negative EBITDA in Q1 due to timing and seasonality. In fact, I think it's far less common for a rooftop solar company to have a profitable Q1. But it is also the case that we underperformed versus our own internal budget in Q1, so the culprit isn't just... At our HEC business in Hawaii, revenue is down both year over year and versus budget. The lucrative battery bonus program that drove a large and sustained wave of demand on Oahu throughout 2023 crashed on the shore in December.
Kyle: In fact, I think it's far less common for rooftop solar companies Abbott profitable Q1.
Kyle: But it is also the case that we underperformed versus our own internal budget in Q1. So the culprit is it just seasonality.
Kyle: At our Hec business in Hawaii revenue was down both year over year and versus budget.
Kyle: The lucrative battery bonus program that drove a large and sustained wave of demands on Oahu throughout 2023 crashed on the shore in December.
Kyle Udseth: Confusion over the timing and details of the successor tariff caused uncertainty and lack of action from customers throughout the first quarter of the year. We believe we are through the worst of the lull, and while the current incentives are not as lucrative as before, the economics of going solar with storage are still very strong, in addition to all of the resiliency, control, and clean energy benefits that homeowners love and are becoming more prominent in the decision-making process in Hawaii.
Kyle: And confusion over the timing and details of the successor tariffs caused uncertainty and lack of action for customers throughout the first quarter of this year.
Kyle: We believe we are through the worst of the lull and while the current incentives are not as lucrative as before the economics is going solar with storage is still very strong. In addition to all of the resiliency and control and clean energy benefits that homeowners love and are becoming more prominent in the decision in Hawaii.
Kyle Udseth: Additionally, there are proceedings underway at the Public Utilities Commission that will influence the future of the grid, and we believe it will be more connected, with distributed energy resources playing a key role. HEC and our technology arm, eGear, are ready to lean in and help shape the grid of the future in Hawaii.
Kyle: Additionally, there are proceedings underway at the public utilities Commission that will influence the future of the grid and we believe it will be more connected with distributed energy resources, playing a key role.
Kyle: And our technology arm each year are ready to lean in and help shape the creator of the future in Hawaii.
Kyle Udseth: Now turning to our Senation business in New York, we also had misses on both the residential and commercial sides of the business year over year and versus budget. The residential story, especially though, is pretty positive, as the year-over-year comp really wasn't meaningful due to noise from December of 2022, and the missed versus budget was very slight. Furthermore, new kilowatts sold in the quarter were up strongly year over year, which sets us up well for success going forward.
Kyle: Now turning to our nation business in New York, We also had misses on both the residential and commercial sides of the business year over year and versus budget.
Kyle: The residential story, especially that was pretty positive as the year over year comp really wasn't meaningful due to noise from December of 2022, and the Miss versus budget was very slight.
Kyle: Furthermore, new kilowatts sold in the quarter were up strongly year over year, which sets us up well for success going forward.
Kyle Udseth: We went through a significant transition in late Q3 and early Q4 of last year, changing marketing leadership, lead generation, budgeting, and approach, our marketing agency, and the sales leadership approach. These were big changes and took some time to stabilize, but they were the right moves, and they resulted in better conversion at lower customer acquisition costs. And then our ability to get projects through the pipeline from a signed sales agreement to glass on the roof to an activated system has continued to improve as well. Overall, the residential business on Long Island is in good shape.
Kyle: We went through a significant transition in late Q3, and early Q4 of last year changing marketing leadership lead generation budgeting and approach our marketing agency.
Kyle: And the sales leadership approach.
Kyle: These were big changes and took some time to stabilize but they were the right moves and it resulted in better conversion at lower customer acquisition costs.
And then our ability to get projects through the pipeline from assigned sales agreement to glass on route to an activated system has continued to improve as well.
Overall, the residential business on long island is in good shape.
Kyle Udseth: Turning now to the commercial business unit, this is where we saw the biggest underperformance versus budget. We had a number of projects slip due to extenuating circumstances. The good news is, these projects are all still on our schedule for the remainder of 2024, along with many more that have been signed so far this year in a strong demand environment. We have a healthy pipeline on paper, and now it will come down to execution over the rest of the year.
Turning now to the commercial business unit. This is where we saw the biggest underperformance versus budget.
Kyle: We had a number of projects slip due to extenuating circumstances.
Kyle: The good news is these projects are still on our schedule for the remainder of 2024, along with many more that have been signed so far this year in a strong demand environment.
Kyle: We have a healthy pipeline on paper and now it will come down to execution over the rest of the year.
Kyle Udseth: We have implemented new project management, tracking, and oversight processes, and we will get commercial back on track as the growth engine it can become. I just mentioned the strong demand environment for commercial solar in New York. Let me expand on that and reprise a bit a paragraph from last quarter's call. Demand is starting to rebound for residential and commercial rooftop solar all over the country. Although the real acceleration should pick up in the second half of the year as a result of rate cuts.
Kyle: We have implemented new project management tracking and oversight processes, and we will get commercial back on track as the growth engine that can become.
Kyle: I just mentioned the strong demand environment for commercial solar in New York, Let me expand on that and recreated a bit a paragraph from last quarter's call.
Kyle: Demand is starting to rebound of residential and commercial rooftop solar all over the country, although the real acceleration should pick up in the second half of the year as rate cuts we get.
