# Tigo Energy, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Tigo Energy, Inc.](/companies/tygo.md) (CIK 1855447)
- Form: 10-Q
- Filed: 2024-11-06
- Accepted by EDGAR: Nov 6, 2024, 21:05 ET
- Period: 2024-09-30
- Accession: 0000950170-24-122269
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1855447/000095017024122269/tygo-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1855447/000095017024122269/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $14.24bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $36.74bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $12.5m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $28.3m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $1.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $8.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $2.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $7.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$10.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$27.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $2.9m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $8.5m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $16.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$13.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$35.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.22 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.60 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.22 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.60 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 60,608,934 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 60,130,249 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$13.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $757.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $9.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $78.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $98.6m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $19.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $65.1m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $38.3m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-09-30 | $33.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,180 characters.

*The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto included in our 2023 Annual Report. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q, including those set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors” in the 2023 Annual Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise indicated or the context otherwise requires, references in this section to “we,” “our,” “us,” “the Company” or other similar terms refer to the business and operations of Tigo Energy, Inc. and its subsidiaries prior to the Business Combination (“Legacy Tigo”) and Tigo Energy Inc. following the consummation of the Business Combination. References to “ROCG” refer to Roth CH Acquisition IV Co. prior to the consummation of the Business Combination.*

### Overview

Our mission is to deliver smart systems solutions, combining hardware and software, which enhance safety, increase energy yield, and lower operating costs of residential, commercial, and utility-scale solar systems. We believe we are a worldwide leader in the development and delivery of products and solutions that are flexible and dependable, increase the energy generation of solar energy systems and address the need for change. We primarily offer products and services through distributors and solar installers. We have a worldwide footprint with product installations in over 100 countries and on all seven continents.

### Key Factors that May Influence Future Results of Operations

Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting our results of operations are summarized below.

*Demand for Products.* The demand for our products in Europe and the United States experienced a notable slowdown beginning in the second quarter in 2023 and has continued into 2024. Although our net revenue has increased on a sequential basis in each quarter of 2024, our quarterly and year-to-date results remain substantially lower than comparable periods of the prior year. In Europe, the slowdown was primarily due to elevated inventory levels with distributors and an overall channel inventory correction as they responded to a slower demand environment. Additionally, there has been uncertainty surrounding the net energy metering policies and solar export penalties in the European markets, such as Germany, Belgium, Italy and the United Kingdom, which also contributed to the overall slowdown in demand in Europe. In the United States, the slowdown was primarily attributable due to higher interest rates than recent prior periods and the transition from the second iteration of net metering (“NEM 2.0”) to the third iteration of net metering (“NEM 3.0”) in California. In response to these factors, we reduced staffing levels across all geographies in December 2023 by approximately 15%, and in April 2024 by approximately 10%. In addition, our inventory levels have continued to remain elevated in 2024 compared to historical norms. As a result, we recognized charges of $3.4 million and $4.0 million to write down inventories to their estimated net realizable value for the three and nine months ended September 30, 2024, respectively. Further write-downs of inventories and additional cost reduction measures in future quarters could occur if market conditions do not improve or deteriorate.

*Unfavorable Macroeconomic and Market Conditions.* The global macroeconomic and market uncertainty, including higher interest rates and inflation, has caused disruptions in financial markets and may continue to have an adverse effect on the U.S. and world economies. Since the second quarter of 2023, we have experienced a significant number of customer requests to delay purchase order deliveries and a smaller number of purchase order cancellations and returns. Other customers may decide to delay purchasing our products and services or not purchase at all. A tighter credit market for consumer and business spending could, in turn, adversely affect spending levels of installers and end users and lead to increased price competition for our products. Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, have adversely affected, and could continue to adversely affect our business, results of operations and financial condition.

*Managing Supply Chain.* We rely on contract manufacturers and suppliers to produce our components. Our ability to grow depends, in part, on the ability of our contract manufacturers and suppliers to provide high quality services and deliver components and finished products on time and at reasonable costs. While we have diversified our supply chain, some of our suppliers and contract manufacturers are sole-source suppliers. Our concentration of suppliers could lead to supply shortages, long lead times for components and supply changes. A significant portion of our supply chain originates in Thailand and China. In the event we are unable to mitigate the impact of delays and/or price increases in raw materials, electronic components and freight, it could delay the manufacturing and delivery of our products, which would adversely impact our cash flows and results of operations, including revenue and gross margin. In addition, in a slowing economic environment, our inventory levels may continue to increase due to existing purchase commitments and our ability to negotiate volume pricing discounts may be impaired.

