Tigo Energy Q1 2024 Earnings Call Transcript

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May 14, 2024

There are 7 speakers on the call.

Operator

Good afternoon. Welcome to Tango Energy's Fiscal First Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Joining us today from Tygo are Zvi Alon, CEO and Bill Ruschlein, CFO.

Operator

As a reminder, this call is being recorded. I would now like to turn the call over to Bill Ruschlein, Chief Financial Officer.

Speaker 1

Thank you, operator. We'd like to remind everyone that some of the matters we'll discuss on this call, including our expected business outlook and ability to reach cash flow breakeven, adjusted EBITDA breakeven and long term growth prospects, expectations regarding a recovery in our industry, statements about current and future inventory levels and their impact on future financial results, inventory, supply and its impact on our customer shipments and our revenue and adjusted EBITDA for the fiscal Q2 2024, our ability to penetrate new markets and expand our market share, including expansion in international markets, investments in our product portfolio are forward looking and as such are subject to known and unknown risks and uncertainties including but not limited to those factors described in today's press release and discussed in the Risk Factors section of our annual report on Form 10 ks for the fiscal year ended December 31, 2023, and other reports we may file with the SEC from time to time. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. These forward looking statements are made only as of the date when made. During our call today, we will reference certain non GAAP financial measures.

Speaker 1

We include non GAAP to GAAP reconciliations in our press release furnished as an exhibit to our Form 8 ks. The non GAAP financial measures provided should not be considered this

Speaker 2

conference call is being webcast and a

Speaker 1

recording will be made this conference call is being webcast and a recording will be made available for replay on Tygo's Investor Relations website at investors. Tygoenergy.com. I would like to now turn the call over to Tygo's CEO, Zvi Elan. Zvi?

Speaker 3

Thank you, Bill. To begin today's discussion, I'll give some background on our company, its recent performance and market trends before turning the call over to our CFO, Bill Roschlein. He will discuss our financial results for the quarter in more depth as well as provide our outlook for the Q2 of 2024. After that, I will share some closing remarks before opening the call for questions. All right, let's begin.

Speaker 3

For those of you who may be new to our journey, Tiger Energy stands as a global leader in intelligent solar and energy storage solutions. Founded in 2,000 and 7, our mission is to deliver smart hardware and software solutions that enhance safety, increase energy yield and lower operating costs for residential, commercial and utility scale solar systems. At Tiger, we offer 3 primary product categories: 1, TS4 MLP, our flagship product, which comprises a range of flexible design MLP solutions to meet diverse needs of installers worldwide. The second one, GOESS Energy and Storage Solutions, is a line of energy storage solutions built on modular components designed to be intuitive and flexible during the installation. Our GO VSS range includes the GO inverter, GO battery, GO ATS and Go EV charger and the third one, Energy Intelligence, our EI software platform, which includes monitoring fleet management and our flagship Predict Plus software platform.

Speaker 3

We believe that the opportunity for solar and energy storage solutions is large and durable, both in the United States as well risk of the recent operational results and demand outlook. As discussed in our previous call, our business faced significant challenges in the second half of twenty twenty three, primarily due to the elevated inventory levels in the channel. However, we are pleased to report that we have seen revenue stabilize since the start of this year. We reported $9,800,000 in revenue and shipped 249,000 MLPs or approximately 100 Megawatt DC at an assumed panel size of 400 watts. We also shipped 3.3 Megawatt DC and 1.5 Megawatt hours of inverter and battery, respectively.

Speaker 3

Additionally, we continue to make the headway in our AI software services platform, which with annual recurring revenue of ARR exceeding $1,000,000 Geographically, the Americas region, which comprise 28% of revenue, appears to be stabilizing, and we are cautiously optimistic that Tiger will be able to grow its share in the region in the second half of twenty twenty four. Specifically, we are beginning to experience low sales traction in Brazil, where rapid shutdown capabilities for solar products such as ours are increasingly becoming legally required. Within the EMEA region, which generated 59% of revenue, we are beginning to see some inventory replenishment activity and pockets of gold. Notable regions of improvements for us include Germany, Italy and Czech Republic. Within the APAC region, which comprise 13% of the total revenue, results have been uneven due to the nature of timing of the C and I projects that we are involved in.

