Tigo Energy, Inc. Q3 FY2025 Earnings Call

Good afternoon. Welcome to Tigo Energy's Fiscal Third Quarter 2025 Earnings Conference Call. Joining us today from Tigo are Zvi Alon, CEO, and Bill Roeschlein, CFO. This call is being recorded. I would now like to turn the call over to Bill Roeschlein, Chief Financial Officer. You may begin.

Thank you, operator, and it's a pleasure to join you today. Also with us is Zvi Alon, our CEO. 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 and our overall long-term growth prospects; expectations regarding recovery in our industry, including the timing thereof, statements about our demand for our products, our competitive position and market share; the impact of tariffs and our current and future inventory levels, charges and reserves and their impact on future financial results; inventory supply and its impact on our customer shipments, statements about the recovery of the solar industry, statements about our revenue and adjusted EBITDA for the fourth quarter of fiscal 2025 and our revenue for the full fiscal year of 2025; as well as statements about our existing backlog and bookings; statements about the anticipated benefits of our manufacturing and marketing partnership with EG4; and our ability to realize such benefits, as well as our ability to expand market share in the U.S. through the power market; our ability to refinance our convertible debt prior to maturity; our ability to obtain funding that's acceptable to fund our working capital needs; our ability to penetrate new markets and expand our market share, including expansion in international markets, investments in our product portfolio are all 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 most recent annual report on Form 10-K, our quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2025, and other reports we may file with the SEC from time to time. These risks and uncertainties may 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 to GAAP reconciliations in our press release furnished as an exhibit to our Form 8-K. 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'd like to remind everyone 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. And with that, I'd like to now turn the call over to our CEO, Zvi Alon. Zvi?

Thank you, Bill. To start today's discussion, I will highlight important aspects of our recent financial and operational performance before handing over to our CFO, Bill Roeschlein, who will discuss our financial results for the third quarter in greater detail, as well as provide our guidance for the fourth quarter and updated guidance for the full year of 2025. After that, I will share some concluding thoughts, outline our outlook, and then open the call for analyst questions. I am pleased to report that we finished the third quarter of 2025 with our seventh consecutive increase in sequential quarterly revenue growth. Quarter-to-quarter, we grew more than 27% and on a year-over-year basis, we achieved 115% growth. We are glad to witness a return to growth akin to what we experienced prior to the industry downturn and we believe that our revenue growth and market share gains highlight the value that Tigo offers in the marketplace. Now, regarding the numbers. In the third quarter of 2025, we reported total revenue of $30.6 million and shipped 795,000 units or 600 megawatts of MLPE. Notably, we have also returned to GAAP operating profitability for the quarter, which we aimed for on the high side of our estimates during our last quarter call. For the second consecutive time, we are reporting positive adjusted EBITDA, which fills me with pride for what our team at Tigo has accomplished. To provide some geographical context to our results, we saw significant growth in the EMEA and Americas regions, contributing 70% and 26% of our revenue, respectively. Specifically, we excelled in the U.S., with sales increasing by about 68% sequentially, making it our largest sales region at the country level this quarter. This success can be attributed to our ongoing efforts in the U.S. repower market, where we continue to make substantial progress. During the third quarter, we also announced a domestic manufacturing marketing partnership with EG4 Electronics in the U.S. This collaboration will enable Tigo and EG4 to provide Tigo-optimized inverters eligible for ITC and domestic content bonus tax credits to U.S. customers, alongside the 45X tax credit for both companies. While analysts anticipate market weakness in the U.S. next year, we believe that this partnership, coupled with our repower initiative, may help alleviate the broader challenges in the U.S. market and potentially present significant growth opportunities for us in 2026. With that, I will now turn it over to Bill. Bill?

