Good afternoon. Good afternoon. Good afternoon, and welcome to Complete Solaria's earnings call. My name is Brian Wuebbels, and I am the Chief Operating Officer for Complete Solaria. Joining me here today is T.J. Rodgers, Chief Executive Officer of Complete Solaria. We will be presenting the company's recent financial and operational results for the fourth quarter of 2023, first quarter of 2024, and a business update. The formal presentation will be followed by a question and answer session. A few quick reminders before we start: First, today's call is being webcast. A link to the webcast can be found, along with our press release, on our investor section of our company website at www.completesolaria.com. Second, during this call, we will be making forward-looking statements based on current expectations. Actual results may differ due to factors noted in the press release and in our periodic SEC filings. We will reference some non-GAAP financial measures. Reconciliations to the nearest corresponding GAAP measure can be found in today's release on our website. Last, questions can be submitted anytime during the call using the question submission box found on your screen. With that, I will turn it over to T.J. Rodgers. Thanks, Brian. First of all, let me introduce people going, starting with you. This is, as he said, Brian Wuebbels, who's our COO. He is actually our CFO as well. He is... We will hire to replace him, and I, since Brian is moving up in the company, I'd like him to introduce himself to you. Yeah. Thanks, T.J. Just a little bit about myself. I joined the company about a year ago as the CFO, as T.J. mentioned. You know, I started my life out as an engineer. I have a mechanical engineering degree from the University of Illinois. I've also got my MBA. Before I joined Complete Solaria, I was with a multinational company, and I was the president of the Control and Elevator division of that business, and that company was called Nidec. Before I joined Nidec, I'd actually spent some time in solar, quite a bit of time, actually, at GCL, running their U.S. finance operations. And before that, I was with almost 10 years with MEMC Electronic Materials and SunEdison, where I and with various operating and finance roles. And then prior to my experience in solar, which was about 10+ years, I spent my life at two large industrials. I spent my time at Honeywell for about four years, and the beginning of my career, where I worked in operations and finance with the General Electric company under Jack Welch's leadership. So I'm super excited to be here. I'm. You know, like I said, I've been on the long road in the last year, getting the company public, and I think what's really exciting about where we're at right now as the company, is I can come in and provide some stability. I can also help the company move to the next level in quality, delivery, and cycle time, which T.J. is gonna talk about today. So I'm super excited to be part of this transformation and work closely with T.J. as our new CEO. So I'll turn it back to you, T.J. Next is Will Anderson. I've introduced him before. Will is the founder of Complete Solaria, 12 years, 13? Will is still probably our best engineer. He's certainly in the software side, great, and he is the guy we go to to solve problems. I'll talk about stock grants today and how he helped us out. I'll wait till I get there. Last one is Siddharth Madhav. Siddharth is from Ayna. Ayna is a company that spun out of McKinsey. McKinsey, the famous McKinsey that we all know. The most highly known McKinsey group was Palo Alto. That group came to my company and helped me. When I went to Enphase for a turnaround effort, I rehired the same group 'cause they had been very, did a lot for me at Cypress. And Siddharth was the project leader for the Enphase turnaround. I think that one's pretty famous. That's the one that went from, I don't know, $115 today, and when I came in, they were $0.92. And they were big enough that the turnaround isn't me coming in, pounding on the table. The turnaround is 15 guys working for a year to get a lot of stuff fixed. And that is the level of work we're doing right now at Complete Solaria. Siddharth, you got a... Thank you, T.J. As T.J. said, my name is Siddharth Madhav. I help lead the team that is supporting Complete Solaria and its turnaround. On the topics that Brian covered, gross margin, cycle time, quality, customer satisfaction, the company is on the verge of lots of initiatives, which will take time to bear fruit, but we're already seeing early results. And it's a privilege for me and the team to work with T.J. and his team on this effort. Okay, so let's get on with the quarter report. First of all, we did our first 10-K this year, and that thing didn't get ready till almost the end of the first quarter. So we decided to put the first quarter report and the 2023 Q4 report together. By the time, of course, you get to the first quarter, that's all you care about, and you wanna know about the second quarter. So that's really, really what we're gonna talk about today. Okay. Press release. I wrote this myself, so I picked the title that I thought would tell you the most important thing that happened, and that is we're to be self-funded in the quarter we're in right now. T.J. won't be writing any more checks. That's even, even more important, for me, and that's a lot of work, and I'll show you what that is. The bullets.... First, talk about revenue. Our Q1 revenue was $10 million, half of the prior quarter. We got cut in half in one quarter, even though our backlog was $17.8 million. The revenue drop is due to a shortage of working capital. We can't buy panels to put on people's roofs, therefore, we can't charge them and get our revenue. And that's where we are right now, and that's-- we're running just super lean on capital. The working capital crunch is due to an unresolved loan situation with one of our private equity funding firms, Carlyle. Our revenue in the second quarter, we've already had a very lean April, will also be limited, and depending upon whether or not I get $ a few hundred thousand is all I need. Maybe I'll do crowdfunding. $ A few hundred thousand, we can be on the high end of that. Okay, our gross margin was 24%. That is not our target. Our target is over 40%, but with $10 million in revenue, that was pretty good. And we've got a forecast to break the 30% mark in