Complete Solaria Inc. (NASDAQ: CSLR) published its third quarter
2023 results, which will be reviewed for investors at 5:00 p.m. EST
today at https://investors.completesolaria.com/.
Third quarter summary (financial comments based
on non-GAAP results unless noted):
- Revenue (systems only) of $24.6
million, down 4% from previous quarter
- Modules sales, $3.8 million,
reported as “discontinued operations,” not revenue
- 25% gross margin, up from 18% in
the prior quarter
- Sale of Module business and
transfer of 26 employees to Maxeon for $10.2 million
- Leaning out the company: second RIF
of 68 with $7.5 million of annualized savings
- Systems bookings remained strong
with $56.4 million in new contracts, a record
Fellow Shareholders:Our revenue
and earnings for Q3 2023 are given below, compared with Q2 2023
actual results and a Q4 2023E forecast:
($1000s, except gross
margin) |
|
GAAP |
|
Non-GAAP1 |
|
|
|
Q3 2023 |
|
Q2 2023 |
|
Q3 2023 |
|
Q2 2023 |
|
Q4 2023E3 |
|
Revenue |
|
24,590 |
|
32,173 |
|
24,590 |
|
32,173 |
|
22,000 |
|
Gross Margin |
|
25% |
|
17% |
|
25% |
|
18% |
|
35% |
|
Operating Income |
|
(11,078) |
|
(17,546) |
|
(9,231) |
|
(15,788) |
|
(5,698) |
|
Cash Flow2 |
|
(884) |
|
(804) |
|
(884) |
|
(804) |
|
973 |
|
Cash Balance |
|
1,661 |
|
2,545 |
|
1,661 |
|
2,545 |
|
2,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Reconciliation to GAAP attached.2. Includes
funding of $10,252 in Q2 (deSPAC bridge), $19,500 in Q3 (deSPAC)
and $10,153 in Q4 (Maxeon).3. Ranges: $21-$23M revenue, 32%-40% GM,
($4)-($8)M opinc, $1M cash flow (minimum), $1M end cash (minimum),
based on agreement with current shareholders.
Chairman’s Report
A Systems CompanyWe have completed
the Module business divestiture to Maxeon and received $10.2
million, which provides the cash needed in our Q4 plan. This
restructuring and singular focus on our high-margin systems
business model raised our gross margin to 25% in Q2, and we aim to
further improve it to the 32%-40% range in the current Q4
quarter.
Figure 1 is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/e3ade911-f53e-44c2-8953-91dbca423034
Reducing Excess Fab InventoryOur Q3 revenue was
$24.6 million, below the “above $30 million” revenue expectation I
wrote in the Q2 report and the $38-$41 million previous street
expectation. The fab remained overloaded because our
incorrect assumption that the improvements we made
allowed us to load the line with all the contracts we received
during Q3, but that bloated the fab WIP to 3,615 jobs as is shown
in the WW39 WIP inventory graph below. I consequently shut down new
starts in the fab for five weeks, and the excess inventory dropped
by 13.5% to 3,127 jobs.
Figure 2 is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/f6ba9cf4-12b0-42cc-82f7-69e49af1182a
Plan to Achieve Cash Flow Breakeven
& ProfitabilityWe now have a growing company with $88
million in annualized revenue that comes solely from the
high-margin systems business. Our plan is
to make that $88 million in revenue profitable as soon as
possible by leaning out the organization further and
increasing its efficiency using classic quality control methods.
Paradoxically, our increase in orders into the line in Q3 slowed
the fab down and thus again impeded revenue growth. Our plan after
the five-week shutdown is to limit fab starts this quarter to
produce $22 million in revenue in Q4 – and focus our engineering
and operations efforts on making that $22 million more profitably,
and with better quality. While it does not yet show up on the
bottom line, we did make significant progress in the third quarter
on our “North Star” plan to achieve profitability and cash flow
independence in 2024.
The North Star plan simultaneously drives three
key components of profitability: 1) reducing opex
from $12,875 (all numbers in $1000s) in Q2 to $6,732 in Q3 (done)
and then to our $5,918 forecast for Q4 (on track), 2)
reducing our sales commissions from 36% in Q3 to
34% in Q4 and 32% in Q1, and 3) increasing gross
margin from 18% in Q2 to 25% in Q3 (done) and again to
32%-40% in Q4 (on track). We have made significant progress on each
North Star component, as detailed below.
