Complete Solaria Reports Second Quarter 2023 Results
- Systems revenue increased by 54% QoQ to $25.6 million
- Gross margin improved by 6% QoQ to 18%
- Company plans to focus solely on higher-margin Systems business
- Signed non-binding term sheet to sell Modules business
- Streamlined organization with a reduction of 59 employees
- Modules revenue decreased by 65% QoQ to $6.6 million
FREMONT, Calif., Aug. 22, 2023 (GLOBE NEWSWIRE) -- Complete Solaria Inc. (NASDAQ: CSLR) published its second quarter 2023 results, which will be reviewed for investors at 5:00 p.m. EDT today, https://investors.completesolaria.com/.
Second quarter summary (financial comments based on non-GAAP results unless noted):
- Revenue of
$32.2 million , down9% from previous quarter
Systems:$25.6 million , up54% QoQ, and a record
Modules:$6.6 million , down65% QoQ
18% gross margin, up6% QoQ- Strategic Decision: company to pursue only higher-margin Systems business in the future
- Sale of Modules business: non-binding term sheet with module manufacturer signed
- Streamlined organization: RIF of 59 with
$7.9 million of annualized savings - New Systems bookings remain strong with
$49.1 million in contracts in Q2
Fellow Shareholders:
Our revenue and earnings for the quarter are given below, compared with the prior quarter:
| ( | GAAP | Non-GAAP* | ||||||||||||
| Q2 2023 | Q1 2023 | Q2 2023 | Q1 2023 | |||||||||||
| Revenue | 32,174 | 35,398 | 32,174 | 35,398 | ||||||||||
| Gross Margin | 18 | % | 6 | % | 17 | % | 6 | % | ||||||
| Operating Income | (17,546 | ) | (20,233 | ) | (15,788 | ) | (15,698 | ) | ||||||
| *reconciliation attached | ||||||||||||||
The details of a plan to address operating losses are found in the CEO’s report, which comes directly after the Chairman’s report, which focusses on restructuring.
Chairman’s Report
When I became the Executive Chairman of Complete Solaria seven weeks ago, I chose to devote most of my time to improving the company’s organization and business practices – to build a “machine to make quarters,” not to make quarters per se. Those efforts are just becoming visible.
The first operational problem we addressed was described to investors in a Zoom-cast from Complete Solaria’s Salt Lake fabrication plant (fab) on June 30, 2023. We told investors that a surge in orders had flooded the Salt Lake fab with new installation jobs, jamming it up and slowing it down. Our fab inventory had climbed to 2,800 home installation jobs, up from the historical 1,200 or fewer jobs. That fab logjam and slowdown limited our total Q2 revenue to
I asked for help from three top experts: a fab expert who came to the Salt Lake fab for two extended periods, a quality expert who began to systematically address underlying fab quality problems, and an information technology expert who helped to install manufacturing-friendly documentation and specification systems. These experts also spent considerable time tutoring management and workers.
While the fab remains overloaded, its cycle time went down slightly in Q2, despite a higher number of jobs installed. This good news leads us to expect Q3 Systems revenue of well over
Yesterday, we announced an additional reduction of 25 employees from our Module organization by divestiture. Together, the total company-wide reduction comes to 59 employees (
The Modules organization wind-down is a result of a measured business decision to stop offering solar modules separately. A glut of modules from Chinese manufacturers has driven market pricing down below
The shift to the Systems business (where the price is about
To conclude, we restructured Complete Solaria this quarter, cutting headcount by 59 and costs by
CEO’s Report
The Company experienced a significant shift in its business during the second quarter of 2023. Over the previous four quarters, our Systems and Modules businesses generated approximately equivalent revenue (
We expect the Systems business to achieve another revenue record in Q3 with continued margin improvement, while the Modules revenue will be flat in Q3 as it begins to wind down.
