TYGO - NASDAQ

Good afternoon and welcome to Tigo Energy's Fiscal Fourth Quarter and Full-Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. Joining us from Tigo are

Thank you, operator. We would like to remind everyone that some of the matters we'll discuss on this call, including our expected business outlook and anticipated costs and marketing trends; statements about our current and future inventory levels, its impact on future financial results; inventory supply and its impact on our customer shipments and our revenue for the fiscal fourth quarter and full-year 2023; our ability to penetrate new markets and expand our market share, including expansion in international markets; expand our continued expansion of, and investments in, our product portfolio are all forward-looking statements and, as such, are subjected to unknown and known 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 quarterly report on Form 10-Q for the quarter ended December 30, 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 the call. We will reference certain non-GAAP financial measures. We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to our Form 8-K. Non-GAAP financial measures provided should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Finally, I'd like to remind everyone that today's conference call is being webcast and a recording will be made available for replay at Tigo's investor relations website at investors.tigoenergy.com. I would like to now turn the call over to Tigo's CEO,

Thank you, Bill. To begin today's discussion, I will give some background on our company recent performance and market trends before turning the call over to our CFO, Bill Roeschlein. He will discuss our financial results for the quarter and the year in more depth as well as provide our outlook for 2024. After that, I will share some closing remarks before opening the call for questions. All right, let's begin. For those of you who may be new to our story, Tigo Energy is a global provider of intelligent solar and energy storage solutions. Founded in 2007, our mission is to deliver smart hardware and software solutions that enhance safety, increase energy yield, and low operating costs for residential, commercial and utility scale systems. Tigo's offerings include three main product categories – Tigo TS4 MLPE; GO ESS energy and storage solutions and our Energy Intelligence or EI software platform. Our Tigo TS4 is our largest selling product, consisting of a series of flexibly designed MLPE solutions to meet particular needs of a broad base of installers. Our superior MLPE design provides a number of important benefits to customers. First, our MLPE has an energy efficient design that operates on an as needed duty cycle, which optimizes the MPPT of solar strings when compared to solutions requiring constant optimization and high duty cycle. Our design is so efficient, in fact, that it is housed in a plastic casing instead of a metal one that uses a heatsink. Second, our MLPE solution provides customers with a higher reliability product and a very low failure rate. High reliability is driven by the lower component count duty cycle and design. Third, our MLPE are quick and easy to install, in about 10 seconds each. You literally clip the MLPE to the back of the panel and connect the wires. And lastly, we provide flexibility. Tigo products are certified to work with more than 1,600 inverters across all market segments, including the resi, C&I and utility marketplaces today, while operating in seven continents. In addition to our MLPE solutions, the Tigo GO Energy Storage Systems product line, or GO ESS, is our line of products that provide energy storage solutions based on modular components that are intuitive and flexible to install and are optimized to work together. GO ESS includes the GO inverter, a hybrid inverter that can be configured with the battery and automatic transfer switch in a DC coupled architecture. The GO battery which provides high density and high surge power with up to six modules of 5 kilowatt hour incremented building blocks and 2.5 kilowatt continuous power of the module. The GO ATS, or automatic transfer switch, a central hub for managing power loads and sources, including solar, battery systems or a generator. And last, but not least, the GO EV charger, the newly launched smart charging station for electric vehicles that is available as both a single phase or a three phase charger and up to 22 kilowatts and can be wall mounted or outdoor, indoor/outdoor. Overall, GO ESS enables dynamic customizable interaction between the energy source and loads with a maximum flexibility for energy utilization, references and is compatible with the Tigo MLPE product. Moreover, the system includes the battery, can be commissioned in about 10 minutes. Lastly, our EI, our energy intelligent products, make up Tigo's EI software platform. Our EI products, including monitoring, fleet management and our flagship Predict+ software platform. We have integrated and scaled Predict+ offering, in particular, as it is a unique software offering that provides customers with the ability to both accurately predict production and consumption of energy with near real-time window segments and manage energy demand and load balancing to drive ROI and profitability. Our Predict+ software solutions enables utilities and VPPs to manage this so-called duck curve challenges posted by changes in electricity demand and generation throughout the day. We anticipate that these three product categories will continue to constitute the main products for Tigo moving forward, and we expect to continue investing in their growth, especially for our GO ESS and EI solutions. We believe that the opportunity for the solar energy storage solutions is large and durable, both in the United States as well as internationally. Turning now to a review of our recent operational results and demand outlook. As we discussed on our last call, our business faced order push-outs and cancellation that ramped more significantly than expected through the second half of last year, largely driven by elevated inventory levels in the channel. In the fourth