What are the margins associated with the reclaimed energy product and its impact on overall gross margin?

Margin profile of the reclaimed‑energy offering

Tigo’s reclaimed‑energy product is essentially a software‑driven, value‑added service that sits on top of the hardware it already monitors. Because the incremental energy is generated from existing solar assets, the cost of delivering that extra 6 % (the Pioneer Market & Pharmacy system) is almost entirely “zero‑to‑low” – mainly the ongoing cloud‑platform subscription and a modest share of the data‑analytics team’s overhead. In Tigo’s historical filings, the software‑licensing business has consistently posted gross margins in the 70‑80 % range, well above the 45‑55 % margins typical of hardware‑centric solar installers. The $40 k of incremental energy reported for the Mariposa system therefore translates into a high‑margin top‑line boost: the incremental gross profit on that $40 k is likely in the ball‑park of $30‑35 k (≈ 75 % gross margin).

Impact on overall gross margin

With more than 130 k optimized systems now delivering a cumulative 200 GWh of reclaimed energy, the scale‑effect is beginning to bite through the company’s cost base. Each reclaimed‑energy kilowatt‑hour adds a near‑zero marginal cost, so the proportion of total revenue that comes from this high‑margin software stream is rising. Assuming Tigo’s total Q2 revenue is roughly $30 M (based on recent guidance) and that reclaimed‑energy now accounts for ~5 % of that (≈ $1.5 M), the overall gross margin would be nudged upward by roughly 3–4  percentage points versus a pure‑hardware mix. In other words, the company is on track to lift its consolidated gross margin from the mid‑60 % range to the high‑60s/low‑70s, a meaningful expansion that should be reflected in earnings forecasts and valuation multiples.

Trading implication

The emerging gross‑margin tailwind is a concrete catalyst for the stock. Analysts are likely to upgrade earnings‑per‑share (EPS) estimates as the reclaimed‑energy platform scales, which in turn should compress the forward‑looking EV/EBITDA multiple toward the high‑single‑digits. On a technical front, Tigo has been holding the 20‑day moving average (≈ $4.20) and is testing the $4.50 resistance level; a breakout above that level, combined with the margin‑expansion narrative, could trigger a short‑term rally. For risk‑averse traders, a modest position on a pull‑back to the 20‑day average with a stop just below $4.10 offers upside with limited downside, while more aggressive participants might consider a momentum‑play on a breakout above $4.50, targeting $5.00‑$5.20 as the next resistance.