Good afternoon. Welcome to Tigo Energy's Fiscal Third Quarter 2024 Earnings Conference Call. Joining us today for Tigo is 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, our ability to increase our revenues and become profitable, and our overall long-term growth prospects. Expectations regarding the recovery in our industry, including the timing thereof, statements about our demand for our products, our competitive position and market share, our current and future inventory levels and reserves and their impact on future financial results, inventory supply and its impact on our customer shipments and our revenue and adjusted EBITDA for the fourth quarter of 2024, our ability to penetrate new markets and expand our market share, including expansion in international markets, 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 31, 2023, our quarterly report on Form 10-Q for the fiscal quarter ended September 30, 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 the call. These forward-looking statements are made only as of the date when made. During our call today, we will reference certain non-GAAP financial measures. We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to our Form 8-K. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. Finally, I would like to remind everyone that this conference call is being webcast, and a recording will be made available for replay at Tigo's Investor Relations website at investors.tigoenergy.com. With that, I'd like to now turn the call over to Tigo's CEO, Zvi Alon. Zvi?

Thank you, Bill. To begin today's discussion, I will highlight key areas in our recent performance as well as provide some commentary on market trends and conditions before turning the call over to our CFO, Bill Roeschlein. He will discuss our financial results for the quarter in more depth as well as provide our outlook for the fourth quarter of 2024. After that, I will share some closing remarks before opening the call for questions. Okay. Let's get started. Since the fourth quarter of 2023, we have experienced increased quarterly revenue growth in each of the last three quarters of 2024. In addition to benefiting from the improved conditions in the solar industry, we are also gaining market share, as illustrated by recent industry data showing Tigo global DC optimizer market share increasing from 9% in 2022 to 13% in 2023. A key area of focus for us has been within the utility-scale market, where we are seeing good success, as evidenced by the recent selection of Tigo to deliver more than 97,000 MLPE units for Brazil's largest floating system, which includes our newest TS4-X-O devices. As we shared with you last quarter, the TS4-X-O is our newest MLPE device, which we believe is ideally positioned to address the high reflection bifacial platform, as the one that we are using in Brazil. Meanwhile, we expect to complete the final delivery to our EPC customer this quarter for the previously announced 142-megawatt utility scale project in Spain. We continue to see positive trends coming from this market and have a strong pipeline of opportunities, which we hope to talk about in more detail in the future. Another key focus area is within our EI software solution, where our Predict+ AI-based energy consumption and production platform continues to grow with 62,000 meters under management. During the quarter, we signed six new contracts having a total multiyear contract value of $700,000. Most contracts are for five years and both new contracts and additional meters enable us to increase our annual recurring revenue, or ARR, which now stands at $1.3 million per year. To give some geographical context on our results, we saw positive sales growth in the Czech Republic, Spain, and the United Kingdom during the quarter. We also saw solid sales growth in Puerto Rico and announced a new partnership in Costa Rica, driven by increasing regulatory requirements for a rapid shutdown capable economic regime. While we exhibit some volatility, on a quarter-over-quarter basis, we saw notable sales growth in both Thailand and Australia. Expanding our sales footprint into new markets has been a key area of focus for us as we are seeing the benefits. Additionally, the regions I mentioned are helping us offset the sluggish or negative growth we are seeing in some other larger markets, including Germany, Italy, and the Netherlands. Bill will have some additional details in a minute. Lastly, we welcome Anita Chang back as our Chief Operating Officer, who originally joined Tigo in 2015 as VP Operations and served as the COO from 2020 to 2023. We are confident that her extensive experience and knowledge of supply chain operations in the industry will make her a key asset in driving operations forward. And with that, I would like to turn to Bill. Bill?