Leaning Out The OrganizationAs
shown in the headcount graph below, by the end of the second
quarter (WW26), our headcount had been reduced to 415. In Q3
(WW39), two more RIFs reduced our headcount further to 321 in Q3,
saving an incremental $10.6 million annually. Today (WW46), our
headcount is down 33% to 285 and will be lower yet by the end of
the quarter. And – as is typical – when the lean method is used,
our performance has actually improved with fewer people.
Figure 3 is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/a9a3024b-649b-4b7e-ba9b-d678b80812f8
When our headcount reduction is combined with
other cost reductions, opex was reduced from $12,875 in Q2 to
$6,732 in Q3 (done), and we are on track to reduce opex to $5,918
in Q4.
ConclusionAlthough our bottom
line does not yet show it, we have made major progress in quality
and our North Star profitability goals by
restructuring to a systems-only company,
reducing headcount by 33%,
reducing our panel cost from an average cost of
$0.61/watt with our new $0.25/watt contract, and our commissions
from 34% as we phase in our new 30% rate. We expect these
improvements to cut our operating income losses from $15.8 million
in Q2 to $9.2 million in Q3 (done) and to $5.7 million in Q4. The
profit improvement will improve cashflow losses in Q4 to levels
already funded by the Maxeon divestiture. Our planned future cash
need is less than $5 million in total cashflow needed until
mid-2024. Obviously, these estimates have high uncertainty in a
company with immature business processes in the current chaotic
market, but the company has become fundable by existing
investors with acceptable dilution.
We have established a franchise with $88 million
in annualized revenue. We will build shareholder value by driving
CSLR to operating profitability, which we can credibly envision for
the first time.
Building The Complete Solaria
Team
We have a new CEO: Taner
Ozcelik. Founder Will Anderson will report to him.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/6a2c4993-82bf-4f18-9cc6-4089cfb6d0f8
Born in Turkey#82
among 650,000 college entry students, country-wideBronze metal at
World Mathematics Olympiad, Helsinki23 US patents, 12 technical
papersMBA, WhartonPhD Electrical Engineering, Northwestern. GPA
3.9/4.0Sony, ’95-’01: founded semiconductor unit,
grew it from $0-$200 millionNvidia, ’04-’14:
founded automotive semiconductor unit, grew it from $0-$600
million
Launched Tegra AI
supercomputer chip for autonomous drivingDesigned Tegra into 126
cars at 23 companiesCar of the year awards: Tesla Model S, Audi
A3
On
Semi: ’14-’21, 800 employees, 13 countries, $250M
budget
Grew Smart Sensor
division from $590 million to $850 millionFixed “distress asset”
Cypress imaging division
And, we have a new board member: Chris
Lundell
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/20c7e5ba-c096-4993-8b95-00548179a595
Brigham Young, MBA,
3.85 GPA, Finance & EconomicsNovel, 1990-2003: Five promos
ending as VP of MarketingVivint Solar: ’13-’16,
CMO at Vivint 2013 for their IPOCMO Grow: CEO of a
national consulting company that creates scalable growth plansLives
in Salt Lake near our main plant; connected to Salt Lake “Solar
Valley”
CEO’s Report
Continued Strong Customer
DemandWhile our industry has reported slowing customer
demand, Complete Solaria has experienced the opposite. In the third
quarter the Company experienced record gross bookings of $56.4
million, a 1.4x increase over the same period last year.
Figure 4 is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/a3c97809-c663-4fd0-a478-a9f55b2b6f0b
Complete Solaria’s two most important core
competencies have always been: 1) We make selling solar easy, and
2) we deliver a fast, world-class customer experience. The increase
in new bookings – even in markets like California that are
experiencing regulatory headwinds – proves that our model
effectively drives customer demand.
Improving the FabWe have made
progress in reducing the excess inventory in our fab, the primary
cause of project delays. These delays come from both external
factors such as long permitting and utility approval cycles, but
primarily from internal factors such as quality of execution and
difficulty in scaling our corporate business processes rapidly to
beyond the $88 million revenue level we are at. The compounding
effect of record new orders and delayed project completions
resulted in significant wait times for many customers and a
reduction in customer satisfaction, which improved in Q3 but has
not yet returned to historical levels.
