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spk00: Welcome to TIGO's Energy Financial Second Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a questions and answer session. Join us today from TIGO are Zivi Alon, CEO, and Bill Rushline, CFO. As a reminder, this call is being recorded. I would now like to turn the call over to Bill Rushline, Chief Financial Officer.
spk02: Thank you, Operator. We'd like to remind everyone that some of the matters we'll discuss on this call, including our expected business outlook, our ability to increase our revenues, reach cash flow breakeven, adjusted EBITDA breakeven, become profitable, and our overall long-term growth prospects, expectations regarding recovery in our industry, statements about demand for our products, our competitive position, our current and future inventory levels and their impact on future financial results, inventory supply and its impact on our customer shipments and our revenue, and adjusted EBITDA for the third fiscal quarter 2024, our ability to penetrate new markets and expand our market share, including expansion in international markets and investments in our product portfolio, are forward-looking. and as such are 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 annual report on Form 10-K for the fiscal year ended December 31st, 2023. Our quarterly report on Form 10-Q for the fiscal quarter ended June 30th, 2024 and other reports we may file with the SEC from time to time. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. These forward-looking statements are made only as of the date when made. During our call today, we will reference certain non-GAAP financial measures. We include non-GAAP and GAAP reconciliations in our press release furnished as an exhibit to our Form 8K. The non-GAAP financial measures 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 webcast and a recording will be made available for replay at Tygo's investor relations website at investors.tygoenergy.com. I would now like to turn the call over to Tygo CEO, Zvi Alon. Zvi?
spk04: Thank you, Bill. To begin today's discussion, I will give some background on our company. its recent performance and market trends 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 financial outlook for the third quarter of 2024. After that, I will discuss the demand outlook and 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 journey, Tygo Energy is recognized as a global leader in intelligent solar and energy storage solutions. Established in 2007, our mission is to provide smart hardware and software solutions that improve safety, enhance energy use, and reduce operating costs of residential, commercial, and utility-scale systems. At Tygo, we offer three primarily product lines. The TS4 MLPE, module-level power electronics, our flagship product, which offers a range of flexibly designed MLPE solutions to meet the diverse needs of installers worldwide. Second, GO ESS energy and storage solutions, a line of energy storage solutions built on modular components designed to be intuitive and flexible during the installation. Our GO ESS range includes the GO Inverter, GO Battery, GO ATS, and GO EV Charger. And the third one, Energy Intelligence, or our EI software platform, which includes monitoring, fleet management, and our flagship PredictPlus EI-based prediction tool for energy production and consumption. Now let's discuss our recent operational results and demand outlook. As mentioned in our last quarterly call, our revenue stabilized during the first quarter of the year, and we are pleased to report a significant sequential revenue growth of up to 30% this quarter, surpassing many of our peers during this period of extended market recovery. We conclude Q2 with $12.7 million in revenue within the previously stated guidance and shipped 378,000 MLPE devices, which translates to approximately 151 megawatts DC, assuming a panel size of about 400 watts. Our CNI business saw an increased activity highlighted by Tygo's selection as the rapid shutdown technology provider for 142 megawatt power solar installation for a large ETC in Spain, marking our largest order in history. Once installed, we believe that this will represent the largest utility project globally to deploy MLPE. We are proud to deliver the best in class with our newly introduced TS4X product at large scale. We also welcome Midnight Solar as our latest rapid shutdown licensee. This agreement empowers them to deploy innovative products containing TIGOS rapid shutdown intellectual property for compliance with safety regulations. Geographically, The EMEA region grew 20.9% sequentially and represents 55% of our total revenue in the quarter. During the quarter, we saw solid sales growth in Germany, Italy, and the United Kingdom. The Americas grew 3.6% sequentially and represents 22% of our revenue during the quarter. During the quarter, we saw solid sales growth in Brazil, driven by increasing regulatory requirements for rapid shutdown capabilities in that country. The Asia-Pacific region grew more than 124% sequentially and represents 23% of our revenue during the quarter. During the quarter, we saw solid sales growth in Singapore, Australia, and in the Philippines. Turning to an update to our newest line of MLPE. The TS4x, as a reminder, the TS4x family represents a culmination of multi-year effort to provide the CNI and utility marketplace with leading edge MLPE that are designed to satisfy the several key industrial needs. The TS4x MLPE products offer higher power, higher current solution, and maximum design flexibility, all while enabling lower overall system costs than alternatives. We are pleased to report that we have received a great reception since last quarter's rollout. We believe the TS4X family will continue to prove its safest most reliable most cost effective and most flexible and highest power mlp solution in the market in addition to the ts4x we would also like to highlight some other recent announcements we've made including the unveiling of the new tygo and story installer loyalty program for residential tv installers in a mia at inter solar europe 2024 This program will recognize the dedication of professionalism of installers who choose the Tygo solution, further supporting their continued success and emphasizing the vitality of all members of the Solox value chain. Within our EI software product line, we recently introduced a new three-tiered paid service offering with the flagship solution EI Professional. offering a centralized view of critical health and performance data or systems under management. Beyond scalable monitoring experience and simple flat price model, the ultimate SIT-EI professional package includes one-click enrollment of company-wide unlimited SIT subscription access, covering all systems under management. A portfolio-wide dashboard with prioritized view into critical data such as health status, production, performance, equipment status, local data, location data, and commissioning time tracking. And time setting feature including advanced tagging, grouping, and site filtering for improved management, maintenance, optimization, and trend analysis. The standard system by system monitoring view, now named EI Basic, remains free of charge and includes module-level resolution and insight into third-party hardware. More advanced monitoring analytics tools, historical data, and minute-level monitoring resolution, among others, are available via simple in-platform upgrades to EI Premium. Finally, we are pleased to announce that more than 520 solar installations have been enrolled in our Tygo Green Glove program, which provides premium customer experience for every phase of system installation for CNI installers. And with that, I would like to turn over to Bill.
