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spk03: 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.
spk09: 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.
spk20: 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?
spk09: Thanks, V. Revenue for the fourth quarter 2023 decreased 70% to $9.2 million, from $30.9 million in the prior year period. By geography, EMEA revenue was $3.7 million, or 40% of total revenues. America's revenue was $3.4 million, or 37% of total revenues. and APAC was $2.1 million or 23% of total revenues for the quarter. GO-ESS represented 14% of total revenues in the quarter compared to 8.4% last quarter and 7.3% in the prior year comparable period. Revenue for the full year 2023 increased 79% to $145.2 million from $81.3 million in the prior year period. By geography, EMEA revenue was $109.3 million or 75% of total revenues. America's revenue was $25.2 million, or 17% of total revenues. And APAC revenue was $10.8 million, or 7% of total revenues for the year. GO ESS for the year represented 9.2% of total revenues in the year, compared to 4% in the full year 2022. Growth profit in the fourth quarter of 2023 was $2.9 million, or 31.1% of revenue. compared to 10 million or 32.2 percent of revenue in the comparable year-ago period. On a sequential quarter basis, gross margins increased by 6.8 gross margin points due primarily to lower warranty costs and the sale of fully reserved inventories. Gross profit in the full year, 2023, was 51.3 million or 35.3 percent of revenue compared to 24.8 million or 30.5 percent of revenue in the comparable year-ago period. On an annual basis, gross margins increased by 4.8 gross margin points. The year-over-year increase was primarily due to cost-down initiatives and leveraging our fixed costs across a larger revenue base. Total operating expenses for the fourth quarter were $16.4 million compared to $7.8 million in the prior year period. The increase was primarily driven by higher headcount expenses compared to the year-ago period. Total operating expenses for the full year of 2023 were $59.6 million compared to $25.7 million in the prior year period. The yearly increase was driven primarily by higher headcount expenses and legal consulting and compliance costs associated with our transition to becoming a public company. Operating loss for the fourth quarter totaled $13.5 million compared to an operating profit of $2.2 million in the prior year comparable period. Operating loss for the full year 2023 totaled $8.3 million compared to $900,000 in the prior year comparable period. Net loss for the fourth quarter totaled $14.8 million compared to a net income of $900,000 in the prior year period. Net loss for the full year 2023 totaled $1 million compared to a net loss of $7 million for the full year of 2022. Adjusted EBITDA loss in the fourth quarter totaled $11.6 million compared to adjusted EBITDA of $2.7 million in the prior year period. Adjusted EBITDA in the full year totaled $1 million compared to an adjusted EBITDA of $2.5 million in the full year 2022. 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 $58.8 million for the fourth quarter of 2023. Cash cash equivalents, short and long-term marketable securities totaled $33.2 million at December 31st, 2023. Accounts receivable net decreased in the fourth quarter to $6.9 million, or 68 days outstanding, compared to $20.4 million last quarter and $15.8 million in the year-ago comparable period. Inventories net were $61.8 million compared with $57.4 million last quarter and $24.9 million in the year-ago comparable period. Over the past several months, we have made substantial progress in reducing our inventory commitments and expect to destock our inventories to more normalized levels over the coming quarters. Before I turn the call back over to Zee, I'll now take a few minutes to provide our financial outlook in our 2024 first quarter. As a reminder, Tygo provides quarterly guidance for revenue as well as adjusted EBITDA. We believe these metrics to be key indicators for the overall performance of our business. The following projections reflect our first quarter expectations in light of the previously discussed industry-wide macroeconomic uncertainties. We expect revenue in the first quarter ending March 31, 2024 to range between $9 and $14 million. We expect adjusted EBITDA loss to range between $8 million and $12 million. That completes my summary, and I'd like to now turn the call back over to Vy for final remarks. Vy? Thanks, Bill.
spk20: Overall, we are confident in our team's ability to manage the current macroeconomics environment and in the long 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.
spk03: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.
spk15: Our first question comes from Phil Shen with Roth Capital Partners.
spk03: Your line is open.
