What you need to know: • Braille Energy Systems reported Q2 financial results that were in line with our expectations. Revenue came in at $1.1M (+3% YoY, +26% QoQ) compared to our estimate of $1.1M. • Gross margin came in at 28% compared to our estimate of 32% and adjusted EBITDA came in at ($0.6M) vs. our estimate of ($0.7M). • BES remains well positioned for revenue growth acceleration and margin expansion for the back half of FY23. Braille Energy Systems (BES:TSXV) reported Q2/23 financial results this morning that were in line with our expectations. While we were not expecting an inflection point in Q2 for Braille Battery, we are expecting the segment to start turning a corner in Q3 due to regular seasonality, its new Landport distribution deal, and factory improvements. We encourage readers to revisit our initiation report for a full breakdown of our investment thesis. We are maintaining our BUY rating and $0.15/share target price on Braille Energy Systems. Key Highlights • BES reported $1.1M in revenue compared to our estimate of $1.1M and $0.9M last quarter, representing 3% YoY and 26% QoQ growth. While this figure is below historical growth rates, we reiterate that management expects the back half of the fiscal year to show stronger growth. • Gross margin for the quarter came in at 28% compared to our estimate of 32% and 29% last quarter. BES has historically posted 35-40% gross margins but has recently underperformed due the re-engineering and development of its facility; we expect BES to reach those historical levels by Q4. • Adj. EBITDA for the quarter came in at ($0.6M) vs. our estimate of ($0.7M) and ($0.7M) last quarter. We remind readers that Braille Battery is roughly breakeven, implying that BES burned $0.7M on the development of its residential backup power products. • Braille ended the quarter with $0.7M in cash and equivalents and $0.6M in debt (not including its $913K non-brokered private placement announced in April). Corporate Updates During the quarter, BES announced that its ESS Lithium Battery Modules will be commercially available beginning in May 2023. The modules are expected to include its Firebulb Technology, addressing the growing concern of lithium fires. BES also announced that it is in discussions for licensing the Firebulb Technology. On the Braille Battery side, the Company signed a European Distribution Agreement with Landport Batteries, who sells 1.5M batteries annually with its network of 500 partners across 35 countries. The agreement has a three-year term and will immediately bring visibility and reach to the Braille Battery brand. Valuation BES currently trades at 0.8x 2023E sales (no impact from energy storage division) and 0.3x 2024E sales compared to auto parts manufacturers at 0.5x 2024E sales and energy storage peers at 3.2x 2024E sales. We continue to use a SOTP analysis to value BES, applying a 0.5x sales multiple onto Braille Battery and a 1.0x sales multiple onto Braille Energy, arriving at our $0.15/share target price.