Q4 2023 and Q1 2024 Complete Solaria Inc Earnings Call

Participants

Brian Wuebbels; COO; Complete Solaria Inc

T.J. Rodgers; CEO; Complete Solaria Inc

William Anderson; Director; Complete Solaria Inc

Siddharth Madhav Madhav; President and Chieft Strategy Officer; Ayna.AI

Presentation

Brian Wuebbels

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 -- 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.

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 that we will hire to replace him. And since Brian is moving up in the company, I'd like him to introduce himself to you.

Brian Wuebbels

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.

T.J. Rodgers

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 softer aside, great. And he is the guy we go to 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 Siddharth Madhav. Siddharth is from Ayna. Ayna is a company that spun out of 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 Siddharth 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. Siddharth, you got --

Siddharth Madhav Madhav

Thank you, T.J. As T.J. said, my name is Siddharth Madhav. I have been with the team that is supporting Complete Solaria in its (inaudible) on the topics that Brian covered -- gross margin, cycle time. 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.

T.J. Rodgers

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 or even though our backlog was $17.8 million. How the revenue drop is due to a shortage of working capital, we can buy panels throughput on people's Roos. 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 crisis due to an unresolved loan situation with whatever private equity funding firms, Carlyle and our revenue in the second quarter, we already had a very lean April. I will also be limited. And depending upon rather not get a few hundred thousand bucks designee, maybe I'll do crowdfunding $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, was 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 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 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 buyer orders, if you don't have a sales force in 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 the order of 30%. So a lot of times, you pay and then the order doesn't happen, the guided changes his mind would ever.
So this is some queue and 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 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 to July 24 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 by the way that report if you go there on 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 were looking at the last quarter before Q4 23. This is a report for Q4 of 23 in Q1 of 24. 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. Okay. Sorry, number one is normally a few.
Revenue gets cut in half in the quarters. Over the fact is our losses, which were 12 million last quarter, one to six. So we actually cut our losses in half, meaning our cost-cutting efforts offset a massive revenue decline. And we are we actually cut our losses the same time and of course, that projects forward. Okay. I'll come to that later. There's the last three or 5 million bucks and you can see our funding what's required. Your cash balances 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 as 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 very 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. All of that came out of cost, and we're proud of that investment. Painful is this not been an easy road?
Okay. We changed. I became the week or so ago. The CEO. on we have our CEO, Chris Liddell is from Salt Lake. He was our man in the corner. You as a steward of the place right now, we need in I helped this cost cutting side. I was kind of like a driving force now. We need to raise some money and we need to do some M&A. And they've done a lot of those in my career when I was CEO of Cypress, my acquired 26 companies in 34 years.
And so I have spent for it what a surprise on Rogers objectives, 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 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 this stuff happened literally when I take one vacation, you go sit in the beach in Mexico and read the book. I didn't have time to read and I got the call know Mexico more like 20m in one day and a site took over. And therefore I want to well-defined endpoint.
This is not this is not career two from me, and we're going to have all define that. And it's vague right now, 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 your old revenue. We've routinely ad 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 so-called or private equity debt holders have on us, I'll talk more about that later on will prevent the company from ever being successful on that. I'm not willing to waste my time and I am willing to walk off my own investment. We are ready to introduce you to Brian. So I won't do that teaser, COO during the quarter. We reorganized in the product lines, but when I ran a chip company in my industry, you ran it with product lines in this study in the semiconductor company were the seven product line managers, well-made silicon things, but there were different shifts made differently for different customers.
And they really were different businesses. And we've designed and dividing 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 that we got another 42 contracts. So here's a Starbucks solar owning a lot of panels up there, 50,000 lots. So this is looks good and it makes a statement about being committed to solar. It also will cut your electricity will wait out because it produces a lot of power.
Okay. Headcount. So shown this graph before on number of employees starting at for 28 back in June of last year and then the ride. And we got to the last risks to this down to 100. 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 for you to a 10% layoff to get temper tantrum. So and this was the most severe I've seen. It also obviously says the Company was fat and I used exactly those were inside.
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 as 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 a 10 million a quarter of 409 employees, the math works out to be $3 $67,000 per employee per year. That's right there, even a little bit better than Sunrun Sonova 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 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 on I have a system called the rec auction that is requisition as an employment requisition to hire somebody all companies typically have hundreds of these. They are the giant waste 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 not nine, I'm talking about now the stasis in head count, you can go up and down by adding and subtracting Rex from the mix. But let's suppose you're trying to hold headcount, then you have to have you you get a weekly report exactly who left the courses denominated in dollars.
So you're dealing this. This is done. And when I'm going to for sake of big explanation, I 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 is a very valuable asset. This fills up. The mentality of people are valuable asset and you don't waste money. 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 our I loved about it was used to be nine VPs against strategic.
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 design a chip with so many people that I was always on the end to one argument on the wrong side of it in the new the new method direct gets thrown out a piece of the table in our meat flies under the boardroom table. And then the VPs start talking about why the person they want is most important. And they also learn don't trying to get 18 rigs, don't hire recruiting firm, find the one person you need to take your time to find the really right personnel, change a company and bring them in and make a compelling argument that overwhelms the other guys compelling argument that's called a wreck option.
That's how it works from an 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 turned 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 auctions. So I actually film a staff meeting and the VP of VP of HR came in and did say Mary Jane and marketing left.
