Complete Solaria, Inc. (NASDAQ:CSLR) Q1 2024 Earnings Call Transcript

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T.J. Rodgers: Well, I got a letter from NASDAQ the other day and you said your stocks under book — been under book for 30 days and if you don’t what they call it, a cure. If you don’t cure the problem than you get traded on the pink sheets. So the answer to that would have been, yes. I think the company will be clearly worth well north of a dollar shortly. And then the question is, how do you want to play the game to me? I give somebody the dollar and he gives me two $0.50 pieces. It doesn’t matter. I give them two $0.50 pieces and get $1. A lot of people care about that. A lot of people like stock or they can buy 100,000 shares. So the fact is if we safely and the right side of NASDAQ and employees like options like that where they can see upsides will probably not do a reverse split. It is easily doable if we want to do it, it’s another paragraph in the annual report. Right now, there’s not a plan. Right now, we’re going to earn our way back above dollar.

Brian Wuebbels: Thank you, T. J. Next question comes from Thomas Merrick at Janney. What do you expect you talked about though 1,000 job with target? What do you expect the cash generating or the free cash flow to be looking at that point.

T.J. Rodgers: Answering that question makes me feel like as [indiscernible] and he is on Southern California the La Brea carpets and somebody says once you put your foot in the timing and design services and that’s kind of sticky me. He uses other foot and try to pull it out and then 50,000 years laters, you find his bones. I don’t know, that’s hard for me to answer that question. Look at the issues today, look at the statement, if we survive – I haven’t done those calculations that step after next. And we will do those calculations, we’re capable of doing it.

Brian Wuebbels: Thanks, T.J. Can you discuss the current retail economics for solar customers, i.e. the value proposition for our customers as well as the availability for pioneer to those sub-owners?

T.J. Rodgers: Will, you want to do that?

Will Anderson: Yes. So the current economics for the retail customer was the question. So we’re seeing utility rates increase all over the country. In California, they’ve been going up rapidly. That’s our biggest market. Texas, where retail energy is non-regulated, like to stay there lower, but even it’s going up. The cost of burning things in order to generate power continues to increase. And so that’s really the competition for the solar industry is to compete against the retail cost of power coming from traditional sources and in all of our markets we beat the utility. And that gap is growing. As we continue to work on our cost basis and improve our margins that gives us even more opportunity to hold our prices and allow consumers to increase the benefit to them. So it is typical that we’ll see our customers saving on our financed project 40% to 20%. And then if they’re buying it outright than their return on investment happens within five to seven years.

T.J. Rodgers: Let me take a shot at that one as well. And it’s about the structure of the industry, which isn’t very good frankly. 1960 when I was at Stanford, I took two courses from William Shockley, the Nobel Prize Winner on Transistor Electronics. And in 1962, he and one of his students guys name Qasir [ph] wrote a paper on the – based on corner mechanics under theoretical efficiency the solar cell made from silicon and turns out it’s still true today. And the answer is 29.3% that’s it. And if you want to do more than that you got to start using more exotic materials, using layers of material that trap different colors of light. And I actually worked with a couple of companies that work on that stuff. Okay. That’s big time science.

I’ve always love that. Guess what? It doesn’t make a damn little difference today, because in China, you’ve got the government decided they’re going to own that market and they will drop to whatever prices required to own it. And they currently own a lot of it. I’m a free market capitalist but suppose they attacked me, and they really killed me and they drop the price of the panels to zero. Then I get all I want. Then I’ll have to do some installment and make money. It’s not bad. So then if you look at the value chain and you ask, is there a free market, true free market with competition in the value chain? The answer is not really. And the hardest point is to sell a solar, the kitchen table cell, to sell solar is the hardest point.

And therefore there are sales companies who know this and that’s what they do for a living and some of the stuff they do to – their customers isn’t good. Just the matter of fact, we just signed a document, which is accretive for the corporation is call the customer golden rule and 10 commandments, and it talks about ethical treatment of customers. And there’s a lot of it in the sales industry that’s not there. The point I’m making is that after all this science and all the work and all the incredible things that have happened, the guy knocks on your door, he knows how to talk his way in, and even if everything says not true, he’s the eliminating point in the solar chain, therefore, that guy is king. So the industry is organized around that.

