Good afternoon and welcome to the 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, 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 Investors section of our company website at www.completesolaria.com. Second, during this call we will be making forward-looking statements based on current expectations and 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 any time during the call using the Question Submission Box found on your screen. And 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 you said Brian Wuebbels, who's our COO. He is actually our CFO, as well. He is – we will hire to replace him. And since Brian is moving up in the company, I'd like him to introduce himself to you.

Thanks T.J. And just a little bit about myself. I joined the company about a year ago as the CFO, as T.J. mentioned. 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 US finance operations. And before that I was with almost 10 years MEMC Electronic Materials and SunEdison, where I last – with various operating and finance roles. And then prior to my experience in solar, which was about 10-plus years, I spent my life at two large industrials. I spent my time at Honeywell for about four years and in 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. 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 going to 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 a software side grade. And he is the guy we go to solve problems. I'll talk about stock grants today and how it helped us out a way until I get there. Last one is Siddarth Madhav. Siddarth 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 because they've been very – did a lot for me at Cyprus. And Siddarth was the project leader for the Enphase turnaround. I think that one's pretty famous. That's one that went from $115 bucks 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. Siddarth go ahead.

Thank you T.J. As T.J. said my name is Siddarth Madhav. I have been with the team that is supporting Complete Solaria in its [indiscernible] on the topics that Brian covered – gross margin, cycle time, quality, customer satisfaction. The company is on the verge of much 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 until 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 want to know about the second quarter, so that's really what we're going to 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 anymore checks. That's even more important for me. That's a lot of work and I'll show you what that is. The bullets, first, talking about revenue. Our Q1 revenue was $10 million half of the prior quarter. We got cut in half from 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 in 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 due to an unresolved loan situation, with one of our private equity funding firms Carlyle and our revenue in the second quarter we already had a very lean April. We’ll also be limited. And depending upon rather not get a few hundred thousand bucks designee, maybe I'll do crowdfunding. The $300,000 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 this 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 the 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 that the tranches that we did. Our 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, the 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 3 down in OpEx, in terms of OpEx were about where we want to be. Sales commissions, so the way our industry works for those who don't know it, is that you typically buy your orders if you don't have a sales force. And an order cost you 33% 34% of sales and you pay for that a lot of it upfront. And the order fallout rate is something on your order of 30%. So a lot of times you pay, and then the order doesn't happen, the guy that changes his mind whatever. So, this is if you want to ask, the weakest part of our profit and loss statement right now. It's 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 further to go. On the last equity employed [ph] in the company is $5 million in January and we now believe based on we have very accurate cash flow capability, that's going to last us up to through the second quarter. So I put July 2 2024, here. I will need more money at that time, but we're not voracious for money. We're running real close to cash flow breakeven. Here are the finances from the report and by the way, that report if you go there -- this where they go to get the report. Okay, you go to this and this report is available. Okay. So here's the non-GAAP numbers. Look at revenue, gross margin, our bank funding, cash flow and cash balance at the end of the quarter. We’re looking at the last quarter before Q4 2023. This is a report for Q4 of 2023 and Q1 of 2024. So you can see the cash crunch has taken a rep new down dramatically. We do have orders and I'll show you our orders. Story number one is normally a few revenue gets cut in half in the quarters 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 efforts offset a massive revenue decline. And we actually cut our losses the same time and of course that projects forward, I'll come to that later. There's the last wheel $5 million, and you can see our funding was required, you need cash balance 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 in this quarter, which have not forecast is zero. Second thing I want to talk about is gross margin. In last quarter even with $10 million, we had 24% gross margin and we have a whole team working on gross margin. And we're actually very proud that we got hammered this badly. If you look in the year ago quarter, we had 2.5 times more revenue in the same gross margins. So all of that came out of cost and we're proud of that, and that’s been painful, this has not been an easy road. Okay, we changed. I became -- the week or so ago the CEO. Our CEO, Chris Lundell is from Salt Lake. He was our man in the corner. He was a steward of the place, right now we need and I helped with cost cutting. So, I was kind of like a driving force. Now, w 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 spec for it, what a surprise. Rodgers objective as CEO and there's really two points, in 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 we're willing to work for Carlyle at all, and that's still true that's got to get resolved if we're going to go forward. And then when becoming CEO, I'm 76. All of this stuff happened literally when I take one vacation, you go and sit in 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 to well-defined endpoint. This is not career two for me, and we're going to have one or two things happen. We’re going to 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've 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 solar world is not that great right now, we're recovering back to ld revenue. We've routinely had revenue in the low 20s to the low 30s of millions of dollars per quarter in the past. The failure point is when I believe that the chock holder private equity debt holders have on us, and I'll talk more about that later it will prevent the company from ever being successful. I'm not