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 be not that productive. You can very high higher, but if that is an important position, but it's very unlikely that somebody liquids is going to be more important than the most important person, the higher than the corporation, and that's what you get. So if you have this turnover and you're less important, people go away in key people get hired. And after you do that for the year, it changes your company. And by the way, this is very scalable, think about 1,000 person company. They got a 5% turnover that's 50 people year. Okay.
And 5% turnover is moderate or even a little bit low, 50 people years, one person a week. So the rec auction means every week, VP. walks in with HR and says we can hire one person may be to maybe zero. And then you have the argument that any hire that person than 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 may be even can't remember anymore. That's how it works now want to show to you and action. And this was truly Mary Jane in marketing quitting. And then we're trying to decide who gets a little more time and there are five didn't bring I was going to bring him I had today for I forgot it. So there there's a wreck auction in action by the way that system I just described, comes out of a book I wrote in 1992. Net book was the story of building a semiconductor company from 1982.
And 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 its systems for hiring systems through 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 three really isn't that bad day. And we ended up having to use the tools. We had word in that time as we're perfect XL. And that time was Lotus one, two three and the other and PowerPoint.
And but it's not an easy company to run. So at age 10, I worked on writing all the systems down and what's interesting the booked and 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 effect active 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 system solar systems, repeatable thousands of fab, because of my background 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 to you've got a box Cisco wafers into bunny suites in the boxes move through the fab from step-by-step. Typically you have something like 35 or 40 masking steps in each masking step has two or three operations. So you have something like honored operations.
Our fab is 42 steps and we've documented at semiconductor style. So we step has got a spec and it's not perfect yet. But as every time we messed up something, we make that back 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 still have things back in the non-compete, today's call lot travelers. So they move with the silicon and the operator come in. They mark the step there at the marketing machine number, they marked a lot number. They go into the operation and the machine pulling up the recipe, there was supposed to be an output management thickness of a layer whatever, and they 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 got to do to make a fab run-rate. So we exactly of fab only. We have a lot traveler and the things that move around 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 24,000, 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 20,000 is what we can handle two thousands where we can handle enough screw it up and what screws? Yes, of course, is each job at some special problems like Citi won't give you a permit because the person has and on permitted structure and they'll shut you down for that. That's illegal in California. But legal everywhere else for the financing gotten done.
And then the the dating on the financing expired in the financing expired and you got to go get refinanced, etc. 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 the slow. So you down and that's what happened here. So here you see this when I came in on June 23 and their 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 that is we're going to turn away orders up. But different point orders we may not have revenue up. And if we don't have revenue, we might dialogue bingo. So you better get the problem fixed, don't you think that kind of shut non authority is often used in the real world and manufacturing where when you screw something up, it's not a recoverable, they're getting another permit is in a recoverable air ruining away for So reset or down? What do we turn it back on?
I should have put that in here November, Velcade. So I didn't really hang in there too long. I said I turned it back. We had this drop and members of this drop here, and I turned it back on, but that broke the problem. And then the inventory came back in the news today is we now have 2000 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 a whole that cycle time best way to slow just FYI in this 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, you that slope. So we started working on cycle time and cycle time primarily is getting rid of quality defects and that's in semiconductors, scope first pass yield. Do 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 the day today.
And by the way, we have a couple semicon, Dr. 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 what have you here, you can do to have cycles per year. So you can make 20 times 2.5 loss per year here had, let's say, use 34. It's a month and 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 is a very powerful effect.
And that's where we are today. And if I had the name one thing that changed the Company set now, the other point is this is our target. And let's take that as the given I'm going to suggest is not good enough in a minute that had 56 million of revenue. And so when you run a fab-light this, you're taking money and you think about think about roofing and guys 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 borrowed some money and that 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 2000. And I think we could maintain our revenue of 0.5 to whip half the money and 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 there's a number of days can drop some more as well. Okay. Well, given that Tech Talk high nine 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 a 25 million quarterly revenue that 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, which even with fast cycle time you do have to have stuff you bind 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 paying payback. On the other thing being cash, I would be piled up 13 million of accounts pay. Some of it's not okay like the lawyer who checked this pitch today for accuracy.
So I didn't mislead anybody. We own money 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 bucks in my career. I've raised billions of dollars. I had a single offerings that were new always write this back, but even then I would have 600 million offering. So this this offering is not a big deal promise. If you have somebody is saying you are in default of your covenants and we can call it and then you call or Bluff and say great, come on and run the company.
Here's the key is through the front door, then of course, they go well, you know, we'll let you work on it for awhile, hence my statement I made before we've got to get past that because nobody is going to let us, but nobody is going to give us money in and offering with the hammer paying an overhead. And that's where we are right now. So we need Carlyle inclined to agree to a debt to equity swap and they made profit on us on the debt as significant because the debt side, high coupon debt, how 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 live, 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 and said Cline Shale. We got to deal with cleaning out. That's one of the two equity firms, the investment complete Solaria with the debt debt for equity swap. So the deal was 9.8 million shares at 19.9%. The largest amount, the Board can authorize without a shareholder vote in return for all of their debt. And they also got are going to buy 3.7 million shares that complete Solaria.
So obviously, as overjoyed on that, I have might be go here. This is going to be ugly. He's on a cell phone is the President of client Hill. These New York And Mike, I apologize in advance role of bad things. I said and we'll say in this talk about New York, but why did you do it and thank you very much. Asia. Yes.