Thank you, Zvi. Turning now to our financial results for the third quarter ended September 30, 2025. Revenue for the third quarter of 2025 increased 115% to $30.6 million from $14.2 million in the prior year period. On a sequential basis, revenue increased 27.3% with improved results coming from many countries in the EMEA and Americas regions, including Italy, the United Kingdom, Czech Republic and the United States. By region, EMEA revenue was $21.6 million or 70.5% of total revenues, Americas revenue was $8 million or 26% of total revenues and APAC revenue was $1.1 million or 3.5% of total revenues. By product family, for the third quarter of 2025, MLPE revenue represented $26.8 million of revenue or 87.5% of total revenues, while GO ESS represented $3.1 million or 10.3% of total revenues and Predict+ and Licensing revenue represented $0.7 million or 2.2% of total revenues during the quarter. Gross profit for the third quarter of 2025 was $13.1 million or 42.7% of revenue compared to a gross profit of $1.8 million or 12.5% of revenue in the comparable year-ago period. Sales of GO ESS, which included reserved inventories, had a positive 1.5% gross margin impact during the quarter. Operating expenses for the third quarter increased 1.8% to $12.4 million compared to $12.2 million in the prior year period. The increase was driven primarily by higher sales and marketing costs in the quarter. Operating income for the third quarter increased by 106.2% to $0.6 million compared to an operating loss of $10.4 million in the prior year period. GAAP net loss for the third quarter was $2.2 million compared to a net loss of $13.1 million for the prior year period. And adjusted EBITDA in the third quarter increased 134.3% to $2.9 million compared to adjusted EBITDA loss of $8.3 million in the prior year period. These results reflect both top line growth and operating expense management. As a reminder, adjusted EBITDA is a non-GAAP measure that represents net loss as adjusted for interest and other expenses, income tax expense, depreciation, amortization, stock-based compensation and M&A transaction expenses. Primary shares outstanding were 69.5 million at the end of the third quarter of 2025. During the quarter, we issued 6.5 million shares from our ATM program for gross proceeds of $10.9 million, representing an average purchase price of $1.69 per share. Subsequent to quarter end, we completed the ATM program with the issuance of 837,000 shares for gross proceeds of $2.2 million, representing an average purchase price of $2.61 per share. Now turning to the balance sheet. Accounts receivable net increased $5.4 million in the third quarter to $15.8 million compared to $10.4 million last quarter and $8.8 million in the year-ago comparable period. Inventories net increased by $9.6 million or 50.8% to $28.5 million compared to $18.9 million last quarter and $46.8 million in the year-ago comparable period. Our inventory buildup comes as a result of increased activity that we're seeing in our business. Cash, cash equivalents, and short-term and long-term marketable securities totaled $40.3 million at September 30, 2025. Principal on our convertible debt due in early January 2026 is $50 million. We've been working diligently with certain financial parties regarding refinancing this debt. And while we have not entered into any binding agreements yet, we expect to complete this process in the fourth quarter. We further expect to utilize a combination of cash on hand and borrowing arrangements to complete the refinance and fund our working capital needs as we continue to grow the business in 2026. Turning now to our financial outlook for our fourth quarter of 2025 and full year 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 fourth quarter of 2025, which traditionally is a seasonally slow quarter in our industry, we expect revenues and adjusted EBITDA to be in the following range. We expect revenues in the fourth quarter ended December 31, 2025, to range between $29 million and $31 million. We expect adjusted EBITDA in the fourth quarter ended December 31, 2025, to range between $2 million and $4 million. For the full year of 2025, we anticipate revenue to be between $102.5 million and $104.5 million. That completes my summary. I'd like to now turn the call back over to Zvi for final remarks. Zvi?

Thanks, Bill. As we look ahead, I'm happy to say that even against the backdrop of the economic uncertainty, we believe that our track record of 7 consecutive quarters with top line growth and disciplined expense management builds a strong foundation for profitable future growth as we near the end of 2025 and look into 2026. We firmly believe in the growth prospects of our business and look forward to providing additional updates in the coming quarters. With that, operator, please open the call for Q&A.

Our first question is from Eric Stine with Craig-Hallum Capital Group.

I'm interested in discussing the improvements you've observed in the U.S., as that was a notable aspect of the quarter. Additionally, I'm curious about your new partnership with EG4. Although it's early, what are your initial thoughts on its potential as we approach fiscal '26?

