Tigo Energy, Inc. Q1 FY2025 Earnings Call

Good afternoon. Welcome to Tigo Energy's Fiscal First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Joining us today 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, Karen. And it's a pleasure to join you from Campbell, California. Also with us is Zvi Alon, our CEO, who is joining us from the Intersolar Conference in Munich, Germany. I'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 and become profitable in our overall long-term growth prospects, expectations regarding our industry, including the timing thereof, statements about demand for our products, competitive position and market share, the impact of tariffs, our current and future inventory levels, charges, reserves and their impact on future financial results, inventory supply and its impact on our customer shipments, statements about our revenue and adjusted EBITDA for the second quarter of 2025 and our revenue for the full year of fiscal year 2025, 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 that are described in today's press release and discussed in the Risk section of our most recent annual report on Form 10-K. Our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2025, 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 they are 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 to exhibit to our Form 8-K. The non-GAAP financial measures provided should not be considered as a substitute for or to the measures of financial performance prepared in accordance with GAAP. Finally, I would like to remind everybody that this conference call is being webcast and a recording will be made available for replay on 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 financial and operational performance and briefly address the current macroeconomic developments before turning the call over to our CFO, Bill Roeschlein. He will discuss our financial results for the first quarter in depth as well as provide our guidance for the second quarter and the full year of 2025. After that, I will share some closing remarks, tell you about our outlook, and then open the call for questions from you and the analysts. I am pleased to report that we ended the first quarter of 2025 with our fifth increase in sequential quarterly revenue growth, growing 9.1% sequentially and 92.2% on a year-over-year basis. In the first quarter of 2025, we reported a total revenue of $18.8 million and shipped 502,000 or 351 megawatts of MLPE. I'm exceptionally proud of what our team here at Tigo has accomplished. To give some geographical color on our results, we saw positive sequential sales growth in EMEA, the Americas, and APAC regions. Within the EMEA region, the recovery that began for us a year ago has now broadened as we saw much stronger results from Italy and the Netherlands. In addition, both the Americas and Asia Pacific regions also grew sequentially in the first quarter. I'm also excited about our recently introduced 22A TS4-A series, now serving panels up to 125 watts, joining the TS4 family with the highest safety solutions, including the unique Tigo multifactor rapid shutdown, demonstrating our commitment to ahead of the module performance. Given the current developments in Washington, many of you are likely interested in how the latest reciprocal tariff decisions may impact us. As you may know, the majority of Tigo's revenue occurred outside of the United States. Based on the current reciprocal tariffs announced, we estimated that approximately 5% of our Q1 revenue would have been affected by the China record tariffs of 145%. We also estimate there is approximately 15% of our Q1 revenue would have been affected by 10% tariffs from the rest of the world or cyclical tariffs. We are currently working with our supply chain partners to mitigate the effects of these reciprocal tariffs where possible. And with that, I will turn it over to Bill.

Thank you, Zvi. Turning now to our financial results for the first quarter ended March 31, 2025. Revenue for the first quarter of 2025 increased 92.2% to $18.8 million from $9.8 million in the prior year period. On a sequential basis, revenues increased 9.1% with improved results coming from many countries in the EMEA and APAC regions, including Italy, Czechia, the Netherlands, and the Philippines. By region, EMEA revenue was $11.5 million or 61.3% of total revenues. Americas revenue was $4.7 million, and APAC revenue was $2.6 million or 13.6% of total revenues. By product family, for the first quarter of 2025, MLPE revenue represented $16 million of revenue or 84.8% of total revenues. GO ESS represented $2 million or 10.7% of total revenues, and Predict+ and licensing revenue represented $0.8 million or 4.5% of total revenues during the quarter. Gross profit in the first quarter of 2025 was $7.2 million or 38.1% of revenue compared to a gross profit of $2.8 million or 28.2% of revenue in the comparable year-ago period. Operating expenses for the first quarter declined 5.9% to 11.2% compared to $11.9 million in the prior year period. The decline was driven primarily by our previously announced cost-cutting efforts. Operating loss for the fourth quarter decreased by 56.2% to $4 million compared to $9.1 million in the prior year period. GAAP net loss for the first quarter was $7 million compared to a net loss of $11.5 million in the prior year period. Adjusted EBITDA loss in the first quarter decreased 67.4% to $2 million compared to an adjusted EBITDA loss of $6.3 million in the prior year period. These results reflect progress towards profitability on a non-GAAP basis as previously announced. As a reminder, adjusted EBITDA loss is a non-GAAP measure that represents net loss adjusted for interest and other expenses, income tax expense, depreciation, amortization, stock-based compensation, and M&A transaction expenses. Primary shares outstanding were $61.9 million for the first quarter of 2025. Turning now to the balance sheet. Accounts receivable net increased this quarter to $10.4 million compared to $8 million last quarter and $6.3 million in the year ago comparable period. Inventories net decreased by $3.1 million or 14.1% to $89 million compared to $102 million last quarter and $55.8 million in the year ago comparable period. Cash, cash equivalents, and short and long-term marketable securities totaled $20.3 million at March 31, '25. On a sequential cash basis, cash increased by $0.4 million as we continue to make progress on reducing our inventory and working capital. Turning now to our financial outlook for the second quarter of 2025 and full year of 2025. 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 second quarter of 2025, we expect revenues and adjusted EBITDA to be in the following ranges. We expect revenues in the second quarter ended June 30, 2025, to range between $21 million and $23 million. We expect adjusted EBITDA to range between negative $1.5 million and positive $500,000. For the full year of 2025, we are reiterating our previous guidance of revenues of between $85 million and $100 million. That completes my summary, and I'd like to now turn the call back over to Zvi for final remarks.

