TYGO - NASDAQ

Good afternoon. Welcome to Tigo Energy's Fiscal First Quarter 2025 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 are

Thank you, Karen. And it's a pleasure to join you from Campbell, California. Also with us is

Thank you, Bill. To begin today's discussion, I will highlight key areas in our recent financial and operational performance and briefly address the current macroeconomic developments before turning the call over to our CFO, Bill Roeschlein. He will discuss our financial results for the first quarter in no debt as well as provide our guidance for the second quarter and the full year of 2025. After that, I will show some closing remarks, tell you about our outlook and then open the call for questions from you and the analysts. I am pleased to report that we ended the first quarter of 2025 with our fifth increase in sequential quarterly revenue growth. Growing 9.1% sequentially and 92.2% in on a year-over-year basis. In the first quarter of 2025, we reported a total revenue of $18.8 million and shipped 502,000 or 351 megawatts of MLPE. I'm exceptionally proud of what our team here at Tigo has accomplished. To give some geographical color on our results, we saw positive sequential sales growth in EMEA, the Americas and APAC regions. Within the EMEA region, the recovery that began for us as a year ago has now broadened as we saw much stronger results from Italy and the Netherlands. In addition to both the Americas and Asia Pacific regions also grew sequentially in the first quarter. I'm also excited about our recently introduced 22A TS4-A series. Now serving panels up to 125 watts. And joining the TS4 family the highest safety solution, including the unique Tigo multifactor rapid shutdown, demonstrating our commitment to ahead of the module performance. Given the current developments in Washington, many of you are likely interested in how the latest reciprocal tariff decisions may impact us. As you may know, the majority of Tigo's revenue occurred outside of the United States. Based on the current reciprocal tariffs announced, we estimated that approximately 5% of our Q1 revenue would have been affected by the China record tariffs of 145%. We also estimate there is approximately 15% of our Q1 revenue would have been affected by 10%, the rest of the world or cyclical tariffs. We are currently working with our supply chain partners to mitigate the effects of these reciprocal tariffs where possible. And with that, I will turn it over to Bill. Bill?

Thank you,

We look ahead I'm happy to say that even against the backdrop of the economic uncertainty, we believe is our track record of consecutive quarters with topline growth will continue for the remainder of 2025 as demand for our solutions continue to return. We firmly believe in the growth prospect for our business and look forward to providing additional updates in the coming quarters. With that, operator, please open the call for Q&A.

Thank you. At this time, we would like to conduct the question-and-answer session [Operator Instructions] Our first question comes from the line of Eric Stine of Craig-Hallum Capital Group. Your line is now open.

Hi,

Hey, Eric.

Hello. So curious, I mean, obviously, a nice recovery you're seeing in -- actually across all your markets. But when you think about this, I mean break this down between just improving conditions with your current distributors and direct sales versus market share gains? Because clearly, this is a little bit of both. I would love your thoughts on how that breaks down between the two.

Outstanding question, Eric, thanks for asking it. I will share that, we continue to see current existing distributors which are very strong, increasing their footprint with us and becoming much more bullish on the market requirements. Similarly, our efforts with going directly to at least promoting the products with system integrators and large EPCs is paying very nice dividends. And I can tell you that majority, I would say, of our growth is coming from an increased market share, we believe. Even though it's the same exact distributors, and that's what we hear from them, at least I would not mention any names, but two or three of them mentioned specifically that we have increased the footprint within their portfolio substantially above any other competitor.

That's good color. I mean, do you attribute that to just a broader product offering, the fact that this can be used residential, C&I, utility scale? Is it price? Is it kind of all of the above?

So I'll tell you that I'll touch the price first. We have not changed price at all, and we've been consistent on that front. We introduced the TS4-X family at a higher price and we see a nice increase for those products for a different market, which is accepting it so far. But as far as the TS4-A product, price was not an issue. Now I can tell you that many stores are helping us gain market share. One, the number of SKUs is very small. We have a single optimizer that covers basically the whole market. Not only that, it's the highest power rating which is the current shipping version is 700 watts or 800 watts and we just announced the 725 watts. And working for essentially all three market segments. Number three, I would say, we are -- I believe the company with a backward compatibility of the current shipping products to products we shipped seven, eight, nine years ago, exactly identical, if you have any failure with the old product, which they sometimes do happen, you don't need to have the same exact part number. You can just buy anyone off the shelf and replace it or get an RMA from us to replace it. Also, the fact that our product works with pretty much any inverter out there is also a major contributor. So all in all I would mention one more thing. Our installation time of the MLPE product is superb. It's about 10 seconds per PV module. It's unheard of. I mean, literally just slide the unit on the panel and you're done. So all those factors together get to the more they buy into it and want to do more. And I can tell you that the amazing part for us also is that we see a larger number of fields being shipped to large EPCs as they become much more well and successful with those products.