spk14: Hi, everyone. Thanks for taking my questions. I wanted to get through the destocking outlook. And I think, Svi, you mentioned that it should be done by the end of Q1. I was wondering if you could talk through what the sellout was in Q4 and then what you expected to be in Q1. Our checks suggest that your stock in Rotterdam still seems quite high. And so how much longer do you think that gets worked through? And what kind of risk is there that this carries over into Q2? Thanks.
spk20: Hi, Phil. Thanks for the question. First of all, for clarification, Rotterdam is our own inventory. That's part of the $61 million we mentioned that inventory we have. The inventory in the distribution continues to get depleted. As I've highlighted, actually I started, I believe Tiger was the first one to actually highlight that back in September last year. And we are consistently continuing. Our rate of installations is steady. It did not come down. And as a result, we have seen a depletion, a lowering of the inventory at our distribution, both in europe and other locations and uh we indicated that we believe that we will get close to normal towards the end of q1 and we are still maintaining that position i don't want to make any pre-announcements here but i can tell you we are very confident that the business is starting to turn around for us in the different regions got it okay
spk14: uh thank you um can you uh talk about from a cash flow standpoint you know you have 33 million of cash at the end of q4 i was you know 13-ish million of uh burn in q4 i think and then so what kind of cash um could you generate from inventory in q1 and what kind of burn overall should we expect for q1 thanks
spk09: So there's three factors in liquidity. The first being the improved economic environment, which we all know about, which we, like we mentioned, we're seeing that improve. The second is that we have dramatically been able to reduce the amount of required purchases from our contract manufacturers such that we can be in a position to convert the $61.4 million into cash And the third I'll mention is that we are in discussions with certain parties around credit facilities to enhance our balance sheet flexibility. So the combination of all three, we believe, will provide us with ample and sufficient liquidity. As a general rule, given the guidance, 60% of the revenue is cost of goods sold. So I leave it to you to calculate what that conversion and cash looks like, but it's essentially 60% of the nine to 14 million that we guided.
spk14: Okay. Got it. Can you talk through timing of the credit facilities and those negotiations? And then, you know, are we talking about a $30 million credit line or maybe 70 million? What kind of ballpark could it be? Thanks.
spk09: I can't go beyond what I just, what I mentioned at this point, since they're fluid negotiations. Sorry.
spk14: Okay. Back to the sell-through. Do you think sell-through is at a bottom? You know, I think you kind of talked through that a little bit already. And so you're talking about that things are improving. But can you give any quantification of, you know, remind us again what your biggest market is. Is it Netherlands or is it Germany? And some of the kind of metrics from some of the countries that can give us some confidence that. you have that visibility. Thanks.
spk17: In Europe, Germany is the largest market.
spk20: We have a fairly strong footprint in Italy, in the Netherlands, Eastern Europe. We have several countries. The Czech Republic has been a fairly strong supporter and provider of revenue for us. As far as the depletion of the inventory, We see basically in all territories, we see in number of distributors, not just a small number, it's coming down. And also the number of installations continues to the same pace in the different geographies. So it's not in just one location, which gives us confidence by the numbers that we are tracking what we have seen now for the last four, five months, six months.
spk14: Okay. uh got it so when you think about the trajectory of revenue by quarter uh so you've given us q1 official guidance but you know with the seasonal strength that comes from q2 and three what you know what do you think we could see for q2 and three without giving guidance uh maybe you can point us to some um uh qualitative uh description of what the year might look like thanks
spk09: I'll just start off by saying I think it's more than what's in your model, Bill.
spk13: Okay. Great. Okay.
spk22: This is very quantitative. Yeah.
spk14: Okay. And one other thing. Some of our checks suggest the Chinese are actually doing quite well. So think of SunGrow, Huawei, GrowWatt. And their channel material was cleared. has been cleared, and so they're not dealing with that anymore. It seems like they're maintaining price. But I've heard from distributors that their mix of their business, like the Chinese inverter mix of the overall European business, is increasing. What are your thoughts on the competitive dynamics there? We're also hearing that some of them might be launching optimizers that might challenge you guys, maybe like a SunGrow. Talk to us about the risks you see and the competitive dynamics. Thanks.