We look ahead, and I'm happy to say that even against the backdrop of economic uncertainty, we believe our track record of consecutive quarters with topline growth will continue for the remainder of 2025 as demand for our solutions continues to return. We firmly believe in the growth prospect for our business and look forward to providing additional updates in the coming quarters. With that, operator, please open the call for Q&A.

Thank you. We are now ready to begin the question-and-answer session. Our first question comes from Eric Stine of Craig-Hallum Capital Group. Your line is open.

Hi, Zvi, hey Bill.

Hey, Eric.

Hello. I'm curious about the nice recovery you're seeing across all your markets. When you think about this, could you break it down between the improving conditions with your current distributors and direct sales versus market share gains? Clearly, this is a bit of both, and I would love your thoughts on how that breaks down between the two.

Outstanding question, Eric, thanks for asking it. I will share that we continue to see current existing distributors which are very strong, increasing their footprint with us and becoming much more bullish on the market requirements. Similarly, our efforts in promoting our products with system integrators and large EPCs are paying very nice dividends. And I can tell you that the majority, I would say, of our growth is coming from an increased market share, we believe. Even though it's the same exact distributors, and that's what we hear from them – I would not mention any names, but two or three of them mentioned specifically that we have increased the footprint within their portfolio substantially above any other competitor.

That's good color. I mean, do you attribute that to just a broader product offering, the fact that this can be used residential, C&I, utility scale? Is it price? Is it kind of all of the above?

So I'll tell you that I'll touch the price first. We have not changed price at all, and we've been consistent on that front. We introduced the TS4-X family at a higher price and we see a nice increase for those products for a different market, which is accepting it so far. But as far as the TS4-A product, price was not an issue. Now I can tell you that many stores are helping us gain market share. One, the number of SKUs is very small. We have a single optimizer that covers basically the whole market. Not only that, it's the highest power rating which is the current shipping version is 700 watts or 800 watts, and we just announced the 725 watts. And it works across essentially all three market segments. Number three, I would say, we are the company with backward compatibility of current shipping products to products we shipped seven, eight, nine years ago; exactly identical. If you have any failure with the old product, which sometimes does happen, you don't need to have the same exact part number. You can just buy anyone off the shelf and replace it or get an RMA from us to replace it. Also, the fact that our product works with pretty much any inverter out there is also a major contributor. So all in all, I would mention one more thing. Our installation time of the MLPE product is superb. It's about 10 seconds per PV module. It's unheard of. I mean, literally just slide the unit on the panel and you're done. So all those factors together lead to more demand, and I can tell you that the amazing part for us is that we see a larger number of fields being shipped to large EPCs as they become much more experienced and successful with those products.

Got it. Thank you very much for that. And then I guess, for my last question, then I'll turn it over. Just curious, I mean, OpEx came down a little bit here in the quarter, but I also know that in Q1, you were expecting some audit fees and some other one-time items. So just curious guidance and the fact that at the upper end, positive adjusted EBITDA would imply that OpEx, we should think of it lower. So just curious if you can give any color on that.