Q2, again, with the low revenue hanging over it. Headcount and employees, we now are down to 109 employees. We started last June with 428. That's almost exactly three out of every four. Pretty tough layoff, tougher than I've ever been involved in before, and the team handled it well. I'll show you the tranches that we did. All remaining employees have now been awarded retention stock options, so that's the way Silicon Valley works. This company did not work that way, and we now have given out options. I'll talk about that. Our OpEx is now $5.5 million. That's down from $12.9 million a year-ago quarter. We're forecasting next quarter, we've got some cuts we've already made to get to $3.6 million, so that's almost a factor of three down in OpEx. And in terms of OpEx, we're about where we want to be. Sales commissions, so the way our industry works, for those of you who don't know it, is that you typically buy your orders if you don't have a sales force, and an order costs you 33%-34% of sales. And you pay for that, a lot of it upfront, and, the order fallout rate is something on the order of, 30%. So a lot of times you pay, and then the order doesn't happen. The guy changes his mind, whatever. So this is, if you want to ask, the weakest part of our profit and loss statement right now, is getting control of, these orders. And by the way, last quarter, we dropped from 38%, which is higher than the industry, to 31%, which is better than the industry, specifically, from having worked on this problem, but we've got farther to go. The last equity input in the company is $5 million in January, and we now believe, based on we have very accurate cash flow capability, this is going to last us up to through the second quarter. So I put to July 2024 here. We'll need more money at that time, but we're not voracious for money. We're running real close to cash flow break even. Here are the finances from the report. And by the way, that report, if you go there. Is this where they go to get the report? Yep. Okay, you go to this, and this report is available. Okay, so here's the non-GAAP numbers. Look at revenue, gross margin, Op Inc, funding, cash flow, and cash balance at the end of the quarter. We're looking at the last quarter before Q4 of 2023. This is a report for Q4 of 2023 and Q1 of 2024. So you can see the cash crunch has taken our revenue down dramatically. We do have orders, and I'll even show you our orders. Okay, story number one is, normally, if your revenue gets cut in half and the quarter is over, and the fact is, our losses, which were $12 million last quarter, went to $6 million. So we actually cut our losses in half, meaning our cost-cutting effort offset a massive revenue decline, and we actually cut our losses at the same time. Of course, that projects forward. I'll, I'll come to that later. There is the last, we hope, $5 million bucks, and you can see our funding, what's required. You know, your cash balance is, is kind of an artificial thing with your operating income and what's got to fill in from funding. And as you can see, our funding has been dropping dramatically, and this, this quarter, which I've not forecast, is zero. Second thing I want to talk about is gross margin. In the last quarter, even with $10 million, we had 24% gross margin, and we have a whole team working on gross margin. It, it's. And we're very, actually very proud that, that we got hammered this badly. If you look in the year ago quarter, we had 2.5 times more revenue and the same gross margin. So all of that came out of cost, and we're proud of that, and that's been painful. It's just not been an easy road. Okay, we changed. I became, a week or so ago, the CEO. We had—Our CEO, Chris Lundell, is from Salt Lake. He was our man in the corner. He was the steward of the place. Right now, we need... And I helped with cost-cutting, so I was kind of like a driving force. Now, we need to raise some money, and we need to do some M&A, and I've done a lot of those in my career. When I was CEO of Cypress, I acquired 26 companies in 34 years. So I even have a spec for it. What a surprise! Rodgers's objective as CEO—and there's really two points. On the press release, about a month ago, I said, "I am not willing to work for Carlyle for free anymore. In fact, I'm not willing to work for Carlyle at all," and that's still true. So that's got to get resolved if we're gonna go forward. And then when becoming CEO, I'm 76. All this stuff happened literally when I take one vacation a year, I go sit on the beach in Mexico and read the book I didn't have time to read, and I got the call down in Mexico, more like 20 of them in one day. And so I took over, and therefore, I want a well-defined endpoint. This is not, this is not career two for me. And we're gonna have one of two things happen. We're gonna have success, and I'll define that, and it's vague right now. I'll quantify it later. When we're on solid economic footing, that means we got a bank account, and we're not rationing capital and telling stories like that, and growing rapidly, meaning we're taking off from that revenue trough, and, you know, the solar world is not that great right now. We're recovering back to our old revenue. We've routinely had revenue in the low 20s-low 30s of $ millions per quarter in the past. The failure point is when I believe that the chokehold or private equity debt holders have on us, and I'll talk more about that later, will prevent the company from ever being successful. I'm not, I'm not willing to waste my time, and I am willing to walk off of my own investment. We already introduced you to Brian, so I, I won't do that. He's our COO. During the quarter, we reorganized in the product lines. When I ran a chip company, in my industry, you ran it with product lines, and the studs in the semiconductor company were the seven product line managers who all made silicon things, but they were different chips made differently for different customers, and they really were different businesses. And we've divided into product lines, one for California, one for rest of U.S., and that means for us now, Texas and the East Coast, Massachusetts, Connecticut, New York, and one for Starbucks and other new homes we have. People don't know much about Starbucks, but it's a pretty interesting opportunity. We've already upgraded 33 of their outlets, and we got another 42 contracts. So here's a Starbucks solar