Good afternoon, and welcome to SPI Energy's Second Quarter 2023 Conference Call. As a reminder, this call is being recorded and all participants are in a listen-only mode. The call will be open for questions and answers following the presentation. On today's call are SPI Energy's Chairman and CEO, Denton Peng, CFO, Janet Chen, and COO, HK Cheong. Before we begin, the company would like to remind everyone that various remarks about future expectations, plans and prospects constitute forward-looking statements for purpose of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. SPI cautions that these forward-looking statements are subject to risks and uncertainties that may cause their actual results to differ materially from those indicated, including risks described in the company's filings with the SEC.
Any forward-looking statements made on this conference call speak only as of today's date, Tuesday, August 22, 2023. SPI does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. I will now pass the call over to SPI Energy's Chairman and CEO, Denton Peng. Mr. Peng?
Thank you, Diego. Thank you to everyone for joining us today on our second quarter earnings call. We generated strong double-digit growth during the second quarter, with net sales increasing more than 21% over the second quarter of 2022 to nearly $59 million, and the gross profit improving more than 35% to $5.2 million. Importantly, when we subtract out the operating loss of our Phoenix Motor EV division, which we spun out on NASDAQ last year, our core business line passed the broken even point during the second quarter, underscoring the strength of our rapidly growing solar operation. This exceptional performance further demonstrates our continued ability to drive growth and improve profitability as we execute our strategy with diligence and focus.
In recent years, we have established a solid trend of strong revenue growth that has placed us on a clear path to near-term profitability, especially our solar manufacturing capacity based on Sacramento, California. This business have been profitable since quarter four last year. We are in the process to build additional capacity in Sumter, South Carolina, to meet local strong demand. We are also in the process to build 1.5 gigawatts solar wafer and 500 MW TOPCon solar cell manufacturing capacity in the U.S. We anticipate this trend will accelerate moving forward as we benefit from strong industrial tailwinds, including incentive under the Inflation Reduction Act in the U.S. and other provisions that continue to boost the global renewable energy markets. We believe we are extremely well positioned in our sector with a diverse portfolio spanning solar and EV technologies.
Our established trend of strong growth and improving profitability metrics place us on a clear path to near-term net profitability. We believe that the combination of our strong financial performance, strategic reposition, and exceptional leadership team will enable us to continue executing on our mission of creating a sustainable energy solution while also delivering strong returns for our shareholders. SPI Energy is committed to create a brighter, more sustainable future powered by renewable energy, and we are confident that with your continued support, we will achieve great success together. Thank you. I now pass the call over to our Chief Operating Officer, HK Cheong. HK.
Thank you, Denton, good afternoon to everyone on this call. Over the past four years, SPI Energy has consistently achieved impressive revenue growth, demonstrating our ability to adapt and thrive in a rapidly evolving market and remain on track to accelerate this growth even further in 2023. As Denton noted at the beginning of today's call, we have a highly compelling value proposition for investors. We are well positioned in the renewable sector with a diverse portfolio in solar, EV, and hydrogen fuel cell technologies, while our operating assets generating consistent cash flow and our solar project pipeline in the U.S. is robust and continuing to grow. Additionally, we believe we have the opportunity to unlock significant additional value for our shareholders as we continue to pursue our plan to spin off key business lines.
We began this process in 2022 with the successful IPO of Phoenix Motor on NASDAQ and have already filed for 2nd spin-off, SolarJuice, which will also trade on NASDAQ under the ticker SJA. We plan to follow this with a spin-off of our independent power producing business unit, Orange Power, as well. In each of these spin-off, we have or will have retained majority ownership of the new entities. In the case of Phoenix Motor, we currently hold more than 80% ownership of its share. While we have many exciting business line and a wealth of opportunity to capitalize on, so we are particularly proud to have launched a new state-of-the-art 400 megawatt N-type TOPCon solar cell manufacturing in the U.S. through our Solar4America subsidiary.
With the launch of this solar cell manufacturing facility in South Carolina, it will support the production of the Solar4America made in the U.S., Pioneer4 of 430 watt black module for residential market, and Pioneer5, 580 watt bifacial module for commercial and utility scale market. This Pioneer series of American-made solar cell and modules are expected to be available for delivery to customer in the first half of 2024. Looking ahead, key growth driver for the remainder of the year and into 2024 will be the continued ramping of our American-made solar module manufacturing capacity.
We are currently based in Sacramento, California, with a 700 MW capacity in mass production and delivering latest M10 , 410 watts and 550 watt American-made solar modules to residential, commercial, and utility customer in the U.S. We are proud to say that this business has been profitable since quarter four of 2022. Our Phase III capacity expansion of an additional 700 MW is on the way, and we expect to be up and running by the first half of 2024. With the completion of this expansion plan, we will have 1.4 GW per year capacity at our existing facility in California.
The continued growth of our Australian solar distribution business throughout Australia and Asia Pacific saw us delivering 448 MW of inverters, 105 MW of solar modules, and 83 MW of battery to Australian installer, which is equivalent to 15% of rooftop PV and residential storage installation in Australia in 2022. We also expect steady revenue growth from other business arms. Our current solar project pipeline has been stable, which is expected to drive improved profitability. Our Orange Power business has also consistently provided a stable cash flow for the company, and that will further strengthen our overall profitability. As I mentioned on the prior call, the Inflation Reduction Act of 2022 provide attractive incentive for companies to produce solar cell and solar modules in the U.S..
