Good afternoon and welcome to Tigo Energy's Fiscal Fourth Quarter and Full-Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. Joining us from Tigo are Zvi Alon, CEO, and Bill Roeschlein, CFO. As a reminder, this call is being recorded. I would now like to turn the call over to Bill Roeschlein, 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 and marketing trends; 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 subjected 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 December 30, 2023 and other reports we may file with the SEC from time to time. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. These forward-looking statements are made only as of the date when made during the call. We will reference certain non-GAAP financial measures. We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to our Form 8-K. 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 Tigo's investor relations website at investors.tigoenergy.com. I would like to now turn the call over to Tigo's CEO, Zvi Alon.

Thank you, Bill. To begin today's discussion, I will give some background on our company's 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, Tigo 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. Tigo's offerings include three main product categories – Tigo TS4 MLPE; GO ESS energy and storage solutions and our Energy Intelligence or EI software platform. Our Tigo TS4 is our largest selling product, consisting of a series of flexibly designed MLPE solutions to meet particular needs of a broad base of installers. Our superior MLPE design provides a number of important benefits to customers. First, our MLPE 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 uses a heatsink. Second, our MLPE solution provides customers with a higher reliability product and a very low failure rate. High reliability is driven by the lower component count duty cycle and design. Third, our MLPE are quick and easy to install, in about 10 seconds each. You literally clip the MLPE to the back of the panel and connect the wires. And lastly, we provide flexibility. Tigo products are certified to work with more than 1,600 inverters across all market segments, including the residential, C&I, and utility marketplaces today, while operating in seven continents. In addition to our MLPE 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 of the module. The GO ATS, 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, the newly launched smart charging station for electric vehicles that is available as both a single phase or a 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 maximum flexibility for energy utilization and is compatible with the Tigo MLPE product. Moreover, the system includes the battery, can be commissioned in about 10 minutes. Lastly, our EI, our energy intelligent products, make up Tigo's EI software platform. Our EI products, including monitoring, fleet management and our flagship Predict+ software platform. We have integrated and scaled the Predict+ 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 segments and manage energy demand and load balancing to drive ROI and profitability. Our Predict+ software solutions enable utilities and VPPs to manage this so-called duck curve challenges posed 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 Tigo moving forward, and we expect to continue investing in their growth, especially for our GO ESS and EI solutions. We believe that the opportunity for the solar energy storage solutions is large and durable, both in the United States as well as internationally. Turning now to a review of our recent operational results and demand outlook. As we discussed on our last call, our business faced order push-outs and cancellations 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 $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 Tigo. Our team drove overall revenue goals 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 millionth Tigo TS4 device, a significant milestone for our business and indicator of how far Tigo has come. We made significant progress across our product categories, and we had a successful year converting new customers to our TS4 platforms, including GoodWe, SolaX Power, and Intercraft Solar as new licensees for 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 of a successful launch in the German market, the US 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 Predict+ technology. During the year, we expanded the Predict+ 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 current $800,000 per year. Lastly, we launched the Green Glove service program in 2023 to provide a premium support experience for first-time and existing commercial installers of Tigo systems. This program is expected to enhance customer confidence in the safety, security, and reliability of Tigo product installations and features, our six-point design inspection along with 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 sites. Early feedback has been overwhelmingly positive. This effort will continue to enhance market service while increasing the usage of Tigo orders. 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 occurs once the 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 Tigo module level monitoring services continued at a similar pace with Q3, which indicates to us that 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 the potential to delay the recovery until the second half of the year at the macro level, although we do expect to gain real 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 into new geographies, 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 macroeconomic environment. We also remain committed to our three major initiatives in 2024. One, cost effectiveness. We will continue to sell the advantages of using the Tigo product to lower the electrical balance of system costs in the solar installation. Two, market expansion. We will continue our market penetration of underserved markets, especially in new geographies such as South America, Asia-Pacific, and Eastern Europe. These regions represent under-tapped geographies where rapid shutdown is gaining traction, and we believe we are positioned well to capture additional market share in these areas. Three, product suite expansion. As mentioned previously, our GO ESS product represents 9% of our business, while our EI software platform represents a nominal percent of our business today. We see both product lines as highly under-penetrated areas for growth for our business. Further improving and growing these products 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 detail. Bill?