awning. A lot of panels up there, 50,000 watts, so this looks good, and it makes a statement about being committed to solar. It also will cut your electricity bill way down because it produces a lot of power. Okay, headcount. So I've shown this graph before, number of employees starting at 428 back in June of last year, and then the ride. And we got to the last RIF took us down to 109. And like I said, I've never been through it before. The companies I've worked for or have run, typically, if you do a 5% layoff, you get screaming and crying. If you do a 10% layoff, you get temper tantrums, and this was the most severe I've seen. It also obviously says the company was fat, and I used exactly those words. I actually used the term morbidly obese, so with them. Here's our RIF number one. It was difficult, and then I'll show you. You notice this climb here. I'll talk about that in a minute. When you get to 109 people, then the math, even for a $10 million quarter, for 109 employees, the math works out to be $367,000 per employee per year. That's right there, even a little bit better than Sunrun, Sunnova, and SunPower with only $10 million a quarter per revenue. So the point is, there's a huge amount of leverage in our company for dropping through orders. We have a lean and efficient company. We've had just a quarter ago or two quarters ago, a $24 million quarter. That number, it starts to approach $1 million, and any company that has $1 million per employee per year is a viable company in any industry. Here, I told you we laid off, and then we had the backsliding. It's classic. I have a system called the req auction. That is requisition, as in employment requisition, to hire somebody. All companies typically have hundreds of these, and they are the giant waste of time and a big game. And I managed to get rid of them at Cypress. And the way they work is simple. There are no reqs. You can interview anybody, anytime you want, and the only way you get to hire somebody is if somebody else quits. I'm talking about the stasis in headcount. You can go up and down by adding and subtracting reqs from the mix. But let's suppose you're trying to hold headcount, then you get a weekly report, exactly who left. Of course, it's denominated in dollars, so you're dealing. This is done in dollars, but I'm gonna, for sake of explanation, talk about heads. So you go to your staff meeting, the president runs it, and the VP of HR comes in and says, "Mary Jane in marketing quit last week." Then you got one req, and then the question is, what do you do with it? It's a very valuable asset. This builds up the mentality of people are a valuable asset, and you don't waste them, and you don't have extra ones. So you go around the room, and each VP argues why he or she wants such and such a person. What I loved about it was it used to be nine VPs against T.J. And I would argue, your efficiency isn't that good. You should get more per person per week out of that fab, or, you know, you should be able to design a chip with so many people. That I was always on the end of one argument, on the wrong side of it. In the new method, the req gets thrown on a piece of the table, you know, meat flies onto the boardroom table, and then the VPs start talking about why the person they want is most important. They also learn, don't try to get 18 reqs. Don't hire a recruiting firm. Find the one person you need, take your time to find the really right person that'll change the company, and bring them in, and make a compelling argument that overwhelms the other guy's compelling argument. That's called a req auction. That's how it works, and it really does work. So here, I didn't have it, and I saw the classic backward drift. Here, I turned it on, and in this case, we had it turned on with less than 1-to-1 replacement, and as you can see, even though we were really lean, we were drifting downward at a new record low level. That's the Req auction. So I actually filmed a staff meeting, and the VP of HR came in and did say, "Mary Jane in marketing left," and then we decided who would get that. By the way, the way the system works, think about it, your attrition, the people that don't wanna be there, may be not that productive. You can rehire if it-if that is an important position, but it's very unlikely that somebody who quits is gonna be more important than the most important person to hire in the corporation, and that's what you get. So you have this turnover, and less important people go away, and key people get hired. And after you do that for a year, it changes your company. And by the way, this is very scalable. Think about a 1,000-person company. They got a 5% turnover. That's 50 people a year, okay? And 5% turnover is moderate or even a little bit low. Well, 50 people a year is one person a week. So the req auction means every week, VP walks in, HR, and says, "We're gonna hire one person, maybe two, maybe zero." And then you have the argument, then you hire the person. Then, a year later, you have 50 people that the consensus of the executives are key people, and you don't have 50 other people whose names you maybe even can't remember anymore. That's how it works. Now, I wanna show it to you in action, and this was truly Mary Jane in marketing quitting, and then we're trying to decide who gets it. And, I didn't bring- I was gonna bring in my hat today. I forgot it. So there, there's the req auction in action. By the way, that system I just described comes out of a book I wrote in 1992, and that book was the story of building a semiconductor company from 1982, when I wrote the business plan in my living room, Cypress Semiconductor, to getting it to $100 million in revenue. It was all the things you had to do to build a company, and it's all—it's systems for hiring, systems for giving raises, giving out stock, measuring efficiency, speccing and bringing to market on time, new products, et cetera, and each time, back in those days, we had no tools, right? And we didn't have IT departments, which really isn't that bad, okay? And we ended up having to use the tools we had, Word—in that time it was WordPerfect—Excel—in that time it was Lotus 1-2-3—and PowerPoint, and that's what you had to run a company with, and you had to run a chip company, so it was not an easy company to run. So at age 10, I worked on writing all those systems down, and what's interesting, the book didn't sell