Ladies and gentlemen, thank you for being here. My name is Desiree, and I will be your conference operator today. I would like to welcome everyone to the SUNation Energy Second Quarter 2025 Financial Results Conference Call. I will now hand the conference over to Devin Sullivan of The Equity Group. You may begin.

Thank you, Desiree, and good morning, everyone. Thank you for joining us today for Sun Nation's 2025 Second Quarter Financial Results Conference Call. Our speakers for today are Scott Maskin, Chief Executive Officer; and James Brennan, the company's Chief Financial Officer. Mr. Maskin will open with prepared remarks, followed by Mr. Brennan and then a question-and-answer session. Before we get started, I'd like to remind everyone that prospects of SUNation Energy are subject to uncertainties and risks. Remarks on today's call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. The company intends that such forward-looking statements be subject to the safe harbor provided by the foregoing section. These forward-looking statements are based largely on the expectations or forecasts of future events, can be affected by inaccurate assumptions and are subject to various business risks and known and unknown uncertainties, a number of which are beyond the control of management. Therefore, actual results could differ materially from the forward-looking statements contained in today's call. The company cannot predict or determine after the fact what factors would cause actual results to differ materially from those indicated by the forward-looking statements or other statements. Participants should consider statements that include the words believes, expects, anticipates, intends, estimates, plans, projects, should, or other expressions that are predictions of or indicate future events or trends to be uncertain and forward-looking. We caution investors not to place undue reliance upon. The company does not undertake to publicly update or revise forward-looking statements, whether because of new information, future events or otherwise. Additional information respecting factors that could materially affect the company and its operations, are contained in the company's filings with the SEC, including its Form 10-K and subsequent filings, which can be found on the SEC's website at www.sec.gov. With that said, I'd now like to turn the call over to Scott Maskin, Chief Executive Officer of SUNation Energy. Scott, please go ahead.

Good morning, everyone. I want to thank everybody for this opportunity today. As you know, we just released our Q2 filings, so welcome to our earnings call. I look forward to answering your questions at the end. Feel free to throw hardballs or softballs and I'll be answering them. So I want to take a few minutes to talk about where SUNation stands today, what we're seeing across the solar industry and where I believe we're headed in the back half of 2025 and into early 2026. Let's start at the top. I couldn't be prouder of the progress that we've made as a business. We've avoided more than a few icebergs navigating through fabricated headwinds and economic noise. And SUNation has come out stronger. We're stable, we're lean and in my view, we're set up to outperform our peer set. That said, this industry just doesn't quit throwing curveballs. You hear me referring to our industry as riding the solar coaster. And before each earnings call, I look backwards and I ask myself, did I see this coming? Could I have seen this coming? And what changes would I have made? Honestly, nothing could have prepared us for what the post-election solar landscape would look like, but the results of the one big beautiful bill and its impact on the solar industry would have been like predicting COVID. Coming off a brutal 2024, where SUNation and many others saw sales drop 25% to 40%. If they even stayed afloat, I came into this year very optimistic, not because of politics, but because of fundamentals, job growth, domestic manufacturing, energy independence. It just made sense. Solar and storage brought Americans back to work faster than any other sector post-COVID. We delivered the cheapest per kilowatt hour of any energy source, provide grid benefits and diversification while adding benefits unmatched by the environment and the local communities we serve. Elon Musk is even in the game. I felt like we're finally going to get a seat at the big table. But instead, we got lumped in with wind and the Green New Deal narrative, and that political baggage has hurt us. I spent the last two months in D.C. side-by-side with other industry leaders and lobbyists fighting to preserve key tax credit provisions and so far, no luck. The fragmentation in our sector left us exposed, and we're paying for it. A lesson to be learned for sure. It also didn't help that some of the biggest names in solar collapsed. SunPower filed for bankruptcy in August of 2024. Sunnova and Mosaic followed in 2025. And even though those events were finalized in June, investor confidence started taking back in Q1, and it created a ripple effect that dragged down the entire sector. But through it all, one thing has remained true. Our greatest strength at SUNation is our diversification. We operate in two of the most expensive energy markets in the country, New York and Hawaii. Our diversification in the residential, commercial, service and roofing spaces elevates us above all others, and our 22 years of experience are key differentiators. We attract confidence. Our Hawaiian team at HEC is benefiting from our shift towards service and commercial work. And HECO's new battery storage program is helping us make real progress. In New York, commercial projects faced delays due to utility red tape, but we've broken through, boots are finally on the roof, and our pipeline is strong through the end of 2026 already. The shining star is that residential solar is on fire across the country and especially in our markets. While I paused to salute the federal government's decision to sunset Section 25D of the ITC at year's end, homeowners are moving fast. Sales are surging in both New York and Hawaii, and our teams are running beyond full speed. We're already planning for the next phase with new financing models lined up for 2026 and beyond. We are prepared to pivot unlike our competition. Behind the scenes, I'm incredibly proud of what we've accomplished corporately. Jim Brennan has shared many of the details, but the highlights are clear. We've cleaned up our capital stack. We built our cash position, and we're relentlessly pursuing our targets of OpEx efficiency and have cleared out debt. I also want to give credit where it's due. Our Board of Directors has been lockstep with Jim and me, rolling up their sleeves and driving real value every single day. And as our momentum builds, so do our opportunities. Our roll-up strategy is still very much active with multiples of companies dropping considerably. But I'm also looking closely at opportunities for smart strategic consolidation within public markets. This journey as a public CEO over the last 14 months hasn't been easy, but it's been deeply rewarding. What drives us is our team, the 188 SUNation employees across New York and Hawaii, who continue to show up, give their all and push through the noise. They are the heartbeat of this company. And if there's one big takeaway from the first half of 2025, it's this: solar-only companies are vulnerable. Our original thesis of acquiring top-tier regional solar firms still makes sense. But I'm now laser-focused on aligning with diversified energy companies, especially those in AI, crypto and data center infrastructure. These are the largest emerging consumers of power and they're going to shape the next decade of demand. We need to be part of that evolution. SUNation is strong. We're beating the odds and most importantly, we're growing and winning. So thank you for your continued confidence. Everything we do is aimed at increasing shareholder value, and that mission remains our North Star. I'll see you again in the next quarter, and I thank you for your time today. With that, I'll turn it over to Jim Brennan to get into the nuts and bolts.