Kyle Udseth: The desire for homeowners to go solar, and ideally add a battery, is as high, in my opinion, as it's ever been. People want control and predictability over their electric bills, they want a way out of crushing annual bill inflation, they want to produce their own clean power, and they want backup and resilience in the face of increasingly severe weather and an increasingly fragile grid.
Kyle: The desire for homeowners to go solar and ideally at a battery is as high in my opinion as it's ever been.
Kyle: People want control and predictability over their electric bills, they want a way out of crushing annual bill inflation.
Kyle: On a produced their own clean power and they want backup and resilience in the face of increasingly severe weather and an increasingly fragile grid.
Kyle Udseth: That desire has not yet fully translated into demand this year and into closed sales as people have stayed on the sidelines due to interest rates, regulatory uncertainty, and the General Economic Malaise. But it's really important to parse out that first point, that this is the winning technology. It's the technology of the future and also the technology of the present. Consumers very much want solar, battery storage, and to further electrify their homes and transportation and lifestyle.
Kyle: That desire is not yet fully translated into demand this year and into closed sales as people have stayed on the sidelines due to interest rates regulatory uncertainty.
Kyle: Some general economic malaise.
Kyle: But it's really important to parse out that first point that this is the winning technology is the technology of the future and also the technology of the president and consumers very much want solar battery storage and a further electrify their homes and transportation and lifestyles.
Kyle Udseth: On this, as well as on prior calls, you've heard a lot of discussion on organic growth and bottom line focus from our existing visitors. That is our foundation. It supports the strategic platform for Pineapple, but the broader vision is absolutely still intact to drive a roll-up of leading local and regional rooftop solar. We've made steady progress on that front as well. The current environment presents a tremendous buying opportunity for experienced and savvy consolidators who can find and integrate the right... With that, I'll now turn the call over to our CFO, Eric Ingvaldson, to walk through our financials. Eric, please go ahead.
Kyle: On this as well as prior calls you've heard a lot of discussion on organic growth and bottom line focus from our existing businesses that is our foundation to support the strategic platform for pineapple, but.
Kyle: But the broader vision is absolutely still intact to drive a roll up of leading local and regional rooftop solar companies.
Kyle: And we've made steady progress on that front as well.
The current environment presents a tremendous buying opportunity for experienced and savvy consolidators, who can find and integrate direct companies.
Kyle: With that I'll now turn the call over to our CFO, Eric <unk> to walk through our financials. Eric. Please go ahead.
Eric: Thank you Kyle.
Eric Ingvaldson: Thank you, Kyle. Total revenue was $13.2 million in the first quarter of 2024, down $8.8 million, or 40% from the first quarter of 2023. In addition to unfavorable market conditions in the first quarter of 2024, the first quarter of 2023 was a tough comparison for Pineapple. In late 2022, permitting issues in Hawaii and delayed equipment deliveries in New York led to a significant number of projects originally scheduled for the fourth quarter of 2022 being installed in the first quarter of 2023. These timing issues led to a robust first quarter in the prior year during the period which is normally a seasonal low point for the business. This was a great session.
Eric: Total revenue was $13 2 million in the first quarter of 2024 down $8 8 million or 40% from the first quarter of 2023.
Eric: In addition to unfavorable market conditions in the first quarter of 2020 for the first quarter of 2023 was a tough comparison for pineapple and late 2020 to.
Eric: Permitting issues in Hawaii and delayed equipment deliveries in New York led to a significant number of projects originally scheduled for the fourth quarter of 2022.
Eric: Being installed in the first quarter of 2023. These timing issues led to a robust first quarter in the prior year during the period, which is normally a seasonal low point for the business.
Eric: This.
Eric Ingvaldson: Thank you. Thank you. Despite this decline in revenue and gross profit, we were able to minimize operating losses in the quarter, which I'll expand on in the presentation. As I mentioned, total revenue was $13.2 million in the first quarter of 2024, down $8.8 million or 40% from the first quarter of 2023. Residential contract sales decreased 6.7 million, or 37 percent, due to a 29 percent reduction in residential kilowatts installed and also a decrease in average price per system installed as a result of lower financing fees and lower battery attachment rates. Commercial contract sales decreased 1.8 million, or 65%, due to a delay in the start of commercial pipeline projects.
Eric: Despite this decline in revenue and gross profit, we were able to minimize operating losses in the quarter.
Eric: Which I'll expand on in.
Eric: In the preceding text.
Eric Ingvaldson: In addition, there was software revenue of $250,000 in the first quarter of 2023 that was related to a one-time licensing arrangement that did not recur in the first quarter of 2024. Total gross profit was $4.8 million in the first quarter of 2024, a decrease of $3.2 million or 40% from the first quarter of 2023. Gross profit decreased due primarily to decreased revenue. However, gross margin remained flat at 36% during the first quarter of 2024 as compared to the first quarter of 2023.
Eric: As I mentioned total revenue was $13 2 million in the first quarter of 2024 down $8 8 million or 40% from the first quarter of 2023.
Eric: Residential contract sales decreased $6 7 million or 37% due to a 29% reduction in residential kilowatts installed.
Eric: And also a decrease in average price per system installed as a result of lower financing fees.
Eric: And lower battery attachment rate.
Eric: Commercial contract sales decreased one 8 million or 65% due to a delay in the start of commercial pipeline projects.
Eric: In addition, there was software revenue of 250000 in the first quarter of 2023.
Eric: That is related to a onetime licensing arrangement that did not recur in the first quarter of 2024.
Eric: Total gross profit was $4 8 million in the first quarter of 2024, a decrease of $3 2 million or 40% from the first quarter of 2023.
