SPI Energy Co., Ltd.

For Q2 ended June 30, 2023, net revenue increased 21.1% year over year to $58.9 million from $48.6 million. Gross profit rose 35.3% to $5.2 million from $3.9 million, and gross margin improved to 8.9% from 8.0%. Cost of revenues increased to $53.6 million from $44.7 million. G&A expense fell to $6.3 million from $7.6 million, and total operating expenses declined to $8.3 million from $9.5 million. Operating loss was just over $3 million, including a $3.2 million operating loss from Phoenix Motor; excluding that, management said the core business was at operational breakeven. Interest expense was $2.4 million versus $1.6 million last year, and net loss attributable to SPI shareholders was $2.5 million. As of June 30, 2023, total assets were $230.5 million and cash, cash equivalents and restricted cash were $5.9 million. Management maintained 2023 net income guidance of $29 million to $35 million, with Denton Peng saying that guidance includes the expected $0.07 IRA benefit in concept, but the company’s current reporting does not yet include it because the treatment is not clear.

Denton Peng framed the quarter as evidence that SPI’s solar business is scaling and improving profitability, pointing to strong double-digit revenue growth, higher gross profit, and breakeven at the core business level excluding Phoenix Motor. He emphasized the company’s U.S. manufacturing buildout, including Sacramento, Sumter, and planned capacity in solar wafers and TOPCon cells, and said IRA incentives and industry tailwinds should support growth. His tone was confident and optimistic, but he also acknowledged uncertainty around how the $0.07 tax credit will be recognized in the financial statements.

Janet Chan focused on the operating improvement in the quarter: net revenue of $58.9 million, gross profit of $5.2 million, gross margin of 8.9%, and lower G&A expenses of $6.3 million versus $7.6 million a year ago. She said total operating expenses fell to $8.3 million, and that the reported operating loss of just over $3 million included a $3.2 million loss from Phoenix Motor; excluding that, the core business reached breakeven. She also noted $2.4 million of interest expense, $2.5 million of net loss attributable to shareholders, and $5.9 million of cash, cash equivalents and restricted cash at quarter-end.

In Q&A, analysts pressed management on how the 2023 guidance can imply full-year net income of $29 million to $35 million despite a first-half net loss of $12 million. Peng said the guidance assumes the IRA-related $0.07 benefit in future periods, but it is not yet reflected in current reporting because the accounting is still unclear. He was also asked whether guidance assumed additional solar project sales and resolution of the SinSin dispute; he said asset sales are being worked on and that SinSin remains a priority, but he gave no timeline, noting the issue includes more than $60 million of payables on the books and more than EUR 30 million of cash in Greece that is not consolidated.