*Expansion of Sales with Existing Customers and Adding New Customers.* Our future revenue growth is, in part, dependent on our ability to expand product offerings and services in the U.S. residential market. In our North American market, revenue is generally generated from our product offerings and services in the commercial and industrial markets. In order to continue revenue growth, we plan to expand our presence in the residential market through offerings with residential solar providers. We also expect to continue to evaluate and invest in new market opportunities internationally. We believe that our entry into new markets will continue to facilitate revenue growth and customer diversification. We primarily acquire new customers through collaboration with our industry partners and distributors. While we expect that a substantial portion of our future revenues in the near-term will be generated from our existing customers, we expect to invest in our sales and marketing to broaden reach with new residential customers in the U.S. and EMEA.

*Expansion of New Products and Services.* We have made substantial investments in research and development and sales and marketing to achieve a leading position in our market and revenue growth. While a majority of our revenue is generated from the sale of our MLPE products, we also generate revenue from our offerings of GO Energy Storage Systems (“GO ESS”) and Predict+ service, and the Company intends to continue developing and promoting these product and service lines.

### Key Operating and Financial Metrics

We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We believe the operating and financial metrics presented are useful in evaluating our operating performance, as they are similar to measures used by our public competitors and are regularly used by securities analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.

The following table sets forth these metrics for the periods presented:

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $14,237 | $17,104 | $36,740 | $135,988 |
| Gross profit | $1,774 | $4,158 | $8,407 | $48,433 |
| Gross margin | 12.5% | 24.3% | 22.9% | 35.6% |
| Operating (loss) income | $(10,417) | $(11,218) | $(27,908) | $5,267 |
| Net (loss) income | $(13,117) | $29,056 | $(35,944) | $13,790 |

#### Gross Profit and Gross Margin

We define gross profit as total net revenue less cost of revenue, and define gross margin, expressed as a percentage, as the ratio of gross profit to revenue. Gross profit and margin can be used to understand our financial performance and efficiency and allow investors to evaluate its pricing strategy and compare it against competitors. We use these metrics to make strategic decisions identifying areas for improvement, set targets for future performance and make informed decisions about how to allocate resources going forward.

### Key Components and Comparison of Results of Operations

### Net Revenue

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenue | $14,237 | $17,104 | $(2,867) | (16.8)% | $36,740 | $135,988 | $(99,248) | (73.0)% |

#### Three months and nine months ended September 30, 2024, and 2023

Net revenue decreased by $2.9 million or 16.8% for the three months ended September 30, 2024, and by $99.2 million or 73.0% for the nine months ended September 30, 2024, as compared to the same periods in 2023. The decreases are primarily due to the solar industry experiencing a broad-based slowdown in both the U.S. and European markets, which resulted in elevated inventory with distributors and installers, and as a result the overall demand for our products and services decreased as distributors and installers responded to this slower demand environment. Please see the section below for further explanations over the fluctuations for each of the Company’s geographic regions.

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| EMEA | $8,639 | $10,241 | $(1,602) | (15.6)% | $21,426 | $105,595 | $(84,169) | (79.7)% |
| Americas | 2,940 | 3,576 | (636) | (17.8)% | 8,512 | 21,776 | (13,264) | (60.9)% |
| APAC | 2,658 | 3,287 | (629) | (19.1)% | 6,802 | 8,617 | (1,815) | (21.1)% |
| Total net revenue | $14,237 | $17,104 | $(2,867) | (16.8)% | $36,740 | $135,988 | $(99,248) | (73.0)% |