spk20: Most welcome. So first of all, if you recall back at InterSolar last year, that promotion to try and drive market changes started by Huawei, there were one or two additional suppliers who tried the same And we know, at least from facts we are collecting, that that didn't produce the expected result. And they stopped, and actually prices stabilized. And now it's really just a depletion of inventory, which is really the key. We do see, however, that the glut of Chinese suppliers is still dominating the market, and not necessarily with new product as much as just the depletion of the inventory. And as such, our optimizers work with pretty much all of them, and we don't prefer one or the other. Yes, Huawei has been pushing an MLP now for the last six or seven years. Sango might be a newcomer to the market, at least they announced it. In both cases, their optimizers work only with their own inverter, and as a matter of fact, not with all their inverters, only with a subset of their inverters. So from a competitive perspective, we feel and see that our position is actually fairly good. In addition, I will say that we see an increase in demand for rapid shutdown standalone, and specifically just in the residential, but also see it in larger-scale systems. And we are the number one supplier in that space, and neither SolarEdge, Huawei, and or SunGrow have a rapid shutdown solution only. So we still maintain that our position is going to continue to be positive, fairly strong. And the fact that the two of them, actually, the latest one is Sango. Huawei has been around for quite some time. But the fact that they're jumping in is only to demonstrate that the MLP market is vibrant, vivid, and needed. And so we believe as an independent supplier in the space, we will maintain our leverage.
spk14: Great. Thanks very much, guys. I'll pass it on.
spk03: Most welcome. One moment for our next question. Our next question comes from Eric Stein with Craig Hallam. Your line is open.
spk06: Hi, Zvi. Hi, Bill.
spk03: Hi, Eric.
spk06: Hey, so maybe I'll just get at some of the previous questions, just ask them differently. I mean, do you have an estimate of how much maybe over the last quarter or two you have undershipped? You know, as you try to help the process of the channel clearing, you know, just trying to get an idea of kind of, you know, where true demand might be as we think about Q1 and then obviously improvement going forward.
spk18: So, we normally...
spk20: did not measure it this way because we don't under-ship. We have plenty of inventory, and so unless we were able to supply from existing backlog or new orders we have received, we did not under-ship. And so whatever the shipment, it was a true demand. Okay, right, right.
spk06: So true demand, but a thought of what would it be? Let's say that the inventory was somewhat normalized. The $9 million you did this quarter, I mean, any thoughts you have, even from a high level, that $9 million would have been X, whatever that number may be. I'm just trying to get a sense of kind of that level set demand under a more normalized environment.
spk09: So we took more than a 50% haircut from the C2 highs as a result of this environment. And so, I mean, just a really broad brush stroke suggests at least a 50% or more. OK.
spk06: Got it. And I know you're not guiding the queue, too. I guess I'll have to take a look at where Phil's estimates are to get a line on that. But, okay, that helps. Maybe then just coming back to working capital, helpful what you're talking about. Yep.
spk19: As Bill said, better than his estimates.
spk06: Correct. Yes, I heard that loud and clear.
spk09: I'll add one more.
spk06: Okay.
spk09: I'll just add that we continue to make the investments and have purposely been very thoughtful in how we instituted our cost restructuring in the last quarter. You know, it's a reasonable number. It's sort of in line with what our competitors have done. But in the same vein, it reflects our expectations. This is a much more promising outlook.
spk06: Right. Nope. Understood. And I would assume that if things, you know, for whatever reason, don't play out that way, there's, you know, there would be more that you could do. I guess I'm curious. I mean, is that, is that fair? Do you think there is more room if needed? Um, or, you know, do you feel like this kind of strikes a good balance between cutting costs here near term, but also keeping the, you know, the situation in place for, for growth, which you obviously expect to come going forward.