Let me start with the first question about the improvements in North America. Over the last few quarters, we have pointed out that we identified a segment that is not well served, focusing on repowering existing installations rather than new ones, and this market has a substantial installed base. We targeted this segment and are pleased to report that it has been very successful. We have experienced a significant increase in our revenue for North America, and we anticipate continued growth in the future. We have a unique solution specifically designed to address this issue. Additionally, we have made great progress with new installations and storage, to the extent that we are nearing the depletion of our existing inventory. These developments are positive indicators for our ability to meet the growth in North America, in contrast to the overall market, which is currently declining. In Europe, we maintain a diversified approach, and while Germany remains a significant part of our business, we are also seeing strong growth in Italy, the U.K., and the Czech Republic. This diversification helps mitigate some of the downturn in various countries. Overall, our strategy has been effective in minimizing the negative impact of market challenges as recovery occurs. Regarding our partnership with EG4 in North America, they are a well-established supplier that began in the off-grid market and has since expanded. We have collaborated with them for some time by complementing their inverter and storage solutions with our MLPE products. We have announced that we will jointly bring to market a solution that meets domestic content requirements, featuring an optimized inverter solution that encompasses both the inverter and optimizers. This progress is proceeding as planned. The early indications we shared at the announcement suggest we expect to begin shipments early in Q1 or around mid-Q1, and this timeline remains unchanged. I believe this partnership will significantly enhance our presence in new installations and provide a competitive solution in the optimized inverter market.

Got it. That is helpful. Sticking with part of that answer, when you mention repowering, I assume the open architecture setup of your optimizer is important for pursuing that market opportunity. I am curious about how you believe this positions you against others who may also be looking at repowering.

So you're absolutely 100% correct. The open architecture is really very well positioned to address any repowering capability. But in addition, we have a very strong inverter solution that is also an open system and can work with pretty much any old installation in the market and can be easily adjusted with the power requirements to whatever power needs of that one specific system is, and that's really very unique. So the combination of these two is what's really very unique in the market. Needless to say, it also benefits from the fact that it's very easy to install. It is virtually 100% compatible with all the other components that you have in the system. So you don't need to replace the whole system and provides all those benefits to the installer and to the owners of those systems.

And the next question will come from Philip Shen with ROTH Capital.

I wanted to get some more clarity on the EG4 partnership. Sorry if I missed it because I'm navigating a couple of calls at the same time. But when do you expect your initial output to be available?

So as we've indicated before, and I just repeated it, Phil, it will be sometimes in Q1, middle to the second part, but we don't yet have the specific date, but we are targeting Q1 shipments. And we have a fairly good indication as to the potential for us next year, and it is significant.

Great. So how much of your overall volume of production could come from EG4 for 2026? I mean, could it be half? Or do you think it's maybe 1/3?

So in the U.S., it's a brand-new production capacity for us. So it would initially be the majority for EG4, but we plan to actually utilize it also beyond the EG4 as well. And so the initial production capacity will be really dedicated to the EG4 relationship. But it's a brand-new line, which we are just in the final stages of getting it up and running.

Right. Okay. So...

This is additional capacity, which we did not have before. It's not replacing any. We are adding capacity.

Right. And do you think you could use this U.S. EG4 facility to ship units to Europe or elsewhere in the world?

Correct. You're absolutely 100% correct, yes. And we do plan to get the maximum utilization we can, as you can imagine.

Right. Okay. Great. Shifting over, I know you have not provided any guidance for 2026, but I wanted to see if we could get a sense for what you're looking for. From a seasonality standpoint, would you expect Q1 to be similar to a past Q1, maybe which one might be a useful comparison? And then what kind of growth could we see in '26 year-over-year or maybe sequential growth? However you think you can describe the '26 outlook in a way that makes you feel comfortable, but can give the market color would be fantastic?