#### Three months and nine months ended September 30, 2024, and 2023

- EMEA - Net revenue for the EMEA region decreased by $1.6 million or 15.6% for the three months ended September 30, 2024, and by $84.2 million or 79.7% for the nine months ended September 30, 2024, as compared to the same periods in 2023. The decreases are primarily due to a slowdown in demand in the region due to elevated inventory levels at distributors and installers. This slowdown was primarily the result of a decrease in customer purchases in Europe after a surge of sales were realized in 2022 and going into the first half of 2023 due to higher energy prices in Europe related to the onset of the armed conflict in Ukraine in 2022, and overall channel inventory correction.
- Americas - Net revenue for the Americas region decreased by $0.6 million or 17.8% for the three months ended September 30, 2024, and by $13.3 million or 60.9% for the nine months ended September 30, 2024, as compared to the same periods in 2023. The decreases are primarily due to demand for our solutions slowing as a result of higher interest rates impacting customers’ investment decisions and the transition from NEM 2.0 to NEM 3.0 in California.
- APAC - Net revenue for the APAC region decreased by $0.6 million or 19.1% for the three months ended September 30, 2024, and decreased by $1.8 million or 21.1% for the nine months ended September 30, 2024, as compared to the same periods in 2023. The decrease in net revenue for the three months ended September 30, 2024, compared to the same period in 2023 is primarily due to an overall decline in sales in Asia of $1.3 million, which is partially offset by an increase in sales in Australia of $0.7 million. The decrease in net revenue for the nine months ended September 30, 2024, compared to the same period in 2023 was primarily driven by a $1.6 million decline in sales in China.

### Cost of Revenues and Gross Profit

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of revenue | $12,463 | $12,946 | $(483) | (3.7)% | $28,333 | $87,555 | $(59,222) | (67.6)% |
| Gross profit | $1,774 | $4,158 | $(2,384) | (57.3)% | $8,407 | $48,433 | $(40,026) | (82.6)% |
| Gross margin | 12.5% | 24.3% |  |  | 22.9% | 35.6% |  |  |

#### Three months and nine months ended September 30, 2024, and 2023

Cost of revenue decreased by $0.5 million or 3.7% and gross profit decreased by $2.4 million or 57.3% for the three months ended September 30, 2024, compared to the same period in 2023. Cost of revenues decreased by $59.2 million or 67.6% and gross profit decreased by $40.0 million or 82.6% for the nine months ended September 30, 2024, as compared to the same period in 2023. The decreases are primarily due to a 16.8% and 73.0% decline in net revenues for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The decrease is offset by increases in inventory reserves of $3.4 million and $4.0 million during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023 due to slow-moving inventory as a result of the macroeconomic factors noted above.

Gross margin decreased by 11.8 percentage points for the three months ended September 30, 2024, and by 12.7 percentage points for the nine months ended September 30, 2024, as compared to the same periods in 2023. The decreases are primarily due to an increase in the Company’s inventory reserves due to slow-moving inventory, lower sales volume due to the unfavorable macroeconomic and market conditions noted above and sales promotions and discounts related to the Company’s GO ESS product line.

### Research and Development

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $2,433 | $2,425 | $8 | 0.3% | $7,608 | $7,063 | $545 | 7.7% |
| Percentage of net revenue | 17.1% | 14.2% |  |  | 20.7% | 5.2% |  |  |

#### Three months ended September 30, 2024, and 2023

Research and development expense remained constant for the three months ended September 30, 2024, as compared to the same period in 2023.

#### Nine months ended September 30, 2024, and 2023

Research and development expense increased by $0.5 million or 7.7% for the nine months ended September 30, 2024, as compared to the same period in 2023. The increase was primarily driven by an increase in consulting and facility expenses.

The amount of research and development expenses may fluctuate from period to period due to differing levels and stages of development activity.

### Sales and Marketing

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Sales and marketing | $4,378 | $5,601 | $(1,223) | (21.8)% | $13,036 | $15,536 | $(2,500) | (16.1)% |
| Percentage of net revenue | 30.8% | 32.7% |  |  | 35.5% | 11.4% |  |  |

#### Three months ended September 30, 2024, and 2023

Sales and marketing expense decreased by $1.2 million or 21.8% for the three months ended September 30, 2024, as compared to the same period in 2023. The decrease is attributed to reduced payroll and travel expenses resulting from a lower headcount during the three months ended September 30, 2024, compared to the same period in 2023.

#### Nine months ended September 30, 2024, and 2023

Sales and marketing expense decreased by $2.5 million or 16.1% for the nine months ended September 30, 2024, as compared to the same period in 2023. The decrease is attributed to reduced payroll and travel expenses resulting from a lower headcount during the nine months ended September 30, 2024, compared to the same period in 2023.