Speaker 3

Still, we see an upward trend in that region continuing into the later half of twenty twenty four. We are also very pleased to announce the introduction of our newest line of MLP, the TS4x. The TS4x family represents a combination of multiyear effort to provide the C and I and utility marketplace with leading edge MLP that are designed to satisfy several key industry needs. The TS4 MLP products provide customer with higher power, higher current solutions and maximum design flexibility, all while enabling a lower overall cost than alternatives. We also designed the PS4X to provide the highest available level of safety through its unique multifactor technology that activates its rapid shutdown capabilities.

Speaker 3

Particular use case include high power panels, bifacial panels and system designed to support the mixture of optimization, monitoring and rapid shutdown in a single installation. And the TS4X family is especially useful for customers who are searching for a product with selective deployment abilities that enables maximum energy generation and safety. In summary, we believe that the TS4X represents the safest, most reliable and most cost effective most flexible at the higher power MLTE solutions in the marketplace today. In addition, the PS4X, we would like to highlight some other recent announcements we have made, including the introduction of Go EV charger into the European market, a complement of our to our Go existing Go products portfolio and the new market for our EV charger. And its first installation and commissioning of the Taigo EI residential solar solution with whole on backup as part of the solution introduction to the Puerto Rican market.

Speaker 3

The Tygo ER residential solar solution consists of Tygo TS4 Flex MLPE products, the TAGO ER inverter, a modular DC coupled ER battery and everything else required for fast, flexible, dependable installation and is designed to protect the households from grid disruptions. Turning to our demand outlook for the Q2 and the rest of the year. We will continue to focus on the following three tenths of our growth strategy: 1, promote the flexibility and cost effectiveness of our solution 2, penetrate new markets and expand existing markets 3, expand the suite of products we offer. We have discussed in prior quarters, we are still navigating through what we believe to be the tail end of the industry wide inventory oversupply problem. Our guidance reflects the expectation that the Q2 will be transitional in nature as the industry reaches a new supply demand equilibrium.

Speaker 3

Additionally, we expect to see a sharper recovery in the second half of the year once the seeds of the recovery that we are currently experiencing take hold. With that, I will turn the call over to Bill to discuss our Q1 2024 financial results and 2024 outlook in greater details. Bill?

Speaker 1

Thank you, Zvi. Turning now to our financial results for the Q1 ended March 31, 2024. Revenue for the Q1 of 2024 decreased 80 20 59% of total revenues. Americas revenue was $2,700,000 or 28% of total revenues and APAC was $1,300,000 or 13 percent of total revenues for the quarter. On a sequential basis, revenues improved 6% compared to Q4 with improved results coming from many countries in the EMEA region, including Germany, Italy and the Czech Republic.

Speaker 1

Gross profit in the Q1 of 2024 was $2,800,000 or 28.2 percent of revenue compared to $18,400,000 or 36.7 percent of revenue in the comparable year ago period. The year over year decline on a dollar basis was primarily due to lower sales volumes, while the decline in gross margin percentage was primarily due to a change in the product mix and lower ASPs on our battery products. On a sequential quarter basis, gross margin decreased by 90 basis points due primarily to lower ASPs on batteries within our GOESF product lines. Total operating expenses for the Q1 were $11,900,000 up from $10,600,000 in the prior year period. The year over year increase was driven primarily by higher audit and legal fees that we incurred as a public company.

Speaker 1

Operating loss for the Q1 totaled $9,100,000 compared to an operating profit of $7,800,000 in the prior year comparable period. GAAP net loss for the Q1 totaled $11,500,000 compared to net income of $6,900,000 in the prior year period. Adjusted EBITDA loss in the Q1 totaled $6,300,000 compared to adjusted EBITDA of $8,600,000 in the prior year period. As a reminder, adjusted EBITDA represents operating profit as adjusted for depreciation, amortization, stock based compensation and M and A transaction expenses. Primary shares outstanding were 59,400,000 for the Q1 of 2024.

Speaker 1

Turning to the balance sheet. Accounts receivable net decreased by $600,000 in the Q1 to $6,300,000 compared to $6,900,000 last quarter and $32,400,000 in the year ago comparable period. Inventories net decreased by $5,600,000 or 9% compared to $61,400,000 last quarter and $36,600,000 in the year ago comparable period. In the Q1, the vast majority of our cost of goods sold was comprised of inventory, which we expect will continue to decline and generate cash for us in future quarters. Cash, cash equivalents and short and long term marketable securities totaled $21,900,000 at March 31, 2024.

