Tigo Energy, Inc. Q4 FY2025 Earnings Call

Good afternoon. Welcome to Tigo Energy's Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today 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. Please go ahead.

Good afternoon. Welcome to Tigo Energy's Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today from Tigo are Zvi Alon, CEO, and myself, Bill Roeschlein, CFO. This call is being recorded. We would like to remind everyone that some of the topics we discuss today, including our expected business outlook, our ability to increase revenues and maintain profitability, and our long-term growth prospects, are forward-looking. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from what we discuss. During today's call, we will reference certain non-GAAP financial measures, and reconciliations to GAAP are included in our press release. These non-GAAP measures should not be seen as a substitute for GAAP measures. Finally, this conference call is being webcast, and a recording will be available for replay on Tigo's Investor Relations website. Now, I would like to 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 before turning the call over to our CFO, Bill Roeschlein. He will discuss our financial results for the fourth quarter in more depth as well as provide our guidance for the first quarter of 2026 and full year of 2026. After that, I will share some closing remarks, tell you about our outlook and then open the call for questions from the analysts. I'm pleased to report that we ended 2025 with yet another strong quarter and that against the backdrop of seasonally slower periods for our industry. During the year, we continuously built on our 2024 results, and I'm exceptionally proud of what our team here at Tigo has accomplished in 2025. Beginning with achieving $103.5 million in revenue, representing annual year-over-year growth of 91.7%. Moving to the fourth quarter of 2025, we reported total revenue of $30 million, a 73.8% increase over the $17.3 million in revenue reported in Q4 of 2024. During the quarter, we shipped 744,000 of 567 megawatts of MLPE. The total shift to customers is 2.7 million units for the year. I will also note that our optimizer unit volume outgrew that of our main competitor in this space, indicative of the market share gains we achieved in 2025. Turning now to our geographical results. We saw continued sequential growth in several countries within the EMEA and Americas region during the fourth quarter, which comprised 60.3% and 3.8% respectively. Of our quarterly revenue, by country, we performed exceptionally well again in the U.K., which grew 72.3% sequentially and in the U.S., which grew 24.4% sequentially. These results were offset by seasonal softness in Germany and Italy and lower revenue from Eastern Europe, specifically the Czech Republic and Poland, where unusually cold weather patterns this year significantly impacted the solar installations. While the environment has improved lately, we do expect some lingering effects to spill into our first quarter of 2026 revenue expectations. Within the APAC region, we saw renewed growth as revenues more than doubled sequentially with particularly strong results in Australia. Looking ahead, we're excited about a number of growth drivers that we believe will propel continued growth in 2026 and beyond. In the U.S. market, we have a number of initiatives in play. We have now established a domestic contract manufacturing operation in the U.S. that allows us to produce qualified domestic content and CoC compliant MLPE to support our U.S. customers and our EG4 partnership. Initial deliveries are scheduled for May, and we believe that our combined optimized inverter product will be well received by the market. In addition, we also see continued growth in our repower initiatives and expect further growth in this area in 2026. Finally, we recently announced our new GO battery for the U.S. market, featuring 5 to 30-kilowatt hour capacity in 5-kilowatt hour modules and 11.4-kilowatt hour continuous output. We expect this new battery to further enhance upsell opportunities and produce additional growth for us in the U.S. market. In EMEA and APAC regions, we have witnessed some competitors reducing their physical footprint in the market. We expect to benefit from this dynamic as the year progresses, and we are currently making investments in this area. Finally, we continue to push the envelope technologically and have a robust pipeline of new product introductions in the 3 market segments we serve, mainly MLPE, energy storage solutions, and AI-driven software solutions that we look forward to updating investors about as the year progresses. I would like to close by stating that we achieved an important milestone during the fourth quarter of 2025 by eliminating our $50 million convertible promissory note ahead of its January 2026 maturity. This allowed us to end the year with no outstanding debt maturities, removed $2.5 million in annual interest payment obligations, strengthened our balance sheet and capital structure, and sets us up for success in 2026. And with that, I will turn it over to Bill. Bill?