willing to waste my time. I am willing to walk off my own investment. We already introduce you to Brian. So I won't do that, he’s a COO. During the quarter, we reorganized the product lines, but when I ran a chip company in my industry, you ran it with product lines in this studs in this semiconductor company were the seven product line managers who all made silicon things, but there were different chips made differently for different customers and they really were different businesses. And we've designed and divide the new product lines, one for California, one for rest of US, 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 is it's pretty interesting opportunity. We've already upgraded 33 of their outlets and we got another 42 contracts. So here's a Starbucks solar owning, lot of panels up there, 50,000 lots. So this looks good and it makes a statement about being committed to solar. It also will cut your electricity and will wait out, because it produces a lot of power. Okay. Headcount. So shown this graph before the number of employees starting at 428 back in June of last year and then at the right we got to the last RIF to WIP down to 109. And like I said I've never been through it before. The companies I've worked for run, typically if you do have 5% layoff you get screaming and crying, if you do a 10% layoff to get a temper tantrum and this was the most severe I've seen. It also obviously says the Company was fat and I used exactly those words. They actually use the term morbidly obese consult with them. Here's our risk number one, it was difficult and then I'll show you -- you notice this climb here and I'll talk about that in a minute. When you get to 109 people than the math even for $10 million a quarter of 409 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 or SunPower with only $10 million a quarter for 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 $24 million quarter. That number starts to approach $1 million in any company that has $1 million per employee, per year, is a viable company in any industry. Our Tier, I told you we laid off and then we had the backsliding, as classic. I have a system called the Rec Auction that is Requisitioned as an 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. Cypress. And the way they work is simple. There are no risks. 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 or extra from the mix. But let's suppose you're trying to hold headcount, then you have -- you get a weekly report, exactly who left, the courses denominated in dollars. So you're dealing with this. This is done in dollars and when I'm going for the sake of explanation talk about where it is. So you got your Staff Meeting and present. It runs that and the VP of HR comes in and says Mary, Jane and marketing quit last week. Then you got one rack. And then the question is, what do you do with it? It is a very valuable asset. This fills up the mentality. People are valuable assets. And you don't waste someone. You don't have the 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 used to be nine VPs against TJ. And I would argue your efficiency isn't that good. You should get more per person, per week out of that fab or you should be able to sign a shift with so many people. I was always -- I am in the end of one argument, on the wrong side of it. In the new method, direct gets thrown out a piece of the table. Meet price under the boardroom table. And then the VPs start talking about why the person they want is most important. And I also learn, don't try to get 18 racks, don't hire a recruiting firm, find the one person you need, take your time to find the really right person who will change a company and bring them in and make a compelling argument that overwhelms the other guy's compelling argument. That's called the Rec Auction. That's how it works. And it 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 to turn on with less than one-to-one replacement. And as you can see, we -- even though we were really lean, we were drifting downward at a new record low level. That's the Rec Auction. So I actually filmed a Staff Meeting and the VP of -- VP of HR came in and said Mary, Jane and Mark can you leave. And then when we decided, who would get that. By the way, the way the system works, think about it, your attrition the people that don't want to be there may not be that productive. You can be higher, but that is an important position. But it's very unlikely that somebody will request it. It's going to be more important than the most important person, higher than 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've 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 rec auction means every week VP walks in HR and says, we can hire one person, maybe two, maybe zero. And then you have the argument, then you hire the person. And 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 want to 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. I was going to bring in my hat today. I forgot it. So there's the wreck 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 site for a 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 specking 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, and that time was WordPerfect,, Excel and that time was Lotus123 and the other -- 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 solar systems for people's houses a fab because 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've 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 every time we mess up something, we make that spec a little bit better. And we are getting better, and the numbers will 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 with the silicon, and the operator would 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 is computerized on a silicon lot, so you can start doing yield analysis and cycle time measurement and stuff you've got to 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 23, and everybody in the company tells me those are 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 un-permitted 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, and now you've 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 when I came in, on June 23 and their inventory was big. I did it for fab guys call back-of-the-envelope analysis on the inventory, and I say you guys have bloated inventory. So then I said, 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 wanted a little bit longer. And when we got to that point I send out the memo. No new jobs are going to go in our fab, none. But does that means we're going to turn away orders up. But if we don’t have orders, we may not have revenue up. And if we don't have revenue we might die. I go bingo. So you better get the problem fixed, don't you think. And that kind of shut non-authority is often used in the real world in manufacturing where when you screw something up, it's not a recoverable, they're getting another permit is in a recoverable there ruining away for that never will produce revenue. So there we shut it down? When do we turn it back on? I should have put that in here?

November.