Speaker 1

The sequential decline was primarily due to $9,700,000 decline in accounts payable and our adjusted EBITDA loss of $6,300,000 partially offset by inventory to cash conversion of $5,600,000 in the quarter. As we mentioned on our last call, we continue to have discussions regarding credit facilities to enhance our balance sheet flexibility, which we believe will be available in more favorable terms as our financial performance continues to improve. In April, we initiated cost reduction efforts that included personnel costs and other discretionary items to better align our business model with the current pace of the industry recovery and lower the breakeven points for profitability and cash generation. As a result of these actions, we expect that on a normalized basis for the remainder of 2024, GAAP operating expenses will be in the range of $12,500,000 per quarter with non GAAP operating expenses expected to be in the range of $11,000,000 per quarter. With these changes and considering our current supply of inventory on hand, we expect a cash breakeven point at the quarterly revenue level of approximately $17,000,000 to 19,000,000 dollars and an adjusted EBITDA breakeven point at a quarterly revenue of approximately $33,000,000 to $35,000,000 on a normalized basis.

Speaker 1

Before I turn the call back over to Zvi, I'll now take a few minutes to provide our financial outlook for our 2024 Q2. As a reminder, Tygo provides quarterly guidance for revenue as well as adjusted EBITDA as we believe these metrics to be key indicators for the overall performance of our business. For the Q2 of 2024, we expect revenues and adjusted EBITDA to be in the following range. We expect revenues in the Q2 ended June 30, 2024 to range between $12,000,000 16,000,000 We expect adjusted EBITDA loss to range between $5,500,000 $8,000,000 Finally, as we approach our 1 year anniversary certain other shareholders have registered their stock went stale on April 30, and we received a registration rights waiver from the majority of these holders to register their holdings under an S-three filing, which we will do as a post effective amendment to our S-one filing and expect it will be filed around May 31. We wish to emphasize that there will be no new primary shares registered in our upcoming S-three S3 filing, as this filing is being done only to comply with Tygo's registration rights obligations to our affiliates.

Speaker 1

That completes my summary. I'd like to now turn the call back over to Zvi for final remarks. Zvi?

Speaker 3

Thanks, Bill. Overall, we are confident that we have started to turn the corner for our business and that our team can effectively manage the current macroeconomics environment while our industry recovers. We believe firmly in the long term growth prospects of our business and look forward to providing additional updates in the coming quarters. With that, operator, please open the call for Q and A.

Operator

Thank you. At this time, we'll open the line for questions from the company's publishing analysts. And our first question comes from the line of Philip Shen from ROTH. Your question please.

Speaker 2

Hi, everyone. Thanks for taking my questions. First one is on the adjusted EBITDA breakeven. Bill, I think you were talking about $33,000,000 to $35,000,000 of revenue. Wanted to get a sense for when you expect that revenue to be possible?

Speaker 2

Could it be Q4 this year as Europe improves or do you think it might need to wait until 2025? Thanks.

Speaker 1

So as Zvi alluded to, we see the second half leading to a much sharper recovery as it relates to Tygo. So from our perspective, we see we do see a clear path to EBITDA breakeven this year. And while we're not providing that specific guidance there, I mean, we see a strong probability of that occurring.

Speaker 2

Okay. Thanks, Bill. And then as it relates to channel inventory, at one point, earlier this year, I think you guys thought it might clear by Q2. Do you still expect that? I mean, do you think Q3, we see a nice ramp and then an even better Q4?

Speaker 2

I know there's these are a few questions in here, but if you can talk about when you think your channel inventory clears maybe by geography, so Europe and then the U. S? And then also what that should we expect the revenue ramp? I mean, you said back half, but do we have to wait more to Q4? Do you think actually Q3 you feel confident with that bump?

Speaker 2

Thanks.

Speaker 1

So, I'll jump in first and I'll let Zvi add additional color as he'd like. But we're viewing the current quarter as transitional in nature because we have customers who have depleted and are now replenishing their stocks of inventory, but we still have some customers who are not quite through the destocking process. But in our view, as we look into the second half of the year, we feel that destocking process will be mostly complete. And so I don't think it necessarily have to be Q4. It could be Q3, could be a particular not sure if it's the end of the quarter or the beginning of a quarter.