very well. The reason I have a picture of one to show you here with a brand-new, clean cover on it, is that, I have several cases of them in my study. But it turns out this book is exactly right for where these guys are. They don't have a lot of money. They don't have an effective IT department, and they need to build a company, and investors don't care about any of that. Okay, fab. So we call the area where we make new systems, solar systems for people's houses, a fab, 'cause of my background. It is a virtual fab in that there are no physical objects working through it, but if you look at a fab in semiconductors, you got a box that's got wafers in it, bunny suits, and the boxes move through the fab from step to step. Typically, you have something like 35 or 40 masking steps, and each masking step has two or three operations, so you have something like 100 operations. Our fab has 42 steps, and we've documented it semiconductor style, so each step has got a spec, and it's not perfect yet, but as every time we mess up something, we make that spec a little bit better, and we are getting better, and the numbers, and I'll show you in a minute. Okay, so this is jobs, and so the... Our fab, we used to have things back in the non-computer days called lot travelers. So they'd move the silicon, and the operator'd come in. They'd mark the step they're at. They'd mark the machine number. They'd mark the lot number. They'd go and do the operation on the machine, pulling up the recipe that they were supposed to. There'd be an output measurement, thickness of a layer, whatever, and they'd mark that down, and then that lot traveler would move through along, and at the end of the line, you'd have a record, and that also was computerized on a silicon lot, so you can start doing yield analysis and cycle time measurement and stuff you gotta do to make a fab run right. So we exactly have a fab, only we have the lot traveler, and the things that move around in the world are out in Texas or Southern California. So we treat it like a fab, and we think about it like a fab. Okay, I'm now looking at the number of jobs in the fab, and that's 2,000, 4,000.... And this is back in January 2023, and everybody in the company tells me, "Those were the good old days." So we started out saying, "2,000 is what we can handle. 2,000 is what we can handle and not screw it up." And what screws you up, of course, is each job has its own special problems, like the city won't give you a permit because the person has an unpermitted structure, and they'll shut you down for that. That's illegal in California, but legal everywhere else. Or the financing got done, and then the dating on the financing expired, and the financing expired. Now you got to go get refinanced, et cetera. I can name 100 of them, and these are the defects that pile up, and when you have a lot of jobs in the fab, those defects end up being pretty important, and they slow you down, and that's what happened here. So here you see, this is when I came in, June 23, and their inventory was big. I did a—for fab guys, this is called back-of-the-envelope analysis on the inventory, and I said, "You guys have bloated inventory." So then I said, "You know, you got to cut down on the inventory." And then they said, "No, we're not going to do that," in the standard way, ignore me, and then go off and do what they want. So we went a little bit longer, and when we got to that point, I send out the memo, "No new jobs are to go in our fab. None." "But that, that means we're going to turn away orders." "Yep." "But if we don't have orders, we might not have revenue." "Yep." "And if we don't have revenue, we might die." And I go, "Bingo! So you better get the problem fixed, don't you think?" And that kind of shutting on authority is often used in the real world in manufacturing, where when you screw something up, it's not a recoverable error, getting another permit. It's an irrecoverable error, ruining a wafer that never will produce revenue. So there we shut her down. When did we turn it back on? I should have put that in here. Uh, November. Okay, so I didn't really hang in there too long. I turned it back... We had this drop. I remember this drop here, and I turned it back on, but that broke the problem, and then the inventory came back, and the news today is we now have 2,000 lots in the line. And so I have the shutdown. Now, what's interesting is when we started, our cycle time was 112 days. We managed to hold that cycle time. That's way too slow, just FYI, and this is cycle time from order to install, complete. We managed to hold it, but it's not good enough, and, and you, you can't react quickly enough to problems. You can't flush your line. You can't take advantages of new orders if you're that slow. So we started working on cycle time, and cycle time primarily is getting rid of quality defects, and that, in the semiconductor, is called first pass yield. You want something to go to a step, go through the step, get it done right the first time, and move on, and do all that in a fraction of a day. Today, by the way, we have a couple semiconductor experts that are helping us on this problem in the line, and their work, which is primarily quality, has brought our cycle time down to the 34-40 day, meaning when you're here, you can do 2.5 cycles per year, so you can make 2,000 times 2.5 lots per year. Here, let's say... Let me use 34. It's a month. You can do 12 cycles a year. So you can do 24,000 lots a year, so you're getting more out of the same fab. It's a, it's a very powerful effect. And that's where we are today, and if, if I had to name one thing that changed the company, it's that. Now, the other point is, this is our target, and let's take that as a given. I'm going to suggest it's not good enough in a minute. That had $56 million of revenue in it. So when you run a fab like this, you're taking money, and you think about, think about roofing a guy's house with hundred-dollar bills, and they stay there for months. And then you do another one and another one and another one, then you run out of money, and you borrow some money, and that, that was the problem. Of course, what we've done now is we've taken that money back out, or the fraction of it that was still left. You lose some, and we're down here. I did a calculation today, and it's again, back of the envelope, but it's not far from wrong, and within a week, it'll