spk09: So there are a couple of things that there is always more, uh, definitely through a top line and our, in 2023 and 79% growth in the year. So things that we want to be cognizant of are that the market is turning, our product is selling, the monitoring solutions are steady, the end demand is steady, and we don't want to miss out. So if the market turns one way or the other, we'll react. But there's still some questions about true demand. And as we get further along into this quarter, us along with others, we'll have some more commentary on where we think that is. But we know it's much higher than what we're guiding to right now.
spk06: Yep. Yeah, understood. Maybe just last one for me, working capital, obviously, as you kind of laid out, we can back into how much you work down that inventory here in Q1. But maybe just thinking about it longer term, I mean, it's obviously going to depend on what your sales expectations are. But do you have kind of a number that you think is the right number? I mean, clearly... as things kind of turned down in the second half, you were unable to shut off the, you know, as you said, some of the automatic purchases from the contract manufacturer. Is there a number, you know, whether it's a percentage of the 61 that you think is a more realistic level based on where the business stands today in the outlook?
spk09: Yes, I can. We have been thinking about this frequently. And Our inventory position of 61.4, or 61 and change, should be at 30 million or below. 30 million or below gives us 50 million a quarter, or 200 million in revenue, and a one turn per quarter. So at least 30 million is where our inventory level should be, which would generate cash for 30 million, obviously, for us. Now from there, we can tune it, but the fact that we're Again, we're thinking – that's how we're thinking of being able to support 50 million in revenue because, again, we don't want to come up short when the market turns. We want to be able to respond and take advantage of the market upturn.
spk04: Okay. That's helpful. Thank you.
spk03: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. Our next question comes from Gus Richards with Northland. Your line is open.
spk21: Yes, thanks for taking the question.
spk10: I'm just wondering if you could talk a little bit about your market share as we went through this shortage period at the beginning of 22. And, you know, as there was a shortage, your revenues ramped relative to your competitors a little bit faster, and then, you know, it's come down a little bit faster. And I'm wondering, you know, is it a reasonable assumption that before that that say you had X percentage of market share relative to your competitors, are you asymptoting to that level or coming back to that level? Could you just talk a little bit about that?
spk09: Sure. So we don't look at every competitor in the landscape, and there is a lack of third-party data to tie that all together, but within MLPE, We do look at SEG and we look at what they report. And we do note that in 2022, they had 23.8 million in MLPE units. And as we've disclosed, we had 2.6 million. That was 11% of SEG's total. We also look at 2023 with some forecasting done by the analysts. Put SEG at somewhere around 17.3, 17.5-ish And we sold almost 4.2 million units. That puts us at 24% of the MLP units that SEG had. So clearly, we've gained share.
spk10: Right. Now, post that bubble, you know, are you going to maintain that share, you think? Or, you know, are you going to kind of go back to where you were before? Or is it somewhere in between? And then, you know, if I've done the math on this. It feels like your revenue is kind of stable around or sell out, if you will, demand around 20 to 25 million. Are those numbers kind of correct? And what do you think your end state market share might be?
spk09: I don't know if I can give you full answers on those questions precisely. Again, I don't think again, consult third-party reports that put the largest amount of share with Sedge and Enphase, and then we are third, but a distant third. But as I just mentioned, we have gained share, and we believe we'll continue to gain share, as we've outlined in this call and in our release. And that, along with just the greenfield revenue coming from Go ESS and our software EI, that's completely new revenue. So we went from two and a half in Go ESS to more than 13 and a half. And so, you know, that's 100% revenue market share gain. I mean, that's all new stuff. And so the combination of our base business MLPE, as I mentioned, goes from 11% to 24%. And you tack on going from You know, two and change to 13 and a half, that's very significant. So I don't really see a world where we're not being shared.
spk21: Okay. Thanks for taking my questions.
spk12: Welcome.
spk03: Ladies and gentlemen, let's conclude the Q&A portion of today's call. Thank you for joining us today for Tyco's fourth quarter and full year 2023 earnings conference call. You may now disconnect.
spk15: Oh. Human Ed. Thank you. Bye. music music Thank you.
spk03: 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 like to turn the call over to Bill Roschlein, Chief Financial Officer.
spk09: 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 where 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?
