Prepared remarks
Good afternoon. Welcome to Tigo Energy's Fiscal Second Quarter 2026 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.
Thank you, operator, and it's a pleasure to join you today from our corporate offices in Los Gatos, California. Also with us is Zvi Alon, our CEO. We'd like to remind everyone that some of the matters we'll discuss on this call, including expected business outlook, our ability to increase our revenues and achieve and maintain profitability, our overall long-term growth prospects, expectations regarding continued recovery in our industry, statements about demand for our products, our competitive position and market share, the impact of tariffs and other trade barriers, including U.S. restrictions on foreign-produced power inverters, the anticipated impact of regulatory actions, including actions by the FCC and the European Union on demand for our products, our current and our future inventory levels, charges and reserves and their impact on future financial results, inventory supply and its impact on customer shipments, statements about our revenue and adjusted EBITDA for the third fiscal quarter of 2026, and our revenue for the full fiscal year 2026, the expected timing of the market introduction and volume ramp of our Section 45X and ITC-qualified optimized inverter solution, our ability to penetrate new markets and expand our market share including expansion in international markets and our continued expansion of and investments in our product portfolio and the timing thereof, and our U.S. manufacturing strategy 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 June 30, 2026, and other reports that 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. Those 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 reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures in our press release furnished as an exhibit on our Form 8-K. The non-GAAP financial measures provided should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Finally, I would like to remind everyone that this 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 of our recent financial and operational performance before turning the call over to our CFO, Bill. He will discuss our second quarter financial results in more depth and provide our guidance for the third quarter and revised outlook for the full year of 2026. After that, I will share some closing remarks and then open the call for questions from our analysts. Second quarter revenue grew 5.6% year-over-year to $25.4 million, but came in below our expectations. While results were below our prior guidance and the variance was primarily driven by external timing factors and current market conditions. To put that in context, we grew overall revenue year-over-year in a quarter when residential solar contracted in many of the markets that we serve. In the U.S., Q2 residential volumes contracted by approximately 25%, in line with Wood Mackenzie's expectation of a 21% decline. And Italy and Czech residential installations both declined double digits, respectively. In the first half, residential installations in Germany, meanwhile, are recovering off a 21% decline in Q1 of 2026, according to the German Solar Industry Association. In the United States, sales were down 4% year-over-year following the expiration of the residential clean energy tax credit. In addition, our U.S. optimized inverter partner encountered operational delays that will shift the timeline of market introduction of our Section 45X and ITC-qualified optimized inverter solution with volume shipments now expected to begin ramping up in the fourth quarter. While this timing shift will delay the near-term contribution, the FCC's recent decision to restrict future authorization of foreign-produced power inverters strengthens the strategic relevance of our U.S. manufacturing strategy and positions our Section 45X and ITC-qualified optimized inverter solutions to meet the growing demand for domestically produced solar products. In Europe, the market recovery continues at a more measured pace than anticipated. Similar to the U.S. market, the European Union restriction on inverters from high-risk vendors in EU-funded projects is directing demand towards trusted vendors in countries where Tigo is already strong, including the Czech Republic and Poland. We believe Tigo is one of the few companies in the solar industry positioned to benefit from both of these policy actions. Encouragingly, Germany and Italy grew 6% and 20% year-over-year, respectively. Despite weakness in both residential markets, we have delivered year-over-year growth in Spain and Australia, demonstrating the benefits of our diversified geographic footprint. In Germany, specifically, the cabinet approved changes in July that would fix the feed-in tariff for new systems beginning in 2027. While systems connected to the grid by the end of this year keep their existing terms, we believe this should pull demand into the second half of 2026 and raise the value of storage and self-consumption, which is what our MLPE and storage products are designed to deliver. Within our product portfolio, GO ESS contributed $2.2 million or 8.6% of the quarterly revenue as the ramp of our new GO battery progressed more slowly than planned. In summary, we remain focused on advancing our product initiatives, expanding partner relationships, aligning our cost structure with near-term demand and maintaining close control of working capital. These priorities are central to capitalizing on the broader international opportunities and driving more consistent growth and sustainable profitability. And with that, I will turn it over to Bill. Bill?
