Tigo Energy, Inc.

Good afternoon. Welcome to Tygo's Energy Incorporated Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Joining us today from Tygo are C. Alon's CEO and Bill Rochelein, CFO. As a reminder, this call is being recorded. Before we begin, Tygo management 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, our forward-looking and, as such, our 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 definitive prospectus filed with the SEC on April 26, 2023. as supplemented by the prospectus supplement filed with the SEC on May 19, 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 expected 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, We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to our Form 8-K. The 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 would like to remind everyone that this conference call is being recorded and a recording will be made available for replay on Tygo's investor relations website at investors.tygoenergy.com. I would now like to turn the call over to Tygo CEO, Svi Alon. Svi?

Thank you. Welcome, everyone, and thank you for joining us this afternoon. To begin today's discussions, I will give some company background followed by a view of our recent performance 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 remainder of the year. After that, I will share some closing remarks before opening the call for questions. All right, let's get started. We are pleased to host our first earning call with you following our successful D-SPAC in May of 2023. For those of you who may be new to the story, Tygo Energy is a global provider of intelligent solar energy storage solutions. Founded in 2007, our mission is to deliver smart hardware and software solutions that enhance safety, increase energy yield, and lower operating costs of residential, commercial, and utility-scale solar systems. As you know, there are significant macroeconomic trends that continue to drive the solar energy adoption globally, including the need to address climate change and energy independence. We have witnessed governments around the world respond by providing incentives to encourage such adoption. The MLPE market, and specifically the market within the U.S., has been primarily served by a duopoly of companies utilizing either a microinverter or a closed system string inverter architecture. Installers and designers of solar systems projects, however, are increasingly interested in flexibility design solutions that meet their particular needs. Tygo addresses that segment of the market as evident by more than 1,600 different inverter types that we are certified to work with. Our superior MLP design provides a number of significant benefits to the customer, including an energy-efficient design that operates on an as-needed basis duty cycle, which optimizes the MPPT of Solar Stream compared to solutions requiring constant optimization and high-duty cycles. Our design is so efficient, in fact, that it is housed in a plastic casing instead of a metal one that uses heat sinks. Our MLPE solutions also provide customers with a high-reliability product with a very low failure rate. High reliability is driven by low component counts, duty cycle, and design. Quick and easy installation. You literally clip the MLP to the back of the panel. And flexibility. We are certified to work with more than 1,600 inverters in the marketplace today. Since the expiration of an exclusive marketing arrangement in mid-2019, Tiger has experienced significant growth in our MLPE business, specifically in the last 12 months. To put this into numbers, we grew more than 86% in 2022 compared to 2021. And in 2022, we shipped approximately 2.6 million MLPEs on 977 megawatts DC. Meanwhile, In just Q2 of 2023, we shipped approximately 2.1 million MLPEs or 765 megawatts DC. That's 78% of what we did in all of 2022. In addition to our MLPE products, we expanded our product footprint with our energy intelligence or EI solutions. First introduced in the residential market in the US, in late 2021 and in Europe in late 2022. This solution combines a hybrid inverter, battery, and automatic transfer switch configured in a DC-coupled architecture. The hybrid design allows for one inverter to be used for both panels and the battery, while the DC coupling increases round-trip efficiency by reducing the number of DC to AC conversions needed in the system. Moreover, the system including the battery can be commissioned in about 10 minutes. This solution represents 4% of our revenue in 2022, and we are continuing to see an increasing market acceptance in 2023. In addition, We acquired a small software company in January of 2023 that provides customers with software solutions, which we call Predict Plus, for energy generation and consumption forecasting. This product line currently a small revenue stream, but we expect it to grow for growth opportunities in the future. By many measures, Tygo has been growing the market while doing so profitably. With 140 patents and counting, we believe that our products already provide us with a substantial competitive advantage as we continue to grow. As evidenced by this, we announced earlier this quarter that Goodway will be licensing certain of our Epic Shutdown patents, joining APS and QC Solar as patent licensees. Moving to key financial highlights, a record quarter showed record results in multiple areas. Second quarter 2023 revenue were a record $68.8 million. Geographically, we saw EMEA grow 382% year-over-year and 37% sequentially, while America grew 110% year-over-year and 59% sequentially. On both a year-over-year and sequential basis, we saw significant revenue growth from key markets such as Germany, Czech Republic, Netherlands, UK, Spain, Australia, and other geographies. Also, our EIS solution continues to grow and represents almost 8% of our overall sales in the quarter. We believe that EIS solutions will comprise an increasing percentage of our revenue as we gain regulatory approval to offer the solution in additional geographies. Finally, adjusted EBITDA for the second quarter of 2023 was a record $13.6 million, demonstrating the operating leverage in our business model. Turning to our demand outlook, We recently started seeing some demand softening in the channel as the supply constraints defined in 2022 began to improve in 2023. We believe these supply constraints led to some across-the-board over-ordering that the industry now is facing. However, end market demand remains strong, and we have seen a significant increase in installations of our product. which gives us confidence that the current market environment is temporarily and that an overall growth strategy remains intact. Looking ahead, we expect that being a public company will enhance our land and expense strategy with the industry's largest customers and their approved vendor list. Geographically, we will continue to penetrate new markets, and product-wise, our AI solutions have increased our addressable market and continue to gain market share. In summary, we remain confident that the market is realizing the value of our technologies, open architecture, ease of installation, and powerful software position that can continue to outgrow the market. With that, I will turn the call over to Bill to discuss the second quarter financial results and the 2023 outlook in greater details. Bill?