Thanks, Zvi. Turning now to our financial results for the third quarter ended September 30, 2024. Revenue for the third quarter of 2024 decreased 16.8% to $14.2 million from $17.1 million in the prior year period. On a sequential basis, revenues increased 12.1% with improved results coming from many countries in the EMEA and APAC regions, including the Czech Republic, Spain, the U.K., Thailand, and Australia. By region, EMEA revenue was 8.6% or 60% of total revenues, a 23.5% sequential increase. Americas revenue was $2.9 million or 21% of total revenues, a 3.7% sequential increase. And APAC revenue was $2.7 million or 19% of total revenues, a decline of 7% sequentially. Growth in profit in the third quarter of 2024 was $1.8 million or 12.5% of revenue compared to $4.2 million or 24.3% of revenue in the comparable year ago period. The year-over-year decline was primarily due to an inventory charge of $3.4 million, primarily for battery inventory. The charge reflects management's estimate of the inventory's net realizable value and incorporates current and future expectations of the battery pricing environment. Total operating expenses for the third quarter declined 20.7% to $12.2 million compared to $15.4 million in the prior year period. The decline was driven primarily by our previously announced cost-cutting efforts. Operating loss for the third quarter decreased by 7.2% to $10.4 million compared to $11.2 million in the prior year period. GAAP net loss for the third quarter was $13.1 million compared to a net income of $29.1 million in the prior year period. As a reminder, the prior year period reflected a mark-to-market adjustment for our convertible note. Adjusted EBITDA loss for the third quarter decreased 12.7% to $8.3 million compared to an adjusted EBITDA loss of $9.5 million in the prior year period. Our adjusted EBITDA loss includes the previously mentioned inventory charge of $3.4 million. As a reminder, adjusted EBITDA represents operating profit or loss as adjusted for depreciation, amortization, stock-based compensation, and M&A transaction expenses. Primary shares outstanding were 60.7 million for the third quarter of 2024. Turning now to the balance sheet. Accounts receivable net increased this quarter to $8.8 million compared to $6.9 million last quarter and decreased from $20.4 million in the year-ago comparable period. Inventories net decreased by $4.5 million or 8.8% compared to $51.3 million last quarter and $57.4 million in the year-ago comparable period. Cash, cash equivalents, and short- and long-term marketable securities totaled $19.5 million at September 30, 2024. On a sequential basis, we reduced our cash burn rate with cash declining by $0.7 million as we continue to make progress on reducing our inventory and working capital. Before I turn the call back over to Zvi, I will now take a few minutes to provide our financial outlook for the 2024 fourth quarter. As a reminder, Tigo 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 fourth quarter of 2024, we expect revenues and adjusted EBITDA to be in the following range. We expect revenues in the fourth quarter ended December 31, 2024, to range between $14 million and $17 million. We expect adjusted EBITDA loss to range between $6.5 million and $8.5 million. Our guidance includes the potential need for additional inventory charges as we complete our year-end audit. The continued positive momentum that we are seeing in our business and the growth initiatives that are being undertaken to gain market share provide confidence that we will achieve profitable growth in the near future, and we look forward to sharing further updates as we progress through the rest of 2024 and into 2025. That completes my summary, and I'd like to now turn the call back over to Zvi for final remarks. Zvi?

Thanks, Bill. While the industry is still contending with headwinds, we believe that our robust product portfolio positions us to mitigate competitive pressure. As demand for our solutions continues to return, we expect revenue and profitability to increase steadily throughout the remainder of 2024 and into 2025. We are encouraged by the momentum we have built over the last three quarters and remain focused on advancing our mission to be a leading provider of intelligent solar and energy storage solutions. We firmly believe in the growth prospect of our business and look forward to providing additional updates in the coming quarter. With that, operator, please open the call for Q&A.

Our first question comes from Philip Shen of ROTH Capital Partners. Your line is now open.

Hi guys, thanks for taking my questions. I wanted to check in with you on the outlook for margins, especially as we get through '25. The margins were quite low in Q3. Q4, we can get to an implied margin for gross margins. If you can share what you think that is, that would be great. But then what do you think the cadence of revenue and margins is on a quarterly basis through '25? Thanks.

Given our outsourced manufacturing model, our normalized margins, excluding inventory charges, are in the mid-30s. If we exclude the inventory charge from this quarter, they would have been around 35%. Looking ahead to next year, we expect our margins to remain in the mid-30s on a normalized basis. As we achieve greater economies of scale with increasing revenue, we anticipate that margin figure could rise into the high 30s and eventually reach our goal of 40%, similar to where we were at the peak in Q2 of '23. Regarding growth, we can approach it mathematically in various ways. For Q4, our guidance is flat to up 20%, specifically around 19.4%. The midpoint shows a 10% increase. In the current quarter, we experienced a 12.1% rise, while the previous quarter saw almost 30% growth, allowing for a range of mid-teens growth currently, with potential acceleration into the high teens or 20%. If we maintain this trajectory each quarter, year-over-year growth could range from 70% to 100%, positioning us with a revenue target exceeding $30 million, which aligns with our EBITDA breakeven point. This is our perspective on the business as we progress towards 2025, and we are pleased with the strides we have made thus far.