be a paper on exactly what we have to do by our consultants. I think we should have 1,000 jobs instead of 2,000. I think we could maintain our revenue with half the WIP, half the money and WIP, work in process. So that is what we're. That's the next step here now that we've had a nice move to where we are, and by the way, I think this number of days can drop some more as well. Okay, well, given that tech talk, I know I'm for many of you, I'm speaking boring stuff. Let me talk about cash flow, break even, and profitability. Last quarter, $10 million cash limited, talked about it. To get back to our $25 million quarterly revenue, that, that's a $100 million runway, and I'd be happy as heck right now to have a $100 million profitable solar company, and it's very doable. We're gonna need about $11.5 million more of working capital. We even with fast cycle time, you do have to have stuff you buy and put on their roof, and you're holding, you're paying for it until you turn it on, and then they, they get the money from the finance company and start pay... and pay you back. Another thing, being cash shy, we've piled up $13 million of accounts payable. Some of it's not okay. Like the lawyer who checked this pitch today for accuracy, so I didn't mislead anybody, we owe him money, millions, and he did it 'cause he likes us, and he's trying to help us. But we've got there, so there between those two things, there's $25 million. In my career, I've raised billions of dollars. I, I've had single offerings that were, in the old days, right? This is back, but even then, I would have $600 million offerings. So this, this offering is not a big deal. Problem is, if you have somebody who's saying you're in default of your covenants, and we can call it, and then you call their bluff and say, "Great! Come on in. Run the company. Here's the keys through the front door." Then, of course, they go, "Well, you know, we'll let you work on it for a while," hence my statement I made before. We've got to get past that because nobody's gonna let us borrow, nobody's gonna give us money in an offering with the hammer hanging over our head, and that's where we are right now. So we need Carlyle and Kline Hill to agree to a debt-to-equity swap. And they made profit on us on the debt, significant, 'cause the debt's high, high-coupon debt. They can roll the whole thing over into equity, and I'll make money for the shareholders. If I'm still around and this company's still alive, I am quite convinced we can make money for shareholders. Now, this—I wrote this data last night. I wrote this thing last night, and 8 minutes after I got it done, the lawyers called me up and said, "Kline Hill, we got a deal with Kline Hill." That's one of the two equity firms. They invest in Complete Solaria with a debt, debt for equity swap. So the deal was 9.8 million shares. That's 19.9%, the largest amount the board can authorize without a shareholder vote, in return for all of their debt. And they also are gonna buy 3.7 million shares of Complete Solaria. So obviously, I was overjoyed on that. I have Mike Bego here. This is gonna be ugly. He's on a cell phone. He's the president of Kline Hill. He's in New York. Mike, I apologize in advance for all the bad things I said and will say in this talk about New York, but why did you do it? Thank you very much. Hey, TJ, first of all, thank you so much for including me on this call. I'm very excited about everything that you're doing, everything going on at the company. For those who don't know Kline Hill Partners, we are a $4 billion diversified secondary fund. We typically provide liquidity to investors in private assets, and we only get directly involved in companies when we see there's a huge potential upside. We're super excited about everything going on in Complete Solaria, and it's, like, three things. It's the Complete Solaria platform, the technology, everything going on at the company, the management team, led by TJ, and we're excited about the unlocked cap table. I'll talk about it a little in a second. So with regards to the company, you know, the solar space is huge and expected to grow substantially over the years, and we see their technology and what they can offer to you know, to the residential market throughout the U.S. as being a like, very compelling offering with like, substantial upside. And it's a huge opportunity, and right now, Complete Solaria is very small, so there's a huge amount of upside there. Second is the management team, led by T.J., and the thing there is he's a guy, and they're a team that thinks big and can execute big. So you've got this smaller company, huge opportunity, and people that are there that can execute on a huge amount of growth. And you know, obviously, everybody knows T.J. has been like, very successful. He's been fantastic to work with. Same thing with, like, a very, like, very high level of quality across the whole management team. And then, and the last part where Kline Hill is coming in a little bit right now is what we're very excited about, is unlocking the capital structure. And so that has been a little bit of a noose around the neck of the company, and that probably has been the number one thing holding the company back over the recent past. And we're very excited to convert our debt into equity because we see a lot more upside on the equity, from an equity standpoint, as we and Carlyle looking to do this jointly together. So we would be doing this, as you know, as and when Carlyle is also agreeing to come alongside with us on this, and they're, you know, reasonable, very smart investors, so we're, you know, we're really expecting that to be coming out shortly as well. And it's a tremendous opportunity for investors. And so if you just, like, stand back again, it's like Complete Solaria, industry-leading company, amazing platform, tons of room to grow into the industry, TJ and this management company thinking big, executing big, and then now this capital structure will wipe out this massive entire layer of debt, free the company up to be much more nimble. And in addition to converting the debt, we're also excited to be putting capital into the company. So thank you. Thank you, TJ. Thank you, everyone at Complete Solaria. We're very excited about the prospects. So at 11 o'clock last night, having gotten the news, I had to figure out what to say that was true about Kline Hill. And