Pineapple Energy Inc., a leading provider of sustainable solar energy and back-up power to households and small businesses, announced financial results for the second quarter ended June 30, 2022.
“Performance in our first full quarter as a public company showed the strength of our strategy and market opportunity,” said Kyle Udseth, Pineapple CEO. “Growth was strong in our core initial market of Hawaii, especially in battery storage where installations were up 53%.”
Udseth continued, “We built backlog—and thus customer relationships and future revenue—with sales growth far outpacing installation growth, setting us up for a strong second half of the year. In fact, we are already scheduling installs into October, and even have begun scheduling Saturday installs to enhance the customer experience. To prepare for this burst of activity, we are hiring in Hawaii, as we also build our headquarters team.”
Second Quarter Business Highlights
In its first full quarter as both a publicly traded company and merged entity with its Hawaiian operations, Pineapple executed across key strategic initiatives:
Drove Solid Performance in Core Hawaiian Operations (Q2 2022 vs Q2 2021)
• # of Systems sold +75%
• kW sold +61%
• Batteries sold +137%, attach rate was 84% in Q2 2022
• Systems installed -4%, batteries installed +53%
• Backlog growth: pending installs +75%
• Customer acquisition cost (CAC) per watt down 37%
Built Infrastructure
• Supported campaign that resulted in veto of bill that would have capped clean energy
• Expanded and diversified strong supply chain of modules and battery energy storage systems
• Continued investment and R&D in E-Gear products and intellectual property
• Focused hiring in key roles, including Hawaii installation, commissioning, tech support, human resources, corporate development, and accounting
• Continuing search for Chief Financial Officer
Udseth noted, “We are encouraged by our accomplishments during the second quarter, which were achieved as we integrated operations, expanded our team, and sought new sources of growth. As we recruit more talent into all levels of the organization and deepen the strength of our leadership team, we are working to build the foundation for solid business momentum going into 2023.”
Udseth concluded, “I also want to thank two key contributors who are leaving the Pineapple family. As you know, CFO Mark Fandrich was instrumental in the merger, and is moving to new opportunities now that the merger is complete. We wish him success in his next endeavor. In addition, HEC co-founder Steve Godmere is retiring after spending over 15 years working with Chris DeBone to build HEC into a residential solar leader in Hawaii. We wish Steve all the best in the next phase of life. In his place, our operations manager Keali’i Kahanu will step into Steve’s shoes, taking the reins to drive growth and continue delivering a great customer experience in our core market. We look forward to harnessing the energy Keali’i will bring to the role.”
Financial Highlights
To facilitate analysis of the Company’s operating business, the unaudited pro forma information below represents results of operations as if the Company had completed the merger with Communications Systems, Inc. (“CSI”) and the asset acquisitions of Hawaii Energy Connection, LLC (“HEC”) and E-Gear, LLC as of January 1, 2021. The unaudited pro forma financial information below is not necessarily indicative of consolidated results of operations of the combined business had the acquisition occurred at the beginning of the respective period, nor is it necessarily indicative of future results of operations of the combined company.
Sales growth was driven by an increase in systems installed and battery attach rate. Net income (loss) was impacted by higher labor costs and growing headcount in preparation for second half growth. Operating expenses included higher amortization expense and higher compensation related to growth of the management team. As noted above, the Company had an operating loss in the second quarter of 2022 but had net income in that period due to $4,639,554 in other income, net, driven primarily by a $4,671,000 gain on the fair value remeasurement of the Company’s contingent earnout consideration from the CSI merger.
Status of Legacy CSI Contingent Value Rights
Pursuant to the merger of CSI and Pineapple Energy LLC, which was completed on March 28, 2022, CSI shareholders of record at the close of business on March 25, 2022 (the “CVR Holders”) received one contractual, non-transferable contingent value right (“CVR”) per share of CSI common stock held. Each CVR represents the right to receive a pro rata portion of proceeds available from the disposition of CSI’s pre-merger assets during the 24-month period following the effective time of the merger.
On August 3, 2022, Pineapple Energy Inc. and the CVR Holders’ Representative jointly determined that $8,745,628 was available for distribution to the CVR Holders from the disposition of CSI’s pre-merger assets between March 28 and June 30, 2022, representing a distribution of $3.60 per CVR. The $3.60 per CVR distribution to the CVR Holders commenced on August 12, 2022. Any CVR holder that has not received this distribution should initially contact their broker for more information.
Pineapple anticipates future CVR payments, depending on the completion and timing of sales of remaining legacy assets, including JDL Technologies, Inc. and Ecessa Corporation, which comprise the Company’s IT Solutions & Services operating segment.