spk02: Bill? Thank you, Zvi. Turning now to our financial results for the second quarter ended June 30th, 2024. Revenue for the second quarter of 2024 decreased 81.5% to $12.7 million from $68.8 million in the prior year period. By geography, EMEA revenue was $7 million or 55% of total revenues. America's revenue was $2.8 million or 22% of total revenues. And APAC was $2.9 million or 23% of total revenues for the quarter. On a sequential basis, revenues improved 29.6% compared to Q1, with improved results coming from Germany, Italy, and the UK in the EMEA region, and Singapore, Australia, and the Philippines in the APAC region. Gross profit in the second quarter of 2024 was $3.9 million, or 30.4% of revenue, compared to $25.9 million, or 37.6% of revenue in the comparable year-ago period. The year-over-year decline was primarily due to lower revenue, and lower gross margins on our GOESS product line amid competitive pricing conditions in that market. On a sequential quarter basis, gross margins increased by 220 basis points due primarily to product mix. Total operating expenses for the second quarter were $12.3 million, down from $17.2 million in the prior year period. The year-over-year decrease was driven primarily by M&A expenses recognized in the prior year period as a result of our D-SPAC. During the quarter, we initiated additional cost-cutting efforts and expect that, on a normalized basis, our gap operating expenses to be approximately $12.5 million per quarter and our non-gap operating expenses to be approximately $11 million per quarter. Operating loss for the second quarter totaled $8.4 million compared to an operating profit of $8.7 million in the prior year comparable period. while gap net loss for the second quarter totaled $11.3 million compared to a net loss of $22.2 million for the prior year period. Adjusted EBITDA loss in the second quarter totaled $6.4 million compared to adjusted EBITDA of $13.6 million 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 $60.4 million for the second quarter of 2024. Now turning to the balance sheet. Accounts receivable net increased $0.6 million in the second quarter to $6.9 million compared to $6.3 million last quarter and $45.8 million in the year-ago comparable period. Inventories net decreased by $4.4 million or 8% to $51.3 million compared to $55.8 million last quarter and $50.6 million in the year-ago comparable period. In the second quarter, the vast majority of our cost of goods sold was comprised of inventory, which we expect to continue to decline and generate cash for us in future quarters. Cash, cash equivalents, and short- and long-term marketable securities totaled $20.2 million at June 30, 2024. This sequential decline by $1.8 million was primarily due to our adjusted EBITDA loss of $6.4 million offset by the conversion of existing inventory into cash. As we mentioned on our last call, considering our current supply of inventory on hand, we expect a cash break-even point at a quarterly revenue level of approximately $17 to $19 million and an adjusted EBITDA break-even point at a quarterly revenue level of approximately $33 to $35 million on a normalized basis. Before I turn the call back over to Zvi, I'll now take a few minutes to provide our financial outlook for our 2024 third quarter. As a reminder, Tygo provides quarterly guidance for revenue as well as adjusted EBITDA as we believe these metrics to be key indicators for the overall performance of our business. For the third quarter of 2024, we expect revenues and adjusted EBITDA to be in the following range. We expect revenues in the third quarter and in September 30th, 2024 to range between $13 million and $16 million. We expect adjusted EBITDA loss to range between $6.5 million and $8.5 million and reflects the potential variability in product mix and non-cash inventory reserve expenses for the third quarter. That completes my summary. I'd like to now turn the call back over to Zvi for final remarks. Zvi? Thanks, Bill.