spk20: 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, Tiger 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 5 kilowatt-hour incremented building blocks and 2.5 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 real-time window segment and manage energy demand and load balancing to drive ROI and profitability. Our PREDICT Plus 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 GOV ESS 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 device, significant milestone for our business and indicator of how far Tygo has gone. We made significant progress across our product categories as well as we had 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 U.S. 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 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 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 9% of our business, while our AI software platform represents a nominal percent of our business today. And we see both product lines as 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?
spk09: Thanks, V. Revenue for the fourth quarter 2023 decreased 70% to $9.2 million, from $30.9 million in the prior year period. By geography, EMEA revenue was $3.7 million, or 40% of total revenues. America's revenue was $3.4 million, or 37% of total revenues. and APAC was $2.1 million or 23% of total revenues for the quarter. GO-ESS represented 14% of total revenues in the quarter compared to 8.4% last quarter and 7.3% in the prior year comparable period. Revenue for the full year 2023 increased 79% to $145.2 million from $81.3 million in the prior year period. By geography, EMEA revenue was $109.3 million or 75% of total revenues. America's revenue was $25.2 million, or 17% of total revenues. And APAC revenue was $10.8 million, or 7% of total revenues for the year. GOESS for the year represented 9.2% of total revenues in the year, compared to 4% in the full year 2022. Growth profit in the fourth quarter of 2023 was $2.9 million, or 31.1% of revenue. compared to $10 million or 32.2% of revenue in the comparable year-ago period. On a sequential quarter basis, gross margins increased by 6.8 gross margin points due primarily to lower warranty costs and the sale of fully reserved inventories. Gross profit in the full year, 2023, was $51.3 million or 35.3% of revenue compared to $24.8 million or 30.5% of revenue in the comparable year-ago period. On an annual basis, gross margins increased by 4.8 gross margin points. The year-over-year increase was primarily due to cost-down initiatives and leveraging our fixed costs across a larger revenue base. Total operating expenses for the fourth quarter were $16.4 million compared to $7.8 million in the prior year period. The increase was primarily driven by higher headcount expenses compared to the year-ago period. Total operating expenses for the full year of 2023 were $59.6 million compared to $25.7 million in the prior year period. The yearly increase was driven primarily by higher headcount expenses and legal consulting and compliance costs associated with our transition to becoming a public company. Operating loss for the fourth quarter totaled $13.5 million compared to an operating profit of $2.2 million in the prior year comparable period. Operating loss for the full year 2023 totaled $8.3 million compared to $900,000 in the prior year comparable period. Net loss for the fourth quarter totaled $14.8 million compared to a net income of $900,000 in the prior year period. Net loss for the full year 2023 totaled $1 million compared to a net loss of $7 million for the full year of 2022. Adjusted EBITDA loss in the fourth quarter totaled $11.6 million compared to adjusted EBITDA of $2.7 million in the prior year period. Adjusted EBITDA in the full year totaled $1 million compared to an adjusted EBITDA of $2.5 million in the full year 2022. 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 $58.8 million for the fourth quarter of 2023. Cash cash equivalents, short and long-term marketable securities totaled $33.2 million at December 31st, 2023. Accounts receivable net decreased in the fourth quarter to $6.9 million, or 68 days outstanding, compared to $20.4 million last quarter and $15.8 million in the year-ago comparable period. Inventories net were $61.8 million, compared with $57.4 million last quarter and $24.9 million in the year-ago comparable period. Over the past several months, we have made substantial progress in reducing our inventory commitments and expect to destock our inventories to more normalized levels over the coming quarters. Before I turn the call back over to Zvi, I'll now take a few minutes to provide our financial outlook in our 2024 first quarter. As a reminder, Tygo provides quarterly guidance for revenue as well as adjusted EBITDA. We believe these metrics to be key indicators for the overall performance of our business. The following projections reflect our first quarter expectations in light of the previously discussed industry-wide macroeconomic uncertainty. We expect revenue in the first quarter ending March 31, 2024 to range between $9 and $14 million. We expect adjusted EBITDA loss to range between $8 million and $12 million. That completes my summary, and I'd like to now turn the call back over to V for final remarks. V? Thanks, Bill.