Eric: Gross profit decreased due primarily.
Eric: Merrily to decreased revenue.
Eric: Gross margin remained flat at 36% during the first quarter of 2024 as compared to the first quarter of 2023.
Eric Ingvaldson: Total operating expenses were $7 million in the first quarter of 2024, a decrease of 3.2 million, or 31%, from the first quarter of 2023. The decrease in operating expenses was primarily due to lower amortization expense and lower sales and marketing expense, including commissions, on lower revenue in the quarter and decreased personnel expenses. Operating expenses in the first quarter of 2024 included $800,000 of amortization and depreciation expense, $197,000 of share-based compensation expense, and a $350,000 favorable fair value remeasurement of earn-out consideration.
Eric: Total operating expenses were <unk> 7 million in the first quarter of 2024.
Eric: A decrease of $3 2 million or 31% from the first quarter of 2023.
Eric: The decrease in operating expenses was primarily due to lower amortization expense and lower sales and marketing expense, including commissions.
Eric: On lower revenue in the quarter and decreased personnel expenses.
Eric: Operating expenses in the first quarter of 2024 included 800000 of amortization and depreciation expense of 197000 of share based compensation expense and a $350000 favorable fair value remeasurement of earn out consideration.
Eric: <unk>.
Eric Ingvaldson: Other income was $3.4 million in the first quarter of 2024, an increase of $3.8 million from the first quarter of 2023. This increase was primarily due to a $3.7 million fair value remeasurement gain on our warrant liability and a $626,000 increase in the favorable fair value remeasurement of contingent value rights, which was partially offset by a $306,000 increase in interest expense.
Eric: Other income was $3 4 million in the first quarter of 2024.
Eric: An increase of $3 8 million from the first quarter of 2023.
Eric: This increase was primarily due to a $3 $7 million fair value remeasurement gain on our warrant liability and.
Eric: In a $626000 increase and the favorable fair value remeasurement of contingent value rights.
Eric: Which was partially offset by a $306000 increase in interest expense.
Eric Ingvaldson: Because of debt financing, we closed in the second quarter of 2023. The net loss from continuing operations, attributable to common shareholders, was $10.1 million, or $0.26 per diluted share in the first quarter of 2024. This was a decline from the net loss from continuing operations attributable to common shareholders in the first quarter of 2023 of $2.6 million, or $0.26 per diluted share. The net loss from continuing operations attributable to common shareholders in the first quarter of 2024 included $11.3 million in deemed dividends attributable to common shareholders.
Eric: Because of that financing we closed in the second quarter of 2023.
Eric: Net loss from continuing operations attributable to common shareholders was $10 1 million.
Eric: We're 26 cents per diluted share in the first quarter of 2024.
This was a decline from the net loss from continuing operations attributable to common shareholders in the first quarter of 2023 of $2 6 million or 26 cents per diluted share.
Eric: The net loss from continuing operations attributable to common shareholders in the first quarter of 2024 included an 11.3 included $11 3 million and deemed dividends attributable.
Eric: Attributable to common shareholders.
Eric Ingvaldson: Net income from continuing operations in the first quarter of 2024 was a positive 1.2 million, a 146% increase from a net loss from continuing operations of 2.6% million in the first quarter of 2023. First quarter 2024 adjusted EBITDA decreased $1.9 million compared to the first quarter of 2023. This was due primarily to a decline in gross profit partially offset by a decline in operating expenses. As of March 31, 2024, cash, cash equivalents, and restricted cash were $3.3 million.
Net income from continuing operations in the first quarter of 2024.
Eric: It was a positive $1 2, million% to 146% increase from a net loss from continuing operations of $2 6 million in the first quarter of 2023.
Eric: First quarter 2024, and adjusted EBITDA decreased.
Eric: $1 9 million compared to the first quarter of 2023.
Eric: This was due primarily to the decline in gross profit, partially offset by the decline in operating expenses.
Eric: As of March 31, 2024, cash cash equivalents and restricted cash were $3 3 million.
Eric: Of that $1 5 million was held as restricted cash and investments.
Eric: It can only be used for the legacy CSI businesses and will be paid to the holders of the <unk>.
Eric: Which stands for contingent value rights.
Eric Ingvaldson: Of that, $1.5 million was held as a restricted cash investment that can only be used for the legacy CSI businesses and will be paid to the holders of the CVR, which stands for contingent value rights. We are actively engaged in fundraising efforts to ensure that we have adequate capital to fund all of the company's obligations for the remainder of 2024. Now we would like to open the call for any questions. Operator, please go ahead.
Eric: We are actively engaged in fund raising efforts to ensure that we have adequate capital to fund all of the companys obligations for the remainder of 2024.
Now we would like to open the call for any questions. Operator. Please go ahead.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker in your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue, and your first question comes from the line of Donovan Schafer with Northland Capital Markets.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Speaker Change: I'd like to withdraw your question simply press Star one again.
Speaker Change: If you are called upon to ask your question and are listening they'll loud speaker in your device. Please pickup your handset and ensure that your phone is not on mute when asking your questions.
Speaker Change: Again press star one to join the queue.
Speaker Change: And your first question comes from the line of Donovan Schafer with Northland Capital markets. Please go ahead.
