NeoVolta (NEOV) Q1 2027 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Ardes Johnson
• Chief Financial Officer - Jing Nealis

TAKEAWAYS

• Revenue -- $2.8 million, representing a sequential increase from $13,500 in the previous quarter driven by the launch of the third-party ownership platform.
• Gross Margin -- 36.5%, compared to a gross loss in the quarter ended June 30, 2026, reflecting the transition to a project-based sales model.
• GAAP Net Loss -- $7.7 million, or $0.13 per share, which represents an improvement from a net loss of $11.7 million in the prior quarter.
• Adjusted EBITDA -- Negative $5.5 million, compared to negative $8 million in the previous quarter, following the reset of the residential business.
• Master Purchase Agreement -- $116 million, for battery energy storage system products built at the Georgia facility with deliveries scheduled for the first quarter of calendar 2027.
• Utility Scale Commitment -- $53 million, formalized under a commercial framework with Infinite Grid Capital for projects to be deployed throughout 2027.
• C&I Sales Commitment -- $10 million, representing a minimum purchase agreement through 2027 with initial shipments expected in late 2026.
• SK On Battery Agreement -- 9 gigawatt hours, of domestic lithium iron phosphate battery cells to be delivered from 2027 through 2031 to support pack and storage manufacturing.
• Total Liquidity -- $28.8 million, consisting of $26 million in cash and cash equivalents and $2.8 million in restricted cash.
• Senior Secured Term Loan -- $20 million, closed in September to fund working capital with an additional uncommitted facility of up to $10 million available.
• Net Property and Equipment -- $18 million, nearly doubling from $9.9 million as of June 30, 2026, due to leasehold improvements and equipment at the Pendergrass facility.
• Capital Expenditures -- $7.3 million, primarily directed toward production equipment and improvements for the Georgia manufacturing site.
• TPO Platform Revenue -- $2.7 million, recognized from the first batch of residential energy storage projects that reached substantial completion.
• Cash Used in Operations -- $6.6 million, reflecting management expectations as the company began its production ramp at the Georgia facility.
• Workforce -- 14 employees, managing the company's energy storage design and manufacturing operations.
• Inventory -- $5.9 million, compared to $2.1 million in the prior quarter, reflecting raw material procurement for initial production units.

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RISKS

• Johnson indicated that management must manufacture, deliver, and collect payment on secured commitments to convert them to revenue, noting that project timing in the industry often shifts during delivery phases.

SUMMARY

NeoVolta Inc. (NASDAQ:NEOV) reported a transition from facility commissioning to active production at its Pendergrass manufacturing site. Management stated that the company is executing on a production ramp-up to fulfill contracted commitments across residential, commercial, and utility-scale verticals. The company announced it is changing its fiscal year-end to Dec. 31 to align with industry budgeting cycles and optimize the monetization of manufacturing tax credits. Management indicated that the recovery in the residential segment is being driven by the launch of a modular storage product and a proprietary financing platform that lowers upfront ownership costs for customers. Strategic supply agreements for domestic battery cells are intended to support long-term pack manufacturing and ensure compliance with federal incentive requirements.

• CEO Johnson stated, "Opening the facility was the accomplishment. Operating it well is the job now," regarding the production phase at the Georgia site.
• The company reported that the TPO platform allows them to establish a business model and customer base while capturing higher revenue and margin at the project level.
• CFO Nealis noted that the company is in active conversations to align supply chain payment terms with customer down payments and milestones to manage working capital.
• CEO Johnson indicated that the company is seeing a reduction in competitors as Foreign Entity of Concern compliance requirements impact the energy storage market.
• Management confirmed that the technical negotiation for the final SK On agreement is nearing completion, with the expectation of finalizing documents in the near term.

INDUSTRY GLOSSARY

• 45X: A federal manufacturing tax credit for domestic production of clean energy components.
• BESS: Battery Energy Storage System, a technology that stores energy using batteries for later use.
• C&I: Commercial and Industrial, referring to the market segment for business-scale energy applications.
• FEOC: Foreign Entity of Concern, a federal designation that affects eligibility for certain energy incentives based on supply chain origin.
• LFP: Lithium Iron Phosphate, a type of battery chemistry known for safety and long cycle life.
• NVWAVE: NeoVolta's modular residential energy storage product designed for domestic compliance.
• TPO: Third-Party Ownership, a financing model where a third party owns the energy system and provides it to the user through a lease or service agreement.