Speaker 1

We're going to believe ourselves will get a little bit of room, but I don't think it's a straight line. I do think it's a step function jump. And in our view, the second half of the year is going to be much more of a sharper recovery with a much more of a step function increase for Tygo. And by geography, I think as we've said on multiple calls, we didn't have much of a inventory issue or a destocking issue in the Americas or in Asia Pacific. It's been primarily an EMEA problem this whole time.

Speaker 2

Great. Thanks. Can you share how much might be like remaining in EMEA? Can you talk about some customers being done with the destocking, some not? So on a blended average basis, when you think about how many weeks might be out there in the channel, does it sound like it's still north of 10 weeks or in Europe specifically?

Speaker 2

Or do you think it's meaningfully lower? Thanks.

Speaker 1

I don't think we can give you enough qualitative information, I guess, to address your question. But we're seeing, at least from our customers in Germany, a really strong bounce back that is continuing even up to today. We're also seeing strong results from UK, Italy that also exist were strong in our Q1 and we're seeing some continued strength as we're coming into the 2nd quarter. The thing about the what we're seeing currently is that we're a little bit more than 1 month into the second quarter and the amount of pipeline activity, booking activity is just a lot stronger than it was during the same period of the last quarter. So we're seeing the we've definitely turned the corner and we're seeing strength that we expect to continue as we go through the year.

Speaker 2

Great. Sorry, I have one last question. Sorry, if you guys talked about it earlier as well, but Enphase and SolarEdge talk about how much sell through is each quarter versus your sell in and the degree of under shipment in terms of 1,000,000 of dollars. Could you can you speak to that at all for Q1 and maybe even Q2?

Speaker 1

So we don't get sell through data from our distributors specifically to be able to provide that kind of metric with any degree of competence. But we do see the pipeline booking activity and in talking with customers, getting an understanding as to where their inventory levels are and the amount of replenishment that has occurred in Q1 and that is steadily progressing upward for us as we move forward through the current period here in the Q2. We did say on the last call, we were at least 50% lower than where we should be. And I think we also just told you that we see us being EBITDA breakeven or better in the current year. So I mean, I think all that kind of serves as a guidepost to tell you where we think normalized recovery would put us.

Speaker 2

Great.

Speaker 3

Steve, I will just add one clarification. Just not that it's required, but in the countries that Bill mentioned, like Germany and the U. K, And we talked about the fact that the replenishment is occurring. Those are our main markets, and that's where it is happening.

Speaker 2

Great. Okay. Best of luck with the ramp and I'll pass it on. Thanks.

Speaker 3

Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Eric Stine from Craig Hallum. Your question please.

Speaker 1

Hi, Zvi. Hi, Bill.

Speaker 2

Hi. Hi.

Speaker 4

So I just wanted to focus on the balance sheet a little bit. I think last quarter you were hopeful that you would get some working capital benefit and you did get some on the inventory line. Just curious what your expectation is here for the remainder of the year. You did talk about inventory that you expect to work down, but maybe just what you've seen early in Q2 and how you expect that to play out?

Speaker 1

We've lowered our accrued current liabilities by more $11,000,000 and the current amount of AP is much lower. The previous quarter had some inventory payable that had to be settled and we've worked through that and we don't have that as something that's going to continue in the future quarters. So we expect to again, we guided 12% to 16% and we've also given you guidance at 2017% to 2019% is our cash breakeven point. So you can see that we're quite close to our cash burn rate is would be very minimal or at least within a predictable range given what we've provided on those two fronts with the bulk of the cash generation coming from our inventory conversion, which is upwards of 90% of our cost of goods sold.

Speaker 4

Okay, that's helpful. All right. So that is expected to continue in Q2 and going forward. That is helpful. Maybe then just sticking with the liquidity side of it, you mentioned and you have for some time you've been in some negotiations for line of credits, just for more flexibility and sounds like hopeful, I mean, waiting for maybe better rates.

Speaker 4

Is it fair to say that you have line of sight to facilities right now, just not at rates that you think are acceptable? That would be helpful to know.

Speaker 1

Yes, that's correct. At the current moment, there's still some projection risk over the shape of the recovery in the market. And once we as an industry get a little bit more clarity and consensus on what that looks like, it just creates a better environment to borrow money essentially and negotiate rates. So we want to be prudent in how we do that.

Speaker 2

Okay, thanks.

Speaker 1

Thank you.

