Mr. Justin Holland reports

EGUANA ANNOUNCES FIRST QUARTER 2023 FINANCIAL RESULTS

Eguana Technologies Inc. has released the results for its first quarter ended March 31, 2023.

"The Eguana team advanced several objectives across hardware and software during the quarter, which will have significant and positive long-term impact on growth and global positioning objectives. These include, to name a few, moving the 10-kilowatt whole-home product to full-scale manufacturing, expanding the energy management system software licence for direct control from the utility to the ESS, advancing Eguana cloud development to allow for the recurring revenue, and a doubling of the number of unique enrolments and completions within the Eguana university platform, which already has over 400 unique log-ins," commented Eguana chief executive officer Justin Holland. "Additionally, the completion of the Solarlab acquisition, LFP product certification to new Australian standards and entry into the Simply Energy cybersecurity program has set up Australia very well for the second half of 2023."

Fiscal Q1 2023 financial highlights:

• The company previously announced its change in fiscal year-end from Sept. 30 to Dec. 31, to align the company's financial reporting with the calendar year-end and the majority of publicly traded companies. Dec. 31, 2022, was the first financial year-end with the new date and time period that comprised five quarters. As a result, the comparative period for the first quarter of 2023 is technically the second quarter of 2022, both at March 31, in the respective years.
• Q1 2023 revenue of $5.9-million, a significant increase from the comparative quarter in March, 2022, with product revenue of approximately $285,000. This revenue growth is due to expanded products, expanded markets, enhanced business development efforts and overall company growth. The first quarter 2023 was slower than the prior quarter ended Dec. 31, 2022, which follows typical seasonality patterns, however, management is cautious in near-term market growth, as a result of changing consumer buying patterns related to increased interest rates and inflation, and increased inventory levels through distribution. Second-half growth is expected to be stronger driven by the early success of the company's partner training programs.
• Q1 2023 gross margin was approximately $152,000 or 2.6 per cent, a decline from 25.1 per cent in the comparative quarter of March, 2022, which was uncommonly high due to the impact of inventory adjustments. Margin has remained steady over the last two quarters with further 6-per-cent-to-8-per-cent improvement anticipated in the coming quarters as a result of freight cost reduction, battery price reduction, and removal of import tariffs by a prior shift of certain components and subassemblies out of China. The increases in margin are expected to take effect when current inventories procured in 2022 are consumed through manufacturing. Longer-term cost reduction activities are also planned with battery module and advanced power electronics, which are expected to drive an additional 12 per cent to 15 per cent over the next 18 months.
• Q1 2023 operating loss was $3.2-million, a slight increase from a $2.5-million operating loss for the comparative March quarter in 2022. This decline is largely due to higher expenses in product research and development in the first quarter of 2023, supporting sales and growth objectives.
• Working capital at March 31, 2023, was $32.1-million, a slight decrease from $33.7-million at Dec. 31, 2022. The working capital position is much improved from the prior year, at March 31, 2022, reported as a deficit of $12.2-million.
• Itochu Corp., a strategic investor in the company, purchased 16,666,666 common shares of Eguana, for total proceeds of $3.3-million, through the exercise of its share purchase warrants, previously issued in an offering that closed on March 16, 2020. Additionally, Itochu and Eguana agreed to convert approximately $1.1-million of interest owing under the company's 7 per cent unsecured convertible debenture into 4,242,617 common shares of Eguana in full satisfaction of the March 1, 2023, interest payment.

Business highlights:

• Eguana completed its acquisition of Solarlab Pty. Ltd., based in Adelaide, South Australia. Solarlab has been delivering high-value design, sales, installation and monitoring services in energy storage and residential and commercial solar markets nationally throughout Australia. Alongside its commercial rooftop solar business, Solarlab is a preferred supplier of solar and storage solutions to embedded electricity network operators in the multitenant residential market, including low-rise apartments and retirement communities. In these developments, the utility serves the embedded network as a single microgrid customer, and the embedded network operator manages on-site renewables and storage, and individual customer billing, providing tenants with the lowest energy costs and services to the grid;
• The company continues to work with long-term partner Pineapple Energy and expanded its licence agreement to include the E-Gear EMC, the on-site energy management system used in the Evolve energy storage product line, which completes the full software stack from user interface to utility APIs (application programing interfaces) by providing direct control of the connection between the Eguana cloud and the PCS;
• Hansine Ullberg was appointed as chief financial officer, as Sonja Kuehnle left the company to pursue other opportunities. Ms. Kuehnle will remain in an advisory role for a smooth transition;
• Over 100-per-cent increase in installer module enrolments and completions through Eguana University, a comprehensive partner training platform across system design, sales, installation and commissioning;
• Completed the installation and commissioning of the third inverter functional test station (IFT) and its first with dual five-kilowatt/10-kilowatt testing capability, bringing annualized production capacity in San Jose to 15,000 systems with two additional IFTs in Calgary adding another 9,000 units of capacity;
• As part of expanding manufacturing capacity, the company has transitioned its 10-kilowatt full-home Evolve solution to full-scale production and commenced initial customer shipments. The 10-kilowatt Evolve is designed to simplify installation to provide the highest power and capacity rating in a fully integrated residential storage system, to provide high-power expandible solutions for utilities in virtual power plant applications, and is listed compliant with Clean Energy Council's (CEC) California;
• The 10-kilowatt/28-kilowatt-hour whole-home energy storage systems are now available in North American markets through distribution and dealer direct channels;
• Eguana completed all required certifications for its five-kilowatt Evolve LFP and NMC residential battery energy storage systems (BESSs) to the new Australian and New Zealand grid standards. The BESSs certifications also meet all Australian grid interconnection requirements and are now listed in the CEC's approved list of batteries;
• Enrolled in Simply Energy cybersecurity program in preparation for rolling out frequency control auxiliary services (FCAS) virtual power plant in Australia;
• Postquarter-end, the company announced the partnership of Eguana and Virtual Peaker, a cloud-based software-as-a-service (SaaS) company that empowers modern utilities with the friendliest distributed energy platform on the planet. The partnership allows for integration of the companies' respective technologies, providing utilities and consumers with dynamic options to leverage batteries to benefit the grid and reduce energy costs, while providing recurring revenue opportunities for the company.

The condensed unaudited consolidated financial statements and the management's discussion and analysis thereof are available on SEDAR.

Conference call

Eguana management will also host a conference call on Tuesday, May 30, 2023, at 5:30 p.m. Eastern Time, to discuss the results, provide a business update and hold a question-and-answer period.

Canada/United States toll-free:  1-800-319-4610

International toll:  1-604-638-5340

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About Eguana Technologies Inc.

Based in Calgary, Alta., Canada, Eguana designs and manufactures high performance residential and commercial energy storage systems. Eguana has two decades of experience delivering grid edge power electronics for fuel-cell, photovoltaic and battery applications, and delivers proven, durable, high-quality solutions from its high-capacity manufacturing facilities in Europe, Australia and North America.

With thousands of its proprietary energy storage inverters deployed in the European and North American markets, Eguana is one of the leading suppliers of power controls for solar self-consumption, grid services and demand charge applications at the grid edge.

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