Thanks, Zvi. 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. Americas 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, Americas revenue was $25.2 million or 17% of total revenues, and APAC revenue was $10.8 million or 7% of total revenue for the year. GO ESS for the year represented 9.2% of total revenues compared to 4% in the full year 2022. Gross 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 the 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 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 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 31, 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 will now take a few minutes to provide our financial outlook for our 2024 first quarter. As a reminder, Tigo provides quarterly guidance for revenues 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 million 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 Zvi for final remarks.

Thanks, Bill. Although we are confident in our team's ability to manage the current macroeconomic environment and in the longer-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.

Our first question comes from Phil Shen with ROTH Capital Partners.

I wanted to get through the destocking outlook. And I think, Zvi, you mentioned that you should be done by the end of Q1. I was wondering if you could talk through what the sell-out was in Q4 and then what you expect it to be in Q1. Our check suggests 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?

First of all, for clarification, what goes down 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 Tigo 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've seen a depletion, a lowering of the inventory at our distribution, both in Europe and other locations. And we indicated that we believe that we will get close to normal towards the end of Q1, and we're still maintaining that position. I don't want to make any pre-announcements here. But I can tell you we're very confident that the business is starting to turn around for us in the different regions.

Can you talk about from a cash flow standpoint? You have $33 million of cash at the end of Q4. There was 13-ish-million of burn in Q4, I think. So, what kind of cash could you generate from inventory in Q1? And what kind of burn overall should we expect for Q1?

There's three factors affecting liquidity. The first being the improved economic environment, which we all know about, which like Zvi 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, sufficient liquidity. As a general rule, given the guidance, 60% of the revenue is cost of goods sold. So, I'll leave it to you to calculate what that conversion to cash looks like. But it's essentially 60% of the $9 million to $14 million that we guided.

Can you talk through the timing of the credit facilities and those negotiations? And then, are we talking about a $30 million credit line? Or maybe $70 million? What kind of ballpark could it be?

I can't go beyond what I mentioned at this point since they're fluid negotiations. Sorry.

Back to the sell-through, do you think sell-through is at a bottom? I think you kind of talked through that a little bit already in you. So, you're talking about, Zvi, that things are improving? But can you give any quantification or 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?

In Europe, Germany is the largest market. We have a fairly strong footprint in Italy, and 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, is 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're tracking what we've seen now for the last four or five months, six months.

When you think about the trajectory of revenue by quarter, so you've given us Q1 official guidance, but with the seasonal strength that comes from Q2 and Q3, what do you think we could see for Q2 and Q3? Without giving guidance, maybe you can point us to some qualitative description of what the year might look like?

I'll just start off by saying I think it's more than what's in your model, Phil.

This is very promising.

And one other thing, some of our checks suggest the Chinese are actually doing quite well. So, think of Sungrow, Huawei, Growatt. And their channel inventory 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. Just talk to us about the risks you see and the competitive dynamics.

First of all, if you remember back in the summer of last year, a promotion aimed at driving market changes was initiated by Huawei. A couple of other suppliers tried similar strategies, but based on the facts we’ve gathered, it didn’t yield the anticipated results. They eventually halted those efforts and prices stabilized. Currently, the key factor is simply the depletion of inventory. We do observe that there is still an oversupply from Chinese suppliers in the market, primarily resulting from the reduction of inventory rather than the introduction of new products. Our optimizers collaborate with nearly all of them without any preference. Yes, Huawei has been promoting an MLPE for the past six or seven years, while Sungrow is relatively new in this regard, although they have made announcements. In both instances, their optimizers are compatible with just one inverter, and not all of their inverters, only a select few. From a competitive standpoint, we believe our position is quite strong. Additionally, we are noticing an increase in demand for rapid shutdown standalone solutions in residential, commercial, industrial, and larger scale systems. We hold the leading position in that area, and neither SolarEdge, Huawei, nor Sungrow offer a dedicated rapid shutdown solution. Therefore, we are confident that our position will remain robust. The entry of both companies, particularly the newer one Sungrow, emphasizes the vibrancy and necessity of the MLPE market. As an independent player in this sector, we believe we will continue to maintain our leverage.

Next question comes from Eric Stine with Craig-Hallum.