Full Conference Call Transcript

Operator: Good day, and welcome to the NeoVolta First Quarter 2027 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ardes Johnson, Chief Executive Officer. Please go ahead.

Henry Johnson: Thank you, operator, and good afternoon, everyone. Welcome to NeoVolta's first quarter fiscal 2027 earnings conference call. I'm Ardes Johnson, Chief Executive Officer of NeoVolta, and I'm joined today by our Chief Financial Officer, Jing Nealis. Before we begin, I would like to remind everyone that our remarks today will include forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from what we discussed today. Please refer to the safe harbor statements in today's earnings release as well as the risk factors included in our most recent annual report on our Form 10-K and other filings with the SEC.

We undertake no obligation to update forward-looking statements, except as required by law. The central message today is straightforward. NeoVolta has moved from construction to production. Now it's about execution of our manufacturing platforms against customer commitments. Demand continues to be strong across all verticals: Residential, C&I, and utility scale. This past quarter, we had a grand opening of our Georgia facility and it is now online and producing, and we are lining up several commercial opportunities supporting the ramp-up schedule. We formally launched our third-party ownership, TPO, finance platform for residential and C&I, along with our NVWAVE Residential product and are ramping up projects under that platform.

We announced our domestic battery supply agreement and strategy and began taking orders for C&I and utility scale products. Last quarter, we talked about the building blocks we put in place: The factory, the team, the product capabilities, and the strategic relationships. That's exactly what we've done. We will continue to build out the infrastructure to support our growth in line with ramping of our factory. So let me turn to the first quarter. Revenue was approximately $2.8 million. Residential rebound we expected after a difficult fourth quarter due to the slip in timing of our TPO launch. Jing will cover the financials in more detail momentarily. Residential remains an important part of our business.

With NVWAVE available and our third-party ownership financing platform now live, we have both the product and the financing our installer partners need to reach more customers. We continue to build on that momentum created last quarter and are looking to grow this quarter and into the future. Our TPO platform was designed to lower the upfront cost of ownership and support growth across residential and commercial applications. This combination of product availability plus financing access uniquely positions us to drive continued residential growth through fiscal 2027 and beyond. We announced our strategic supply of manufacturing collaboration with SK On, up to 18 gigawatt hours of domestic made cells to support pack and BESS manufacturing.

We also formalized a $53 million commercial commitment under our utility scale framework with Infinite Grid Capital, and we officially opened Pendergrass following a well-attended grand opening event. While it was an active quarter, we know we are just getting started. Let's spend a few minutes on the factory. Pendergrass is officially online and producing. The immediate focus now is building a consistent production rhythm, holding the line on quality, and getting products ready for customers as we ramp. Opening the facility was the accomplishment. Operating it well is the job now. That means having the materials, people, processes, and working capital in place to meet customer requirements.

It means staying disciplined as volume increases, and it means turning the commitments we've already secured into shipments and revenue. The ramp remains on track, and the recent agreements give us a stronger foundation for planning production and allocating capital. We are not building capacity on hope. We're building it around specific customer commitments. As we look ahead, our priorities are clear. First, execute the Pendergrass ramp without sacrificing quality or delivery discipline. Second, convert our committed business into shipments and revenue. Third, keep building the pipeline across commercial and utility scale markets while supporting the residential recovery. And fourth, align capital spending and working capital with the production schedule and customer commitments.

The commercial progress is real, but orders aren't the finish line. We still have to manufacture the product, deliver it, and get paid. That's where our attention is now. We entered calendar year 2027 with an operating factory, a recovering residential business, an initial commercial customer base, and meaningful contracted manufacturing activity behind our growth plans. We're proud of what the team has built. Now it's time to deliver on it. With that, I'll turn it over to Jing to walk through our financial results, balance sheet, and capital priorities.

Jing Nealis: Thank you, Ardes. For the quarter ended September 30, 2026, our revenue was $2.8 million compared with $13,000 in the previous quarter ended June 30, 2026. This sequential increase is the first financial result of the residential reset we described on our last call. Last quarter, our revenue was held back by the sharp slowdown in the traditional installer channel demand after changes in the federal incentive environment. We responded to the changing residential market by advancing the NVWAVE modular residential product design and setting up the TPO structure. This quarter, the revenue rebound came from our TPO platform.