To improve the customer experience, we need to
further reduce fab WIP by limiting the number of new projects we
launch into the fab. Specific actions we have taken to accomplish
this include:
- Shutting down new order launches
for five weeks during Q3 to kick-start fab WIP reduction.
- Establishing a Quality Department
led by an experienced VP Quality. The department is responsible for
reducing rework and defects that slow down our business processes.
It has defined and implemented strict quality gates at project
launch to control WIP and to avoid installation errors. This is the
main reason we are throttling our revenue to $22 million in
Q4.
- Hiring a VP IT to increase the
scalability of our IT systems.
- Extending the engagements of senior
consultants in IT, fab management, quality and customer service
management to help us scale more quickly.
These actions have already resulted in a
significant reduction of our fab inventory as shown. However, there
are still many aged projects in our fab, which will flush out over
the next two quarters, during which we will return to our faster
historical cycle times.
Improving Gross MarginWe
improved gross margin from 18% in Q2 to 25% in Q3. The primary
contributors to the improvement in Q3 were reductions in the cost
of solar modules and other equipment and reduced headcount. These
gains were partially offset by an increase in installation labor,
especially in the Northeastern US. We invested in four internal
installation teams which will provide lower Q4 installation costs.
Our “GM47” project, which I personally run, is targeted to add ten
percentage points to our Q3 GM of 25% this quarter, as quantified
below:
Figure 5 is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/feb535d7-075a-40f4-b265-8b3269c05fea
We are targeting 32%-40% Q4 gross margin as
driven by lower solar panel, inverter, and battery pricing, as well
as the benefits of using lower-cost internal installation
teams.
ConclusionComplete Solaria now
focuses solely on what it does best – the Systems business. We are
striving to regain our prior performance in rapid fulfilment and
customer satisfaction. Investors will see a steady improvement in
our financial metrics.
About Complete SolariaComplete
Solaria is a solar company with unique technology and an end-to-end
customer offering – which includes financing, design and project
fulfilment, and follow-on customer service – allowing it to sell
more products across more markets and enable more options for
customers wishing to make the switch to a more energy-efficient
lifestyle. To learn more,
visit https://www.completesolaria.com.
Forward Looking
Statements This press release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, about us and our
industry that involve substantial risks and uncertainties.
Forward-looking statements generally relate to future events or our
future financial or operating performance. In some cases, you can
identify forward-looking statements because they contain words such
as “will,” “goal,” “prioritize,” “plan,” “target,” “expect,”
“focus,” “look forward,” “opportunity,” “believe,” “estimate,”
“continue,” “anticipate,” and “pursue” or the negative of these
terms or similar expressions. Actual results could differ
materially from these forward-looking statements as a result of
certain risks and uncertainties. For additional information on
these risks and uncertainties and other potential factors that
could affect our business and financial results or cause actual
results to differ from the results predicted, readers should
carefully consider the foregoing factors and the other risks and
uncertainties described in the “Risk Factors” section of the
registration statement on Form S-4 filed, which was declared
effective by the Securities and Exchange Commission (the “SEC”) on
June 30, 2023. Such filings identify and address other important
risks and uncertainties that could cause actual events and results
to differ materially from those contained in the forward-looking
statements. Forward-looking statements speak only as of the date
they are made. Readers are cautioned not to put undue reliance on
forward-looking statements, and Complete Solaria assumes no
obligation and does not intend to update or revise these
forward-looking statements, whether as a result of new information,
future events, or otherwise.
