SolarJuice (SJA) Begins U.S. IPO Effort

A Quick Take On SolarJuice

SolarJuice (SJA) has filed to raise an undisclosed amount in an IPO of its ordinary shares, according to an F-1 registration statement.

The firm provides a range of solar products and services to end users in Australia and the United States.

When we learn more about management’s IPO pricing and valuation expectations, I’ll provide an update.

SolarJuice Overview

Sydney, Australia-based SolarJuice was founded to be a manufacturer and wholesaler of solar products in Australia, and roofing and solar modules installation services in the five U.S. states of Colorado, California, Nevada, Florida and Texas after acquiring the assets of bankrupt company Petersen-Dean (Solar 4 America).

Management is headed by Chief Executive Officer, Hoong Khoeng Cheong, who has been with the firm since April 2015 and was previously a director of SPI Energy since September 2017 and COO of SPI since May 2014.

The company’s primary offerings include:

• PV modules

• Solar energy converters

• Batteries and storage devices

• Balance of system components

• Accessories

• Resale

• Installation services

As of June 30, 2022, SolarJuice has booked fair market value investment of $35 million as of June 30, 2022 from investors, including SPI Investments Holding Limited.

SolarJuice – Customer Acquisition

The firm wholesales its various solar products in Australia and New Zealand to installers and resellers through its 80%-owned Australian subsidiary, SJ Australia.

The company also manufactures solar modules in California, delivering the Solar4America brands products to customers as well as providing installation services.

SJA has over 5,000 commercial customers in Australia and New Zealand; it expects to expand its California manufacturing capacity to 2.4 gigawatts per year by the end of 2023.

Sales, Marketing & Customer Service expenses as a percentage of total revenue have trended higher as revenues have increased, as the figures below indicate:

Sales, Marketing & Cust. Svc.	Expenses vs. Revenue
Period	Percentage
Six Mos. Ended June 30, 2022	2.0%
2021	4.0%
2020	1.7%

Click to enlarge

(Source – SEC)

The Sales, Marketing & Customer Service efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Sales, Marketing & Cust. Svc. spend, dropped to 3.5x in the most recent reporting period, as shown in the table below:

Sales, Marketing & Cust. Svc.	Efficiency Rate
Period	Multiple
Six Mos. Ended June 30, 2022	3.5
2021	6.5

Click to enlarge

(Source – SEC)

SolarJuice’s Market & Competition

According to a 2022 market research report by Mordor Intelligence, in 2021, Australia installed an estimated 360,000 rooftop solar systems, ‘an increase of nearly 40% compared to 2020.’

The country has one of the highest solar radiation amounts per square meter but is still behind other countries when it comes to mid-scale and large-scale solar installations.

As of September 30, 2021, Australia counted at least 2.96 million solar installations.

Also, the government plans to approve two large-scale solar projects with a combined energy transmission capacity of 950 megawatts by the end of 2023.

Major competitive or other industry participants include:

• AGL Energy

• Infigen Energy

• Neoen SA

• First Solar

• SunPower

• Tesla

• SolarCity

• Sunrun

• Titan Solar

• Freedom Forever

• Others

SolarJuice’s Financial Performance

The company’s recent financial results can be summarized as follows:

• Growing topline revenue, although at a decelerating rate

• Reduced gross profit and lowered gross margin

• Variable operating losses

• Increasing cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue
Period	Total Revenue	% Variance vs. Prior
Six Mos. Ended June 30, 2022	$81,517,000	7.5%
2021	$153,276,000	35.0%
2020	$113,505,000
Gross Profit (Loss)
Period	Gross Profit (Loss)	% Variance vs. Prior
Six Mos. Ended June 30, 2022	$3,971,000	-26.0%
2021	$7,380,000	-19.7%
2020	$9,192,000
Gross Margin
Period	Gross Margin
Six Mos. Ended June 30, 2022	4.87%
2021	4.81%
2020	8.10%
Operating Profit (Loss)
Period	Operating Profit (Loss)	Operating Margin
Six Mos. Ended June 30, 2022	$(4,437,000)	-5.4%
2021	$(19,976,000)	-13.0%
2020	$3,219,000	2.8%
Net Income (Loss)
Period	Net Income (Loss)	Net Margin
Six Mos. Ended June 30, 2022	$(778,000)	-1.0%
2021	$(23,281,000)	-28.6%
2020	$763,000	0.9%
Cash Flow From Operations
Period	Cash Flow From Operations
Six Mos. Ended June 30, 2022	$(4,263,000)
2021	$(7,463,000)
2020	$(2,592,000)
(Glossary Of Terms)

Click to enlarge

As of June 30, 2022, SolarJuice had $3.2 million in cash and $50.3 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2022 was negative ($8.4 million).

SolarJuice’s IPO Details

SolarJuice intends to raise an undisclosed amount in gross proceeds from an IPO of its ordinary shares.

Management says it will use the net proceeds from the IPO as follows:

Expand U.S. assembly factory capacity for solar modules. In addition to our current module manufacturing facility in California, we plan to build a 2.5GW module assembly factory with leased space in the east coast of the U.S. and industry leading machinery that we plan to purchase from Asia. We will invest in new staff hiring and training, as well as raw material purchases. We expect to invest approximately $20.0 million for this purpose.

Expand our distribution business in Australia and other countries by funding the working capital needed to establish inventory levels that can support the growth. We expect to invest approximately $5.0 million for this purpose.

Expand our U.S. roof and solar system installation business by hiring new sales staff, opportunistically purchase in bulk to lower material costs. We expect to invest approximately $3.0 million for this purpose.

Other general corporate purposes. We expect to invest all the rest of offering net proceeds for this purpose.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management said the firm was not involved in any legal proceedings that would have a material adverse impact on its financial condition or operations.

The sole listed bookrunner of the IPO is Maxim Group.

Commentary About SolarJuice’s IPO

SJA is seeking U.S. public capital market funding to invest in increasing its manufacturing capacity and other growth initiatives.

The company’s financials have shown increasing topline revenue, although at a decelerating rate, lowered gross profit and gross margin, fluctuating operating losses and growing cash used in operations.

Free cash flow for the twelve months ended June 30, 2022 was negative ($8.4 million).

Sales, Marketing & Customer Service expenses as a percentage of total revenue have trended higher as revenue has increased; its Sales, Marketing & Customer Service efficiency multiple fell to 3.5x in the most recent reporting period.

The firm currently plans to pay no dividends and expects to retain future earnings to reinvest back into its growth and operational initiatives.

SJA’s trailing twelve-month CapEx Ratio indicates it has spent significantly on capital expenditures as a percentage of its operating cash flow.

The market opportunity for providing solar products and services in Australia and the U.S. is large and has been growing markedly.

Maxim Group is the lead underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (65.2%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is slowing revenue growth while producing higher cash burn.

While management may have acquired bankrupt Solar4America’s assets at a bargain, it faces significant competition in the U.S., and I’m not convinced it can keep up its Australia product sales growth rate.

When we learn more about the IPO’s pricing and valuation, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.