Thank you, Zvi. Turning now to our financial results for the second quarter ended June 30, 2026. Revenue for the second quarter of 2026 increased 5.6% to $25.4 million from $24.1 million in the prior year period. On a sequential basis, revenue increased 0.8% from $25.2 million in the first quarter. By region, EMEA represented 73.1% of total revenue. APAC represented 10.1%, and the Americas and LatAm represented a combined 16.8%. By product family, for the second quarter of 2026, MLPE revenue represented $22.7 million of revenue or 89.2% of total revenues. GO ESS revenue was $2.2 million, representing 8.6% of total second quarter revenue and EI platform revenue represented $0.6 million or 2.2% of total revenues during the quarter with Predict+ annual recurring revenue reaching $1.7 million at quarter end. Gross profit in the second quarter was $10.0 million or 39.3% of revenue compared with a gross profit of $10.8 million or 44.7% of revenue in the comparable year-ago period. Excluding GO ESS gross margin was 42.1%, with the difference primarily attributable to the sale of our remaining stock of older EI batteries. Operating expenses for the second quarter decreased 4.8% to $11.7 million from $12.3 million in the prior year period and decreased 11.6% sequentially. We remain focused on disciplined expense management throughout the quarter. Operating loss for the second quarter was $1.7 million compared with an operating loss of $1.5 million in the prior year period. GAAP net income for the second quarter was $2.2 million compared with a GAAP net loss of $4.4 million in the prior year period. Second quarter net income included a $3.2 million income tax benefit. On a pretax basis, we recorded a loss of $1.0 million. Non-GAAP net income, which excludes stock-based compensation from GAAP net income or loss, was $3.6 million compared with a non-GAAP net loss of $2.1 million in the prior year period. As a reminder, we believe this measure provides investors with additional insight into our progress towards achieving consistent GAAP net income. Adjusted EBITDA for the second quarter was $52,000 compared with an adjusted EBITDA of $1.1 million in the prior year period. As a reminder, adjusted EBITDA is a non-GAAP measure that represents earnings or loss before interest and other expenses, net income tax benefit or expense, depreciation and amortization as adjusted to exclude stock-based compensation and merger-related transaction expenses. We believe this measure provides helpful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business operating results, providing investors with additional insight on key metrics used by management. Weighted average basic shares outstanding during the quarter were 76.3 million. Turning to the balance sheet. Accounts receivable, net, decreased to $13.6 million from $14.2 million at the end of the first quarter and from $13.9 million at year-end 2025. Inventory decreased to $20.6 million from $24.8 million at the end of the first quarter. Compared with year-end 2025, inventory declined by $10.7 million or 34.3%. Cash and cash equivalents totaled $16.9 million at June 30, 2026, an increase of $5.3 million sequentially and $9.2 million from year-end 2025. At the end of the second quarter, we had $4.1 million in borrowings outstanding under our revolving credit facility. We remain focused on working capital discipline and maintaining appropriate liquidity as we execute our operating plan. Both inventory and receivables declined during the quarter, which, together with the facility draw, supported the sequential increase in cash. Turning now to our financial guidance for the third quarter of 2026 and our outlook for the full year 2026. As a reminder, Tigo provides quarterly guidance for revenue and adjusted EBITDA as we believe these metrics are key indicators for the overall performance of our business. For the third quarter of 2026, we expect revenue and adjusted EBITDA to be in the following ranges. We expect revenue for the third quarter ending September 30, 2026, to range between $24 million and $26 million. We expect adjusted EBITDA to range from a loss of $1 million to a positive $500,000. For the full year of 2026, we are updating our revenue outlook and now expect revenue to range between $100 million and $110 million. The revision reflects our U.S. optimized inverter partner's shift of its go-to-market launch to the fourth quarter, the slower ramp of our new GO Battery and a more gradual market recovery in Europe. We believe the anticipated fourth quarter launch of our domestically produced optimized inverter solution together with the anticipated demand created by the FCC in the U.S. and European Union actions in EMEA positions us for a stronger end to 2026. That completes my summary, and I'd now like to turn the call back over to Zvi for final remarks.