I said, "Thank you, Kline Hill, for your confidence in us. I would like to sincerely thank Mike Beagle and his team for working with us literally for years in supporting our company." So thanks. Okay, conclusion. We're alive, and we're starting to improve. I won't claim victory yet, but we have a different company than nine months ago. Our fab is doing a lot better right now. We've had a vigorous but painful reorganization. We don't need any funding until July. And I had this in last night. We have come to terms with two private equity groups, and I put this one in. We got one left, and if we get that, we can go raise money based on merits. And my last point was last night, if we survive, our newly lean and fit company can become profitable and grow. So that... Oh, yep, that's for a question, in case you ask it. That's it. We like to take questions. There are electronic texting kind of things. Thank you, TJ, and, thanks, everyone, for joining the call. We're gonna now move into the Q&A section. So if you have any questions, you can go on the link that's on the webcast, and you can type your question in directly. First question I've got here, TJ, is from Derek Soderberg from Cantor Fitzgerald. It says, "In the event that Carlyle is refusing to convert their debt, what is the most logical way for the company to solve the working capital problem and return to the $100 million annual run rate? I'd have to ask other questions. If that happens in a way that I... Let me tell you something. Our contracts with Carlyle, we have two of them, and these are debt contracts, right? Give me money, give me interest, and then, of course, there's covenants. One is 84 pages long, and one is 55 pages long. I can't go to the bathroom without calling New York. That ain't gonna happen. So answer number one is, if that structure, and I used the word knee in my neck in a prior communication, stays in place, I'm gone, and I don't think the company's gonna make it. Maybe it will. You know, Carlyle is a big company. They've got a lot of solar companies. Maybe they got a hot dog that wants to come in, get a lot of the stock at less than $1, and that would be fine with me, and I'd do everything in my power to help the guy out, 'cause after all, I got a bunch of money in the company. It's not in my interest to do anything negative. The best way is a debt-for-equity swap, assuming you can agree, and that's a big assumption. But we'll talk. What I've got to be able to do is run the company. Right now, I can't raise money with equity. I can't raise money with debt. I can't sell an asset unless I get written permission, and the written permission always has a "now therefore" clause and then a few more pages. Can't work that way. That, that's got to end. Other than that, we'll talk, and we've. I'll leave it there. We'll talk. Yeah. Thanks, TJ. We got another question here. It says, "Dear Complete Solaria management, under the assumption that the debt-to-equity swap with Carlyle completes soon, what would be the approximate break-even revenue?" And there's a second question as well. We'll go with the first one. All right, so I read that question when I... 5 minutes before showtime here, and turns out we obviously ask that question to ourselves all the time. That's the question. So I'll give you— This is a, this is a large document, and I picked out one page. And what it is, is three parameters that matter: commission percent, gross margin percent, and this is gross margin on the solar. Commission is treated separately, and then OpEx. And our OpEx is headed to $3 million next quarter, 3.6 and, and more—less than 3 after that, so that's kind of a given. Then, this table defines for a matrix of percentages, what is our break-even revenue? So this says that 30% commission, we're currently at 31, and 47% gross margin. Our break-even revenue is $16.6 million, and that break-even revenue could be a lower gross margin and lower commission, lower gross margin and lower commission, yet it's quite possible, if we work on getting an indigenous order creation effort in the company, and we're paying for cost for orders as opposed to the higher profit, that we can get down to these levels. Right now, I just showed you 24%-25%. That, that is based on $10 million of revenue. We can see how to get into the 40s pretty well. So the answer to your question is, somewhere between $90 million and $99 million a quarter, and, and the, the real numbers are here, and $16 million is an achievable number within a couple of quarters. I don't know how long it's gonna take to grow back from $10 million. I, I don't know how much damage has been done, but right now I know there's a robust market for solar. Let me. I forgot to show you. Let me show you this. Okay. This is, this is the graph I showed you. This is inventory and jobs, and then it divides it out by where it is. So this is pre-construction. Think of orders. This is post-construction, orange, and then up here is pending PTO. That's power turn on. So this is the systems in, and it's, we've already been paid for it, and we're waiting to turn it on. And this is a place where when you get in trouble, this bulks up. So you see, the good old days turned into the not so good old days when that, that one bulked up. Okay, so here's our order backlog that peaked up when we were getting orders, and we couldn't—and they went into a fab and didn't move, or we couldn't put them in the fab because the fab was jammed. Notice what's happening here. They're piling up again, and it's because we can't service them. So I infer that this means there's business out there. Utilities are charging more and more. They're extremely inefficient businesses. People don't like them, and all you gotta do is go put solar on their house, and they'll appreciate it, and the faster you put it on, we keep tracking that promoter score. The faster you put it on, the more they like you. So the recipe's pretty simple. This little fab right here is complex, and it's kind of obvious. You know, you say, "Well, it's silicon fab. It's got equipment, it's got science, and all that." This one's got 5,000 jurisdictions with 5,000 different sets of rules in it, with a lot of people who really don't like you or solar, and you've got to somehow make it happen, and you've got to get funding for it in a 7% world. So this particular problem, although there's no big technology in it from a company point of view, is a significant problem that it— By the way, any companies you see having survived this little goat downturn, I think we're getting near the end. I think we'll have a better summer. Those are good companies. Those are good companies that are well-run. Thank you, TJ, and you answered his second question. So the next question comes from Thomas Meric at Janney. "Using the fab chart on page 13, will you discuss the improvements in gross margin you've realized over the past 12 months? Okay. Do we have Fin Form one here? We'll have to bring this out of our head. We obviously tracked that. What is our record for gross margin? 