Got it. Thank you very much for that. And then I guess, for my last question, then I'll turn it over. Just curious, I mean, OpEx came down a little bit here in the quarter, but I also know that in Q1, you were expecting some audit fees and some other onetime items. So just curious guidance and the fact that at the upper end, positive adjusted EBITDA would imply that OpEx, we should think of it lower. So just curious if you can give any color on that.

So in general, there's two levers to think about in the guidance and projections for the year build out your model. We are tracking at a high gross margin. We're seeing that both in our MLPE business as well as the lack of having a drag on the margin from our GO ESS product line, which we did a large reserve for last quarter. So combining those both should lead to some gross margin uplift as we look later into the year, so 38% plus. I would put it more closer to 40%. And OpEx would, conservatively speaking, between 11% and 12% or maybe midpoint 11% is, I think, it's a fair range. We were 11% and 11.2%, Q1, but we were also 15% and in Q4. So there's a little bit of variability there. But when you model that out, you'll come up with numbers for the adjusted EBITDA that we guided to.

Okay. All right. Thank you very much.

Thank you.

Thank you. Our next question comes from Philip Shen from ROTH Capital Partners.

Hello?

One moment for our next question. Our next question comes to us from Sameer Joshi of H.C. Wainwright. Your line is now open.

Hey,

So I would characterize it this way. The U.S. represented about 22% of our revenues. And within that, you've got 15% of that MLPE products that are made outside of China and Thailand, that are subject to the reciprocal tariffs and we'll see what happens after the 90-day. And then that leaves 5% that's subject to the China tariffs, but that includes both inverter and batteries. And we are working on our supply chain and have the opportunity to move some of that outside of China. So that would negate much of that 5% and then the rest of it is batteries which are sourced in China, but we have a position in the U.S. already. And so that also negates the tariffs on that. So combining all of that, we don't see a substantial impact tariffs on our business, at least for the second quarter, and we're going to leave it quarter-to-quarter because it seems to change so fast on this front.

Yeah. No, you answered my part two of the question, which was inventory, how much of it will support the second quarter. So it seems you have enough inventory that is pre-tariff that can support your business in the second quarter.

Correct.

And then the 2024's off-grid product offering that you are -- the solar package that you're offering, is it still -- like where is this demand for off-grid that you're seeing from? Like is it mainly businesses? Or -- because the press release also mentioned residential, and so I just was curious how large is that demand and from where are you seeing that demand?

There is a substantial region, actually a couple who like to be off-grid and they're in the Midwest and some South, and that's what we were aiming at. And we started seeing some fairly good success. So we have packaged that solution for that one specific market. If you check who else are providing solutions, which are also off-grid, it is becoming an increased number of suppliers. So we are sure we are not going to stay the only one, and we are not right now. But for us, it's a growing segment that we've not touched before.

Understood. And then just last one. The second quarter guidance implies that your second half revenues are likely to be $46 million to $59 million at the midpoint of 2Q guidance. Do you have visibility? And how much confidence do you have in that outlook of strong second half?

I can tell you that we don't have specific orders going out more than a couple of quarters, maybe in some very small cases, a little bit more, but majority are really for the current quarter and the next quarter. But on the other hand, we know how -- and we do talk to our distributors, and we know how the markets behave and what their expectations are. And so we factor it in, in addition to, obviously, what we know about the market. And we have been so far accurate for the last five, six quarters with our projections. So we are fairly confident. I can tell you that our backlog increasingly, we don't share quite those numbers. But increasingly, over the last two or three quarters go from one quarter to the other. And as we got into the current quarter, we felt much more confident on even increasing the numbers, the guidance.

Understood. That sounds good. Thanks a lot for taking my questions.

Most welcome.

Thank you. [Operator Instructions] Our next question comes from Philip Shen of ROTH Capital Partners. Your line is now open.