### General and Administrative

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| General and administrative | $5,380 | $7,350 | $(1,970) | (26.8)% | $15,671 | $20,567 | $(4,896) | (23.8)% |
| Percentage of net revenue | 37.8% | 43.0% |  |  | 42.7% | 15.1% |  |  |

#### Three months ended September 30, 2024, and 2023

General and administrative expense decreased by $2.0 million or 26.8% for the three months ended September 30, 2024, as compared to the same period in 2023. The decrease is primarily related to a decline of bad debt expense associated with the Company’s accounts receivable for the three months ended September 30, 2024, compared to the same period in 2023.

#### Nine months ended September 30, 2024, and 2023

General and administrative expense decreased by $4.9 million or 23.8% for the nine months ended September 30, 2024, as compared to the same period in 2023. The decrease is primarily related to a decline of bad debt expense associated with the Company’s accounts receivable for the nine months ended September 30, 2024, compared to the same period in 2023, in addition to a decline in legal expense which were higher in 2023 due to the Business Combination that occurred in May 2023, and is partially offset by an increase in personnel-related stock-based compensation expenses.

### Other Expenses, Net

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Change in fair value of preferred stock warrant and contingent shares liability | $3 | $(2,977) | $2,980 | (100.1)% | $(152) | $143 | $(295) | (206.3)% |
| Change in fair value of derivative liability | — | (50,498) | 50,498 | (100.0)% | — | (12,247) | 12,247 | (100.0)% |
| Loss on debt extinguishment | — | — | — | — | — | 171 | (171) | (100.0)% |
| Interest expense | 2,861 | 2,875 | (14) | (0.5)% | 8,549 | 5,240 | 3,309 | 63.1% |
| Other income, net | (164) | (636) | 472 | (74.2)% | (377) | (1,859) | 1,482 | (79.7)% |
| Total other expenses, net | $2,700 | $(51,236) | $53,936 | (105.3)% | $8,020 | $(8,552) | $16,572 | (193.8)% |

#### Three months ended September 30, 2024, and 2023

Change in fair value of preferred stock warrant and contingent shares liability increased by $3.0 million or 100.1% for the three months ended September 30, 2024, as compared to the same period in 2023. The Company revalues the contingent shares at each reporting period based on the Company's share price as of the revaluation date. For the three months ended September 30, 2024, the stock price experienced a less significant change, coupled with a smaller base of shares to revalue, compared to the same period in 2023. The final tranche of the contingent shares was released on July 25, 2024. See Note 4, “Acquisition of Foresight Energy, Ltd.,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

The change in fair value of derivative liability for the three months ended September 30, 2023, is related to the Convertible Promissory Note which contained conversion options that met the requirements for separate accounting and was accounted for as a convertible note derivative liability. The derivative instrument was recorded at fair value upon recognition on the Merger Date and was subject to remeasurement at the end of the reporting period. On September 24, 2023, we entered into the Convertible Note Amendment (as defined above) with L1 Energy (as defined above) to modify the conversion terms of the Convertible Promissory Note and, as a result of such amendment, the conversion options no longer meet the requirements to be bifurcated in accordance with *ASC Topic 815, Derivatives and Hedging*. See Note 9, “Long-Term Debt,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Interest expense remained constant for the three months ended September 30, 2024, as compared to the same period in 2023.

Other income, net decreased $0.5 million or 74.2% for the three months ended September 30, 2024, as compared to the same period in 2023. This is primarily due to a decrease in interest income from the Company’s marketable securities, as the underlying asset base generating interest income decreased during the three months ended September 30, 2024, compared to the same period in 2023.

#### Nine months ended September 30, 2024, and 2023

Change in fair value of preferred stock warrant and contingent shares liability decreased by $0.3 million or 206.3% for the nine months ended September 30, 2024, as compared to the same period in 2023, primarily due to a decrease in mark-to-market expense associated with the contingent shares related to the fSight acquisition. The final tranche of the contingent shares was released on July 25, 2024. See Note 4, “Acquisition of Foresight Energy, Ltd.,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

The change in fair value of derivative liability for the nine months ended September 30, 2023, is related to the Convertible Promissory Note which contained conversion options that met the requirements for separate accounting and was accounted for as a convertible note derivative liability. The derivative instrument was recorded at fair value upon recognition on the Merger Date and was subject to remeasurement at the end of the reporting period. On September 24, 2023, we entered into the Convertible Note Amendment (as defined above) with L1 Energy (as defined above) to modify the conversion terms of the Convertible Promissory Note and, as a result of such amendment, the conversion options no longer meet the requirements to be bifurcated in accordance with *ASC Topic 815, Derivatives and Hedging*. See Note 9, “Long-Term Debt,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

The loss on debt extinguishment for the nine months ended September 30, 2023, is primarily related to the repayment of our Series 2022-1 Notes.