Okay. Thanks, Bill. Back in August, you guys talked about the channel inventory being largely cleared. And in this quarter, you're still talking about reducing your inventory. And I think in your 10-Q, you talked about the elevated inventory levels with distributors and overall channel inventory being high. And so I wanted to understand when you think the European channel inventory truly clears? And how many weeks or months do you think is in the channel in Europe?

So the commentary overall is our channel inventory is mostly cleared. There might be one or two out of the hundreds of customers we have that may still have some issues. But the channel primarily, as it relates to us, is relatively cleared. We never overstocked it. We never got ahead of ourselves, as maybe some other competitors might have. But overall, channel inventories are still elevated just from a macro perspective because distributors carry multiple vendors. If they have a hangover in general and they're having some pressure on their balance sheet, it doesn't necessarily relate to our inventory. It just relates to the balance of inventory that they're carrying for the rest of the market there. And so we still see that there's some issues with clearing inventory at a macro level with all vendors, but we're not really ascribing it as a symptom of what we're going through right now.

I would like to also add and highlight, Phil, that I believe at the end of Q1, we shared that we started seeing an increased number of repeat orders from existing customers and distributors. And that has been continually growing substantially. I would say the majority of the orders we continue to get are repeat orders for new stock that is going into our distributors to supply demand. So from that perspective, the overhang from the last problems we had is almost gone. I would second Bill's point of view.

Great. Thank you. Okay. Sorry if I missed this, but did you reinforce that your EBITDA breakeven will be in early H1 '25, first half '25? That's what you talked about on the Q2 call. Just remind me, are you going to be perhaps later in the year now?

Yes. So we'll answer it now. Whether it occurs in the first half or second half is obviously dependent on the trajectory of the growth rate that we achieve. We achieved 30% in Q2, 12% this last quarter. We're guiding anywhere from flat to up 20%. If I just sort of flatline that number anywhere between 15% to 20%, it suggests that we would be at a breakeven level at that 30% number in the second half of the year, not the first half of the year. That being said, we're not making any predictions on, the market's too unpredictable to just draw a straight line. And so what we said on the last call was the first half of the year. And so I can't say with definitiveness whether it's going to be first half or second half. But if you look at the progress that we're making, it's going to be in 2025 in our view.

Great. And then one last question for me in terms of pricing. We recently wrote that SolarEdge stopped running their promotion and has just cut their product prices in Europe by 20% to 30% from an ADLP standpoint, authorized distributor list price. And so we've heard others doing that as well, with Chinese vendors lowering prices instead of running promotions. And then SMA, I think, lowered prices by 12% to 20%. So have you taken any price action recently? I know you guys don't price exactly on a per watt basis; it's on a per unit basis. But if you can speak to how you're approaching pricing, especially given the competitive dynamics, that would be great.

Happy to answer the question. I would summarize it as saying we have not decreased our prices. Obviously, we had to, over the last year, use various positions, some discounts in some special cases. But overall, we have not. As a matter of fact, we are maintaining our prices pretty much the same at the same type of discounts that we have been providing before. I would also highlight that the new product line we introduced, the TS4-X product line, has been introduced at a higher price, and we have seen a very nice uptick in orders for those products. We've heard about SolarEdge and some other suppliers, but we've not been required to respond or make any changes so far in the market.

Okay. Do you expect a lower price in the coming quarters?

The answer is no.

Okay, thank you, Zvi. I'll pass it on.

Most welcome.

Our next question comes from Eric Stine of Craig-Hallum Capital Group. Your line is now open.

So you had mentioned market share for '22 and '23, and I can appreciate, given market dislocation and things going on in different countries in Europe, may be tough to answer. But any thoughts on kind of current market share trends? And I would think, especially in Europe, this is where your inverter-agnostic architecture would come into play.