spk04: As we have discussed in prior quotas, we are still navigating the uncertainty of the prolonged solar market industry recovery. Customers are now reordering products to fulfill demand, and the evidence of market recovery is present, although a slower pace than what was being predicted earlier in the year. Even within the current environment, however, we believe we can continue to outpace the market and return to profitability goals. For the second half of 2024, we expect our revenue on profitability to more slowly continue the upward trajectory, but that the sluggish microeconomics environment may delay EBITDA profitability into early 2025. Longer term, we believe firmly in the long-term growth prospects for our business and look forward to providing additional updates in the coming quarter. With that, Operator, please open the call for Q&A.
spk00: Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Philip Shen with Roth Capital Partners. Your line is now open.
spk03: Hi, everyone. Thanks for taking my questions. Sorry, I'm balancing three calls at the same time, so sorry if I missed some things. On the last quarter, you guys talked about a path to break even on EBITDA in the back half of 24 with the weaker Q3 guide. I was wondering if you might be able to hit it in Q4. of this year, or do you think you need until 2025 to hit your break-even EBITDA target? Thanks.
spk02: Hi, Phil. Yeah, as Vy mentioned in his closing remarks, we made note of the more muted recovery compared to what us and analysts alike were sort of projecting earlier in the year. And because of that, we think that we expect continued upward trajectory in both our revenue and profitability metrics, but that our EBITDA break-even may be pushed to early 2025. And so we alluded to that in our prepared remarks, and I think that reflects our thinking at the moment.
spk03: Okay, got it. So early is not middle yet. And so I would suggest Q1-25. I mean, is that a realistic option, or do you think it might have risk for Q2?
spk02: Yeah, I mean, I would define early as first half. That's how I think of it.
spk03: Got it. Okay. As you think about the channel inventory, you know, this is a little bit slower than expected. You know, I met with you guys at the end of June in Munich, as well as London at our London event, and so was wondering if – the channel inventory is taking a little bit longer to clear. So is it a – like, the slower-than-expected kind of view, is it a function of channel inventory taking longer to clear, or is it perhaps the demand outlook is a little bit weaker than expected, or a combination of both, or something altogether? Thanks.
spk02: Well, first, we thoroughly enjoyed our time with you at Interim Solar and in London at Roth Conference, and I think you and I both, you know, could sort of see what the general view of the market was while we were all there. And compared to analyst reports and industry reports that came out earlier in the year, the macroeconomic just appears to be more muted and taking longer. So last call, last couple calls, we talked about a more step function. improvement in the recovery and uh it it that it looks less like a step function it looks a little bit more um prolonged than we had initially anticipated so we're we're mostly done with any restocking efforts there's always you know one or two laggers out there but for the most part that that's not what's driving the current situation i think it's the macro picture and the demand recovery that's affecting all industry participants including us
spk03: Got it. Yeah, that makes sense. And can you give us a status update on the channel inventory? Are you fully cleared? Or if not, how much longer do you think you need?
spk02: You know, like I mentioned, I think there's a couple, a few laggards here and there, but the channel is largely cleared for us and we're seeing solid pickup in orders from existing customers. So that I really wouldn't call that as having an effect on our future performance. I think we're sort of beyond the channel inventory stage of recovery, and we're really talking more about the demand outlook. So I wouldn't use that as, I don't think it's a discussion point for us any further.
spk03: Got it. Yeah. Sorry to bring that up again. Again, I'm multitasking with multiple calls. So, sorry, go ahead, Steve.
spk04: No, it's fine. I mean, as Bill said, The major places where we had inventory, it's pretty much down to quote-unquote normal or, as you say, depleted. As a matter of fact, we've seen an increase in number of repeat orders from them. And in the markets we've highlighted, like Germany and Italy and the UK, we've seen a growing number of repeat orders. And as a matter of fact, Specifically in Germany, we had at least two of them who stated that the volume of our product grew 2x or 3x month over month just recently. So we are beyond that stage. The market is slow in general.
spk03: Right. Okay. Thanks, V. One last question. I'll pass it on. As it relates to the slowness of the market, can you talk about the general trajectory of that outlook? You know, do you think like what kind of, you know, we had a webinar with Woodmac recently, their European resi team, and they see the overall European market basically being flat for the next five-ish years. And so do you see that as well, or do you think you have exposure to specific countries that while the whole continent might be flat for a number of years, you could still grow because the countries that you have exposure to see growth. Thanks.
spk04: So I can tell you that we cannot project five years, obviously. But we have seen actually an increase in activity in Eastern Europe and some of those places, which is very encouraging. A couple of quarters ago, Czech Republic was one of our biggest countries. And just to give you an example. So we believe that we will see through that exposure, we will see an increased number of activities, not to mention that even within the mainstream, like Germany specifically, we are doing exceptionally well, even though the market is slowing down. But we are growing.
spk03: Great. Okay. Best of luck. Thank you very much. I'll pass it on.