Interest expense increased by $3.3 million or 63.1% for the nine months ended September 30, 2024, as compared to the same period in 2023. This increase is primarily due to the timing of the amortization of the debt discount of $23.5 million that was recorded upon the bifurcation of the conversion options at the time of the Business Combination. Please see Note 9, “Long-Term Debt,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on the conversion options.

Other income, net decreased $1.5 million or 79.7% for the nine months ended September 30, 2024, as compared to the same period in 2023. This is primarily due to a decrease in interest income from the Company’s marketable securities, as the underlying asset base generating interest income decreased during the nine months ended September 30, 2024, compared to the same period in 2023.

### Income Tax Expense

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | Change in $% |  | Nine Months Ended September 30, 2024 | 2023 | Change in $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Income tax expense | $— | $10,962 | $(10,962) | (100.0)% | $16 | $29 | $(13) | (44.8)% |

#### Three months ended September 30, 2024, and 2023

Income tax expense decreased $11.0 million for the three months ended September 30, 2024, compared to the same period in 2023, which was primarily due to recording a valuation allowance against the Company’s U.S. federal net deferred tax asset during 2023. Please see Note 15, “Income Taxes,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on the valuation allowance.

#### Nine months ended September 30, 2024, and 2023

Income tax expense remained constant for the nine months ended September 30, 2024, as compared to the same period in 2023.

### Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents and marketable securities. As of September 30, 2024, the Company held $19.5 million in cash, cash equivalents and marketable securities which were held primarily for working capital purposes. Our working capital, which we define as current assets less current liabilities, decreased by $19.5 million to $58.8 million as of September 30, 2024, compared to $78.3 million as of December 31, 2023. The decrease in working capital during this period is primarily attributable to lower marketable securities and inventory balances and is partially offset by a decrease in accounts payable and accrued expenses and other current liabilities. Revenues stabilized on a sequential quarter basis over the first three quarters of 2024 but declined on a quarter over quarter and year over year basis.

While we have been actively working on reducing our inventory levels, these efforts will depend on our ability to increase future quarterly revenues, maintain a minimal level of inventory purchases with suppliers, and our ability to recover the book value of inventory. Given the macroeconomic factors noted above, the Company recognized charges of $3.4 million and $4.0 million to write down inventories to their estimated net realizable value for the three and nine months ended September 30, 2024, respectively. Through the first three quarters of 2024, we reduced our inventory levels by $14.6 million from December 31, 2023, primarily due to sales, and expect lower inventory levels and positive working capital cash conversion throughout the remainder of 2024.

We believe that our cash position is sufficient to meet our capital and liquidity requirements for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q.

However, as of September 30, 2024, the Company had $50.0 million of aggregate principal borrowings outstanding on its Convertible Promissory Note. The principal amount of the Convertible Promissory Note is due at the maturity date of January 9, 2026. As of September 30, 2024, the Company does not have sufficient cash, cash equivalents and marketable securities to repay this obligation.

In the future, our ability to sustain operations, pay outstanding obligations, including repayment of the Convertible Promissory Note when due, and invest in new technologies will likely necessitate that we seek additional equity or debt financing. Our capital needs will be influenced by several factors, including the amount of our revenue and our revenue growth rate, the success of our current products and services and future product development and capital investments, and the timing and extent of spending to support further sales and marketing and research and development efforts. In addition, we have incurred and expect to continue to incur additional costs as a result of operating as a public company. The Company intends to secure additional funding from either public or private financing sources, however as the plans are outside of management’s control, the Company cannot ensure they will be effectively implemented. In the event that additional financing is required from outside sources, we cannot be certain that any additional financing will be available to us on acceptable terms, or at all. If we are required but unable to raise additional capital, meet our obligations, or generate cash flows to sustain our operations, meet our outstanding obligations, including repayment of the Convertible Promissory Note when due, or expand our business, our business, operating results, and financial condition could be adversely affected.