Thank you, Scott, and good morning, everyone. From a logistics point of view, Scott Maskin, Kristin Hlavka, SUNation's Chief Accounting Officer and Treasurer, and I are usually in the same room for these earnings calls. However, given Hurricane Erin's past and expected flight delays, the three of us are in separate states, and we'll do our best today to make this call go seamlessly. We issued our earnings release yesterday morning and filed our 10-Q with the SEC on August 15. This has been a remarkable period for the SUNation team. With the support of an incredible team, we have reshaped nearly every aspect of the business operationally, financially and strategically. We gained momentum as the year progressed and delivered our second quarter performance that marked a turning point in our journey to create a new, strong and sustainable SUNation energy. We increased our gross margin, reduced our SG&A expenses and improved our adjusted EBITDA loss compared to last year's second quarter. We strengthened our balance sheet through aggressive deleveraging, reduced our total debt by 61% from December 31, 2024, and drove down our second quarter interest expense by nearly $600,000. Our cash position improved nearly fourfold. We have built a robust and growing backlog in our residential and commercial business segments that has given us a clear line of sight to significantly improve performance in the second half of the year and the confidence to reiterate our full-year financial guidance. In summary, we are addressing the new realities of our industry while maintaining the highest level of customer service, remaining a reliable partner to our suppliers and driving sustainable growth opportunities. We are operating more efficiently and delivering on our business and financial obligations. On to the review of our second quarter of 2025 results. Total Q2 sales were $13.1 million compared to $13.5 million last year. Sales in New York rose to $9.8 million from $9.7 million, with residential sales decreasing 6% to $8 million and commercial sales increasing 156% to $1.3 million when compared to Q2 last year. Sales in Hawaii have declined from $3.2 million to $3.8 million. On a consolidated basis, overall kilowatts installed on residential projects decreased by 11% in the second quarter of 2025 with price per watt remaining consistent. On a positive note, revenue per install increased by a whopping 5%. Our backlog has grown considerably, thanks to a large volume of residential customers who are now booking jobs to secure their federal tax credits before they expire at the end of this year. Thanks to the uncertainty from Washington that surrounded the status of these tax credits in both New York and Hawaii markets, our residential backlog improved to $27.1 million on June 30 from $26.9 million on December 31, 2024. Residential backlog accelerated to $35.6 million on July 31 of this year, up more than 31% in just one month. On the commercial side, we ended July with a backlog of $4.2 million, up nearly fivefold from the prior month. We expect to realize 65% of the commercial backlog by December 31 of this year. Consolidated gross margin for the second quarter increased to 37% from 35.4%. New York's gross margin increased a whopping 210 basis points to 40.3% from 38.2%, while Hawaii's gross margin decreased to 27.1% from 28.3%, primarily due to fixed costs on lower revenue. We continue to drive down costs and improve efficiencies as we are creating significant cost savings. In the second quarter of 2025, SG&A expenses declined to $6.4 million from $6.6 million in the prior year period. Total operating expenses rose to $7 million from $6.8 million, which last year's operating expenses benefited from a $450,000 fair value remeasurement of the earn-out consideration. Interest and other expenses in the second quarter of 2025 was $162,000 compared to $736,000 from the last year. This decrease reflects the payoff of some expensive debt earlier this year. Net loss from continued operations was $9.6 million compared to a net loss of $6.9 million in last year's second quarter. However, the net loss in the second quarter of 2025 included a noncash expense from a $7.5 million fair value remeasurement of warrant viability this past quarter versus $3.3 million in the prior year period, as well as a $560,000 financing fee related to the closing of our direct offering versus none in the prior year period. Taking all this into account, our adjusted EBITDA loss improved to negative $1 million in the second quarter versus negative $1.7 million in the prior year period. Moving to the balance sheet. I am very pleased with the progress we have made along several key metrics since the start of the year. Cash and cash equivalents rose to $3.2 million from $1.4 million on March 31 of this year and $840,000 at the end of last year. Restricted cash has remained stable at approximately $300,000 since the end of last year. Just before we ended the second quarter, we terminated our Series A warrants, which protected investors from a potential dilution of 652,000 shares. We believe this was a meaningful way to deploy our capital while enhancing shareholder value. As noted earlier, over the first six months of this year, we reduced our total debt by $11.7 million. Total debt on June 30, 2025, which included consideration of approximately $500,000, the earn-out consideration, declined to $7.5 million from a total debt of $19.1 million on December 31 of last year. This has removed about an annual drain of approximately $3.4 million through 2025. We continue to expect that annual interest expense will decline by approximately $2 million for 2025. In addition to debt repayments, we also restructured $5.6 million of long-term debt to improve our capital structure, enhance cash flows and provide financial flexibility. Other areas of improvement this year through June 30, 2025, include accounts payable improved to $6.4 million from $8 million. Inventories improved to $2.3 million from $2.7 million, current liabilities improved to $12.8 million from $27.2 million, long-term liabilities improved to $9.2 million from $10 million, and lastly, stockholders' equity improved to $22.1 million or $6.49 per share from $8.5 million. Based on our results of our second quarter, project pipeline and general business environment, we are reiterating our guidance for 2025 as follows: total sales are expected to rise to between $65 million and $70 million, a projected increase between 14% and 23% from total sales of $56.9 million in 2024. Adjusted EBITDA is expected to improve to between $500,000 and $700,000 from an adjusted EBITDA loss in 2024. Before turning things back to Scott, I want to again thank our team at SUNation for all of their hard work and dedication. For those of you that have ever met with us over the years, you would have heard us say that transparency is the foundation of our business. When we initiated nearly 100 restructuring actions starting in May of 2024, we did so with the intention to stabilize the business and create a solid financial foundation for growth. While it may have seemed an impossible task at the time, our second quarter results aligned with what we had said earlier this year. But the actions we took in 2024 and early in 2025, however difficult, would result in a stronger SUNation, and that is exactly what has happened. We are excited and optimistic about the future and look forward to keeping you apprised of any news and progress. I feel that this is an exciting time for SUNation Energy as a whole. I want to thank all of you for your time today and turning things back to Scott.