Thanks, Zvi. Before I start reviewing the results for the fourth quarter of 2025, I want to remind investors about the inventory reserve charges that significantly impacted certain line items during the same quarter last year. Now, regarding our financial results for the fourth quarter ended December 31, 2025, revenue increased 73.8% to $30 million from $17.3 million in the prior year period. By region, EMEA revenue was $18.1 million or 60.3% of total revenues, Americas revenue was $9.2 million or 30.8% of total revenues, and APAC revenue was $2.7 million or 8.9% of total revenues. By product family, MLPE revenue accounted for $26.9 million or 89.7% of total revenues, while GO ESS represented $2.2 million or 7.4% of total revenues, and Predict+ and Licensing revenue was $0.9 million or 2.9% of total revenues during the quarter. As Zvi mentioned, we anticipate that the launch of the GO ESS battery will positively contribute to growth in Q2 and beyond. Gross profit for the fourth quarter was $13.4 million or 44.5% of revenue, compared to a gross loss of $12.6 million or negative 72.7% of revenue in the same quarter last year. The year-over-year increase was mainly due to the previously mentioned inventory charge of $19.5 million in the prior year period. We also continue to benefit from USD/Euro FX rates in the marketplace, as most of our revenue and expenses are in U.S. dollars. Operating expenses for the quarter rose 13% to $13 million from $11.5 million in the previous year. This increase was driven primarily by higher sales and marketing expenses as well as general and administrative costs. Operating income for the fourth quarter grew by 101.4% to $0.3 million, compared to an operating loss of $24.1 million in the prior year period. GAAP net income for the quarter was $11.7 million, compared to a net loss of $26.8 million for the same period last year. This net income includes a net gain from the sale of intangible assets of $14.6 million. Diluted earnings per share for the fourth quarter was $0.16, compared to a loss per share of $0.44 in the fourth quarter of 2024. Adjusted EBITDA for the quarter was $2.7 million, revising from an adjusted EBITDA loss of $22.1 million in the prior year. Adjusted EBITDA is a non-GAAP measure, representing net loss adjusted for interest and other expenses, income tax expense, depreciation, amortization, stock-based compensation, and M&A transaction expenses. Shares outstanding as of December 31, 2025, were 70.4 million. Looking at the balance sheet, accounts receivable decreased this quarter to $13.9 million from $15.8 million last quarter and increased from $8 million in the year-ago quarter. Inventories increased by $2.8 million or 9.6% to $31.3 million compared to $28.5 million in the last quarter and $22 million in the year-ago period. Cash, cash equivalents, and short- and long-term marketable securities totaled $7.7 million at December 31, 2025. Sequentially, these decreased by $32.6 million as we repaid a $50 million convertible promissory note, as Zvi mentioned. Additionally, we recently announced a definitive agreement with certain institutional investors for a registered direct offering of 5 million shares of common stock at a price of $3 per share. This transaction is projected to generate gross proceeds of approximately $15 million before placement agent fees and other operating expenses. We believe this financing will further strengthen our balance sheet and enhance our financial flexibility as we pursue our growth trajectory. The offering is anticipated to close on or about February 26, 2026, pending customary closing conditions. Now, regarding our financial guidance for the first quarter of 2026 and outlook for the full year, Tigo provides quarterly guidance for revenue and adjusted EBITDA, as we believe these metrics are key indicators of our overall performance. For the first quarter of 2026, we expect revenues to range between $25 million and $27 million, and adjusted EBITDA to range between negative $1 million and positive $1 million. This guidance reflects weather-related seasonality in EMEA for revenue and a potential $500,000 reserve within operating expenses due to a slow-paying distributor issue we are addressing. Based on the midpoint of our guidance and our annual projections for 2026, our first-quarter revenue expectations represent approximately 19.6% of our expected 2026 revenues, compared to 18.1% of 2025 actual results in the prior year. For the full year of 2026, we expect revenues to grow between 26% and 30%, ranging from $130 million to $135 million. Our annual guidance indicates another year of strong growth, and we expect to surpass our competition again this year. That completes my summary, and I will turn the call back over to Zvi for final remarks. Zvi?

Thank you, Bill. As we close out 2025, we are encouraged by the progress we have made in the market that continues to evolve. While the broader industry has faced periods of volatility, our performance this year reinforces our confidence in the strength of Tigo's platform, the resilience of our business model, and the value of our differentiated product portfolio. We remain confident in the long-term growth trajectory for 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 comes from Eric Stine of Craig-Hallum Capital Group.