We plan to sell certain Modules assets to a global tier-1 solar panel manufacturer, which will provide cash to the company and enable us to focus on growing our core Systems business. We have signed a non-binding term sheet and are working to close the transaction in Q3. Note there is no assurance this transaction will close and remains subject to the signing of a Definitive Agreement with the buyer. However, there are several panel manufacturers interested in gaining access to the U.S. Residential market, as well as supplying Complete Solaria as a customer. The transaction anticipates an ongoing supply agreement that is expected to maintain Complete Solaria’s access to differentiated, premium solar panels at a competitive cost to preserve our end-to-end offering to customers.
Our Q2 gross margin was
Operating losses in Q2 were driven by: 1) one-time expenses related to our business combination with Freedom Acquisition 1 Corp., 2) negative Modules gross margin, and 3)
Third Quarter 2023 Financial Outlook
For the third quarter of 2023, Complete Solaria estimates financial results as follows: Revenues in the range of
We believe our gross margin will continue to increase from Q2 levels based on a larger proportion of revenues from Systems, continued reduction in module costs, and selective use of internal install capability to further reduce the cost of goods sold.
We generated
About Complete Solaria
Complete 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 may contain certain forward-looking statements within the meaning of the federal securities laws with respect to the referenced transactions. These forward-looking statements generally are identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would,” and similar expressions, but the absence of these words does not mean that a statement is not a forward-looking statement. Forward-looking statements are forecasts, predictions, projections and other statements about future events that are based on current expectations, hopes, beliefs, intentions, strategies and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this press release, including but not limited to: (i) risks that the sale of certain assets will not be completed on the terms set forth in the non-binding Letter of Intent; (ii) the sale of assets disrupts current plans and operations of the companies or diverts managements’ attention from Complete Solaria’s business operations; (iii) the outcome of any legal proceedings that may be instituted in connection with the assets sale; (iv) the price of Complete Solaria’s securities may be volatile due to a variety of factors, including changes in the applicable competitive or regulatory landscapes, variations in operating performance across competitors, changes in laws and regulations affecting Complete Solaria’s business, and changes in the combined capital structure; (v) the ability to implement business plans, forecasts, and other expectations after the completion of the business combination, and identify and realize additional opportunities; (vi) the evolution of the markets in which Complete Solaria will compete.
The foregoing list of factors is not exhaustive. 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 Wuebbels
CFO
bwuebbels@completesolaria.com
Sioban Hickie
Investor Relations
sioban.hickie@icrinc.com
| COMPLETE SOLARIA, INC. | ||||||||
| CONDENSED CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||
| (In $ '000) | ||||||||
| (Unaudited) | ||||||||
| July 3, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | 2,545 | 4,409 | ||||||
| Accounts receivable, net | 24,263 | 27,717 | ||||||
| Inventories, net | 7,977 | 13,059 | ||||||
| Prepaid expenses and other current assets | 15,028 | 10,071 | ||||||
| Total Current Assets | 49,813 | 55,256 | ||||||
| Property, plant and equipment, net | 3,942 | 3,476 | ||||||
| Goodwill and other intangible assets, net | 160,543 | 162,032 | ||||||
| Other assets | 10,825 | 7,419 | ||||||
| Total Assets | 225,123 | 228,183 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | 15,071 | 14,474 | ||||||
| Accrued expenses and other current liabilites | 32,305 | 25,237 | ||||||