Okay. So I didn't really hang in there too long. I turned it back. We had this drop and 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 line. And so I have to shut down. Now, what's interesting is when we started, our cycle time is 112 days, we managed to hold that cycle time best way to slow just FYI and this was cycle time from order to install complete. We managed to hold it, but it's not good enough and you can't react quickly enough to problems. You can't slice your line. You can take advantage of new orders if you that slow. So we started working on cycle time and cycle time primarily is getting rid of quality defects and that's in the semiconductors scope first pass yield. Do you want something, you 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 the day. Today -- and by the way, we have a couple semiconductor experts that are helping us on this problem in line. And their work, which is primarily quality has brought our cycle time down to the 34 to 40 days. Meaning when you here you can do 2.5 cycles per year, so you can make 2000 times 2.5 lots per year. Here, let's say, means use 34 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 very powerful effect. And that's where we are today. And if I had the name one thing that changed the company is that. Now the other point is, this is our target, and let's take that as the given. I'm going to suggest it’s not good enough in a minute, had $56 million of revenue in it. And so when you run a fab like this, you're taking money and you think about roofing the guy’s house with $100 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. You borrowed some money and that was a problem. And of course, what we've done now is we've taken that money back out or the fraction of that was still left. You lose some and we're down here. I did a calculation today. It's again back of the envelope but it's not far from wrong. And within a week it will be a paper on exactly what we have to hire consultants. I think we should have 1,000 jobs instead of 2,000. And I think we could maintain our revenue of half the whip, half the money and web, web 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 in. By the way, I think these 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 breakeven and profitability. Last quarter, $10 million cash limited talked about it. To get back to $25 million quarterly revenue, that's $100 million run rate. And I'd be happy as heck right now to have $100 million profitable solar company and it's very doable. We're going to need about $11.5 million of working capital. 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 get the money from the finance company and start paying 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, because 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 raised billions of dollars so I've had single offerings that were the old days right this back, but even then I would have $600 million offering. So this offering is not a big deal. Problem is, if you have somebody saying you are 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 are the keys for the front door, then of course, they go well, we will let you work on it for a while, hence my statement I made before. We've got to get past that because nobody's going to 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, because the debts 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 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 eight minutes after I got it done, the lawyers called me up and said, Kline Hill, we've got a deal with Kline Hill. That's one of the two equity firms. They invest in Complete Solaria with a 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 going to buy 3.7 million shares of Complete Solaria. So, obviously, I was overjoyed on that. I have Mike Bego here. This is going to be ugly. He's on a cell phone. He's the President of Kline Hill. He's in New York. And Mike, I apologize in advance for all the bad things I said and will say in this talk about New York. Why did you do it? And thank you very much.

Hey, T.J., 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 and private assets, and we only get directly involved in companies when we see there's a huge potential upside. And we're super excited about everything going on at 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 T.J., and we're excited about the unlocked cap table. We'll talk about it a little in a second. So with regards to the company, the solar space is huge and expected to grow substantially over the years, and we see their technology and what they can offer to the residential market throughout the U.S. as being a very compelling offering with a 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, obviously everybody knows T.J. He's been like, very successful. He's been fantastic to work with. Same thing with, like, a very high level of quality across the whole management team. And then 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 in when Carlyle also agreeing to come alongside with us on this and they are reasonable very smart investors so we’re really expecting that to be coming out shortly as well. And its -- it's a tremendous opportunity for investors. And so if you just like stand back again like Complete Solaria industry-leading company, amazing platform, tons of room to grow into the industry. T.J. and his management company thinking big, executing big and than – capital structural laid out this – this massive entire earlier that through company have to be much more nimble, and in this and converting that we're also excited to putting capital on the company's. So thank you. Thanks, T.J. Thank you everyone at Complete Solaria. Very excited about the prospect.

So 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 -- for your confidence in us. I would like to sincerely thank Mike Bego 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 the 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 that we have come to terms with two private deck. We have to come to terms with to private equity groups. And I put this when we got one left and if we get that then the -- we can go raise money based on merit. And my last point was last night if we survive our newly lean and fit company can become profitable and grow. So that yes -- that's for a question in case you ask it. That said, we like to take questions. There are electronic texting kind of things.

Thank you. T.J. and thanks everyone for joining the call. We're going to now move into the Q&A section. So if you have any questions you can go on the link. That's on the on the webcast and you can type your question in directly. First question, I've got here T.J. is from Derek Soderberg from Cantor Fitzgerald. Its 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 from and returns to $100 million annual run rate?

I have to ask other question if that happens in a way that I -- let me tell you something. our contracts with Carlyle we have two of the them. These are debt contracts, right? Give me money, give me interest. 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 isn’t going to happen. So answer number one is you have that structure – and I use the word the in my neck and in prior communications stays in place, I'm gone and I don't think the company is going to make it, may be it well. Carlyle is a big company. They've got a lot of solar companies. Maybe they got a hotdog, They want to come in, get a lot of socket that at less than a buck. And that would be fine with me. And I do everything in my power to help the guy out because after all I got a bunch of money in the company its not in my interest to do anything negative. The best way is the 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 written permission only says now four clause and then a few more pages. And it can't work that way. That's got to end. Other than that we will talk. And we've -- I leave it there. We'll talk.

