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Complete Solaria, Inc. (CSLR)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 revenue was $24.6M, materially below prior “street” expectation of $38–$41M, as the company throttled fab starts to reduce WIP; gross margin improved to 25% from 18% QoQ, and non-GAAP operating loss narrowed to $(9.231)M from $(15.788)M QoQ .
  • Systems bookings hit a record $56.4M despite industry demand concerns, while the Modules business was sold to Maxeon for $10.2M and classified as discontinued operations ($3.8M Q3 modules sales not counted in revenue) .
  • Opex fell sharply to $6.732M in Q3 from $12.875M in Q2, headcount down ~33% (415→321), and commission rate targeted to decline from 36% in Q3 to 34% in Q4 and 32% in Q1 2024 .
  • Q4 guidance calls for revenue $21–$23M, gross margin 32%–40%, operating loss $(4)–$(8)M, and at least $1M of cash flow and ending cash; CEO transition to Taner Ozcelik effective Nov 20, 2023 is intended to strengthen execution and scale operations .

What Went Well and What Went Wrong

What Went Well

  • Record systems bookings: “Complete Solaria experienced record gross bookings of $56.4 million, a 1.4x increase over the same period last year” .
  • Gross margin improved QoQ: “We improved gross margin from 18% in Q2 to 25% in Q3…targeting 32%–40% Q4 gross margin” .
  • Cost structure actions: Opex reduced to $6.732M (Q2 $12.875M), second RIF delivered $10.6M annual savings; “when the lean method is used, our performance has actually improved with fewer people” .

What Went Wrong

  • Revenue miss vs prior expectation: “Q3 revenue was $24.6 million, below the ‘above $30 million’ expectation… and the $38–$41 million previous street expectation” .
  • Operational congestion: “incorrect assumption…allowed us to load the line…bloated the fab WIP to 3,615 jobs…consequently shut down new starts for five weeks” .
  • Installation cost pressure: gross margin gains were “partially offset by an increase in installation labor, especially in the Northeastern US” (mitigation via internal crews underway) .

Financial Results

Core P&L metrics

MetricQ3 2022Q2 2023Q3 2023
Revenue ($USD Millions)$12.260 $32.174 $24.590
Gross Margin (% GAAP)n/a17% 25%
Operating Income ($USD Millions, GAAP)$(3.209) $(17.546) $(11.078)
Net Loss per Share – Continuing Ops ($USD)$(0.31) n/a$(1.28)
Net Loss per Share – Total ($USD)n/an/a$(5.20)

Revenue vs prior expectations

ComparisonQ3 2023 Revenue
Company-referenced “previous street expectation”$38–$41M
Actual reported$24.590M
ResultMiss vs expectation

Segment/Business mix

MetricQ1 2023Q2 2023Q3 2023
Systems Revenue ($USD Millions)$16.7 $25.6 $24.6
Modules Revenue ($USD Millions)$18.7 $6.6 $3.8 (discontinued ops; not in revenue)