Thanks, Bill. While our second quarter revenue results were below our expectations, the year-over-year growth we delivered in Germany, Italy, Spain and Australia demonstrates the benefits of our diversified geographic footprint. We remain focused on advancing our product initiatives and expanding partner relationships, including U.S. manufacturing strategy, which we believe has become increasingly relevant following the FCC's recent action on produced power inverters. Combined with disciplined expense and working capital management, we believe these priorities position Tigo to capitalize on the broad international opportunities and improve profitability over time. With that, operator, please open the call for Q&A.
Questions and answers
Wanted to explore the EG4 delays. Originally, it was expected Q1 when you first announced it and then got pushed back later to Q2 for ramp, and now we're looking at Q4. You don't give much of a rationale. Can you explain what's going on and why the delays are happening?
Phil, thank you for the question. What I will highlight is that, as we've highlighted before, we actually shipped our products to EG4 and it's in their possession already. They had some internal issues that they had to deal with. I'm not in a position to fully explain what happened, but it's not a change of the plan; it really is just an operational timing issue. They had several moving parts that conflicted and caused the delays. We are fairly sure that we are back on track and that we will be seeing the results as we've expected now that it will come in Q4.
Okay. And what gives you that confidence? And what is your confidence level? Are you 100% that Q4 is the ramp? Or are you 80% confident or maybe 50% confident?
The reason for our confidence is that we are very closely monitoring the situation, and we are aware of the various conditions that have pushed the timeline. At this stage, I'm fairly confident—I would say close to 100%. You never say 100% because life is not certain, but it's as close as possible to 100%. By the way, Phil, they paid us for the product, so they have an incentive.
Yes. That's important to note. Okay. Good. Now this margin—okay. So you took down the annual guidance, Zvi. And Q3 is coming lower than expected. The full year is coming in lower. You highlighted the three reasons there: Europe is a little bit softer, this EG4 issue, and so what—can you just give us some more color on that kind of lowering of the guidance? And would you expect acceleration in 2027? And if so, in '27, which quarter of the year do you think we could see an acceleration?
So what I will tell you is that we are obviously disappointed. We had to bring it down because of those delays. We felt fairly confident that we would be able to weather the slowdown as we entered the year because every indication was that there was going to be a slowdown. We took initiatives to help grow despite the slowdown, and we are coming in basically flat year-over-year. We do see some signs of improvement, but we don't want to convert that into firm predictions yet on a return to more normal growth. The other component I want to stress is that we are disciplined in managing operations and cash and we did manage to increase cash over the last couple of quarters. From that perspective, we're in fairly good shape.
Okay. Good. And then could we see acceleration in the first quarter next year? Or do you think it's more likely Q2?
I would like to believe it's more like Q1.
Okay. And as we go into this weaker period in Q3 and Q4, should gross margins be in line with Q2 levels? Or do you think you can get back to prior year levels? My guess is you kind of stay flat Q3 and Q4, but just curious, quarter-over-quarter, what kind of movement we might see?
I think you're most likely right on that, and our target gross margin is 40%. So that's where I think we'll end up.
Okay. As it relates to—you guys said on the Q1 call that you had several utility-scale pipeline deals expected to materialize in '26. What's the update there? Have any of these contracts crossed the finish line? And what does the timing look like for this opportunity if it hasn't?
So they have not crossed the finish line. We have not taken them off the radar screen. They are going through some delays like many big projects do, but we are still in play. It's just that predicting the timing is more challenging, so we're being more careful in those predictions. The projects are still very valid.
Okay. And can you give the reason for why it hasn't closed as you expected?