### Cash Flows

The following table summarizes our cash flows for the periods presented:

*(in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(13,407) | $(29,379) |
| Net cash provided by (used in) investing activities | 18,305 | (40,919) |
| Net cash provided by financing activities | 158 | 34,821 |
| Net increase (decrease) in cash and cash equivalents | $5,056 | $(35,477) |

Management closely monitors expenditures and is focused on obtaining new customers and continuing to develop our products and services. Cash from operations and our liquidity could also be affected by various risks and uncertainties, including, but not limited to, economic concerns related to interest rates, inflation or the supply chain, including timing of cash collections from customers and other risks which are detailed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q, including in Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors” in the 2023 Annual Report.

#### Cash Flows Used in Operating Activities

Operating cash flows consists primarily of net (loss) income adjusted for certain non-cash items and changes in operating assets and liabilities. Cash used in operating activities decreased by $16.0 million in the nine months ended September 30, 2024, as compared to the same period in 2023. This is primarily due to a decrease in purchases of inventory for the nine months ended September 30, 2024, compared to the same period in 2023 as a result of the negative macroeconomic factors that are noted above.

#### Cash Flows Provided by (Used in) Investing Activities

Net cash provided by investing activities was $18.3 million for the nine months ended September 30, 2024, which is primarily attributable to the sale and maturities of marketable securities and was partially offset by the purchase of additional marketable securities and property and equipment. Net cash used in investing activities was $40.9 million for the nine months ended September 30, 2023, which is primarily attributable to the purchase of marketable securities and property and equipment and was partially offset by the sale and maturities of marketable securities.

#### Cash Flows Provided by Financing Activities

Net cash provided by financing activities decreased by $34.7 million in the nine months ended September 30, 2024, compared to the same period in 2023. For the nine months ended September 30, 2024, the Company received proceeds of $0.3 million from the exercise of stock options by employees. For the nine months ended September 30, 2023, the Company received proceeds of $50.0 million from the Convertible Promissory Note, proceeds of $3.7 million from the redemptions of common stock warrants and proceeds of $2.2 million from the Business Combination, which was partially offset by the $20.8 million repayment of the Series 2022-1 Notes.

### Contractual Obligations

Our contractual obligations primarily consist of our Convertible Promissory Note, obligations under operating leases and inventory component purchases. As of September 30, 2024, there have been no material changes from our disclosure in our 2023 Annual Report. For more information on our future minimum operating leases, see Note 13, “Leases” and for more information on our Convertible Promissory Notes and other related debt, see Note 9, “Long-Term Debt,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

### Off-Balance Sheet Arrangements

During the periods presented, the Company did not have any off-balance sheet arrangements.

### Critical Accounting Estimates

For the period ended September 30, 2024, there have been no material changes to our critical accounting estimates from the information reported in our 2023 Annual Report.

### Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on the Company’s condensed consolidated financial statements, see Part I, Note 2, “Summary of Significant Accounting Policies”, in the notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 211 characters.

As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is not required to provide the information required under this item.

## Controls and procedures

As filed, 3,238 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls were effective as of September 30, 2024.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on the Effectiveness of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

## Risk factors

As filed, 10,115 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors disclosed in the section entitled “Risk Factors” in Part I, Item 1A, of the Company’s 2023 Annual Report, and the other reports that we have filed with the SEC. Any of the risks discussed in such reports, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations, financial condition or prospects. During the period covered by this Quarterly Report on Form 10-Q, there have been no material changes in our risk factors as previously disclosed except the following:

***Future elections and political uncertainty may have an adverse impact on business.***

As discussed in the Company’s 2023 Annual Report, we are subject to various legal, compliance and regulatory risks in numerous jurisdictions throughout the world. These risks include the availability of economic incentives in certain geographic regions in which the Company operates. Future elections in various countries, including the United States and throughout Europe, may further increase these risks. The elections could result in shifts in domestic, foreign, and economic policy approaches, and uncertainty with respect to, regulation and legislation directly affecting the Company and our business environment, including tax incentives or potential tariffs that could directly affect the solar industry. Actions taken by new administrations may have an adverse impact on our industry and business or may indirectly affect us because of adverse impacts on our customers, suppliers and manufacturers, which could result in a material adverse effect on our business, financial condition, results of operations and future growth.