Operator

Our next question comes from the line of Gus Richard from Northland. Your question please.

Speaker 5

Yes. Thanks for taking the questions. Just wondering, how are you doing on getting on more approved vendor list? How is that process going?

Speaker 3

We are actually making good progress. The major suppliers or customers here in the U. S. And I don't want to provide any predictions, but I think that we will have a different conversation next quarter.

Speaker 5

Got it. And then a while back you all talked about some opportunities in utility scale for the optimizers. And I was just wondering, now that we're sort of getting our feedback on the ground, has that reemerged or is that something that's not materialized?

Speaker 1

We actually have very promising pipeline with respect to that. And we feel really good. But obviously, we have to wait you have to wait until ink dries to announce anything.

Speaker 5

Yes. Any other color you can provide just to give a little bit better flavor?

Speaker 1

So the utility market is it has a pretty good velocity of activity around the world, not affected by government subsidies and NEM 3.0 type of situations. There are there continues to be a good amount of projects from which to better where we're getting RFP requests. And we're working through those with several very promising opportunities in our pipeline currently.

Speaker 5

Just one follow-up follow on and I'll stop. Can you give relative to the resi market sort of the size of the opportunity for you all just in what you're seeing in the pipeline?

Speaker 1

I mean, they're 1,000,000 of dollars. So they tend to be in the 3, 5, 7, 10. I mean they're sizable. So does that help?

Speaker 5

Okay. Yes, that sort of frames it up for me. Thank you so much.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Sameer Joshi from H. C. Wainwright.

Operator

Your question please.

Speaker 6

Hey, thanks Bill. Thanks for taking my questions. Looking at the new products and services, I guess, or software products coming down the pipe. The TS4X, are you already marketing it? And what is the level of interest you are seeing it from, say, the different geographies?

Speaker 6

And then when do we expect to see any initial revenues or any kind of arrangements for the PREDIC plus product?

Speaker 3

So the quick answer to the TRS4X, it is aimed specifically at the markets where bifacial, high currents and high power is required. We are rated at the highest specification for LRP in the market. Nobody is even close to us among the competition. So most of the projects are C and I and utility scale. And to the question, have we shipped it already?

Speaker 3

The answer is no. But we have orders which we have received and we will be shipping shortly. And we have shipped 1st installations for advanced testing, reproduction and whatnot. So we are exceptionally confident with that technology and the solution and market it is covering.

Speaker 6

And for the Predictive Plus, is it too early to talk about it? Or should we expect 2025 initial revenues from the Predictive Plus?

Speaker 3

Predictive Plus is continuing to grow as we expected, and we are seeing extended activity from both new customers and existing customers who are expanding the footprint of the product each. We started in as we've discussed before, we started the effort of the sales effort of the product in Europe and in the U. S. Late last year, and we're seeing some fairly interesting opportunities, which we believe we will be able to share in the next couple of quarters or so. All of them 100% of them are very sizable companies.

Speaker 6

Good to hear. And just maybe a clarification on the cash breakeven versus adjusted EBITDA breakeven revenues. Are we I'm just interpreting this and please correct me if I'm wrong. It seems the 17,000,000 to 19,000,000 versus 33,000,000 to 35,000,000 implies like 14,000,000 to 16,000,000 of cash from tied up working capital inventory, those kind of things. Is that am I looking at it right?

Speaker 1

The cash flow breakeven is based on the reality that 85%, 90% of the cost of goods sold has already been paid for. So you're only paying 10% on that revenue. And then you have to make some adjustments for working capital and AR and maybe paying some AP and etcetera. But you get to a cash breakeven at a very at a rate in the high teens as we guided to. And the EBITDA model is based on the new OpEx guidance we provided and gross margins that are in the either 30% to 35% range.

Speaker 1

So you get there sooner obviously at a higher gross margin, but at 30% to 35% you're in the low 30s.

Speaker 6

Great, great. Thanks a lot, Bill, for clarifying that. That's all I have. Thanks.

Operator

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Zvi Alon for any further remarks.

Speaker 3

Thanks again, everyone, for joining us today. I especially want to thank to the dedicated employees for their ongoing contribution as well as our customers and partners for their continued hard work. I also want to thank our investors for their continued support. Operator?

Operator

Thank you for joining us today for Tycho's Q1 2024 earnings conference call. You may now disconnect.

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