Tigo Energy, Inc.

Good afternoon and welcome to Tygo Energy's fiscal fourth quarter and full year 2023 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. Joining us from Tygo are Sri Alam, CEO, and Bill Roschlein, CFO. As a reminder, this call is being recorded. I would now like to turn the call over to Bill Roschlein, Chief Financial Officer.

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, the marketing trend 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 subject 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 September 30, 2023, and other reports we may file at 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 a call, we will reference certain non-GAAP financial measures. We include non-GAAP to GAAP reconciliations in a press release furnished as an exhibit to our Form 8K. 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 Tygo's investor relations website at investors.tygoenergy.com. I would like to now turn the call over to Tygo's CEO, Zvi Alon. Zvi? 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 Roschlein. 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, Tygo 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 lower operating costs for residential, commercial, and utility-scale systems. Tygo's offerings include three main product categories, Tygo's TS4 MLPE, GoESS energy and storage solutions, and our energy intelligence or EI software platform. Our Tygo TS4 is our largest selling product, consisting of a series of flexibly designed MLP solutions to meet particular needs of a broad base of installers. Our superior MLP design provides a number of important benefits to customers. First, our MLP 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 users are hitting. Second, our NLPE solution provides customers with a high reliability product and a very low failure rate. High reliability is driven by the lower component count, duty cycle, and design. Third, our MLPs are quick and easy to install. In about 10 seconds each, you literally clip the MLP to the back of the panel and connect the wires. And lastly, we provide flexibility. Tygo products are certified to work with more than 1,600 inverters across all market segments, including the resi, CNI, and utility marketplaces today, while operating in seven continents. In addition to our MLP 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 five kilowatt hour incremented building blocks and two and a half kilowatt continuous power per module. The GO ETS, 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, a newly launched smart charging station for electric vehicles that is available as both a single-phase or three-phase charger and up to 22 kilowatts and can be wall-mounted or indoor-outdoor. Overall, GO-ESS enables dynamic, customizable interaction between the energy source and loads with the maximum flexibility for energy utilization, references, and is compatible with the Tygo MLP products. Moreover, the system includes the battery can be commissioned in about 10 minutes. Lastly, our EI or energy intelligent product. make up Tygo's AI software platform. Our AI products, including monitoring fleet management and our flagship PredictPlus software platform. We have integrated and scaled PredictPlus 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 segment and manage energy demand and load balancing to drive ROI and profitability. Our PredictPlus software solutions enables utilities and VPPs to manage the so-called dark 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 Tygo moving forward, and we expect to continue investing in their growth, especially for our GOESS and EI solutions. We believe that the opportunity for the solar energy storage solutions is large and doable, both in the United States as well as internationally. Turning now to the 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 a $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 Tygo. Our team drove overall revenue growth 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 Tygo TS4 devices, a significant milestone for our business and an indicator of how far Tygo 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 Goodway, Solex Power, and Intercraft Solar as a new licensee for our 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 successful launch in the German market, the US market, GO ESS represented only 29% 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 PredictPlus technology. During the year, we expanded the PredictPlus 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-time residential and or new existing commercial installers of TIGO systems. This program is expected to enhance customer confidence in the safety, security, and reliability of Tygo products, installations, and features 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 site. Early feedback has been overwhelmingly positive. This effort will continue to enhance the market service while increasing the usage of the Tygo products. 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 a 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 Tygo module level monitoring services continued a similar pace with Q3, which indicates to us and 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 AVL traction with the expanding list of TPOs serving the market, and that could be a 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 macroeconomics environment. We also remain committed to our three major initiatives in 2024. One, cost effectiveness. We will continue to sell advantages of using the Tygo products to lower the electrical balance of system costs in the solar installation. Two, market expansion. We will continue our market penetration underserved markets, especially in new geographies such as South America, Asia Pacific, and Eastern Europe. These regions represent undertapped 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 suit expansion. As mentioned previously, our GO ESS product represent nine percent of our business while our ei software platform represents a nominal percent of our business today and we see both product lines as a highly under penetrated areas for growth for our business further improving and growing this product 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?