Donovan Due Schafer: Hey guys, thanks for taking the questions. So first I want to ask, with the, you know, the commercial business down in New York or, you know, Long Island, as a result of delays, can you just elaborate on what's driving those delays, if that is like a temporary headwind, or if there's a growing backlog you know like there's there's so much going on in this about around like utility scale and other things but and often commercials kind of been the one that i don't know just fits in nicely or something and doesn't get held up but our various authorities or um ahj's or whatever getting bogged down or what's kind of the driver
Donovan Due Schafer: Hey, guys. Thanks for taking the questions. So first I want to ask with the.
Donovan Due Schafer: The commercial business down.
Donovan Due Schafer: In New York or long Island as a result of delays can you just elaborate on what's driving those delays that that is like a temporary headwind or if there is a growing backlog.
Donovan Due Schafer: There's so much going on in this about around like utility scale and other things but.
Donovan Due Schafer: Austin commercials kind of been the one that I don't know.
Donovan Due Schafer: And nicely or something and it doesn't get held up by our various authorities are.
Donovan Due Schafer: It's James River, getting bogged down or what's kind of the driver behind that.
Kyle Udseth: Yeah, I think that it's Key question for us, kind of looking backwards and moving forward, I'll say every project, Kyle Udseth, Scott Maskin, Pineapple Hldg is kind of its own unique animal, and it's both what's good and bad relative to residential, right? Residential projects are small, but they tend to go consistently, and it's a numbers game, and things happen on any given project, but it's large sample sizes, and overall it's predictable and repeatable, and you have a good sense of how those are going to move through the pipeline, and you can predict pretty well when you go out to what your lead spend is going to be, to what the top of the funnel is going to look like, you know, converting the lead to a opportunity, to a sit, to a closed sale, to an install, and what timeline.
Speaker Change: Yes, I think that is.
Speaker Change: It's a key question for US, we're kind of looking backwards and moving forward I will say every project is kind of idiosyncratic theres not one broad theme across it is it doesn't have anything to do with general interconnection delays or.
Speaker Change: Processing.
Speaker Change: <unk> problems are things from the grid I think that every project.
Speaker Change: Is kind of its own unique animal and it's both.
Speaker Change: Both what's good and bad relative to residential residential projects are small, but they tend to go consistently and it's a numbers game.
Speaker Change: Things happen on any given project, but as large sample sizes and overall it's predictable.
Speaker Change: And repeatable and you have a good sense of how those are going to move through the pipeline and you can predict pretty well when you go out to what your lead spend is going to be towards the top of the funnel is going to look like converting the leads.
Speaker Change: Opportunity to assert to a closed sale to an install and what timeline commercials.
Kyle Udseth: Commercial is a very different beast, and the projects are bigger, and the payments are chunky, and every one is kind of its own unique snowflake. I think that there's no blanket explanation. Sometimes it's Caesar studies, sometimes it's You know, other permitting or environmental sometimes or a sub to a prime sometimes.
Speaker Change: Commercial is a very different beast than the projects are bigger and those payments are chunky and everyone is kind of its unique snowflake.
Speaker Change: I think that there is no blanket explanation, sometimes it's Cesar studies, sometimes it's.
Speaker Change: Other permitting environmental sometimes or a sub to a prime sometimes.
Kyle Udseth: The, company is dragging its feet on things moving forward. I think that, We have. Based on the performance of Commercial in Q4 and Q1, I think we as the corporate team have gotten a lot more involved than we have been in the past on, Making sure we understand every contract, every milestone, all the timing, have done a lot more on forecasting and re-forecasting for the year, just to put a lot more structure and process in place to have oversight and make sure that these are being actively and proactively managed in a way that's moving things through the pipeline and predictable.
Speaker Change: The <unk>.
Speaker Change: Company is dragging its feet on things moving forward.
Speaker Change: I think that's.
Speaker Change: We have.
Based on the performance of commercial in Q4, and Q1 I think we as the corporate team has gotten a lot more involved than we have been in the past on.
Speaker Change: Making sure we understand every contract every milestone all the timing have done a lot more on forecasting and re forecasting for the year.
Speaker Change: Just to put a lot more structure and process in place to have oversight and make sure that these are being actively and proactively managed in a way that's moving things through the pipeline and predictable.
Speaker Change: And so I think that.
Kyle Udseth: And so I think that it's both the case that it's underperformed looking backwards but that we're very optimistic about what the remaining, You know, nine months, if you cut it off at 331, eight months, if you cut it off at the end of April, look like going forward for the rest of the year. And I do think that it's been a part of the business that was maybe out of favor with a lot of the rooftop companies in 2021 2022, the first half of 23.
Speaker Change: It's both the case that it's underperformed looking backwards, but that we're very optimistic about what the remaining.
Speaker Change: Hi.
Speaker Change: Nine months, if you cut it off at $3 31, eight months, if you cut it off at the end of April look like going forward for the rest of the year and I do think that.
Speaker Change: It's been a part of the business that was may be out of favor with a lot of the rooftop companies in 2021 and 2022.
Kyle Udseth: I do think that the Inflation Reduction Act and a lot of the changes to the transferability of tax credits and direct pay, and things like that open up the marketplace and reduce some of the hurdles, especially for nonprofits and so on. You know, I think in the New York market, we're having a lot of successes with kind of nonprofits, things like churches and synagogues and temples, and I think that taking the example from New York and translating that to our Hawaiian market, we've started to ramp up efforts there and have some good top of funnel results there. A significant part of the historical myth, but I think we're optimistic about it going forward.
Speaker Change: First half of 'twenty, three I do think that with the inflation reduction Act.