So first question here. I know, obviously, you're guiding to strong growth in 2026. On the last call, I recall you referring to or talking about potentially substantial growth opportunities that you see out there. So I'm curious, I mean, it seems to me that you're not really including those potential substantial opportunities in your current guidance, so I do want to confirm that. But then also, as you think about some of those things that could drive upside, maybe how you rank them based on the list of things that you expected to be positive drivers here in '26.

Sure. The partnership with EG4 is one we believe will be very successful. However, we have only accounted for the minimum order quantities in the contract we signed, rather than projecting higher volumes. There is significant potential for increased business, but we will provide updates as the year progresses regarding this partnership. We have launched the GO battery, which we expect will positively influence revenues in that product line. We plan to do something similar in Europe, leading to a complete refresh of our battery product line since its introduction a few years ago. This is an exciting development and represents another growth opportunity mentioned by Zvi. We are also enthusiastic about the repower opportunities, which align well with the battery offering, allowing us to upsell to customers buying repowered inverters. We believe this could integrate smoothly into our plans for 2026 as well. Overall, there are several new growth drivers for 2026 that could contribute to additional growth for the year.

Got it. Regarding 2026 in the U.S., is it too early to determine the composition of repowering, EG4, and the battery offering? Any clarity on that would be helpful. Additionally, in terms of repowering, I would assume it's still very early stages, but any details or thoughts around that would be appreciated.

Eric, look, we've not gotten into the differentiation between those 3, and we are excited about all of them. And just to provide an additional insight, we are very excited about the EG4 and to the extent that they increase their market share by a small number, it can represent very significant growth for us. But as we said, we are trying to be conservative about it, but we're very excited about that.

Our next question comes from the line of Amit Dayal of H.C. Wainwright.

Congrats on the strong results and outlook. With respect to this EG4 commentary, is EG4 upside more likely to come through in the second half of the year? Just trying to see what we should look at from an indicator perspective to see the traction from this relationship?

Initial deliveries will begin in May, allowing for some benefits to be realized in the second quarter, with a full impact starting in Q3. This product has optimized U.S. domestic content and is ITC qualified for the U.S. market, presenting significant competition to the leading player in the sector who has established a strong foothold. There is a considerable opportunity for Tigo and EG4 to capture a substantial market share, and we are optimistic about it.

Understood. And just in relation to that and in the context of the financing, do you now have sort of the working capital to pursue even more aggressive growth, say, in 2027 than the growth that you are highlighting for 2026?

We do. We think we're in good shape here on our balance sheet. It's very clean, it's debt-free and we have the flexibility to be able to follow the initiatives that we want. We're excited about our U.S. manufacturing endeavor that has, again, ITC domestic content qualified products for U.S. customers who want that. And we think we've got the growth capital that we need to further expand our growth.

I am showing no further questions at this time. I would now like to turn the call back over to Mr. Alon. Sorry, it looks like someone entered the queue. One moment, please. Our next question comes from the line of Gus Richard of Northland Capital Markets.

Yes. Just on your new storage system, can you talk about the energy efficiency of it and what the parasitic loss will be relative to competition?

So it definitely is providing a very interesting modern technology platform. And I believe that on all parameters, we're actually exceeding the competitors right now, including the fact that we are going to be able to provide consistent or constant 11.4 kilowatt hour output from the battery here in the U.S.

Okay. And then just a housekeeping question. Was there any previously written off inventory sold in the quarter?

Yes, there was. And it had about a 3 percentage point impact on the margins, so margins in the quarter.

Okay. And thinking about margins going forward, given the new product coming out in the second quarter, should we think about gross margins hanging in there around 40% or maybe high 30s?

Our target model is 40%, and I think we're running above that. And I think I would expect our goal is to maintain that 40%.

We'll take a moment before we move to closing. Seeing no questions, I’d like to turn the call back over to Mr. Alon for his closing remarks.

Thank you. 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. Operator?

Thank you for joining us today for Tigo's Fourth Quarter 2025 Earnings Conference Call. You may now disconnect.