Currently, our manufacturing division in California and South Carolina are positioned to receive $0.07 per watt of solar modules produced and $0.04 per watt of solar cell produced. Our U.S. customers will also benefit from additional 10% tax credit, which should increase our ASP and our gross margin. Overall, the strong foundation we have established in key areas of renewables sector, including American solar manufacturing, battery storage, and electric vehicle, that position us extremely well to capitalize on the wealth of opportunities to expand our project pipeline, grow consistent cash flow from our operating assets, and increase our gross margin and profitability moving forward. Before I pass the call over to Janet to discuss our second quarter financial performance in greater detail, I'd like to conclude my comment by noting that our world-class team is building on a multi-decade track record of success.
I'm confident that our strong foundation, combined with growing industry tailwind, places in a great position to rapidly increase market share across each of our business units, ultimately enable us to unblock new value for our shareholders as we accelerate growth in the quarter ahead. I'd like to hand over the call over to our CFO, Janet Chen. Janet, over to you.
Thank you, HK. Good afternoon, everyone. Thanks for joining our call today. For the second quarter ended June 30th, 2023, our net revenue increased 101.1% to $58.9 million, up from $48.6 million in Q2 of 2022. Revenues continue to be mainly driven by increasing sales from our solar business lines. Our cost of revenues, which consists primarily of raw materials and labor costs, increased to $53.6 million in the second quarter, up from $44.7 million in the prior year period, and consistent with our increase in net revenue.
Our gross profit was $5.2 million in the second quarter, up 35.3% from our gross profit of $3.9 million in Q2 2022, giving us a gross margin of 8.9% for the quarter, up from 8% in the comparable period year, prior year period. General and Administrative expenses declined to $6.3 million, or 10.7% of net sales in the second quarter, a strong improvement from G&A expenses of $7.6 million or 15.7% of net sales in Q2 2022. This decrease was a result of our continuous expenses control efforts. Total operating expenses in the second quarter decreased to $8.3 million.
or 14.1% of net revenues, down from $9.5 million or 19.5% of net revenues in Q2 2022. As Denton noted earlier, our overall operating loss of just over $3 million includes $3.2 million operating loss from Phoenix Motor, which was spun out on NASDAQ in 2022. Subtracting these outpaces, our core business lines passed the operational break-even point, a major milestone on our path to what we believe will be sustained profitability. Interest expenses was $2.4 million in the second quarter, up from $1.6 million in Q2 2022. These and other factors resulted in net loss attributable to shareholders of SPI of $2.5 million for the second quarter.
As of June 30, 2023, our total assets was $230.5 million, with $5.9 million in cash, cash equivalents, and restricted cash. I thank you all again for joining us on this call today, and we will now open up the floor for any questions that you may have. Thank you.
Thank you. If you would like to ask a question, press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star followed by the number two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from Tate Sullivan with Maxim Group. Please state your question.
Hi. Thank you. You maintained 2023 net income guidance of $29 million-$35 million versus the first half, net loss of $12 million. Does your guidance assume, like, an accrual for the $0.07 solar panel U.S. manufacturing tax credit? Have you seen any other companies recognizing or accruing for that benefit, please?
Yeah, thank you for your questions. Our guidance is including $0.07 on the in the Inflation Reduction Act. For some reason, for the in the Treasury Department, $7.00 is still not clear. In our current financial report, we're not including the $0.07, but I we are eligible for getting $0.07 in the future. Now our current report is not including these $0.07. Secondly, we are still confident that we generate our guidance for the revenue and also for the profitability for this year.
With how much could this accumulated credit be or for what % of your U.S. solar panel sales? Is there any sort of context to what you recognize in U.S. solar manufacturing that you could give us today, or better yet, your view?
We, we don't know how we, we will to generate this by as a revenue or as additional other income or other, because now we have not yet got it clear which kind of the, this is $0.07 will be put in the, in the, in the financial report. We, we need to get it more clear. Also, we try to get information from other competitors of these things, and now this is information is not clear. The guidance is still is working on, but everybody's still waiting on that.
Okay. Do you also assume in your guidance any additional sales of commercial solar power projects or any resolution of the dispute with Sinsin previously agreed acquisition as well, please?
Yes. We are working on that. We will see in last quarter, we just selling some portfolio in Oregon and to Brookfield. We are still working on as other portfolio in Oregon, Massachusetts, probably Hawaii, and also other portfolios. This is, this business line is coming on, more as this, we will get more revenue and profit for asset sales for this year. This year, we are seeing much more improving on SPI Solar for the solar project development business.
Can you comment on the dispute with the Sinsin, and could you potentially resolve that, or is there a timeline or any guidance on that possible?
Yeah. Sinsin, because it's a long time, this is, you know, already in our balance sheet, more than $60 million other payable. The finances already put the worst situation. We are still working on to find a result to resolve the Sinsin issue. We, the company is continue dialogue with the Sinsin. We currently know we have a big chunk of cash, more than EUR 30 million is in the asset, in Greece. It's not consolidated in the book, but in the meantime, we have shown more than $60 million payable in the book. We, we try to resolve this one as soon as possible. We are still working on that, but we cannot provide a timeline for that.
The company definitely will push to resolve this legal issue in the first priority.
Thank you.
Thank you.
Another reminder, to ask a question, press star one on your telephone keypad. We'll pause for a couple moments to see if there are any additional questions. Thank you. Our next question comes from Mark Anderson, Sacramento Business Journal. Mark Anderson, are you on the line? Looks like he put his line on hold. My apologies, and that's the music that you were hearing. Once again, if you'd like to ask a question at this time, press star one on your telephone keypad. There appears to be no additional requests for questions. I'll hand the floor back to management for closing remarks. Thank you.
Thank you for everybody joining today's conference call. I hope to see you next time. Thank you.
Thank you.
Thanks very much. Thank you.
Thank you. With that, we conclude today's call. All parties may disconnect. Have a good day.