KPIs and operating metrics

KPIQ2 2023Q3 2023
Gross Bookings ($USD Millions)$49.1 $56.4
Opex ($USD Thousands)$12,875 $6,732
Commission Rate (%)n/a36% (targeting 34% Q4, 32% Q1)
Fab WIP (jobs)n/a3,615 peak; 3,127 after throttling
Cash Flow ($USD Thousands)$(804) $(884)
Cash Balance ($USD Thousands)$2,545 $1,661
Headcount (employees)415 (WW26) 321 (WW39)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 2023$38–$41M (Aug guide) Actual: $24.590M Lower vs guidance (miss)
Gross Margin (%)Q3 202329% (Aug guide) Actual: 25% Lower vs guidance (miss)
Revenue ($USD Millions)Q4 2023En/a$21–$23M New guidance
Gross Margin (%)Q4 2023En/a32%–40% New guidance
Operating Income ($USD Millions)Q4 2023En/a$(4)–$(8)M New guidance
Cash Flow ($USD Millions)Q4 2023En/a≥$1M New guidance
Ending Cash ($USD Millions)Q4 2023En/a≥$1M New guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2023)Trend
Fab/WIP operationsFab overloaded; cycle time improved slightly; expected Q3 systems revenue “well over $30M” “Incorrect assumption…line loading bloated WIP to 3,615 jobs; shut down new starts for five weeks; reduced to 3,127” Focus shifts to throttling starts to improve cycle time; operational discipline improving
Business mix (Modules vs Systems)Strategic pivot to higher-margin Systems; Modules revenue fell due to market glut and deliberate inventory decisions Modules divested to Maxeon for $10.2M; Q3 modules $3.8M booked as discontinued ops; Systems-only focus Mix shift completed; Systems-only strategy
Demand/bookingsSystems bookings $49.1M in Q2 Record bookings $56.4M; “experienced the opposite” of industry slowdown Strengthening bookings momentum
Gross margin driversQ2 GM 18%; Systems GM improved; Modules negative GM GM 25%; equipment cost reductions, headcount cuts; install labor pressures; targeting 32%–40% Q4 Upward trajectory with internal install teams and lower equipment costs
Regulatory/macroCalifornia headwinds noted Bookings strong “even in markets like California…regulatory headwinds” Resilient demand despite policy backdrop
IT/quality systemsHired experts; manufacturing-friendly documentation New Quality Dept with strict gates; VP IT hired; consultants extended Institutionalizing process quality and scalability
LeadershipExecutive Chairman-led restructuring New CEO Taner Ozcelik; founder now reports to him; new board member Chris Lundell Strengthening leadership bench to scale

Management Commentary

  • “Our incorrect assumption…allowed us to load the line…[which] bloated the fab WIP to 3,615 jobs…shut down new starts for five weeks” (Chairman’s Report) .
  • “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” (Chairman’s Report) .
  • “We improved gross margin from 18% in Q2 to 25% in Q3…targeting 32%–40% Q4 gross margin…driven by lower solar panel, inverter, and battery pricing and…lower-cost internal installation teams” (CEO’s Report) .
  • “Complete Solaria…experienced record gross bookings of $56.4 million, a 1.4x increase over the same period last year” (CEO’s Report) .

Q&A Highlights

  • Execution and throughput: Management emphasized throttling fab starts and instituting quality gates to reduce rework and accelerate cycle times, acknowledging prior overload as a key cause of delays .
  • Margin roadmap: Detailed the path to 32%–40% GM via lower equipment costs and internal installation crews, with install labor cost pressure in the Northeast being addressed .
  • Cost discipline and commissions: Opex reductions and step-down of sales commission rates (36%→34%→32%) were reiterated as levers to narrow operating losses .
  • Strategic focus: Confirmation of the Modules divestiture and Systems-only emphasis aimed at improving profitability and customer satisfaction .

Estimates Context

  • S&P Global consensus estimates for CSLR Q3 2023 were unavailable due to missing mapping; therefore, formal Wall Street consensus comparisons could not be produced.*
  • The company referenced a “previous street expectation” for Q3 revenue of $38–$41M; actual revenue of $24.590M indicates a significant miss, driven by deliberate throttling of fab starts to reduce WIP and operational congestion (material miss) .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter’s miss was operationally driven; management is prioritizing fab decongestion and process quality, which should improve cycle times and customer satisfaction .
  • Bookings strength and the Systems-only pivot suggest robust demand for the core business despite industry/regulatory headwinds, supporting medium-term revenue visibility .
  • Margin trajectory is positive, with specific initiatives (lower equipment costs, internal install teams) underpinning Q4 GM guidance of 32%–40%; watch execution on install cost containment .
  • Cost actions are impactful (opex down ~48% QoQ; commissions to be reduced), narrowing non-GAAP operating loss and aiming for eventual breakeven; tracking opex and commission rate adherence is key .
  • Liquidity remains tight (Q3 cash balance $1.661M; Q4 ending cash ≥$1M guided); the $10.2M Maxeon proceeds help, but cash generation in Q4 and beyond is a critical watch item .
  • Leadership changes (new CEO, added board expertise) are designed to improve scaling and operational rigor; monitor early indicators of improved throughput and customer metrics .
  • Near-term trading: sentiment likely hinges on evidence of WIP reduction and margin delivery in Q4; medium-term thesis depends on sustaining bookings strength and executing the Systems-only strategy with disciplined cost control .