Thank you. So you're absolutely right. We did not provide the guidance for '26 yet. We will do it early in Q1 as we traditionally have been doing at the beginning of the year. But I was trying to communicate that as you can see in Q3 and some of the guidance we provided Q4, which normally is a down quarter, we actually provided guidance to a flat quarter, not down. And we feel fairly strong about the outcome and where we are. I don't want to unveil too much specificity, but I can tell you, we are very comfortable with that guidance that we just provided, which gives us a very good indication as to how we get into 2026. So we do believe it's going to be a growth year for us, and we will provide a bit more guidance as to the specificity, as I said, in early Q1. And as far as seasonality, normally, as you know, Q4 and Q1 are a little bit more challenged, but Q2 and Q3 are actually on the upside, and we have been demonstrating it also this year. So we do believe that we will see a very similar behavior in the market. I will tell you that we are happy with the results of the repowering in the North America market, and that has no seasonality at all. And so that's a little bit more comforting, and it might actually provide some more stability for us in North America as we move through the year.

Right. Okay. Interesting. And from a margin standpoint, as we get through '26, do you also feel very comfortable with the current levels, call it, 40-plus percent, to actually remain steady through '26?

Absolutely, Phil. Yes.

Great. So that's good. One last question, you mentioned the repowering initiative. Can you share what percentage of the market might be repowering or what percentage of your revenue could come from repowering next year?

I'm not sure we're ready to actually share this number in more specificity. But I can tell you, in Q3, the North America results have been substantially impacted by the repowering. And that has demonstrated for us the depth and strength. So obviously, as we move into 2026, we believe it's going to gain much more momentum and can be much more significant.

So the boost in the North America business really was substantially positively impacted by the repowering efforts?

It was a very strong addition, yes, absolutely.

Great. Okay, so that momentum can continue through Q4 and through '26 as well?

Correct. And I will tell you, it does not suffer from the problems of the new installations that the whole market is going through, including us. Because when you do the repowering, it's installations that you have and they don't quite work and operate and you really have no choice but to repower it.

And the next question comes from Amit Dayal with H.C. Wainwright.

Congrats on another strong quarter. Zvi, just touching on just your last comments. I'm just trying to get a better understanding of what's driving sort of this repowering trend here in the U.S. Is this more market-driven? Or is there any regulatory element that is also supporting some of this repowering-related sales improvements?

Amit, thanks for the question. So to be very, very clear to the point and focus, there is no regulation or government or anything that is impacting it. It's purely financially driven. Customers who installed in systems that are aging and they don't perform anymore and they did benefit from the solar installations they did want to continue, and they have no choice, either to rip it apart, start from scratch, which is very expensive, or to repower. So it is just a ready-made problem that is looking for a solution, and we've identified it and aimed at this market, and we have a solution which is superior and is not relying on any benefits from any local government or any changes at all. It's a purely financial decision by the owners of those systems.

Understood. That's very helpful. And do you get similar efficiencies from the post-repowered setup that you might have had before? Or are there even more improvements?

There are actually more improvements because most of those aging systems have been suffering from a reduction in performance before they actually broke or about to break. And so yes, there is an uptick in performance for those. And in some cases, this is not yet a big phenomenon, but in some cases, customers opt to also add storage too. So that's an additional source that potentially is available for us.

Interesting. It seems that this repowering trend could also start in other regions for you in the future.

That is absolutely correct. We started focusing here in the U.S., and it seems to be working for us well. But this phenomenon is a global phenomenon. And many of the systems are aging. They are 7, 8, 9, 10 years old plus. And in many cases, you cannot get replacement parts. It's just you have no choice. So it's a problem that has been created over time and now it is coming to fruition, and it's a ready-made market basically.

Understood. One final question from my side. You have the EG4 manufacturing setup in the U.S. now. What is happening on the business development front to leverage this? Are there any investments being made in sales teams or partnerships that you are considering to take advantage of the manufacturing capabilities you have here?

The beauty of this relationship is such that it is relying on the strengths of the two entities. EG4 is a very good brand in a specific market, which is doing well and growing nicely. And the Tigo-MLPE optimization has been growing and is very well known in our space. And so the combination of them does not require any additional new sales or marketing activities. It's utilizing the existing channels we have, and that's the beauty of the relationship.

At this time, this concludes our question-and-answer session. I would 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 contributions 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 joining us today for Tigo's Third Quarter 2025 Earnings Conference Call. You may now disconnect.