Speaker Change: A lot of the changes to the transferability of tax credits and direct pay and things like that open up the marketplace and reduce some of the hurdles, especially for nonprofits in that.
Speaker Change: I think in the New York market, we're having a lot of successes with.
Speaker Change: Kind of nonprofits things like churches synagogues and temples and I think that taking the example from New York and translating that to our Hawaiian market. We've started to ramp up efforts, there and having some some good top of funnel.
Speaker Change: Results there so I think that it's.
Speaker Change: It is.
Speaker Change: Significant part of the historical Miss but I think we're optimistic about it going forward.
Donovan Due Schafer: And then I want to ask, I know you don't have a full year 2024 guidance out yet. But given that, you know, you know the sales numbers, like we can point to the first quarter and talk about, you know, there's the seasonality factor that always happens. And then you said that sales, I think in the release, that and I think what you mean by that is sort of originations, not like what translates into revenue because the revenue, I believe mostly gets recognized as installation happens.
Speaker Change: Okay.
Speaker Change: Helpful.
Speaker Change: And then I want to ask I know you.
Speaker Change: <unk>.
Speaker Change: Or are you don't have a full year 2024 guidance out.
Speaker Change: Sure.
Speaker Change: But given that you know the sales number.
Speaker Change: We can point to the first quarter and talk about the seasonality factor that always happens.
Speaker Change: And then.
Speaker Change: You said that sales I think in the release.
Speaker Change: And I think what you mean by that is sort of originations not like what translates into revenue because the revenue I believe mostly gets recognized as the installation happens. So so sales where originations are sort of flat year.
Kyle Udseth: So sales, or originations, are sort of flat, year over year, which would suggest, on a kilowatt basis, which would suggest, you know, a positive trend heading into Q2, revenue, and then given that you've done all this additional kind of studying and looking more granularly at the commercial business, do you have some sort of a rough sense for the rest of the year? Like, do you think? It's the sort of too close to call if you'll be a bit. If you're up or down, that itself kind of gives some general sense. So anything you can comment on there would be
Speaker Change: Year over year, which would suggest on a kilowatt basis, which would suggest positive trend heading into Q2.
Speaker Change: Revenue.
Speaker Change: And then given that you've done all this additional kind of studying.
Speaker Change: Studying and looking more granularly at the commercial business do you have a some sort of rough sense for the rest of the year like do you think the on a full year basis youre going to end up.
Speaker Change: Up year over year.
Speaker Change: Down or maybe like flat in terms of kilowatts, but maybe down a bit from lower equipment costs or things like that.
Speaker Change: Anything kind of a rough sense or even if maybe it's just sort of too close to call if you'll be a bit.
Speaker Change: As you'll be up or down that itself kind of give some general sense. So anything you can comment on there would be nice.
Speaker Change: Yes.
Kyle Udseth: I know we talked about this on the last call, and we didn't have a number, and I think you actually answered more eloquently than I did on that last call about why that might be the case. I think that there's been a lot of noise in the marketplace in the first quarter, and I think that, even for some of the reasons we talked about, the regulatory changes, and that and this kind of ramp-up in commercial, where there's a lot of demand in the market that you think is going to pay dividends down the line.
Speaker Change: I know we talked about this on the last call and we didn't have a number and I think you actually.
Speaker Change: Answered more eloquently than I did in the last.
Speaker Change: Last call about why that might be the case I think that there has been a lot of noise in the marketplace.
Speaker Change: The first quarter and I think that.
Speaker Change: When like for some of the reasons, we talked about the regulatory changes.
Speaker Change: And that and this kind of ramp in commercial aware, there's a lot of demand in the market.
Speaker Change: That you think is going to pay.
Kyle Udseth: I think we didn't have confidence at the start of the year in our ability to forecast super-accurately for the rest of the year yet. I think that, as we sit here right now, we probably are close to the point where we could put a stake in the ground for a reforecast for the full year and for the rest of the year and be pretty accurate on it. We haven't really gone through that in as much detail as we need to.
Speaker Change: <unk> down the line I think we didn't have confidence in the start of the year and our ability to forecast.
Speaker Change: <unk> for the rest of the year, yet I think that.
Speaker Change: As we sit here right now we probably are close to the point, where we could put a stake in the ground for a re forecast for the full year and for the rest of the year it would be pretty accurate on it we have it.
Kyle Udseth: And you know, our accounting cadence of closing out months about the 15th, I think it's something we should probably do here after the April close is do the 4 plus 8 pre-forecast and, you know, could be in a position where we want to share forward guidance at that point, I would say just given how far down Q1 was year over year. I don't think it's realistic to expect that full year 2024 revenue is going to exceed 2023.
Speaker Change: Really got through that in as much detail as we need to and our accounting cadence of closing out months about the 15th I think it's something we should probably do.
Speaker Change: Year after the April close as do the four plus eight <unk> forecast and could be in a position where we want to share.
Speaker Change: Forward guidance at that point I would say just given how.
Speaker Change: How far down in Q1 was year over year I don't think it's realistic to expect that full year 2020 for revenue is going to exceed.
Speaker Change: 2023.
Speaker Change: I think that there is a.
Kyle Udseth: I think that there's a fighting chance of that for Q2, Q3, and Q4 combined this year versus Q2, Q3, and Q4 of last year. I will also just... reiterate what Eric mentioned that equipment prices come down, and especially as the financing fee model changes and the dealer fees aren't as big on some of these projects, then that's not counted as gap revenue up front. You know, it could be the case that for both of those, your units sold and installed are flat, but the revenue is down, but the gross profit dollars are flat even up.