Nice job, Jim. Thank you. And now if anybody has any questions, we're happy to flip back between Jim and me, and answer some questions.

Our first question comes from Julien Dumoulin-Smith with Jefferies.

This is Hannah Velásquez on for Julien. Thanks for the update and nicely done. I have a few questions. The first to open it up, you mentioned on the call just some new financing models and potentially financing structures to enter into 2026. Can you provide any further detail in terms of what you're contemplating there?

Yes, thank you for the call. I would say that when the guidance for 25D and 48E was released, it created a situation where many traditionally loan-focused residential companies realized they needed to change direction. One of the companies that emerged was LightReach, along with others that are really influencing third-party ownership. I believe there are major players working behind the scenes to create a new financing model that connects TPO and the loan market. Some people discuss prepaid leases, but I won't name names; I know there are several entities currently working to combine various elements to create a solution that benefits homeowners and meets everyone's needs. Does that answer the question?

Yes, that's perfect. I understand it's still early innings and everybody is trying to sort through the transition. So commentary is very fair. And then if I could just ask a follow-up. Can you give us a sense of the growth outlook for residential solar in 2026, more so macro growth rather than company growth, in terms of installations, again in 2026 and maybe if you have visibility into 2027, not only taking into account the expiration of 25D, but also the favorable outcome from treasury guidance on Friday of last week?