***We have a history of generating net losses, and if we are unable to achieve an adequate level of revenue or grow our revenue or manage our expenses, we may not have sufficient cash to fund our future operations or achieve or maintain profitability in the future.***

We have a history of incurring net losses, and we may not achieve or maintain profitability in the future. We experienced net losses of $1.0 million and $7.0 million for the years ended December 31, 2023, and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $75.8 million. In the second half of 2023, we also experienced higher operating losses than in previous quarters, primarily as a result of higher channel inventories, order cancellations and a slowdown in the macroeconomic environment. As a result, we cannot accurately predict when or whether we will reach or maintain profitability. We expect our costs will increase over time and our losses to continue as we expect to continue to invest significant additional funds in expanding our business, sales, and marketing activities, and research and development as we continue to develop our products and services, and maintain high levels of customer support, each of which we consider critical to our continued success. We also expect to incur additional general and administrative expenses as we continue to support our operations as a public company. Historically, our costs have increased over the years due to these factors, and we expect to continue to incur increasing costs to support our anticipated future growth. If we are unable to generate adequate revenue or grow our revenue and manage our expenses, we may continue to incur significant losses and may not have sufficient cash to fund our future operations or achieve or maintain profitability.

Given the challenging macroeconomic conditions outlined above, the Company has taken measures to preserve liquidity, including the strategic decision to restructure our operations and reduce our workforce by 15% in December 2023. The Company closely monitors these conditions and may need to reduce operational expenditures further.

We may also make decisions that could adversely affect our short-term operating results if we believe those decisions improve the experiences of our customers and if we believe such decisions will improve our operating results over the long term. Our decisions may not be consistent with the expectations of investors and may not produce the short-term or long-term benefits that we expect, in which case our business may be materially and adversely affected.

***We will likely require additional capital, which additional financing may result in restrictions on our operations or substantial dilution to our stockholders, to sustain and grow our business, and this capital might not be available on acceptable terms, if at all.***

We have funded our operations since inception primarily through financing transactions such as the issuance of bonds, convertible promissory notes and loans, and sales of convertible preferred stock. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations, service our indebtedness, including the Convertible Promissory Note, or invest in the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. In particular, the current disruption in the global financial markets may reduce our ability to access capital and negatively affect our liquidity in the future. The Company intends to secure additional funding from either public or private financing sources, however as the plans are outside of management’s control, the Company cannot ensure they will be effectively implemented. If adequate funds are not available on acceptable terms, or at all, we may be unable to fully fund our ongoing operations, service our indebtedness, including the Convertible Promissory Note, or invest in future growth opportunities, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends to holders of our common stock. If we undertake discretionary financing by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at a price per share that is less than the price per share paid by current stockholders. If we sell common stock, convertible securities, or other equity securities in more than one transaction, stockholders may be further diluted by subsequent sales. Additionally, future equity financings may result in new investors receiving rights superior to our existing stockholders. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests.

***Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations, restrict our ability to incur additional indebtedness and impair our ability to satisfy our obligations under the Convertible Note.***

Our indebtedness could have material adverse consequences for our security holders and our business, results of operations and financial condition by, among other things:

- increasing our vulnerability to adverse economic and industry conditions;
- limiting our ability to obtain additional financing;
- limiting our flexibility to plan for, or react to, changes in our business;
- diluting the interests of our existing security holders as a result of issuing common stock upon conversion of the Convertible Note; and
- placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.

The Convertible Note includes financially restrictive covenants that, among other things, limit our ability to incur additional debt. Without the consent of the holder of the Convertible Note, we may not create, incur, assume, guarantee, or be or remain liable with respect to any senior indebtedness exceeding the greater of (i) $150,000,000 in the aggregate, (ii) an amount equal to 500% of Adjusted EBITDA for the period of 12 consecutive months ending on the last day of the fiscal month ended most recently prior to the date of incurrence of such senior indebtedness or (iii) the amount of senior indebtedness incurred by the Company pursuant to one or more asset-based credit facilities, working capital facilities, or receivable facilities secured only by liens on our or our subsidiaries’ assets and property, plus interest accruing thereon and the termination value of interest rate hedges or currency swaps in respect thereof.

The Convertible Note matures on January 9, 2026. At maturity, unless converted at the election of the holder or redeemed by us with the consent of the holder, we will need to repay the principal amount under the Convertible Note. As of September 30, 2024, the conversion price of the Convertible Promissory Note is higher than the price at which our shares of common stock have traded on Nasdaq since August 2023, therefore we do not currently expect that the holder will elect to convert the Convertible Promissory Note into shares of our common stock. As of September 30, 2024, we have not generated sufficient funds, and we may not otherwise be able to generate sufficient funds or maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Convertible Note, and our cash needs may increase in the future.

Filed Nov 6, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-122269. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.