Yes, hi. Thanks for taking my questions. We went through the 10-Q quickly, we saw that there's the going concern language. You have the $50 million convert, I think, due January 1 or sometime in January of 2026. Can you talk to us about the situation there? How do you expect to manage the $50 million due? How flexible would you expect your convert counterparty L1 energy to be? Thanks.

Yeah, the counterparty is being very flexible and cooperative and is a big supporter of Tigo, and that being said, we are working on a refinance. And I'm sure you can appreciate as something announced, we'll announce it. But rest assured, we are diligently working maturity on that.

Okay, thanks. From a cash standpoint, you guys have an annual guide. And so if you hit the midpoint of that guide, how much free cash flow generation do you think you can have?

So on a go-forward basis, we're looking at EBITDA positive on Q2 guidance for three and four, we would expect that based on the annual guide. The overall cash position is, I would say, probably going to be flattish to slightly up. We did mode on some of the inventory, especially on MLPE. And so there's going to be some consumption there that some of the generation is going to be used for working capital for that purpose. So we're thinking of cash sort of in the -- a bit range bound in this lower 20s level.

Okay, great. Thanks. And then as it relates to Europe, Intersolar is about to kick off, I think tomorrow, are you guys there? I know Europe is a big part of your business. And so what are you hoping to accomplish you think, at that show. Thanks.

We are at full swing. We have our team ready. We have a very nice boost set, and we actually have a very interesting and busy schedule already from partners, distributors as well as customers. And it's interesting, but we are all pretty much booked. We didn't have much left to allocate. So we're very happy with what's going on right now.

Thanks,

So what -- we have seen two phenomenas. First of all, big picture, the total number of distributors we have did not shrink much even with all those guys that went out of business. We actually replenished some of them fairly quickly with others and some came back from almost instinction. So we are very happy for them to be able to actually survive. Now to the question itself, we do see a phenomenon in which the very large distributors are starting to sell to some local distribution. And so we're -- happening in a few places. We are not necessarily encouraging it or discouraging it, but it helps us keep a footprint which is much wider and for the smaller regional ones, they don't necessarily are able to hit the same discount level as the large ones. So that mechanism we have in place which will the following is working for us and it sells pretty much all of them. And so we don't think we need to make any changes, yeah.

Got it. And so when you see the large distributors selling product, smaller ones or local ones, what kind of products are we talking about, modules, inverters, MLPE, your products? Or is it more focused on storage or some other categories?

No. The majority we see is in the line of inverters, MLPE and some PV modules. On the battery side and ESS, not much. Not much at all, I would say.

Got it. Thanks,

So for the foreseeable future, I would say, the next few quarters, we're in good shape with the inventory we have. And we are getting -- the next generation, which is addressing the sources of the suppliers. And so we would not be exposed to China as much. But as you know, China controls a very large part in the market. And so I'm not sure we can avoid it completely, but we have other sources.

So for now, you guys have some insulation maybe a few quarters, that's a fair amount of time. So through that inventory, you do need to start now or diversifying your cell pack geographic sourcing. And so the world is trying to do this for at least most of the U.S. And so what countries are you trying to go to? Is it Korea? Is it Japan? What are the countries are --

It's those two that you mentioned exactly. And also yes, it seems like also some of the Chinese guys are actually also looking for other sales from other places. So we don't know exactly how it's going to all work out, but Korea and Japan are the two main areas.

Okay, great. Best of luck on that transition and with the rest of the year. Thank you nad I’ll pass it on.

Thank you much. Thanks, Phil. Are you in Germany?

Not this time, around, given the earnings season.

Okay, no problem.

Missing. Thanks.

One moment for our next question. Our next question [Indiscernible] Sidoti & Company. Your line is now open.

Congratulation son the quarter gentlemen.

Thank you.

Just turning to the demand side. You've reported regions, but just working out some arithmetic, it looks like EMEA was a little bit stronger in growth. Is that accurate?

Yes. We had a most region in the quarter, but they represent the smallest of the three regions for us, followed by EMEA and the Americas.

Can you release any growth figures for the Americas?

It's growing a little bit more than what the market estimates are. I mean, it's certainly low to mid-single digits. I mean if that helps. No, it's not -- it's certainly not the -- we did 9%. It certainly -- it didn't carry the day for 9%.

Got it, all right. Well thank you for the information and good luck on the quarter.

Thank you so much.

Thank you. At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Alon for closing remarks.

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