At roughly $0.17 a share, pay attention to Solar Integrated Roofing Corp. (OTC: SIRC). Not because of its low-priced exposure to a booming clean-energy sector but because SIRC appears to have grabbed considerable revenue-generating traction in 2022. And the better news for the company, and investors, is that guidance sets expectations for more of the same.
Here's the interesting thing about SIRC. At sub-dollar prices, investors may think this is a typical solar sector penny stock with more ambition than ability. That's not the case for this one. SIRC's Q2 earnings ending June 30th surged by 746% to $66.3 million. Remember, that's a quarterly figure, not a yearly. Few other microcap companies produce similar numbers, even on a yearly basis. But revenues aren't the only thing growing, so is the bottom line. Net income surged to $18.9 million in the same period, or $0.04 per basic and diluted common share. That's compared to a loss of over three million and $(0.01) per basic and diluted common share in 2021.
To therefore suggest that SIRC is operating with a revenue-generating tailwind may be an understatement. A more accurate description may be that SIRC is in hypergrowth.
Increasing Revenues With A Diversifying Strategy
Operating momentum indicates it can stay that way. In fact, as an integrated, single-source solar power, roofing systems installation, and EV charging company, SIRC has positioned itself ideally to benefit from multiple revenue sources. That's evident in recent updates. SIRC announced being awarded a 5-year blanket purchase agreement with the U.S. General Services Administration as part of the $5 billion in federal funds allocated to EV charging installations in the Biden Administration's Infrastructure Bill. That's not all.
SIRC also scored a deal with AED to assist with developing and financing turnkey alternative energy systems for multiple existing hotel locations, targeting revenue-generating opportunities associated with solar, battery storage, and EV charging solutions. That deal could become an even more significant opportunity, with other hotel chains likely, and expected, to join SIRC's client list. There's more.
SIRC also introduced an innovative low-income solar financing product to non-profit commercial entities through a partnership with Renewable Energy Products Manufacturing. That deal can unlock new commercial scale opportunities in a niche market where SIRC could exploit a thin competitive landscape.
Know this, too. More than only operating performance is driving the value proposition. The company filed audited financial statements for the year ended December 31st, 2021, and transitioned to a more traditional December 31st fiscal year. That change positions SIRC to expedite its uplisting strategy, which is well in progress after filing to become a fully reporting company.
A Bullish Proposition Supported By Performance
SIRC operating performance justfies the uplist consideration. They noted in Q2 commentary that the quarter's performance was marked by a strong cadence of continued execution that included record revenue and profitability. But that was only part of an excellent update. Also highlighted were new working partnerships and the introduction of innovative financing products that positions SIRC to extend its streak of impressive revenue growth.
The company isn't projecting small numbers, by the way. Guidance suggests that as its capital position strengthens, revenues could continue to hit record levels in the current fiscal year. And with its foundation in place to facilitate revenues falling faster to its bottom line, investors may be correct to expect increased profitability with minimized dilution. Indeed, the sector rally supports that presumption. Solar companies SolarEdge (NASDAQ: SEDG), Enphase (NASDAQ: ENPH), and First Solar (NASDAQ: FSLR) are all appreciably higher since October. That sector optimism adds to the SIRC value proposition by cueing investors to find value-based opportunities, a list Solar Integrated Roofing should be on.
Moreover, an uplist to NASDAQ could be imminent, a transition that could open the door to new investor interest and more traditional sources of financing. The most significant step to making that leap, audited financials, is completed. Thus, updates on the uplist could be forthcoming.
Accruing Additional Value From Partnerships
Once the uplist happens, the revenue-generating momentum could strengthen further. SIRC's partnership with REPM is already putting that likelihood in play by allowing them to introduce new financing products to help non-profit customers install and realize the benefits of solar with no upfront costs, no credit threshold, and no income verification needed to qualify. That's just part of the market opportunity.
Additional opportunities for comparable financing products are also in play for the residential space. And by having an inherent ability to capitalize on markets that have been historically challenging to break into, SIRC is positioning itself to exploit a massive market opportunity from the consumer level.
Heading into the end of Q4, few argue against SIRC being better positioned than ever to maximize near and long-term market opportunities. They entered Q3 with a revenue-generating tailwind and a management team able and proven to deliver impressive results. By the way, leveraging just the intrinsic value of its nationwide sales presence and product portfolio could drive substantial growth. But there's more than intrinsics in play. SIRC can tap into the inherent potential of its assets as well.
And that's where valuation models could help justify a potentially significant move higher. Most recently, SIRC named Stefan Abbruzzese as its new president to lead that charge. He's an operations and commercial leader bringing vast experience to the company. But that's not all he provides. He's noted to be an expert in securing funding to make businesses bigger faster. And not only is he a proven capital-raiser, but he is known to do it in a way most friendly to shareholders, expected to translate into accretive growth with less dilution to grow and monetize SIRC's business pipeline. Supported by impressive revenues and income, that expertise, leveraged correctly, can generate significant value.
An Impressive Tailwind Into 2023
All tolled, SIRC appears to be doing more than the right things at the right time. They have positioned themselves for that trend to continue. In other words, by securing funding needs, historic performance could be the precursor of better things ahead. Management thinks so. David Massey, SIRC CEO, said, "We're looking to wrap up our funding process … and get cashflow positive. We're very close to that now, and we're looking to really blow the doors off the revenue this year," He added, "Looking forward, 2023 could be twice as good as 2022."
Thus, following SIRC's leader may be a wise consideration. Remember, too, that SIRC has substance to support its optimism, enhanced by rising energy prices and government incentives driving organic growth. Furthermore, they have created a highly complementary business platform providing significant cross-selling opportunities, adding to an impressive 1H 2022 revenues of $93 million and $25 million in net income.
With momentum at its back, nationwide business coverage, a fully integrated finance and supply chain, and targeting business from a clean-energy industry that will be worth trillions, expecting better times ahead for this microcap solar energy player are justified. And from an investor's perspective, investment consideration is as well.
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