49%. So the company, in one time in its life, made 49%. That's how we chose the 47% gross margin. Right now, we're looking at operational issues and financing issues that don't get us into the 40s. We can see easily how to get in the 40s. There's also a tailwind in gross margin. China Inc. has got this little problem. They use slave labor to make silicon, and the world doesn't like it, and they shut them down. Then they move plants to Malaysia and Vietnam to circumvent the shutdown, and now there's a circumvention. So their panels can go to Europe, can't come to the United States. And there's been a dump of panels, and the business is going down. There's been a dump of panels on the market. So, our costs are going to go down, at least for equipment costs. We also - one of the things we're learning from Ayna is how to buy stuff. We're not very good at that. We kind of pay retail, and we kind of do ad hoc purchasing. Sometimes we do purchasing on the way to the job, and obviously, that's bad. So now we have a - In Indianapolis, we've got a rent purchasing group that's pros, and we're going to start driving our costs down. So we've got quite a bit of room there to do better. I believe gross margin will get into the 40% range in a couple of quarters. We will go into the... If you notice, I fudged. You can always tell - Let me go back here. Okay, see, gross margin was 24, despite higher revenue. Q4 forecast is greater than 30%. That's 'cause I don't know what my revenue is going to be, so that's a guard banded number on what we think we can do. So we think we can get into the mid-30s, but we don't know. And then the next step after that is we gotta. We have to get back a little volume. You have amortization of overhead, the way you amortize OpEx to make operating income. You amortize manufacturing overhead, and you've got a VP of manufacturing, you've got a plant, you know, got all that. You amortize manufacturing overhead with revenue that comes through it. So, we'll have a natural improvement in gross margin just from running more stuff with the same group of people. Thank you, TJ. The next question comes from Derek Soderberg at Cantor Fitzgerald. You guys, we made some final cuts in the workforce here, down to 109. Can you talk about the cadence of OpEx from here? Should we continue to expect OpEx around $3.6 million per quarter? You, CFO. I think T.J. actually answered this question a little bit earlier. Right now, we're projecting $3.6 million for this coming quarter, Q2. I think you saw from the break-even chart kind of where we're headed. We believe we need to get this business under $3 million of OpEx in order to be at a break-even and at a efficiency level that we think makes sense. So that's our focus, and I think, you know, to give away a little bit of how much we've been focused on this, if you did notice on that break-even chart that T.J. said, that's version four. I believe the first version that T.J. shared was during our October call, where we talked about the North Star plan, version one. Will gave some updates on it in December, and we were still on version one. So we have really started to hone in, and I want to just thank Siddharth and the team at Ayna for their help because they are helping us think differently every day about what's possible. So that's where we're headed. Thanks, Derek. The next question is... We'll throw this one out there. Do you see a reverse split coming up to stay in compliance? Well, I got a letter from Nasdaq the other day, and they said, "Your stock's under $1, been under $1 for 30 days, and if you don't," what do they call it? Cure. "If you don't cure the problem, then, then you'll get traded on the Pink Sheets." So the answer would, to that would have been yes. I, I think the company will be clearly worth well north of $1 shortly. And then the question is: How do you want to play the game? To me, I give somebody the $1, and he gives me two 50-cent pieces, it doesn't matter, or I give him two 50-cent pieces and get a $1. And a lot of people care about that. A lot of people like stock where they can buy 100,000 shares. So the fact is, if we're safely on the right side of Nasdaq, employees like options like that, where they can see upsides. So we'll probably not do a reverse split. It's easily doable if we wanna do it. It's another paragraph in the annual report. Right now, there's not a plan. Right now, we're gonna earn our way back above $1. Yeah. Thank you, TJ. Next question comes from Thomas Merrick at Janney. What do you expect. You talked about the 1,000 job WIP target. What do you expect, the cash generating or the free cash flow to be at that point? Answering that question makes me feel like a dinosaur, a brontosaurus, and he's in Southern California at the La Brea Tar Pits, and somebody says, "Why don't you put your foot in the tar?" The dinosaur goes, "Hmm, that's kinda sticky." Then he uses his other foot to try to pull it out, and then 50,000 years later, you find his bones. I don't know. It's hard for me to answer that question. Look at the issues today. Look at the statement, "If we survive," comma. I haven't done those calculations. That's step after next, and we will do those calculations. We're capable of doing it. Thank you, 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 financing to those homeowners? Will, you wanna do that? Yeah, so the current economics for the retail customer was the question? Mm-hmm. So we're seeing utility rates increase all over the country. In California, they've been going up very rapidly. That's our biggest market. Texas, where retail energy is non-regulated, rates have stayed down lower, but even there, 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 a financed project 40%-20%. And then, if they're