Contacts: |
Brian WuebbelsCFObwuebbels@completesolaria.com |
Sioban HickieInvestor RelationsCompleteSolariaIR@icrinc.com |
Complete Solaria, Inc. |
Condensed Consolidated Balance Sheets |
(Unaudited) |
(In Thousands, Except Share and per Share Amounts) |
|
|
|
|
|
October 01, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
|
Current Assets: |
|
|
|
|
Cash |
|
$ |
1,661 |
|
|
$ |
4,409 |
|
Accounts receivable, net |
|
|
26,003 |
|
|
|
27,717 |
|
Inventories, net |
|
|
12,503 |
|
|
|
13,059 |
|
Prepaid expenses and other current assets |
|
|
9,947 |
|
|
|
10,071 |
|
Total Current Assets |
|
|
50,114 |
|
|
|
55,256 |
|
Property, plant and equipment, net |
|
|
4,185 |
|
|
|
3,476 |
|
Long-term assets held for sale - discontinued operations |
|
|
12,299 |
|
|
|
162,032 |
|
Other assets |
|
|
5,421 |
|
|
|
7,419 |
|
Total Assets |
|
$ |
72,019 |
|
|
$ |
228,183 |
|
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Current Liabilities: |
|
|
|
|
Accounts payable |
|
$ |
14,571 |
|
|
$ |
14,474 |
|
Accrued expenses and other current liabilities |
|
|
35,681 |
|
|
|
25,237 |
|
Notes payable and short-term debt |
|
|
57,128 |
|
|
|
20,403 |
|
Total Current Liabilities |
|
|
107,380 |
|
|
|
60,114 |
|
Redeemable convertible preferred stock warrant liability |
|
|
10,240 |
|
|
|
14,152 |
|
Long term debt and convertible notes |
|
|
- |
|
|
|
44,148 |
|
Other long term liabilities |
|
|
5,182 |
|
|
|
4,488 |
|
Total liabilities |
|
|
122,802 |
|
|
|
122,902 |
|
Stockholders' deficit |
|
|
(50,783 |
) |
|
|
105,281 |
|
Total liabilities, mezzanine equity and stockholder' deficit |
|
$ |
72,019 |
|
|
$ |
228,183 |
|
|
|
|
|
|
Complete Solaria, Inc. |
Condensed Consolidated Statement of
Operations |
(Unaudited) |
(In Thousands, Except Share and per Share Amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 weeks ended |
|
Quarter Ended |
|
39 weeks ended |
|
Nine months ended |
|
|
|
|
October 1, 2023 |
|
September 30, 2022 |
|
October 1, 2023 |
|
September 30, 2022 |
Revenues |
|
|
$ |
24,590 |
|
|
$ |
12,260 |
|
|
$ |
66,887 |
|
|
$ |
48,974 |
|
Costs
revenues |
|
|
18,354 |
|
|
|
8,266 |
|
|
|
51,788 |
|
|
|
33,792 |
|
Gross profit |
|
|
|
6,236 |
|
|
|
3,994 |
|
|
|
15,099 |
|
|
|
15,182 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
Sales
commissions |
|
|
8,755 |
|
|
|
3,572 |
|
|
|
23,221 |
|
|
|
15,694 |
|
|
Sales and
marketing |
|
|
2,214 |
|
|
|
1,604 |
|
|
|
5,216 |
|
|
|
4,607 |
|
|
General and
administrative |
|
|
6,345 |
|
|
|
2,027 |
|
|
|
22,965 |
|
|
|
6,194 |
|
|
Operating
expenses |
|
|
17,314 |
|
|
|
7,203 |
|
|
|
51,402 |
|
|
|
26,495 |
|
Loss from
continuing operations |
|
|
(11,078 |
) |
|
|
(3,209 |
) |
|
|
(36,303 |
) |
|
|
(11,313 |
) |
Other income
(expense), net |
|
|
(39,896 |
) |
|
|
(937 |
) |
|
|
(37,146 |
) |
|
|
508 |
|
Loss before income
taxes |
|
|
(50,974 |
) |
|
|
(4,146 |
) |
|
|
(73,449 |
) |
|
|
(10,805 |
) |
Income tax
provision |
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
|
|
(4 |
) |
Net loss from
continuing operations |
|
$ |
(50,973 |
) |
|
$ |
(4,146 |
) |
|
$ |
(73,448 |
) |
|
$ |
(10,809 |
) |
Discontinued
operations |
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of tax |
|
|
(8,404 |
) |
|
|
- |
|
|
|
(20,953 |
) |
|
|
- |
|
|
Impairment loss
from discontinued operations |
|
|
(147,505 |
) |
|
|
- |
|
|
|
(147,505 |
) |
|
|
- |
|
Net loss from
discontinued operations |
|
|
(155,909 |
) |
|
|
- |
|
|
|
(168,458 |
) |
|
|
- |
|
|
Net Loss |
|
|
$ |
(206,882 |
) |
|
$ |
(4,146 |
) |
|
$ |
(241,906 |
) |
|
$ |
(10,809 |
) |
Comprehensive
income (loss) |
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment |
|
|
10 |
|
|
|
- |
|
|
|
24 |
|
|
|
- |
|
Comprehensive
income (net of tax) |
|
|
(206,872 |
) |
|
|
(4,146 |
) |
|
|
(241,882 |
) |
|
|
(10,809 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
from continuing operations, basic and diluted |
|
$ |
(1.28 |
