iSUN, Inc. (NASDAQ:ISUN) is a leading solar energy and clean mobility infrastructure company with over 50 years of experience accelerating the adoption of innovative electrification technologies. The company provides a diverse range of services, including solar product services, electrical contracting, and data and communication services, catering to residential, commercial, industrial, and utility customers.

Business Overview

iSUN's core business is centered around its solar engineering, procurement, and construction (EPC) services, which account for approximately 85% of its revenue. The company also generates revenue from its electrical and data business (10%) and project origination, development, and design services (5%). iSUN operates in several key markets, including Vermont, Maine, New Hampshire, New York, Massachusetts, Maryland, Alabama, Georgia, and North and South Carolina, leveraging its union workforce to rapidly expand its geographic footprint.

Financials

For the fiscal year 2022, iSUN reported annual revenue of $95.7 million, a decrease of 3.4% compared to the previous year. The company's net loss for the year was $19.4 million, and its annual operating cash flow and free cash flow were -$8.9 million and -$9.6 million, respectively.

In the first nine months of 2023, iSUN's revenue increased by 38.9% to $70.3 million, compared to $50.6 million in the same period of 2022. The company's net loss for the first nine months of 2023 was $7.8 million, a significant improvement from the $13.5 million net loss reported in the first nine months of 2022.

Quarterly Performance

For the third quarter of 2023, iSUN reported revenue of $27.9 million, a 46.6% increase compared to the $19.0 million reported in the third quarter of 2022. The company's net loss for the third quarter of 2023 was $2.2 million, compared to a net loss of $4.9 million in the same period of the prior year.

Segmental Performance

iSUN's diversified revenue stream has allowed the company to navigate the challenging market conditions. In the third quarter of 2023, the company's residential segment revenue decreased by 18.6% to $8.3 million, while the commercial and industrial segment revenue increased by 168.6% to $18.8 million. The utility segment revenue decreased by 50.0% to $0.9 million.

For the first nine months of 2023, the residential segment revenue remained flat at $24.4 million, the commercial and industrial segment revenue increased by 98.2% to $44.6 million, and the utility segment revenue decreased by 68.4% to $1.2 million.

Liquidity

As of September 30, 2023, iSUN had $5.6 million in cash and a working capital deficit of $7.6 million. The company has relied predominantly on cash flow from financing activities, borrowings from its credit facilities, and sales of common stock to fund its operations.

In October 2023, iSUN executed a term sheet to refinance its existing convertible note with an $8 million long-term note that amortizes over 48 months. This new debt agreement is expected to improve the company's working capital by $5.6 million at closing and eliminate the potential for future dilution from the previous convertible note provisions.

As of September 30, 2023, the company had approximately $10.9 million in gross proceeds potentially available from sales of common stock pursuant to its S-3 registration statement, which could be utilized to support any short-term deficiencies in operating cash flow.

Outlook

The demand for solar and electric vehicle infrastructure continues to increase across all of iSUN's customer groups. The company's residential division has customer orders of approximately $15.0 million expected to be completed within three to five months, its commercial and industrial division has a contracted backlog of approximately $140.3 million expected to be completed within ten to eighteen months, and its utility division has a contracted backlog of approximately $6.5 million and 1.6 GW of projects currently under development.

The recently enacted Inflation Reduction Act of 2022 (IRA) provides stability and certainty of incentives for the next 10 years, creating value for iSUN's shareholders and a long-term commitment for the energy transformation. The IRA renews the full 30% credit rate for Investment Tax Credit (ITC) eligible facilities that meet the prevailing wage and apprenticeship requirements, and also provides a direct pay provision for tax-exempt entities and the transferability of those tax credits.

Risks and Challenges

Despite the positive outlook, iSUN faces several risks and challenges, including the potential for continued volatility in the residential market due to rising interest rates, the need to effectively manage its growing backlog and project pipeline, and the ongoing challenge of maintaining profitability in a competitive industry.

The company's reliance on union labor and its exposure to fluctuations in material and labor costs also present potential risks to its financial performance. Additionally, the company's ability to successfully integrate and leverage its recent acquisitions will be crucial to its long-term growth and profitability.

Conclusion

iSUN, Inc. is a diversified solar and infrastructure company that has navigated challenging market conditions in 2022 and the first nine months of 2023. The company's focus on expanding its commercial, industrial, and utility-scale projects, coupled with the benefits of the Inflation Reduction Act, provide a positive outlook for its future growth and profitability. However, the company must continue to effectively manage its liquidity, project backlog, and integration of recent acquisitions to capitalize on the growing demand for renewable energy and clean mobility infrastructure.