Speaker Change: Fighting chance of that for Q2, three and four combined this year versus Q2, three and four of last year.
Speaker Change: I will also just reiterate what Eric mentioned that.
Speaker Change: As equipment prices come down and especially as the financing fee model changes in the dealer fees arent as big on some of these projects and then that's not counted as GAAP revenue upfront attribute a case that for both of those your units sold and installed.
Speaker Change: Our flat, but the revenue is down but the gross profit dollars are flat or even up and so I think we probably started talking about this in Q4, and we should get better about I think a more consistent drumbeat about this but we really are trying to orient around gross profit dollars as opposed to revenue.
Kyle Udseth: And so I think we probably started talking about this in Q4, and we should get better at, I think, a more consistent drumbeat about this, but we really are trying to orient around gross profit dollars as opposed to revenue as kind of the top line metric going forward. And then it's just so, so, so critical for us to control our off X. And, you know, the biggest line item in that budget is his personnel.
Speaker Change: Kind of the top line.
Speaker Change: Metric going forward and then it is just so so so critical for us to control our Opex and.
The biggest line item and that is personnel and so I think to have a successful remainder of the year.
Kyle Udseth: And so I think to have a successful remainder of the year, we need to. It's not rocket science. We need to keep selling, we need to keep installing at a healthy margin, and we need to drive those gross profit dollars for Q2, Q3, and Q4 at or above where they were for the same time period last year, and we've really got to... have discipline.
Speaker Change: We need to.
Speaker Change: It's not rocket science, we need to keep selling we need to keep installing at a healthy margin and we need to drive those gross profit dollars for Q2, three and four.
Speaker Change: At or above where they were at the same time period last year and we've really got a.
Speaker Change: Have discipline on Opex.
Speaker Change: Yes.
Eric Ingvaldson: Donovan, I would add that you're correct that when we speak about revenue, that is installed kilowatts. And sometimes when we talk about sales, that is... Those are projects that will become revenue later. So if you look at what we disclosed in the earnings release, our quarter over quarter kilowatts sold are down a little bit, 7%, but our year over year kilowatts sold for residential were pretty much flat. At least for the residential market, that's a decent indicator of what is to come, what the installs will look like going forward, and then, as Kyle mentioned, we do have a very robust commercial pipeline Okay, okay. That's very helpful. Um, and then just one last question for me. Uh, I am curious.
Speaker Change: Okay got it.
Speaker Change: That's helpful.
Speaker Change: Jonathan I would add that Youre correct. It when we speak about revenue that is installed.
Speaker Change: Kilowatts.
Speaker Change: Sometimes when we talk about sales that is.
Speaker Change: Those are probably going to remediation.
Speaker Change: And become revenue later, so if you look at what we disclosed in the earnings release our core.
Speaker Change: Quarter over quarter kilowatts sold were down a little bit 7%, but our year over year kilowatts sold for residential was pretty much flat. So.
Speaker Change: At least for the residential market.
Speaker Change: Decent indicator.
Speaker Change: What is to come with the installs will look like going forward and then as Kelvin.
Speaker Change: Robust.
Speaker Change: Pipeline.
Speaker Change: Okay. Okay, that's very helpful.
Speaker Change: And then just one last question for me.
Speaker Change: <unk>.
Speaker Change: I am curious, so comparing kind of comparing and contrasting with other the other big solar companies.
Donovan Due Schafer: So, you know, kind of comparing and contrasting with the other big solar companies, Sonova and Sunrun, and whatnot that are purported to be, I know it's not like they're straight up competitors per se, or like where Nova, you, you might use their product. Um, but you're kind of taking these different strategies where Sunrun is really focusing on driving a higher battery attachment rate. And you know, they're at such a huge scale, like they're so big that if they make that a top-down driven initiative, they can basically make that happen.
Speaker Change: Sunrun and whatnot that have reported I know it sounds like they are sort of competitors per se or like we're nowhere you might use their product.
Speaker Change: But you are kind of taking these different strategies where sunrun.
Speaker Change: Really focusing on driving a higher battery attachment rates.
There is such a huge scale there is so big that it makes that a top down driven initiative. They can they can basically make that happen.
Speaker Change: And so the <unk>.
Donovan Due Schafer: And so they, you know, inched up the attachment battery attachment rate by 200 basis points this quarter over the last quarter, and for you guys, it went down a little bit by 500 basis points and not a heat, you know, from 30. Donovan Schafer, Eric Ingvaldson, Kyle Udseth, Scott Maskin, Pineapple Hldg, generally speaking, smaller than certainly a Sunrun.
Speaker Change: Attachment battery attachment rate 200 basis points.
Speaker Change: This quarter over the last quarter for you guys. It went down a little bit about 500 basis points, so not from 36.
Speaker Change: Sent down to 29% not a huge drop in U R.
Speaker Change: Sure.
Speaker Change: Generally speaking smaller than certainly with Sunrun. So they can also just feel like a lumpiness thing impacting you guys, but I'm curious where you sit in terms of like that strategy how for Sunrun. It's the thrill, we're going to focus on margin.
Kyle Udseth: So, you know, there can also just be like a lumpiness thing impacting you guys. But I'm curious where you sit in terms of like that strategy, how for Sunrun, it's just this real, we're going to focus on margin, you know, we can absorb more overhead and customer acquisition costs and, you know, truck rolls or whatever if we're attaching more batteries each time and all this stuff. And so does that... Does that make sense to you as an approach?