Thank you, Alex. Our client partners. Jerry Revich and private assets directly involved and companies on the there's a huge upside and we're super excited about everything going on and complete area. And it's like three days to complete Telaria platform and technology, everything the company managed team led by Jay and are excited about online cap on development.
So with regards to the Company, solar space is huge and expected to grow substantially over the years. And we see either technology and what they can offer to kudos to the market throughout the US as being very compelling offering with a substantial upside and a huge opportunity. And right now completely is very small, huge amount of upside there and is Nicky types, Jay and his team here to give you the guy in their key stake and execute bags to get a smaller company, huge opportunity for people that are there that they can execute a huge amount of growth.
Obviously everybody has to date and like very successfully it to work with very, very high quality honest. And then the last part we're kind of company right now are very excited about it online in the capital structure and a little bit of a noose around the neck of the company back over the recent past. And we're very excited to convert our equity as we see a lot more upside equity from that standpoint as we in parallel to do this jointly together. So we will be doing this as an unparalleled us agreeing to come along with a net winner
Turning to our store count are really expecting that to be coming out shortly as well. And I should state that it's a tremendous opportunity for investors. And you just expand back again, like complete Gloria industry-leading company platform, tons of room to grow into the industry, Jay, and manage the company, taking a executing, big and structural laid out in messages earlier, actually the company to be much more nimble. And you can tell you that we're off to hedge putting cash on the company's. Thank you. Interest rate scenario.

T.J. Rodgers

So 11 o'clock last night having gotten the news to figure out what to say that was true about about client Hill. And I said, thank you, Claudio, for your confidence in us. I would like to sincerely thank Mike. We go further and his team for working with us literally for years in supporting our company. So banks.
Okay. Conclusion were alive and we're starting to improve. I won't claim victory yet, but we have a different company than than the nine months to go. 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 to private. 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 than than 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 we ask that said, we like to take questions there. Electronic texting kind of things.

Question and Answer Session

Brian Wuebbels

Thank you, Jay, 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 indirectly up. First question. I've got here, TJ's from Derek Soderberg from Cantor Fitzgerald. As in the event that Carlyle is refusing to convert their debt, what is the most logical way for the company this fall that working capital from and returns and $100 million annual run rate?