buying it outright, then, you know, their return on investment happens within five-seven years. Let me take a shot at that one as well. It's about the structure of the industry, which isn't very good, frankly. When I was at Stanford, I took two courses from William Shockley, the Nobel Prize winner, on transistor electronics. In 1962, he and one of his students, a guy named Queisser, wrote a paper based on quantum mechanics, on the theoretical efficiency of a solar cell made from silicon. It turns out it's still true today, and the answer is 29.3%. That's it. If you wanna do more than that, you gotta start using more exotic materials, using layers of material to trap different colors of light. I actually work with a couple companies that work on that stuff. Okay, that's big-time science. I've always loved that. Guess what? It doesn't make a damn bit of difference today. Because in China, you've got a government that's decided they're gonna own that market, and they will drop to whatever price is required to own it, and they currently own a lot of it. I'm a free market capitalist, but suppose they attack me, and they really kill me, and they drop the price of panels to zero, and then I get all I want, then all I have to do is install them and make money. It's, it's not, it's not bad. So then, if you look at the value chain and you ask: Is there a free market, a true free market with competition in the value chain? The answer is: not really. The hardest point is to sell the solar. The kitchen table sell, to sell solar is the hardest point, and therefore, there are sales companies that know this, and that's what they do for a living. Some of the stuff they do to their customers isn't good. As a matter of fact, we just signed a document, which is a credo for the corporation. It's called The Golden Rule, Customer Golden Rule, and Ten Commandments, and it talks about ethical treatment of customers. 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 who knocks on your door and knows how to talk his way in, even if everything he says is not true, is the limiting 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 called a red line. That, in effect, is our price, and then that price is, let's 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 $2, they get $6. So that's how the industry's segregated. So in America... The solar prices aren't what they could be. For example, it's the totally opposite in the semiconductor industry, totally opposite. You know, today, honest to God, today, you can buy 1 billion transistors for $1, okay? 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, they're the electronics companies, who are some of the toughest buyers in the entire world. So retail pricing in the United States is looking like EnergySage. You can get their documents, looking like $3 a watt. So a typical system might be 10 kilowatts, that'll be $30,000. And the same system in Europe, because of, 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 don't. They actually, believe it or not, in France, run freer markets for solar than we run here. So we've got structural and government problems, and asking what the price is is if, you know, you try harder, you advertise, you get a better technology, you get your efficiency up, all the things you would think about doing, doesn't matter. It's some politician wanting to get elected that sets price and the guys that are willing to go to the edge of ethics to sell, 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 where we are. Point two, where's value added? It used to be the calculation was you buy a solar system, and you pay so many dollars a watt, and then you get so many kilowatt hours from the solar system, in, like, 1,500 hours kWh per year, per kilowatt in California, for example. And then you save therefore, pick a number, $0.20/kWh times the number of kWh your 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 happened is utilities, who have a lot of clout, have changed the rules, and the rules are called NEM, Net Energy Metering, NEM. It used to be the utility served as a storage element for your solar system. So your solar system would put electricity, the 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 buy back, as opposed to their price, let's say $0.20 a watt, a watt hour, kWh, is now $0.05 a kWh. So you can't do that calculation anymore. Fortunately, the utilities are creating another opportunity, and that opportunity is for time shifting. So they kinda charge you, pick a number, $0.20 a kWh during the day, and then at 4:00 P.M., they really screw you, and we're talking $0.60 a kWh. The new pitch for systems is buy a battery, and this is a big lithium-ion battery. Buy a battery. During the day, let your solar system charge the battery, and then at night, let the battery run your house. And then you design that system to have the right size 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 those high charges, and that ROI works today. And it's actually pretty good for us because batteries are lucrative to install, and I happen to be a board member of Enphase, and I happen to be an expert on batteries. And so we have a collaboration with them. We're actually having a meeting with them in Salt Lake later this week. 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, it's battery-based systems that do time shifting. And 20% of customers also care about backup. In Germany, you can't sell a backup system. You go to a guy and say, "How'd you like a battery? And if the power goes off, you know, it'll keep your house running." And the guy goes, "The power hasn't gone off in Germany in, like, the last two years. Why would I buy that?" In the United States, if you're on PG&E, if you can pick up your phone, meaning the power is on, you know, 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 have a lot of money, and you really do have to... And they're not that dumb. They really wanna see a return on investment, and we provide them an honest one. That's one of our 10 commandments, a completely honest return on investment. And there are times when you do an ROI and the number's negative. That is, "If you buy this system, eight years from now, you will have less money than you have now." And we tell them that straight up. All right. Well, thank you, everyone. We've come to the top of the hour, and I wanna 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.