So in general, there are two levers to think about in the guidance and projections for the year as you build out your model. We are tracking at a high gross margin. We're seeing that both in our MLPE business as well as the lack of having a drag on the margin from our GO ESS product line, which we did a large reserve for last quarter. So combining those both should lead to some gross margin uplift as we look later into the year, so 38% plus. I would put it closer to 40%. And OpEx could conservatively be between 11% and 12%, or maybe the midpoint of 11% is, I think, a fair range. We were at 11% and 11.2% in Q1, but we were also 15% in Q4. So there's a little bit of variability there. But when you model that out, you'll come up with numbers for the adjusted EBITDA that we guided to.

Okay. All right. Thank you very much.

Thank you.

Thank you. Our next question comes from Philip Shen from ROTH Capital Partners.

Hello?

One moment for our next question. Our next question comes to us from Sameer Joshi of H.C. Wainwright. Your line is now open.

Hey, Zvi. Thanks for taking the question and congrats on the good quarter. I think you, in prepared remarks, mentioned 5% of revenues would have been impacted by 145% tariffs and 15% by 10% tariffs. Back of the envelope, this would be around $1.8 million to $2 million. Should we expect that level of impact going forward? And then how does that mesh with the sort of increased gross margin that you have seen recently?

So I would characterize it this way. The U.S. represented about 22% of our revenues. Within that, you've got 15% of that MLPE products that are made outside of China and Thailand, which are subject to the reciprocal tariffs, and we'll see what happens after the 90 days. Then that leaves 5% that are subject to the China tariffs, but that includes both inverters and batteries. We are working on our supply chain and have the opportunity to move some of that outside of China, which would negate much of that 5%. The rest of it is batteries which are sourced in China, but we have a position in the U.S. already, which also negates the tariffs on that. So combining all of that, we don't see a substantial impact from tariffs on our business, at least for the second quarter, and we're going to leave it quarter-to-quarter because it seems to change so fast on this front.

Yeah. No, you answered my part two of the question, which was inventory, how much of it will support the second quarter. So it seems you have enough inventory that is pre-tariff that can support your business in the second quarter.

Correct.

Can you provide more details about the demand for your off-grid product offering in 2024? Is it primarily from businesses, or do you see residential demand as well? I'm curious about the size of this demand and its sources.

There is a substantial region, actually a couple that like to be off-grid and they're in the Midwest and some parts of the South, and that's what we were aiming at. We have started seeing some fairly good success. So we have packaged that solution for that one specific market. If you check who else is providing solutions, which are also off-grid, it is becoming an increased number of suppliers. We are sure we are not going to stay the only one, and we are not right now. But for us, it's a growing segment that we've not targeted before.

Understood. And then just last one. The second quarter guidance implies that your second half revenues are likely to be $46 million to $59 million at the midpoint of 2Q guidance. Do you have visibility? And how much confidence do you have in that outlook of strong second half?

I can tell you that we don't have specific orders going out beyond a couple of quarters, maybe in some very small cases, a little bit more, but the majority are really for the current quarter and the next quarter. On the other hand, we know how the market behaves and what their expectations are. And we factor it in, in addition to what we know about the market. We have been so far accurate for the last five to six quarters with our projections. We are fairly confident. I can tell you that our backlog is increasing, and although we don't share those numbers, it has been going from one quarter to the other. As we got into the current quarter, we felt much more confident about even increasing the numbers in our guidance.

Understood. That sounds good. Thanks a lot for taking my questions.

Most welcome.

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

Yes, hi. Thanks for taking my questions. We went through the 10-Q quickly, and we saw that there's the going concern language. You have the $50 million convert, I think, due January 1 or sometime in January of 2026. Can you talk to us about the situation there? How do you expect to manage the $50 million due? How flexible would you expect your convert counterparty L1 energy to be? Thanks.

Yeah, the counterparty is being very flexible and cooperative and is a big supporter of Tigo, and that being said, we are working on a refinancing. I'm sure you can appreciate as something is announced, we'll announce it. But rest assured, we are diligently working towards that maturity.

Okay, thanks. From a cash standpoint, you guys have an annual guide. And so if you hit the midpoint of that guide, how much free cash flow generation do you think you can have?