spk04: Thank you very much.
spk00: Thank you. One moment for our next question, please. Our next question comes from the line of Eric Stein with Craig Harlem Capital Group. Your line is now open.
spk01: Hi, Zvi. How are you, Bill? Hi. Hey, so maybe just so it sounds like a little more sluggish here on the recovery, but I would assume, though, it is a decent assumption that in Q4, you know, you would expect if you're going to have further improvement, even if it's modest, that that cash flow break even goal would be in reach in Q4, you know, as we think about the remainder of the year.
spk02: We agree with that.
spk01: Okay. And I know in the past you've talked about, you know, look, if things are slower, you would not hesitate to cut costs further. And it sounds like you did a little bit in the quarter. But it sounds like you're also kind of in a – it's a little bit of a transition because, you know, that break-even EBITDA in your mind is not that far off. So, I mean, how do you kind of balance that knowing that, you know, you don't want to be behind the eight ball but yet – If that recovery is a couple quarters away, you want to be prepared for it.
spk02: Yeah, there's puts and takes on that. So, of course, we can do stuff on the discretionary end as it relates to, you know, event outsourced vendors and professional services fees, et cetera, et cetera. And we will and are doing that. But as it relates to, you know, the more difficult decisions of headcount, you have to balance the risk and rewards of when you do something like that, you do lose momentum and you lose institutional knowledge. I mean, there is a real cost of making and taking actions like that. So if you can see the recovery coming and you can see the clear path to the EBITDA break-even, then you don't cut your nose fight your faith kind of thing. So, um, that we're, we're very flexible and we've, you know, we've been proactive about making cuts and changes and structuring where we have to, and we'll continue to be, you know, um, very, uh, mindful of doing that.
spk01: Okay. Uh, understood. And, and then last one for me, you know, obviously there's been a lot of well-known issues for companies out there and, and headlines, you know, just curious, any, uh, Any exposure to any of these companies that we should think about or not? You're pretty well insulated from that.
spk04: We are completely insulated. We have no impact, none whatsoever. We are not very happy with some of those instances, but no, we don't have any potential exposure at all.
spk01: Okay. That's great. Thanks a lot.
spk04: In fact, we are using... A couple of those changes is a potential market for them.
spk00: All right. Thank you so much. One moment for our next question, please. Our next question comes from the line of Ahmed Dial with HC Weinreich. Your line is now open.
spk05: Thank you. Good afternoon, everyone. With respect to the PS4X sales, were there any contribution from that in the quarter?
spk04: Yes, there were. And we are very happy to go faster than we expected. And yeah, so there were.
spk05: Okay. And in relation to sort of, you know, the launch of this product into the market versus, you know, what you have been previously selling and what may be an inventory, is there any cannibalization or does that impact, you know, um, any of the inventory monetization opportunities for you in the future?
spk04: So, uh, I would say that on the MLPE, uh, a hundred percent of what we have and had in the inventory is, uh, not going to be cannibalized by no stretch of imagination anytime soon. On the storage solution side, the inverter and all the other auxiliary components, we are fine. But the batteries have been facing some challenges, the battery, the storage itself. But we will be able to manage it.
spk05: OK, understood. And just at the macro level, right, you know, going into 2024, we were anticipating sort of a faster pace of recovery in the second half, but it looks like that's being pushed out. You know, what are the factors, you know, driving that? Is it still the industry environment that is, you know, pushing projects out, et cetera, or are there any other sort of drivers that are also, you know, coming into play that is causing some of the, you know, recovery being pushed out?
spk04: So as we all know, there is a big impact both in the US and in Europe in the resi market. On the other hand, utility scale and CNI are having a slower pace, but they are fairly steady. And we have seen a major increase in that space. As a matter of fact, the product and project we just talked about in Spain is a very large utility scale project and it's one of many we're working on. And it ended up being, I think, the largest order we ever received for a single project and the largest installation will be in the world with MLP. So the fact that our MLP product is sort of agnostic to the market is helping us. It helps us from an inventory perspective and to go through the market that has a little bit variations between the different segments.
spk05: Understood. The order from Spain, what's the delivery timeline on that? Is it over the next year or even faster than that?
spk04: It's all going to be delivered this year, all of it, 100%. Before the end of 2024? 100%, yes. Okay.
spk05: Thank you, guys. That's all I have. I appreciate it. Thank you.
spk04: Most welcome.
spk02: Thank you.
spk00: Thank you all so much. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Olong for his closing remarks.
spk04: Thanks again, everyone, for joining us today. I especially want to thank to the dedicated employees for their ongoing contribution as well as our customers and partners for their continued hard work. I also want to thank our investors for their continued support. Operator?
spk00: Thank you for joining us today for Tyco's second quarter 2024 earnings conference call. You may now
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