Speaker Change: We can absorb more overhead and customer acquisition costs.
Speaker Change: Truck rolls or whatever if we're attaching more batteries each time.
Speaker Change: And all this stuff and so does that mean.
Speaker Change: Does that make sense to you as an approach so that may be not apply since or not.
Kyle Udseth: Does it maybe not apply since you're not, you know, doing ABS issuances or something? And is the lower attachment rate, is something driving that for you guys? Or is there just a general lumpiness, given that you're not, you know, at the mega scale that run is at?
Speaker Change: Doing ABS issuances or something.
Speaker Change: And is the lower attach rate is something driving that for you guys or is there just just a general lumpiness given that youre not.
Speaker Change: Mega scale that runs off.
Kyle Udseth: Yeah, I think it's a good question and a very interesting question. I think, look like we've drank the Kool-Aid that the future is a distributed grid with distributed generation, distributed storage, and other distributed energy resources and electrification of everything. So I don't think we're that far away from a grid where every rooftop has solar panels on it, and they're all connected to batteries. And most vehicles are electrified. Like space heating and cooling, water heating is electrified.
Speaker Change: Yes, I think it is.
Speaker Change: Good question and it's a very interesting question I think.
Speaker Change: It looks like we're we have drank the Kool aid like the future is distributed grid with distributed generation and distributed storage and other distributed energy resources and electrification of everything so.
Speaker Change: I don't think we're that far away from a grid, where everyday rooftop has solar panels on it they are all connected to batteries.
Speaker Change: Those vehicles are electrified.
Kyle Udseth: So yeah, in terms of the mega trend, we are all in. I think that so much of the battery story comes down to markets. Right, and I think for Sunrun, I haven't gone deep into their numbers, but they just have so much exposure to California that before NAMM-3, there were a whole lot of... Smaller systems with cheap leases and PPAs were being sold by door-knocking groups in California on Sunrun paper, and then NEM3 happened, and that segment largely vaporized, and they had to shift to battery attach for the economics of NEM3 systems to work and pencil.
Speaker Change: Like space heating and cooling water heating and electrified so yes in terms of the Mega trend like we are all in.
I think that.
Speaker Change: So much of the batteries story comes down to markets.
Speaker Change: Right and I think for Sunrun I.
I haven't gone deep into their numbers, but they just have so much exposure to California.
Speaker Change: At before NIM three there are a whole lot of.
Speaker Change: Smaller systems with cheap leases.
Speaker Change: Leases and Ppas being sold by door knocking groups in California on Sunrun paper.
Speaker Change: And then three happens in that segment largely vapor rises.
Speaker Change: And they had to shift to battery attach for the economics of <unk> systems to work and pencil and so I think there is.
Kyle Udseth: And so, I think there's kind of a before-after comp thing going on there for Sunrun in California because of NEM3 that's probably driving most of it. But at the same time, I think it is probably an intentional strategy for them, and we agree with that strategy.
Speaker Change: There is kind of a before after common thing there for Sunrun in California, because of <unk>, that's probably driving most of it.
Speaker Change: But at the same time I think it is probably an intentional strategy for them and we agree with that strategy I think if you look at our markets.
Kyle Udseth: I think if you look at our markets. Hawaii, in a sense, has almost 100% battery attach rate on any like, brand new greenfield roof that doesn't have PV solar on it, you know, for years. It's like, you just don't put new solar on a house in Hawaii without attaching a battery because of the non-export tariffs. I think in Hawaii, a lot of the attach rate is a mix shift between how many new installations we're doing versus how many, like, add-on or retrofits we're doing to our existing customer base.
Speaker Change: Hawaii.
Speaker Change: In a sense has almost 100%.
Speaker Change: Battery attach rate on any.
Speaker Change: Like brand, new Greenfield roof. It doesn't at PV solar on it for years. It's like you just you don't put new solar on a house in Hawaii without attaching a battery because of the non export tariffs.
Speaker Change: In Hawaii, a lot of the attach rate is a mix shift between how many new installs, we're doing versus how many like add on or retrofits, we are doing to our existing customer base.
Kyle Udseth: And, you know, one of the things that Chris and the team did there, which was a really great pivot, was when we were seeing a lack of customers willing to get off the sidelines at the end of December going into Q1 and sign new sales agreements for solar plus storage because of this tariff uncertainty from the PUC and the unexpected early shutdown of battery bonus. We like that a lot, and we also like doing retrofits and repowering on our And then I think some of it is also just a mix shift between the New York market and the Hawaii market. In Q1 of this year versus Q1 of last year, largely owing to some of that noise from December.
Speaker Change: And one of the things that Chris and the team did there which was a really great debate.
Speaker Change: Was when we were seeing.
Speaker Change: Lack of customers willing to get off the sideline.
Speaker Change: At the end of December going into Q1, and sign new sales agreements for solar plus storage because of this tariff uncertainty from the PUC and the unexpected early shutdown of battery bonus.
Speaker Change: We leaned in a lot more on database marketing and going back out to our own customers and looking to repower older systems are due.
Speaker Change: Nam add ons, where people would increase their usage you could add more panels on to an existing grandfathered system.
Speaker Change: And so it was a great way to.
Kind of keep the head above water in Q1, but it resulted in a mix shift.