Yes. Thanks T.J. We had another question here. It says their Solaria -- Complete Solaria management, under the assumption that the debt to equity swap with Carlyle complete soon, what would be the approximate breakeven revenue? And there is second question as well. We’ll go first.

All right. So I read that question, my five minutes before showtime here. It turns out obviously as a question ourselves all the time. That's the question. So I'll give you this is a this is a large document and I picked up one page. And what it is three parameters that matter; commission percent, gross margin percent – and this is gross margin on the solar commissions is treated separately; and then OpEx. And our OpEx is headed to $3 million next quarter. $3.6 million and more or less than $3 million after that. So, that's kind of a given. Then this table defines for a matrix of percentages what is our breakeven revenue? So, this says 30% commission, we're currently 31% and 47% gross margin. Our breakeven revenue $16.6 million. And that breakeven revenue could be a lower gross margin and lower commission, lower gross margin, lower commissions. Yet it's quite possible if we work on getting an indigenous order creation effort in the company and we're paying for costs 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 $99 million a quarter and the real numbers are here and $16 million is achievable number within a couple of quarters. I don't know how long it's going to take to go back from $10 million. I don't know how much damage has been done, but right now I know this is a robust market for solar. Let me -- I forgot to show you, let me show you this. Okay, this is the graph I showed you. This is inventory and jobs and then it divides that up by where it is. So, this is preconstruction, think of orders. This is post construct in orange and then up here is pending TTO this part turn on. So, this is the systems in and it's a -- and 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 spokes up. So, you see the good old days turned in the not so good old days when that that one bulked up. Okay. So, here's the order backlog that peaked up when we were getting orders and we couldn't -- and we wanted to fab to move or we couldn't put them in the fab because the fab is jammed. Noticed what's happening here, they're piling up again and this is 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 got to do is go put solar on their house and they appreciate it. And the faster you put it on -- we keep tracking Net Promoter Score, the faster you put it on, the more they like you. So, the recipe is pretty simple. This little fab right here is complex and it's kind of obvious, you say well, 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 for the lot of people who really don't like you or solar. And you got to somehow make it happen. And you've got to get funding for 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 -- by the way any companies you see having survived this little go downturn, I think we're getting near the end. I think we'll have better summer. Those are good companies, those are good companies that are well run.

Thank you T.J. And you answered my 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 realized over the past 12 months.

Okay, we got to reaffirm from here. We'll have to bring inside overhead. We obviously track that. What is the record for gross margin?

49%.

So, the company and one-time slight made 49%. That's how we chose a 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 circumvention. So, their panels can go to Europe, can't come to the United States and there's been a dump 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 [indiscernible] you star to buy stuff. We're not very good at that. We kind of pay retail and we kind of do adhoc purchasing. Sometimes we do purchasing on the weight of the job and obviously that's bad. So now we have a -- in Indianapolis we've got the rental purchasing group. There are 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 that. If you notice a fudge, you can always tell me go back here. You can always, okay see, gross margin was 24 despite higher revenue. Q4 forecast is greater than 30%. That's because I don't know if my revenue is going to be. So that's a guard band a 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 got to have to get back a little volume. You have amortization of overhead. We amortize OpEx to make operating income, you amortize manufacturing overhead and you've got to be pure manufacturing, got a plant. You've got all at the amortized manufacturing overhead with revenue that comes through it. So, we are -- we'll have a natural improvement in gross margin just from running more stuff with the same group of people.

Thank you T.J. The next question comes from Derek Soderberg at Cantor Fitzgerald. We made some final half the workforce here down to 109. Can you talk about the cadence of OpEx from here? Should we continue to expect OpEx from $3.6 million per quarter?

New CFO?

So 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 breakeven chart kind of where we're headed. We believe we can get this business under $3 million of OpEx in order to be breakeven and at efficiency level that we think makes sense. So that’s our focus and I think to give away a little bit of how much we've been focused on this. If you did notice on that breakeven chart that T.J. said that's Version 4. And I believe the first version that T.J. shared was during our October call where we talked about the Northstar plan Version 1. We'll give some updates on it in December and we were still on Version 1. So we have really started to hone in and I wanted to just think Siddarth and the team and [indiscernible] for their help because they're helping us think differently every day about what's possible. So that’s where we're headed. Thanks Derek. The next question is this one out there. Do you see a reverse split coming up to staying compliant?

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.

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.

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.

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?

Will, you want to do that?

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.

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.

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.