) |
|
$ |
(0.31 |
) |
|
$ |
(4.33 |
) |
|
$ |
(0.83 |
) |
Net loss per share
from discontinued operations, basic and diluted |
|
|
$ |
(3.92 |
) |
|
|
- |
|
|
|
(9.92 |
) |
|
|
- |
|
Net loss per
share, basic and diluted |
|
$ |
(5.20 |
) |
|
$ |
(0.31 |
) |
|
$ |
(14.25 |
) |
|
$ |
(0.83 |
) |
Weighted average
number of common shares outstanding, basic and diluted |
|
|
|
39,821,078 |
|
|
|
13,431,410 |
|
|
|
16,973,195 |
|
|
|
13,053,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Complete Solaria, Inc. |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
(In Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 weeks ended |
|
Quarter Ended |
|
39 weeks ended |
|
Nine months ended |
|
|
|
|
October 1, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
GAAP operating
loss from continuing operations |
Note |
|
(11,078 |
) |
|
(3,209 |
) |
|
(36,303 |
) |
|
(11,313 |
) |
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
A |
|
1,630 |
|
|
85 |
|
|
2,321 |
|
|
217 |
|
Transaction related
charges |
|
B |
|
- |
|
|
- |
|
|
2,765 |
|
|
- |
|
Restructuring charges |
|
C |
|
217 |
|
|
- |
|
|
217 |
|
|
- |
|
Total of Non-GAAP adjustments |
|
|
|
1,847 |
|
|
85 |
|
|
5,303 |
|
|
217 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net loss |
|
|
|
(9,231 |
) |
|
(3,124 |
) |
|
(31,000 |
) |
|
(11,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
Notes: |
|
|
|
|
|
|
|
|
|
|
(A) Stock-based compensation: Stock-based compensation relates
primarily to our equity incentive awards. Stock-based compensation
is a non-cash expense. |
(B) Transaction related charges: These expenses are related to
audit and consulting fees in connection with efforts needed for the
DPAC process, which includes IPO readiness, catch-up audits
etc. |
(C) Change in fair value of warrants: this is a non-cash,
non-operating impact. |
|
Complete Solaria, Inc. |
Non-GAAP Condensed Consolidated Statement of
Operations |
(Unaudited) |
(In Thousands, Except Share and per Share Amounts) |
|
|
|
|
13 weeks ended |
|
|
|
October 1, 2023 |
Revenues |
|
$ |
24,590 |
|
Costs
revenues |
|
|
18,334 |
|
Gross profit |
|
|
6,256 |
|
Operating
expenses: |
|
|
|
Sales commissions |
|
|
8,755 |
|
|
Sales and marketing |
|
|
2,019 |
|
|
General and
administrative |
|
|
4,713 |
|
|
Operating expenses |
|
|
15,487 |
|
Loss from
continuing operations |
|
|
(9,231 |
) |
Other income
(expense), net |
|
|
(1,987 |
) |
Loss before income
taxes |
|
|
(11,218 |
) |
Income tax
provision |
|
|
1 |
|
Net loss from
continuing operations |
|
$ |
(11,217 |
) |
|
|
|
|
|
Net loss per
share, basic and diluted |
|
$ |
(0.28 |
) |
Weighted average
number of common shares outstanding, basic and diluted |
|
|
39,821,078 |
|
|
|
|
|
|
Use of Non-GAAP Financial Measures
Non-GAAP gross margin, non-GAAP operating income
and other non-GAAP measures are intended as supplemental financial
measures of our performance that are neither required by, nor
presented in accordance with GAAP. We believe that the use of
Non-GAAP measures provides an additional tool for investors to use
in evaluating ongoing operating results, trends, and in comparing
our financial measures with those of comparable companies, which
may present similar Non-GAAP financial measures to investors.
However, you should be aware that when
evaluating the non-GAAP measures, we may incur future expenses
similar to those excluded when calculating these measures. In
addition, the presentation of these measures should not be
construed as an inference that our future results will be
unaffected by unusual or nonrecurring items. Our computation of
non-GAAP gross margin, non-GAAP operating income and other non-GAAP
measures may not be comparable to other similarly titled measures
computed by other companies, because all companies may not
calculate the non-GAAP measures in the same fashion.
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