Thank you, Zvi. Turning now to our financial results for the second quarter ended June 30, 2023. Revenue for the second quarter of 2023 increased 290% to a record $68.8 million from $17.6 million in the prior year period. By geography, EMEA revenue was 55.1 million, or 80% of our total revenues. America's revenue was 11.1 million, or 16% of total revenues. And rest of world revenue was 2.6 million, or 4% of total revenues for the quarter. Growth profit in the second quarter of 2023 increased 368% to 25.9 million, or 37.6% of revenue. from $5.5 million or 31.4% of revenue in the comparable year-ago period. Our margins expanded by 620 basis points as a result of a combination of product cost reduction efforts, lower freight costs, and higher operating leverage as compared to the year-ago period. Total operating expenses increased 250% to $17.2 million in the second quarter from $4.9 million in the prior year period. The second quarter results include $4.1 million of transaction costs related to our D-SPAC, with the remainder of the increase primarily due to higher headcount, particularly in sales and marketing, as well as public company costs. Operating profit for the quarter totals $8.7 million, or 13% of revenue, compared to $610,000, or 3% of revenue, in the prior year comparable period. Other expenses net totaled $41.8 million in the quarter. The majority of the expenses relate to our convertible note accounting. As a result of the DSPAC transaction, we are required to perform a non-cash mark-to-market on the conversion feature of the convertible note and separate the note and derivative liability on our balance sheet. The economic impact, however, remains unchanged. The $50 million note will either be retired at maturity or will convert into approximately 5.45 million shares, a figure that would be reflected in our fully diluted share count. For accounting purposes, however, there is a non-cash adjustment between the P&L and balance sheet that will net out to zero within the equity line upon settlement. Income tax benefit for the quarter was $10.9 million. As a result of our transition to profitability in 2023, we released our reserve on the federal portion of deferred tax assets related to our net operating losses, or NOLs, in the second quarter that can be utilized towards future federal tax obligations. Net loss for the quarter totaled $22.2 million, compared to net income of $178,000 in the prior year period. Adjusted EBITDA totals $13.6 million, an improvement from an adjusted EBITDA of $750,000 in the prior year period. As a reminder, adjusted EBITDA represents operating profit as adjusted for depreciation, amortization, stock-based compensation, and M&A transaction expenses. Primary shares outstanding were $27.8 million and reflect the shares outstanding of the pre-merger SPAC and post-merger Tygo. For forecasting purposes, we expect primary and fully diluted shares for the third quarter to be approximately $59 million and $74 million, respectively. Cash, cash equivalents, and short- and long-term marketable securities totaled $62 million at June 30, 2023. As a result of our D-SPAC, we received trust proceeds of $4.5 million and incurred a total of $8.4 million in transaction-related expenses, a portion of which was recorded in purchase accounting as contra equity and the remainder expense to our P&L. Accounts receivable net increased this quarter to $45.8 million compared to $32.4 million last quarter, representing 61 days outstanding compared to 59 days in the prior quarter. Inventory's net increased this quarter to $50.6 million compared to $36.6 million last quarter, representing 108 days outstanding compared to 106 days in the prior quarter. During the quarter, we engaged a new auditor and expect to file our quarterly report on Form 10-Q by Friday. Before I turn the call back over to Zvi, I'll now take a few minutes to provide our financial outlook for the 2023 third quarter. As a reminder, Tygo provides quarterly guidance for revenue, as well as adjusted EBITDA, as we believe that these metrics are key indicators for the overall performance of our business. As V mentioned, and as other market participants have also noted, excess inventories in the channel are expected to be a headwind in the third quarter. Accordingly, the following projections reflect our third quarter expectations in light of current channel demand. We expect revenue in the third quarter ending September 30, 2023 to range between $41 million and $45 million, a decline from our Q2 23 performance and reflective of what we view as a temporary oversupply of channel inventory. We also note, however, that this range does represent a quarterly increase of 80% to 97% revenue growth over the $22.8 million we recorded in Q3 of 2022, and a quarterly increase of 33 to 46 percent revenue growth compared to the $30.9 million of revenues we recorded in Q4 of 2022. We also expect adjusted EBITDA to range between $1 million and $3 million, representing an increase of 138 to 614 percent compared to the prior year comparable period. That completes my summary, and I'd like to now turn the call back over to Zvi for final remarks. Zvi?