T.J. Rodgers

I had asked over and have to ask other questions if that happens in a way that I think let me say something our contracts with with Carla, we have to meet their debt contracts, right, giving money, give me interest then of course, there's covenants was 84 pages long and wanted to 55 pages long. I can't go to the bathroom without calling New York that is going to happen. So answer. Number one is you have that structure 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 that was committed to 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 is not my interest to do anything negative. The best way is the debt for equity swap assume 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 that. I can't sell an asset unless I get written permission and written permission and always has a now therefore clause, and then it can't work that way. That's got and other net will talk. And we've I leave it there. We'll talk.

Brian Wuebbels

Thanks, TJ. We had another question here. It says their flooring and complete Hilary management. Under the assumption that the debt to equity swap with Carlyle complete soon, what would be the approximate breakeven revenue? And their second questions, we'll go first, right. So I read that question. My five minutes before Showtime here in terms of obviously ask their question ourselves all the time. That's the question.

T.J. Rodgers

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 per segment gross margin percent in this gross margin on the solar commissions is treated separately and then OpEx and our OpEx is headed to $3 million next quarter. On 3.6 and more or less than three after that. So that's kind of a given then this table Defiance for a matrix of percentages, what is our breakeven revenue?
So this as at 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. And yet it's quite possible if we work on getting an indigenous border 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 there's a robust market for solar.
Let me I forgot to show you let me say this. Okay, this is this is the graph I showed you. This is inventory and jobs and then divide that up by where it is. So this is preconstruction. Think of orders 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 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, I spoke stuff. So you see the good old days trend in the not so good old days when that that one bulked up.
Okay. So here's the order backlog. The peaked up when we were getting orders and we couldn't and they wanted to fab to move or we couldn't put them in the fab because the fabs jammed notices happening here, they're piling up again in this because we can't service them. So I infer that this means there's business out there. Utilities are charging more and more of their 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 track of Net Promoter Score, the faster you put it on the more they like you saw the recipes pretty simple. This little fab right here is complex and it is kind of obviously and I say, well, it's silicon fab. Scott equipment is Scott science. And all at this one's got 5,000 jurisdictions with 5,000 different sets of rules than it was a 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 goat downturn, I think we're getting near the end. I think we'll have better summer. Those are good.

Brian Wuebbels

Thank you, DJ. And you answered my second question. So the next question comes from Thomas America, Germany. Using the fab chart on page 13, where you discuss the improvements in gross margin in uveal realized over the past 12 months.

T.J. Rodgers

Okay, we got to do. We have been 41 here. We'll have to bring inside overhead. We obviously track that was a record for gross margin, 49%. So the company and one-time and slight made 49%. That's how we chose a 47% gross margin. Right now. We're looking at operational issues in financing issues that don't get us into the 40s. We can see easily how to get in the 40s is 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 to Malaysia and Vietnam to circumvent the shut down.
And now there's circumvention. So their panels and go to Europe up 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 that at least for equipment costs were also one of the things we're learning from. I know you cited by 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 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. You've for forecast is greater than 30%. But 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 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.

Brian Wuebbels

Thank you, TJ. The next question comes from Derek Soderberg at Cantor Fitzgerald. We made some final half the workforce here down the one oh nine. 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 you actually answered this question a little bit earlier. Right now, we're projecting 3.6 million for this coming quarter. Breakeven chart kind of where we're headed. We get this business under $3 million efficiency level that we think makes sense. A little bit of how much we've been focused on this. If you did notice on that breakeven chart that TJ said that's version for. And I believe the first version that TJ shared was during our October and version one, we'll give some updates on it in December, and we were still on version one. So we have really started to hone in and I wanted to just think Siddharth and the team at China for their help because they're helping us think differently every day about what's possible. Thanks, Derek.
The next question is this went out there. Do you see a reverse split coming up to staying compliant?

T.J. Rodgers

Well, I got a letter from NASDAQ the other day, and you said your stocks under book call a cure. If you don't cure the problem than than you guys, the question is how do you want to play the game to me? I give somebody the dollar and he gives me to $0.5 pieces. It doesn't matter are given to $0.5 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 at right now, there's not a plan right now. We're going to earn our way back above.

Brian Wuebbels

The question comes from Thomas Merrick at Janney. What do you expect you talked about though 1,000 job with Target. What do you expect the cash generating or the free cash flow to be looking at that point.