One of them is overseas and there is timing related to how quickly they could have started before winter, which caused some delays. The other project went through internal operational changes that caused a delay, but we believe both are back on track now. We will see how quickly they come to fruition.
Okay. Got it. One last one, I'll pass it on. The FCC inverter ban, we've heard a fair amount about this. I know you said that it benefits you, but it benefits you insofar as your new models are not made in some of these countries that might see a ban or with companies that might see a ban. So it could be Chinese companies that are operating in Vietnam or other countries that you might source from. Just curious if you can talk about whether you are exposed at all, and if so, what the plan is to avoid being adversely impacted?
Thanks for the question. Let me address the FCC issue. The FCC consideration has two components: the communication and control aspect, and the location of manufacturing. On the manufacturing location, we already started the move into the U.S. and we started shipping from the U.S., so our exposure from a manufacturing-location perspective is going down. On the communication side, we've always controlled our communication aspects of the inverters. We could expand that to other inverters as we've done before, though not as the sole supplier. From that perspective, it might open an opportunity for us rather than present a challenge.
So this issue with EG4, you are indicating is more operational, but is there any demand issue that these guys might be facing that is impacting the pushout and these delays?
Look, the fact that markets are slowing down a little bit is not a secret and has been widely published. We do see a more tentative market in general. For bigger projects, we've seen a shift in our installed base to not just residential but also C&I and large utility scale. Those markets have been less impacted but operate at their own pace, unlike residential which has been the majority of our market. That is why we're seeing a bit of a slowdown. On the other hand, we are encouraged by changes in momentum in Germany and other places where we've seen growth, and we expect that to continue.
Okay. So part of the thinking when you provided guidance in 1Q for $130 million to $135 million was some pickup in the U.S. market. Should we assume the U.S. market will continue to be a drag for the next year? Or do you see any catalysts that could help support demand here in the U.S.?
Generally speaking, we've seen two phenomena. One is an overall slowdown. The other is an increase in adoption of storage solutions: storage is increasing while solar installations are declining. I don't know yet what the net impact will be. I do believe we will see storage increase further as customers realize the benefits of owning storage. We will have to wait and see how the U.S. market evolves; it is a challenge in general.
Understood. Most of my other questions are already discussed. I'll take my questions off-line.
Can we just step back a little bit? Obviously, EG4 is arguably the biggest factor and likely the biggest factor in the guidance reduction. If I think about your thought process coming into the year and the 25% plus growth, the market challenges were well known and you were incorporating that. One of the things was in the U.S., repowering, which obviously didn't benefit from the credit. And with Europe, you were gaining some share but not counting on market improvement. Has your view of those markets changed in terms of how you're modeling and counting on them to hit those numbers? Maybe expand on your thought process in those two areas specifically.
You're absolutely right, Eric. When we guided, the expectation for projecting that growth was predominantly related to the EG4 factor, which was supposed to be earlier in the year. We were exposed to the potential numbers and they did have a meaningful impact. Now we are returning to a more conservative view, with EG4 now expected in Q4, which would put us essentially finishing the year flat to last year. I did mention previously that we are working on some larger projects which have not been lost; they are just taking longer. We're being conservative to provide better guidance for the rest of the year. Despite the market challenges, we feel fairly confident with the guidance we've provided.
I'll keep it to two questions. Digging into your thought process on the guide certainly implies Q4 looks a lot like the first three quarters. At the low end, are you assuming EG4 maybe starts in Q4 but there's very limited impact? What gets you to the low end and what gets you to the high end of that $100 million to $110 million range?
You're absolutely right. We are trying to be very conservative. We look at EG4 with the confidence we have as being a potential positive surprise if it ramps as expected. We are being careful not to overextend or build a plan that would be challenged if timing slips. The low end reflects a cautious assumption about timing and contribution, while the high end assumes a stronger EG4 contribution and more favorable market recovery. Thank you 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 the investors for their continued support. Operator?
Thank you for joining us today for Tigo's Second Quarter 2026 Earnings Conference Call. You may now disconnect.