So on a go-forward basis, we're looking at EBITDA positive on Q2 guidance for Q3 and Q4. We would expect that based on the annual guide. The overall cash position is, I would say, probably going to be flattish to slightly up. We did mode on some of the inventory, especially on MLPE. So there's going to be some consumption there that some of the generation is going to be used for working capital for that purpose. So we're thinking of cash to be somewhat range-bound in the lower $20 million level.

Okay, great. Thanks. And then as it relates to Europe, Intersolar is about to kick off, I think tomorrow, are you guys there? I know Europe is a big part of your business. And so what are you hoping to accomplish at that show?

We are at full swing. We have our team ready. We have a very nice booth set up, and we actually have a very interesting and busy schedule already from partners, distributors, as well as customers. It’s interesting, but we are all pretty much booked. We didn't have much left to allocate. So we're very happy with what's going on right now.

Thanks, Zvi. And then in terms of distributors, I've been hearing that some of the pan-European larger distributors might be having issues with a trend where more of the local distributors are developing a greater influence with the installer base. Are you seeing something similar? And so how might you adjust your strategy to sell into Europe? I don't know if this plays a factor at all, but what are your thoughts on this dynamic?

So what we have seen are two phenomena. First of all, big picture, the total number of distributors we have did not shrink much even with all those guys that went out of business. We actually replenished some of them fairly quickly with others, and some came back from almost extinction. So we are very happy for them to be able to survive. Now to the question itself, we do see a phenomenon in which the very large distributors are starting to sell to some local distribution. We're not necessarily encouraging or discouraging it, but it helps us keep a footprint that is much wider, and for the smaller regional ones, they don't necessarily are able to hit the same discount level as the large ones. So that mechanism we have in place is working for us and it sells pretty much all of them. So we don't think we need to make any changes.

Got it. And so when you see the large distributors selling product to smaller local ones, what kind of products are we talking about? Modules, inverters, MLPE, your products? Or is it more focused on storage or some other categories?

No. The majority we see is in the line of inverters, MLPE, and some PV modules. On the battery side and ESS, not much. Not much at all, I would say.

Got it. Thanks, Zvi. And then in terms of – maybe the last one here for me. The China tariff in the U.S. is 145%. The biggest impact I see is on cell packs for batteries coming into the country. And I wanted to just check in, maybe you already addressed this, sorry if I missed this, but what's the impact for you guys? Do you already have a lot of inventory in country in the U.S., so that's less of an issue? Or if it is a bit of an issue, what are you guys doing to mitigate some?

So for the foreseeable future, I would say, the next few quarters, we’re in good shape with the inventory we have. We are getting the next generation, which is addressing the sources of the suppliers, and so we would not be exposed to China as much. As you know, China controls a very large part of the market. I’m not sure we can avoid it completely, but we have other sources.

So for now, you guys have some insulation maybe for a few quarters; that's a fair amount of time. So through that inventory, you do need to start now or diversifying your cell pack geographic sourcing. And so the world is trying to do this for at least most of the U.S. And so what countries are you trying to go to? Is it Korea? Is it Japan? What are the countries?

It's those two that you mentioned exactly. And yes, it seems like also some of the Chinese companies are actually looking for suppliers from other places. So we don't know exactly how it's going to all work out, but Korea and Japan are the two main areas.

Okay, great. Best of luck on that transition and with the rest of the year. Thank you, and I'll pass it on.

Thank you very much. Thanks, Phil. Are you in Germany?

Not this time around, given the earnings season.

Okay, no problem.

One moment for our next question. Our next question comes from Sidoti & Company. Your line is now open.

Congratulations on the quarter, gentlemen.

Thank you.

Just turning to the demand side. You've reported regions, but just working out some arithmetic, it looks like EMEA was a little bit stronger in growth. Is that accurate?

Yes. We had the most revenue from the EMEA region in the quarter, but they represent the smallest of the three regions for us, followed by EMEA and the Americas.

Can you release any growth figures for the Americas?

It's growing a little bit more than what the market estimates are. I mean, it's certainly low to mid-single digits. If that helps? No, it's certainly not the growth that carried the 9%.

Got it, all right. Well, thank you for the information and good luck on the quarter.

Thank you so much.

Thank you. At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Alon for closing remarks.

Thanks again, everyone, for joining us today. I especially want to thank our 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.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.