T.J. Rodgers

Per makes me feel like as Dinos or the brunt of source than Eastern and Southern California, the La Brea carpets and somebody says once you put your foot in the timing and design services. And I don't know that it's hard for me to answer that question. Look at look at the issues today, look at this, I haven't done those calculations that step after next. And we will do those calculations are capable of doing it.

Brian Wuebbels

Thank you, Jay. On Nimex for solar customers, i.e., the value proposition for our customers as well as the availability for.

T.J. Rodgers

Will you want to do that?

William Anderson

Yes. So the current economics for the retail customer with question. So we're seeing utility rates increase all over the country, but that's our biggest market in Texas where retail energy is non-regular, 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 that.
So 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 our customers saving on a finance present. And then if they're buying it outright than their return on invest seven years.

T.J. Rodgers

Let me take a shot at that one as well, which isn't very good, frankly, 19 six when I was the Stanford two courses from William Shockley, the Nobel Prize winner on transitioning 62 in one of his student scanning. Professor wrote a paper on the basis for ourselves made from silicon and turns out. It's still true today. 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 come that's big time science. I always love that guess what is 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 I mean they drop the price of panels to zero.
And then I guess all I want then I have to do is install them and make money is 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 in the hardest point is to sell a solar hardest point. And therefore, there are sales companies that know this and that's what they do for living in some of the stuff they do to on their cost document, which is that it's Accredo for the corporation is capable and 10 commandments, and it talks about ethical treatment of customers and out there.
The point I'm making is that after all is science and all the way not on your door in those out and talk in some way and even if everything says not true, the preliminary or 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 that and the fact is our price and that price is this a toolbox to 10 above that is profit for the sales guy and they can charge six bucks or so. So that's how the industry and segregated.
So in America, so opposite in semiconductor industry, totally opposite. To date, honest to God, today, you can buy a 1 billion transistors per dollar. I'm used to cost cutting and competing head on in order to serve customers for us in our case or the electronic tire world. So retail pricing in the United States is looking like energy stage. You can get their their document ligand like $3 a watt. So typical system might be and the same system in Europe because, frankly, our government and the way it runs the same system in Europe, you can buy for a dollar a watt and you actually believe it or not in France run through your markets are still lower than we run here.
So you've got structural and government problems and asking what the precise you get a better technology, get your efficiency up all the things to think about doing that matter. Elected that sets price and the guys that are willing to go to the edge of it. 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 0.2 words, value added. It used to be the calculation was you by how many dollars what and then you get so many kilowatt hours from the solar system per kilowatt in California, for example.
And then you say, therefore pick a number $0.2 a kilowatt hour at times the number of kilowatt hours system produces oil 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 in that payback time used to be for utilities to have a lot of clout have changed the rules and the rules are called them on net and it used to be utility service. So your solar system would put deck electricity meter would run backwards in the solar system. The utility would do it will now they're not willing to buy your power anymore.
In the United States $0.2 a watt, what our kilowatt hour is now $0.05 a kilowatt hour. Fortunately, utilities are creating another opportunity and that you're paying for talking $0.6 a kilowatt hour. So the new the new pits through systems is fire battery. And this is a big lithium-ion battery by battery during the day, let your solar system charge the battery and at night let the battery run your house and then you design a system there, the right-sized battery to move the right number of kilowatt hours back and forth. There every day from the sun in the day, your house at night and you wipe out the site charges, the net ROI. works today, and it's actually pretty good for us.
And I happen to be a Board member of. And and so we we have a collaboration when we actually having a meeting with them in Salt Lake later this week. And so the value proposition you have to be nimble, you have to be able to figure out what customers need and provided at a competitive price. And right now is battery-based systems that do timeshifting 20% of customers also care about backup, Germany, you can't sell backup system. You go to a guy and say, I'd just like us right in the guy goes, the part hasn't gone off in Germany and like the last two years.
So Gianni, if you can pick up your for meeting the powers on you, do you do have a problem? There is to keep a real time value proposition in front of customers because they are they are homeowners. They don't want to have a lot of money and you really do after being there or not that done. They really want to see on this one over 10 commandments that completely honest, return on invest. And there are there are times when you do. And if you buy the system eight years from now, you'll have less money than you have now. And we tell on that straight up.

Brian Wuebbels

All right. Well, thank you everyone. We've come to the top of the hour, and I want to thank everyone for joining us today for the Q4 '23 and Q1 '24 earnings update call for Complete Solaria. And I hope everyone has a great day. Thank you.