Maybe I'll just get at some of the previous questions. Just ask them differently. Do you have an estimate of how much maybe over the last quarter or two you have under shipped as you try to help the process of the channel clearing? Just trying to get an idea of kind of where true demand might be as we think about Q1 and then, obviously, improvement going forward.

We normally did not measure it this way because we don't under-ship. We have plenty of inventory. And so, unless we will able to supply from existing backlog or new orders we have received, we did not under-ship. And so, whatever the shipment, it was the true demand.

Right. 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, 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.

We took more than a 50% haircut from the Q2 highs as a result of this environment. And so, just a really broad brushstroke would suggest at least 50% or more.

I know you're not getting to Q2. I guess I'll have to take a look at where Phil's estimates are to get a line on that. But, okay, that that helps. Maybe then just coming back to working capital, helpful what you're talking about…

As Bill said, better than his estimates.

I'll add one more. I'll just I'll just add that we continue to make the investment and have purposely been very thoughtful in how we instituted our cost restructuring in the last quarter. And 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 expectation of a much more promising outlook.

I would assume that if things, for whatever reason, don't play out that way, there would be more that you could do. I guess I'm curious. 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?

There are a couple of points to consider. Our revenue and operating expenses grew in 2023, showing a 79% increase for the year. It’s important to note that the market is shifting, our products are performing well, the monitoring solutions remain stable, and demand is consistent. We want to ensure we don’t miss any opportunities. If the market changes, we will adapt accordingly. However, there are still questions regarding true demand. As we progress through this quarter, we and others will offer more insights on our expectations. We are aware that the actual demand is significantly higher than our current guidance.

Understood. Maybe just last one for me. Working capital, obviously, as you kind of laid out, we can back into how much you worked down that inventory here in Q1, but maybe just thinking about it longer term, 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? Clearly, as things kind of turned down in the second half, you were unable to shut off the – as you said, some of the automatic purchases from the contract manufacturer. Is there a number, whether it's a percentage of the $61 million, that you think is a more realistic level based on where the business stands today and the outlook?

We have been considering this a lot. Our current inventory of $61.4 million should ideally be at $30 million or less. Maintaining it at $30 million or less allows for generating $50 million each quarter or $200 million in revenue with one turnover per quarter. Thus, $30 million is the target for inventory levels, which would also free up $30 million in cash for us. From that point, we can navigate forward. We're actively thinking about how to support $50 million in revenue, but we also want to ensure we are prepared when the market shifts. It's important for us to be able to react and capitalize on market improvements.

Our next question comes from Gus Richard with Northland.

I'm curious if you could discuss your market share during the shortage period that began in early 2022. During this shortage, your revenues increased relative to your competitors, but they have also decreased more quickly. Is it fair to assume that prior to this surge in demand, your market share was at X percentage compared to your competitors? Are you returning to that level now? Could you elaborate on this?

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, you look at SEDG, and we look at what they report. And we do note that, in 2022, they only had 23.8 million in MLPE units. And as we disclosed, we had 2.6 million. That was 11% of SEGE's total. We also look at 2023 with some forecasting done by the analysts. With SEGE, it's somewhere around 17.3, 17.5-ish. And we sold almost 4.2 million units. That puts us at 24% of the MLPE units that SEDG had. So, clearly, we've gained share.

Now, post that bubble, are you going to maintain that share, you think? Or are you going to kind of go back to where you were before? Or is it somewhere in between? And then, 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 million to 25 million, are those numbers kind of correct? And what do you think your end state market share might be?

I’m not sure I can provide exact answers to those questions. However, I do know that while third-party reports indicate that SEDG and Enphase hold the largest market shares, we are in third place, albeit a distant one. That said, we have been gaining market share and believe that trend will continue, as outlined in this call and in our release. Additionally, there is new revenue coming from GO ESS and our software EI, which is completely new for us. We increased our revenue from GO ESS from 2.5 million to over 13.5 million, marking a 100% gain in market share. This is significant growth. Moreover, our base business in MLPE grew from 11% to 24%, and when we add the growth from GO ESS, it’s quite impactful. I don't foresee a scenario where we aren’t gaining market share.

Ladies and gentlemen, this concludes the Q&A portion of today's call. Thank you for joining us today for Tigo's fourth quarter and full-year 2023 earnings conference call. You may now disconnect.