| Notes payable | 27,159 | 20,403 | ||||||
| Total Current Liabilities | 74,535 | 60,114 | ||||||
| Redeemable convertible preferred stock warrant liability | 4,735 | 14,152 | ||||||
| Long term debt and convertible notes | 68,317 | 44,148 | ||||||
| Other long term liabilities | 5,166 | 4,488 | ||||||
| Total liabilities | 152,753 | 122,902 | ||||||
| Redeemable convertible preferred stock | 155,630 | 155,630 | ||||||
| Stockholders' deficit | (83,260 | ) | (50,349 | ) | ||||
| Total liabilities, mezzanine equity and stockholder' deficit | 225,123 | 228,183 | ||||||
| COMPLETE SOLARIA, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||
| ON A GAAP BASIS | ||||||||
| (In $ '000) | ||||||||
| (Unaudited) | ||||||||
| Thirteen Weeks Ended | ||||||||
| July 3, 2023 | April 2, 2023 | |||||||
| Product revenues | 6,554 | 18,721 | ||||||
| Service revenues | 25,620 | 16,677 | ||||||
| Total revenues | 32,174 | 35,398 | ||||||
| Costs of product revenues | 7,046 | 19,489 | ||||||
| Costs of service revenues | 19,588 | 13,818 | ||||||
| Total cost of revenue | 26,634 | 33,307 | ||||||
| Gross profit | 5,540 | 2,091 | ||||||
| Operating expenses: | ||||||||
| Sales commissions | 8,789 | 5,677 | ||||||
| Sales and marketing | 3,883 | 3,549 | ||||||
| General and administrative | 10,414 | 13,098 | ||||||
| Operating expenses | 23,086 | 22,324 | ||||||
| Loss from operations | (17,546 | ) | (20,233 | ) | ||||
| Other income (expense), net | 6,036 | (3,286 | ) | |||||
| Loss before income taxes | (11,510 | ) | (23,519 | ) | ||||
| Income tax provision | - | 5 | ||||||
| Net loss | (11,510 | ) | (23,514 | ) | ||||
| COMPLETE SOLARIA, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||
| ON A NON GAAP BASIS | ||||||||
| (In $ '000) | ||||||||
| (Unaudited) | ||||||||
| Thirteen Weeks Ended | ||||||||
| July 3, 2023 | April 2, 2023 | |||||||
| Product revenues | 6,554 | 18,721 | ||||||
| Service revenues | 25,620 | 16,677 | ||||||
| Total revenues | 32,174 | 35,398 | ||||||
| Costs of product revenues | 6,712 | 19,480 | ||||||
| Costs of service revenues | 19,586 | 13,817 | ||||||
| Total cost of revenue | 26,298 | 33,297 | ||||||
| Gross profit | 5,876 | 2,101 | ||||||
| Operating expenses: | ||||||||
| Sales commissions | 8,789 | 5,677 | ||||||
| Sales and marketing | 3,087 | 2,634 | ||||||
| General and administrative | 9,788 | 9,489 | ||||||
| Operating expenses | 21,664 | 17,800 | ||||||
| Loss from operations | (15,788 | ) | (15,699 | ) | ||||
| Other income (expense), net | (3,171 | ) | (3,286 | ) | ||||
| Loss before income taxes | (18,959 | ) | (18,985 | ) | ||||
| Income tax provision | - | 5 | ||||||
| Net loss | (18,959 | ) | (18,980 | ) | ||||
| COMPLETE SOLARIA, INC. | ||||||||||
| Reconciliation of GAAP to Non-GAAP Measures | ||||||||||
| (In $ '000) | ||||||||||
| (Unaudited) | ||||||||||
| Thirteen Weeks Ended | ||||||||||
| July 3, 2023 | April 2, 2023 | |||||||||
| GAAP Net Loss | Note | (11,510 | ) | (23,514 | ) | |||||
| Amortization of acquired intangible assets | A | 738 | 748 | |||||||
| Stock based compensation | B | 1,020 | 1,021 | |||||||
| Transaction related charges | C | - | 2,765 | |||||||
| Change in fair value of warrants | D | (9,207 | ) | - | ||||||
| Total of Non-GAAP adjustments | (7,449 | ) | 4,534 | |||||||
| Non-GAAP net loss | (18,959 | ) | (18,980 | ) | ||||||
| Notes: | ||||||||||
| (A) Amortization of acquired intangible assets - The amortization expense recognized in relation to the intangible assets recognized for the Solaria merger transaction. These are excluded from our GAAP results. | ||||||||||
| B) Stock-based compensation: Stock-based compensation relates primarily to our equity incentive awards. Stock-based compensation is a non-cash expense. | ||||||||||
| (C) 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. | ||||||||||
| (D) Change in fair value of warrants: this is a non-cash, non-operating impact. | ||||||||||
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.
Source: Complete Solaria, Inc.
A chart accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/348cb130-b8a6-4c61-9212-79acfea6b354