So solar companies EPC, engineering, procurement and construction companies, which is what we are. We have a price call the red line and that in fact is our price, and that price is lets say $2, $2.10 something per watt, and then anything that’s above that is profit for the sales guy, and they can charge $6, and that’s fine, they pay us too, they get $6. So that’s how the industry is segregated. So in America solar prices aren’t what they could be. For example, it’s totally opposite in semiconductor industry, totally opposite. Today, honest to God, today you can buy a billion transistors for $1. So I’m not used to that. I’m used to cost cutting and competing head on in order to serve customers, of course, in our case there’ll be electronics companies who are some of the toughest buyers in the entire world.

So retail pricing in the United States is looking like energy stage, you can get their document, looking like $3 a watt. So typical system might be 10 kilowatt that will be $30,000, and the same system in Europe, because frankly our government and the way it runs, the same system in Europe, you can buy for $1 a watt, and they get much cheaper and better. They actually, believe it or not in France run through the markets with solar than we run here. So we got structural and government problems and asking what the price is, is if you try hard, you advertise, you get a better technology, get your efficiency up, all the things you think about doing, doesn’t matter, its some politician wanting to get elected that sets price and the guys that are willing to go to the edge to fix to sale.

And that’s how the industry runs. So we specialize in the things we can do. We get excellent at them and where we can do it better than anybody else, that’s value added and that’s who we are. Point two, most value added. It used to be the calculation once you buy a solar system, and you pay so many dollars to what, and then you get so many kilowatt hours from the solar system, and like $1500 kilowatt hours per year – per kilowatt in California for example. And then you say, therefore, pick a number $0.20 a kilowatt hour at times the number of kilowatt hours through system produces, and that’s your savings that means your utility bill goes down by that much. Then you add up the savings over the years with the appropriate interest rate, and you have a payback time and that payback time used to be four, five years.

What happen is, utilities do have a lot of clout, they have changed the rules and the rules are called NEM, Net Energy Metering, and it used to be utility services storage element for your solar system. So your solar system would put electricity, meter would run backwards and the solar system, the utility would do it. Well, now they’re not willing to buy your power anymore. In the United States the power they buyback as opposed to their price so say $0.20 watt hour — kilowatt hour is now $0.05 kilowatt hour. So you can’t do that calculation anymore. Fortunately, utilities are creating another opportunity and in that opportunity is for time shifting. So they kind of charge you — pick a number — $0.20 a kilowatt hour during the day and then at 4 o clock at night, they really screw you.

We’re talking $0.60 a kilowatt hour. So the new the new pits through systems is fire battery. And this is a big lithium-ion battery, buy battery, during the day let your solar system charge the battery and at night, let the battery run your house. And then you design that system, they have the right-sized battery to move the right number of kilowatt hours back and forth every day from the sun in the day to your house at night. And you wipe out the side charges and that ROI works today And it’s actually pretty good for us. Because the batteries are lucrative to install. And I happen to be a Board member of Enphase. And I happen to be an extra around batteries. And so we have a collaboration with them. We’re actually having a meeting with them in Salt Lake later this week.

And so that s the opportunity to make money right now. So the point is, the value proposition, you have to be nimble, you have to be able to figure out what customers need and provide it at a competitive price. And right now, its battery-based systems that do time shifting and 20% of customers also care about backup. Germany you can’t sell backup system. You go to a guy and say, how do you like a battery and if the power goes off – keep your house running. And the guy goes, the power hasn’t gone off in Germany in like the last three years. So why would I buy that. In the united states, if you’re a PG — if you can pick up your phone, meaning the power’s on — you do have a problem there. So we are looking at new products and new partners all the time to try to keep a real time value proposition in front of customers because they are homeowners.

They don’t want to have a lot of money and you really do after being there – they’re not that dumb. They really want to see return on investment and we provide them an honest one as whenever 10 commandments that completely honest return on invest. And there are there are times when you do ROI. And the numbers are negative, that is, if you buy the system eight years from now you’ll have less money than you have now. And we tell them that straight up.

Brian Wuebbels: All right. Well, thank you, everyone. We’ve come to the top of the hour and I want to thank everyone for joining us today for the Q4 2023 and Q1 2024 earnings update call for Complete Solaria. And I hope everyone has a great day. Thank you.

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