spk20: Overall, we are confident in our team's ability to manage the current macroeconomics environment and in the long 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.
spk03: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.
spk15: Our first question comes from Phil Shen with Roth Capital Partners.
spk03: Your line is open.
spk14: Hi, everyone. Thanks for taking my questions. I wanted to get through the destocking outlook. And I think, Svi, you mentioned that it should be done by the end of Q1. I was wondering if you could talk through what the sellout was in Q4 and then what you expected to be in Q1. Our checks suggest that your stock in Rotterdam still seems quite high. And so how much longer do you think that gets worked through? And what kind of risk is there that this carries over into Q2? Thanks.
spk20: Hi, Phil. Thanks for the question. First of all, for clarification, Rotterdam is our own inventory. That's part of the $61 million we mentioned that inventory we have. The inventory in the distribution continues to get depleted. As I've highlighted, actually I started, I believe Tiger was the first one to actually highlight that back in September last year. And we are consistently continuing. Our rate of installations is steady. It did not come down. And as a result, we have seen a depletion, a lowering of the inventory at our distribution, both in... europe and other locations and uh we indicated that we believe that we will get close to normal towards the end of q1 and we are still maintaining that position i don't want to make any pre-announcements here but i can tell you we are very confident that the business is starting to turn around for us in the different regions got it okay
spk14: uh thank you um can you uh talk about from a cash flow standpoint you know you have 33 million of cash at the end of q4 i was you know 13-ish million of uh burn in q4 i think and then so what kind of cash um could you generate from inventory in q1 and what kind of burn overall should we expect for q1 thanks
spk09: So there's three factors in liquidity. The first being the improved economic environment, which we all know about, which we, like we mentioned, we're seeing that improve. The second is that we have dramatically been able to reduce the amount of required purchases from our contract manufacturers such that we can be in a position to convert the $61.4 million into cash. And the third I'll mention is that we are in discussions with certain parties around credit facilities to enhance our balance sheet flexibility. So the combination of all three we believe will provide us with ample and sufficient liquidity. As a general rule, given the guidance, 60% of the revenue is cost of goods sold. So I leave it to you to calculate what that conversion and cash looks like, but it's essentially 60% of the nine to 14 million that we guided.
spk14: Okay. Got it. Can you talk through timing of the credit facilities and those negotiations? And then, you know, are we talking about a $30 million credit line or maybe 70 million? What kind of ballpark could it be? Thanks.
spk09: I can't go beyond what I just, what I mentioned at this point, since they're fluid negotiations. Sorry.
spk14: Okay. Back to the sell-through. Do you think sell-through is at a bottom? You know, I think you kind of talked through that a little bit already. And so you're talking about that things are improving. But can you give any quantification of, you know, remind us again what your biggest market is. Is it Netherlands or is it Germany? And some of the kind of metrics from some of the countries that can give us some confidence that.
spk17: In Europe, Germany is the largest market.
spk20: We have a fairly strong footprint in Italy, in the Netherlands, Eastern Europe. We have several countries. The Czech Republic has been a fairly strong supporter and provider of revenue for us. The depletion of the inventory we see basically in all territories. We see in number of distributors, not just a small number, it's coming down. And also the number of installations continues at the same pace in the different geographies. So it's not in just one location, which gives us confidence by the numbers that we are tracking what we have seen now for the last Four, five months, six months.
spk14: Okay. Got it. And so when you think about the trajectory of revenue by quarter, so you've given us Q1 official guidance, but, you know, with the seasonal strength that comes from Q2 and three, what, you know, what do you think we could see for Q2 and three without giving guidance? Maybe you can point us to some, you know, qualitative description of what the year might look like. Thanks.
spk09: I'll just start off by saying I think it's more than what's in your model, Bill.
spk13: Okay. Great. Okay.
spk22: This is very quantitative, too. Yeah.