Yes, thank you. There’s a lot to discuss. Over the past few months, we have focused on securing funding and materials to ensure that we can promise our customers installations by December 31, especially for loan customers. This consumed the efforts of everyone involved. Responsible companies in the residential sector are managing risks by informing customers that, while we have oversold our projects for 2021, there are always potential delays such as permitting issues. It's surprising that we haven’t observed a decrease in sales from customers who were informed about the uncertainty of guaranteed tax credits, meaning we can’t assure that their systems will be installed in time to benefit from those credits. Demand for solar applications continues to be strong, which is encouraging, as I believe that by 2026, after the credit period ends, those customers will still pursue other financing options as energy costs rise. The challenges posed by AI, cryptocurrency, and power demand are likely to increase energy costs for residential customers. Supply is currently limited, and by 2026, we might face constraints due to high demand for products that have already been reserved. A lot can change in the coming year, and in my 22 years in this industry, it has taken just months to shift from a 30% tax credit to no tax credit. There are many developments expected before 2027, so providing transparency about the industry's future is vital for building trust with our customers.

Okay. That's completely reasonable. Please proceed.

If I may, Hannah, I would add that Scott's earlier comments about our diversified approach to this market are key. It's unclear what the total impact on the entire market will be in 2026 and 2027, as there is a shift towards third-party owned selling approaches. Historically, SUNation has focused on purchase to own for the last 22 years, so this will be a change for us. However, the good news is that we have other sources of revenue. We have five or six revenue sources, and residential is just one of them: we also have commercial, roofing, service, electrical services, and we are adding more revenue sources, which is crucial for our success. As residential becomes uncertain in 2026 and 2027, our commercial business unit is rapidly expanding, as I mentioned in our prepared remarks. This will be vital. When the government eliminated the 25D tax credit, it seemed illogical, but the 48E credit continues to support both residential TPO and our commercial business. Therefore, we anticipate ongoing growth in that area.

Right. Super fair. And I think like the safe harbor outcome for smaller solar, it bodes well for both residential and the C&I perspective. Okay. Yes, I was mostly trying to get us the context of some of your peers in the resi space have been sizing 2026 at maybe, call it, down 20% as they take into account loan and cash down meaningfully, but then TPO up. And so I was just looking to see if you agree with that framework or concede it could actually be better again just because you have more visibility into likely 2029 and 2030 on the leasing front for solar?

I think it's going to be better than predictions based on the chatter that I see, and especially because we operate in New York and Hawaii. I can't talk for some of the other markets. But for us, the cost of power is absurd. So I see people getting pushed further and further along to join it.

There are no further questions at this time. I would now like to turn the call back over to the management team.

So we have some questions from the investor inbox. This one comes from John L. At what point does an installation qualify for the tax credit? In other words, does it have to be completely installed, partially installed or connected to the grid?

Yes. Thanks for that, John. Our read on this is we have to have the system up and operational, ready to connect. That is exclusive of closing out building permits and utility interconnection. This is for the residential off-taker. We can't be held accountable for slow utility works and whatnot. So our commitment to the customers that we've made is that you will be up and operational by December 31. And if you can take advantage of the tax credits, and we do not give tax advice, then we'll absolutely be ready to apply for it.

The next question comes from Ariel C. Do you see any opportunity for solar as part of AI/data centers?

Absolutely, thank you, Ariel. We continuously hear about using AI in our business; I personally write some of my content with AI. Recently, I visited a project where Microsoft is constructing a one million square foot AI facility in Milwaukee. The energy and water needs for this building will significantly exceed the consumption of 350,000 homes in the area. As a result, it's clear that electricity prices in Milwaukee will increase for residential users since the energy supply is limited. I believe there is a tremendous opportunity here. I noted earlier that companies focused solely on solar and storage are highly vulnerable. It’s time for those who incorporate both fossil fuels and renewables to collaborate, share resources, and use the same sites and transmission lines. I see a great potential to work alongside fossil fuels, oil, natural gas, and others, rather than choosing one over the other. That’s where my thoughts are headed following the recent bipartisan bill.

And then what looks like maybe the final question from Nick B. How do you expect quarterly revenues/adjusted EBITDA to trend over Q3 and Q4?

I'm going to flip that one over to Jim Brennan.

Thank you, Nick. That's a good question. We don't provide quarterly guidance. You may remember this is the first year we've given guidance in a while. What I can say is that we are in a cyclical business. Typically, Q1 in both New York and Hawaii sees lower revenue and possibly a loss in net income. In Q2, revenue usually begins to improve in those markets, and while we might see growth, profitability may remain neutral. Q3 usually represents a significant ramp-up where we start to accumulate cash, and Q4 tends to be even better. I wish we didn't have this pattern in our two business segments, and as we continue to grow through our roll-up strategy, we hope to acquire companies with different profiles. However, for New York and Hawaii, Q1 is low, Q2 is better, and Q3 and Q4 generally see strong performance year after year. Good question.

And that concludes the investor inbox. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.