quarter, these headwinds created significant uncertainties and limited our performance, resulting in the $9.2 million in revenue and an adjusted EBITDA loss of $11.6 million. In response, we made what we believe were several prudent restructuring steps in the quarter, which included reducing staff levels by 15% to better align our cost structure with the current environment. However, when viewed holistically, 2023 was a transformational year highlighted by growth for Tigo. Our team drove overall revenue goals of 78.6% to $145.2 million for the full year. Our international expansion was particularly successful as our EMEA business more than doubled in revenue and our APAC business grew more than 50% in 2023. Also, we deployed our 10 million Tigo TS4 device, significant milestone for our business and indicator of how far Tigo has gone. We made significant progress across our product categories as well as we had a successful year converting new customers to our TS4 platforms, including the GoodWe, SolaX Power and Intercraft Solar as the new licensee for Rapid Shutdown technology. TS4 revenue grew 69% to $119 million compared to $70 million in 2022, which we believe was driven by the market realization of our technology's significant advantages. Also, our GO ESS solution grew steadily last year, in the first full year of availability in the market, in part because of successful launch in the German market, the US market. GO ESS represented only 9% of our 2023 revenue, but 22% of our 2023 bookings, which encourages us that we'll see continued GO ESS progress in the first quarter of 2024 as well. For our EI software solutions, we notched several wins including our increased collaboration with EDF Renewables in Israel, for them to utilize our Predict+ technology. During the year, we expanded the Predict+ software platform, including improved profit analysis modules, advanced algorithms for production and load forecasting, and the new billing module for IPP and virtual power suppliers. Our ARR grew to a currently represented $800,000 per year. Lastly, we launched the Green Glove service program in 2023 to provide a premium support experience for first timers retention and our new existing commercial installers of Tigo systems. This program is expected to enhance customer confidence in the safety, security and reliability of Tigo product, installations and features, our six point design inspection along with an on-call and post installation support services. We already have many customers who have signed up for the service and several completed the full cycle and received the Green Glove certification for their sites. Early feedback has been overwhelmingly positive. This effort will continue to enhance the market service while increasing the usage of the Tigo orders. As we turn to 2024, we believe that the ongoing inventory question cycle is nearing completion and the distribution inventory weeks will normalize by the end of Q1. Also, as noted last quarter, monitoring services registration occur once the solar panel system installation has been completed for the end customer and provides us with an indication of the level of product sell-through. The number of customers that signed up in the quarter for the Tigo module level monitoring services continued at similar pace with Q3, which indicates to us that demand remains stable. As we look further into 2024, overall outlook for EMEA in 2024 is continued growth, albeit at a more moderate pace compared to 2023. In the Americas, high interest rates and net metering policies still have a potential to delay the recovery until the second half of the year at the macro level, although we do expect to gain a real traction with the expanding list of TPOs serving the market and that could be significant catalyst for growth for us in the region. We believe that there is still significant runway for expansion to new geographies as well as giving us confidence that we can continue increasing our international footprint in 2024. Overall, as we navigate an uncertain beginning of 2024, we are managing our business to be both cautious and responsive. We are cautiously optimistic that we are nearing the end of the industry-wide inventory rebalancing cycle, but will remain responsive to the macroeconomic environment. We also remain committed to our three major initiatives in 2024. One, cost effectiveness. We will continue to sell advantages of using the Tigo product to lower the electrical balance of system costs in the solar installation. Two, market expansion. We will continue our market penetration of underserved markets, especially in new geographies, such as South America, Asia-Pacific and Eastern Europe. These regions represent under tapped geographies where rapid shutdown is gaining traction, and we believe we are positioned well to capture the additional market share in these areas. Three, product suite expansion. As mentioned previously, our GO ESS product represents 9% of our business, while our EI software platform represents a nominal percent of our business today. And we see both product lines as highly underpenetrated areas for growth for our business. Further improving and growing these products is an important part of our strategy for 2024. With that, I will turn the call over to Bill to discuss the fourth quarter and full-year 2023 financial results and 2024 outlook in greater details. Bill?

Thanks,

Thanks, Bill. Although we are confident in our team's ability to manage the current macroeconomics environment and in the longer term growth perspective for our business, we look forward to providing additional updates in the coming quarters. With that, operator, please open the call for questions.

[Operator Instructions]. Our first question comes from Phil Shen With ROTH Capital Partners.

I wanted to get through the destocking outlook. And I think,

Back to the sell-through, do you think sell-through is at a bottom? I think you kind of talked through that a little bit already in you. So, you're talking about,

Next question comes from Eric Stine with Craig-Hallum.

[Operator Instructions]. Our next question comes from Gus Richard with Northland.