spk14: Okay. And one other thing. Some of our checks suggest the Chinese are actually doing quite well. So think of SunGrow, Huawei. GrowWatt, and their channel material has been cleared, and so they're not dealing with that anymore. It seems like they're maintaining price, but I've heard from distributors that their mix of their business, like the Chinese inverter mix of the overall European business, is increasing. What are your thoughts on the competitive dynamics there? We're also hearing that some of them might be launching optimizers. That might challenge you guys, maybe like a sun grow. Talk to us about the risks you see and the competitive dynamics. Thanks.
spk20: Most welcome. So first of all, if you recall back at InterSolar last year, that promotion to try and drive market changes started by Huawei. There were one or two additional suppliers who tried the same, and we know, at least from facts we are collecting, that that didn't produce the expected result. And they stopped, and actually prices stabilized, and now it's really just a depletion of inventory, which is really the key. We do see, however, that the glut of Chinese suppliers is still dominating the market, and not necessarily with new products as much as just the depletion of the inventory. And as such, our optimizers work with pretty much all of them, and we don't prefer one or the other. Yes, Huawei has been pushing an MLP now for the last six or seven years. Sango might be a newcomer to the market. At least they announced it. In both cases, Their optimizers work only with their own inverter, and as a matter of fact, not with all their inverters, only with a subset of their inverters. So from a competitive perspective, we feel and see that our position is actually fairly good. In addition, I will say that we see an increase in demand for rapid shutdown standalone, and specifically just in the residential, but also seeing it in larger-scale systems. And we are the number one supplier in that space, and neither SolarEdge, Huawei, and or SunGrow have a rapid shutdown solution only. So we still maintain that our position is going to continue to be positive, fairly strong. And the fact that the two of them, actually, the latest one is Sago. Huawei has been around for quite some time. But the fact that they're jumping in is only to demonstrate that the MLP market is vibrant, vivid, and needed. And so we believe as an independent supplier in the space, we will maintain our leverage.
spk14: Great. Thanks very much, Gus. I'll pass it on.
spk03: Most welcome. One moment for our next question. Our next question comes from Eric Stein with Craig Hallam. Your line is open.
spk06: Hi, Zvi. Hi, Bill.
spk03: Hi, Eric.
spk06: Hey, so maybe I'll just get at some of the previous questions, just ask them differently. I mean, do you have an estimate of how much maybe over the last quarter or two you have undershipped? you know, as you try to help the process of the channel clearing, you know, just trying to get an idea of kind of, you know, where true demand might be as we think about Q1 and then obviously improvement going forward.
spk18: So we normally...
spk20: did not measure it this way because we don't under-ship. We have plenty of inventory, and so unless we were able to supply from existing backlog or new orders we have received, we did not under-ship. And so whatever the shipment, it was a true demand. Okay, right, right.
spk06: So true demand, but a thought of what would it be? Let's say that the inventory was somewhat normalized. The $9 million you did this quarter, I mean, any thoughts you have, even from a high level, that $9 million would have been X, whatever that number may be. I'm just trying to get a sense of kind of that level set demand under a more normalized environment.
spk09: So we took more than a 50% haircut from the Q2 highs as a result of this environment. And so, I mean, just a really broad brushstroke is suggesting at least a 50% or more.
spk06: OK. Got it. And I know you're not guiding the queue, too. I guess I'll have to take a look at where Phil's estimates are to get a line on that. But, okay, that helps. Maybe then just coming back to working capital, helpful what you're talking about. Yep.
spk19: As Bill said, better than his estimates.
spk06: Correct. Yes, I heard that loud and clear. I'll add one more. Okay.
spk09: I'll just add that we continue to make the investments and have purposely been very thoughtful in how we instituted our cost restructuring in the last quarter. You know, it's a reasonable number. It's sort of in line with what our competitors have done. But in the same vein, it reflects our expectations. There's a much more promising outlook.
spk06: Right. No, understood. And I would assume that if things, you know, for whatever reason don't play out that way, there's, you know, there would be more that you could do? I guess I'm curious. I mean, is that fair? Do you think there is more room if needed? Or do you feel like this kind of strikes a good balance between cutting costs here near term, but also keeping the situation in place for growth, which you obviously expect to come going forward?