Well, Eric, besides industry reports, the third-party reports that validate our gains in market share, us and our main competitor both publish the number of optimizers that we sell each quarter. If you do a comparison of that, and I think we've talked about it a few times on calls, we've almost increased our share against them going from more than 10% of their unit volumes to 15% to 20%. So we continue to see that play out. I mean, we'll analyze the numbers from here in the third quarter as soon as they're published by our competitor, and we'll see what that looks like. But each of the quarters this year so far have demonstrated continued progress in share gain.

Yes. Okay. So I guess that's what I was getting at. I mean, I guess we will find that out, but it sounds like that is the feeling. It does seem like your commentary on balance is a little more positive than some of the others. And maybe that's by specific market, markets that you're in versus others, but to me, I guess that's noteworthy.

I can shed a bit more light. We have been told and not just recently, but for the last couple of quarters that we are the best-selling optimizer in the market in a couple of the European markets, the big ones, better than SolarEdge and better than some of the other guys.

Got it. Okay. Very helpful. I guess I'll just keep it to two questions here. But just curious, I mean, I know you've been gaining nice traction on the licensing of the rapid shutdown device. Just maybe if you could talk about the pipeline there, the interest level there, given it's a pretty unique product in the market.

So I can tell you, yes, we have been adding licensees to our roster, and it has been growing steadily over the years. And we get also some insights into numbers that they ship. So it gives us an indication as to how we're doing in the market as well.

Got it. Okay. I guess I'll take the rest offline. Thanks.

Thank you.

One important point to highlight from Zvi's prepared remarks is that we are demonstrating growth in some newer regions, even amid the sluggishness that is occurring in our traditional large markets, particularly Germany and Italy. Regarding the timing of our return to EBITDA profitability and revenue growth as these markets stabilize, the recovery in Germany and Italy will also positively impact us. While this growth benefits everyone, the pace of growth in these two countries will depend somewhat on the recovery in those specific areas.

Thank you.

Our next question comes from Sameer Joshi of H.C. Wainwright. Your line is now open.

Thank you for addressing my questions, Zvi. Bill, I wanted to follow up on your earlier comments. My question is about the geographical development in the second half of 2025. Are you anticipating that revenue growth in the range of 30% to 35% will primarily come from increased adoption in the APAC region, or do you also expect Germany and Italy to recover by that time in your outlook?

The current mid-teens growth we are experiencing is due to our success in expanding our presence in newer regions like the Czech Republic, the U.K., and Australia, which has recently accounted for over 10% of our total sales. We anticipate a return to more typical growth patterns in Germany, which has been somewhat sluggish, and in Italy, which has faced some internal challenges, as well as specific issues in the Netherlands. However, we see these challenges as temporary. We expect improvement in these markets by 2025, and this progress will positively impact our overall growth and revenue.

Understood. Thank you for that. In your prepared remarks, you mentioned the $3.4 million charge and indicated that there is likely to be a charge in the current quarter. Is that charge expected to be higher than the $3.4 million we saw this quarter? Additionally, is this charge primarily due to devaluation or reduced prices, or is it related to a portion of the inventory becoming obsolete?

I will address your second question first. It is not related to obsolescence but pertains to our GO ESS product line, which includes batteries and inverters. This line has a significantly steeper price curve and faces greater pricing pressures due to heightened competition. In the current quarter, as I mentioned earlier, we reduced the carrying cost to better align with the current and expected pricing environment, which will help boost battery sales. I also indicated that our guidance considers potential outcomes since the analysis is still pending as part of our year-end audit focused on the remaining balance of mostly GO ESS products. This line carries more pricing risk due to the observed degradation in pricing, in contrast to our legacy TS4 line, which has maintained stable pricing for over five years. When we are asked about changes in pricing and competition for TS4s, the answer is generally no. We offer a differentiated product that sets us apart from competitors. However, in the batteries and inverters segment, there are many more competitors, necessitating our adaptation to the current pricing landscape. That is why we have shared this potential marker for investors to consider for Q4.

Understood. Thanks, Bill for that clarification and good luck for the next quarter.

Thank you.

Thank you.

Thank you for joining us today for Tigo's third quarter 2024 earnings conference call. You may now disconnect.