Speaker Change: Which I think was kind of a one off right I think the battery attach rates were very high last year because of this battery bonus program and we're still kind of seeing how it shakes out under the new tariff, but <unk>.
Speaker Change: Generally in Hawaii going forward, all new solar is still going to have batteries.
Speaker Change: We.
Speaker Change: We like that a lot and we also like doing retrofits and repowering on our own customers.
Speaker Change: And then I think some of it is also just a mix shift between the New York market in the Hawaii market in Q1 of this year versus Q1 last year.
<unk>.
Speaker Change: Largely owing to some of that noise from December.
Kyle Udseth: Hawaii made up a larger percentage of residential install revenue in Q1 last year than they did this year, and so it's just a weighted average thing. I will say that we need to do better about breaking down the problem and the customer value proposition and selling storage on Long Island. And I think we can do a better job there, but it really is hard to kind of push on a string when the local market incentives aren't totally there yet.
Speaker Change: Hawaii made up a larger percentage of residential install revenue in Q1 last year than they did this year and so it's just a weighted average thing.
Speaker Change: I will say that we need.
Speaker Change: To do better about breaking down the problem and the customer value proposition and selling storage on long Island and I think we can do a better job there, but it really is hard to kind of push on a string when local market incentives aren't.
Kyle Udseth: You know, it's like I love batteries. I want another battery. We have a well at our house. We live down in the bottom of this kind of hollow where the power lines get buried. Donovan Schafer, Eric Ingvaldson, Kyle Udseth, Scott Maskin, Pineapple Hldg. With incentives in place, like what the battery bonus was in Hawaii and what they have going forward, it's hard to just expect customers to shift to adding batteries just for resilience, right?
Speaker Change: Totally there yet.
Speaker Change: Hi.
Speaker Change: Love batteries I want a battery, we got a well at our house, we lived down in the bottom of this kind of hollow.
Speaker Change: The power lines get.
Speaker Change: Snow and stuff weighing on them and when the grid goes down which happened a decent amount of time stress last year I have to tell my kids. They can't flushed the toilet. So we don't like that situation. So.
Speaker Change: I would very much like to put a battery on but if you look at the cost of putting power wall on versus a backup generator. It's just not economic right and youre not going to find somebody who is more <unk>.
Speaker Change: <unk> about this than me, but if you don't have the right combination.
Speaker Change: <unk>.
Speaker Change: Incentives in place.
Speaker Change: Like what the battery bonus was in Hawaii, and what they have going forward. It is hard to just expect customers to shift to adding batteries just for resilience right and so I think that.
Kyle Udseth: And so I think that it's certainly an opportunity going forward to grow it off of a low base in Long Island, but I think some of what you're seeing of our numbers and our numbers versus Sunrun and the shift over time, a lot of it's just a mixed shift in geography.
Speaker Change: It's certainly an opportunity going forward to grow it off of a low base in long island, but I think some of what youre seeing of our numbers and our numbers versus sunrun in the shift over time a lot of it is just a mix shift in a geography thing.
Donovan Due Schafer: That makes a lot of sense. Okay, well, thank you guys. I'll take the rest of my questions.
Speaker Change: That makes a lot of sense, okay, well. Thank you guys I'll take the rest of my questions offline.
Kyle Udseth: Yeah, thanks Donovan for the engagement and the great questions as always. We appreciate it.
Speaker Change: Yes, Thanks, Donovan for the engagement and the great questions as always we appreciate it.
Operator: Seeing no more questions in the queue, let me turn the call back to Mr. Udseth to conclude the call.
Speaker Change: Seeing no more questions in the queue, let me turn the call back to Mr. Hudson to conclude the call.
Kyle Udseth: Thank you, operator. To conclude, we're in a bit of uncharted territory here for Pineapple as we finish all four quarters of 2023 with positive IVADA. And so this is our first earnings call with a negative EBITDA quarter. Timing and seasonality had a big role to play, but so too did some internal underperformance, and we are refocused for Q2 and beyond around accountability and driving results.
Mr. Hudson: Thank you operator.
Mr. Hudson: To conclude we are in a bit of uncharted territory here for pineapple as we finished all four quarters of 2023 with positive EBITDA.
Hudson: And so this is our first earnings call with a negative EBITDA quarter.
Hudson: Timing and seasonality had a big role to play, but so too did some internal underperformance and we are refocused for Q2 and beyond around accountability and driving results.
Kyle Udseth: We need to continue pushing forward to help more homeowners go solar while holding the line on costs and pursuing growth by acquisition as well. Thanks to everyone listening to or reading this for your ongoing engagement. Utility rates keep going up, solar costs keep coming down, and interest rate cuts are on the horizon. That's a winning setup for consumers and a winning setup for rooftop solar and battery storage.
Hudson: We need to continue pushing forward to help more homeowners to go solar while holding the line on costs and pursuing growth by acquisition as well.
Speaker Change: Thanks to everyone listening to or reading this for your ongoing engagement.
Speaker Change: Utility rates keep going up solar costs keep coming down and interest rate cuts are on the horizon, that's a winning set up for consumers and a winning setup for rooftop solar and battery storage.
Kyle Udseth: Thank you again for joining us this morning and for your continued support. If you have any questions, please contact Eric or me. This concludes our call today. You may all disconnect. Thank you.
Speaker Change: Thank you again for joining us. This morning for your continued support if you have any questions. Please contact Eric Army. This concludes our call today.
Speaker Change: You may all disconnect. Thank you.
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