spk09: So there are a couple of things. There is always more. We definitely grew a top line in our in 2023 and, you know, 79% growth in the year. So, you know, things that we want to be cognizant of are that the market is turning, our product is selling, the monitoring solutions are steady, the end demand is steady, and we don't want to miss out. So if the market turns one way or the other, we'll react. But there's still some questions about true demand. And as we get further along into this quarter, us along with others, we'll have some more commentary on where we think that is. But we know it's much higher than what we're guiding to right now.
spk06: Yep. Yeah, understood. Maybe just last one for me, working capital, obviously, as you kind of laid out, we can back into how much you work down that inventory here in Q1. But maybe just thinking about it longer term, I mean, it's obviously going to depend on what your sales expectations are. But do you have kind of a number that you think is the right number? I mean, clearly... as things kind of turned down in the second half, you were unable to shut off the, you know, as you said, some of the automatic purchases from the contract manufacturer. Is there a number, you know, whether it's a percentage of the 61 that you think is a more realistic level based on where the business stands today in the outlook?
spk09: Yes, I can. We have been thinking about this frequently. And Our inventory position of 61.4, or 61 and change, should be at $30 million or below. $30 million or below gives us $50 million a quarter or $200 million in revenue and a one turn per quarter. So at least $30 million is where our inventory level should be, which would generate cash for $30 million, obviously, for us. From there, we can tune it, but the fact that we're Again, we're thinking – that's how we're thinking of being able to support 50 million in revenue because, again, we don't want to come up short when the market turns. We want to be able to respond and take advantage of the market upturn.
spk04: Okay. That's helpful. Thank you.
spk03: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. Our next question comes from Gus Richards with Northland. Your line is open.
spk21: Yes, thanks for taking the question.
spk10: I'm just wondering if you could talk a little bit about your market share as we went through this shortage period at the beginning of 22. And, you know, as there was a shortage, your revenues ramped relative to your competitors a little bit faster, and then, you know, it's come down a little bit faster. And I'm wondering, you know, is it a reasonable assumption that before that surge in demand that you had X percentage of market share relative to your competitors, are you asymptoting to that level or coming back to that level? Could you just talk a little bit about that?
spk09: Sure. So we don't look at every competitor in the landscape, and there is a lack of third-party data to tie that all together. But within MLPE, We do look at SEG and we look at what they report. And we do note that in 2022, they had 23.8 million in MLPE units. And as we disclosed, we had 2.6 million. That was 11% of SEG's total. We also look at 2023 with some forecasting done by the analysts. With SEG, it's somewhere around 17.3, 17.5-ish And we sold almost 4.2 million units. That puts us at 24% of the MLP units that SEG had. So clearly, we've gained share.
spk10: Right. Now, post that bubble, you know, are you going to maintain that share, you think? Or, you know, are you going to kind of go back to where you were before? Or is it somewhere in between? And then, you know, if I've done the math on this. It feels like your revenue is kind of stable around or sell out, if you will, demand around 20 to 25 million. Are those numbers kind of correct? And what do you think your end state market share might be?
spk09: I don't know if I can give you full answers on those questions precisely. Again, I don't think again, Princeville third-party reports that put the largest amount of share with Sedge and Enphase, and then we are third, but a distant third. But as I just mentioned, we have gained share, and we believe we'll continue to gain share, as we've outlined in this call and in our release. And that, along with just the greenfield revenue coming from Go ESS and our software EI, that's completely new revenue. So we went from two and a half in Go ESS to more than 13 and a half. And so, you know, that's 100% market share gain. I mean, that's all new stuff. And so the combination of our base business MLPE, as I mentioned, going from 11% to 24%, and then you tack on going from Two and change to 13 and a half, that's very significant. So I don't really see a world where we're not gaining share.
spk21: Okay. Thanks for taking my questions.
spk12: Welcome.
spk03: Ladies and gentlemen, that concludes the Q&A portion of today's call. Thank you for joining us today for Tyco's fourth quarter and full year 2023 earnings conference call. You may now disconnect.
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