We recognized revenue on our first batch of residential energy storage projects that reached substantial completion and sold to the third-party-owned platform supported by tax equity partners. The purpose of the TPO platform is to enable us to establish a business model and customer base to leverage our OBBB-compliant residential energy storage product, state and federal tax incentives while capturing higher revenue and margin at the project level. Gross margin was 36.5%, which reflects the higher value of fully installed project sales compared with a product sale-only business model. We expect residential volumes to continue building as we scale the TPO platform and deploy our next-generation residential energy storage product, NVWAVE.

GAAP net loss was $7.7 million or $0.13 loss per share compared with $11.7 million or $0.24 loss per share in the previous quarter. Adjusted EBITDA was negative $5.5 million compared with negative $8 million in the previous quarter. As a reminder, we use adjusted EBITDA as a supplemental non-GAAP measure as we believe it is useful to help investors evaluate our operating performance across periods by excluding items such as interest, taxes, depreciation and amortization, stock-based compensation, and certain nonoperating items. A full reconciliation to the most directly comparable GAAP measure is included in today's earnings release.

Cash used in operating activities was $6.6 million in the quarter, which is in line with our expectation as we start production ramp at the Pendergrass, Georgia facility. Capital expenditures were $7.3 million, mainly for the production equipment and leasehold improvement at Pendergrass. Net property and equipment on our balance sheet nearly doubled during the quarter from $9.9 million at June 30 to $18 million at September 30. We ended the quarter with cash and cash equivalents of $26 million and restricted cash of $2.8 million; for total cash, restricted cash and cash equivalents of $28.8 million. That compares with $25.4 million at June 30.

As we previewed on our last call, in September, we closed a $20 million senior secured term loan with the potential for up to additional $10 million, subject to lender agreement. This facility is part of our capital formation strategy. Fiscal 2026 was funded primarily with equity. As our Pendergrass facility moves from commissioning into production and as we convert pipeline to orders, we expect to have more financing tools available, including customer prepayments, working capital, and asset-backed line of credit facilities alongside cash on hand and equity markets. Before I turn to our priorities, I want to highlight an administrative change. We're changing NeoVolta's fiscal year-end from June 30 to December 31, effective December 31, 2026.

Going forward, our fiscal year will match the calendar year. This aligns our reporting with most of our industry peers with budgeting and procurement cycles of our C&I and utility scale customers. It also aligns our tax year with the calendar year, which positions us to be able to more efficiently monetize the 45X tax credits we expect to generate from our U.S. manufacturing facility since most tax credit buyers operate on a calendar tax year. It also simplifies comparison for our investors and shareholders as we hope to begin our high-growth journey. As a result, the 6 months from July 1 through December 31, 2026, will be a transition period.

We will report that period in the transition report on Form 10-K, which will include audited financial statements for the 6 months. Our next fiscal year will then run from January 1 to December 31, 2027. We will provide recast historical quarterly information to help investors compare periods on a calendar year basis. As we look ahead, our strategy and focus remain unchanged. We are committed to deliver energy storage products to residential, C&I, and utility scale markets. We are continuing to execute against our production ramp road map. We're well positioned to fulfill customer demand that we expect to generate as we move into 2027. We continue to see strong momentum in customer engagements.

Our priority remains moving these engagements from pipeline to committed backlog to shipments. To sum up, the first quarter showed a clear sequential improvement. Revenue recovered with the launch of the TPO platform. Our net loss and adjusted EBITDA both improved from the previous quarter, and we increased our liquidity. Our spending is focused on bringing Pendergrass into production to support the revenue growth in the coming year. We will continue to weight cost of capital, shareholder dilution, financing flexibility, and execution certainty when we choose how to fund our rapid growth. With that, I will turn the call back to the operator to open up for questions.

Operator: [Operator Instructions] Your first question comes from Sean Milligan from Needham & Company.

Sean Milligan: I guess the press release mentioned a $116 million master purchase agreement for products with deliveries this year. Just is that incremental to the IGC, the $53 million IGC award you had too? Just trying to understand like where the current backlog is for this year now for the plant.

Henry Johnson: Yes. Thanks, Sean, for that question. That is backlog that will be in calendar year, beginning calendar year 2027. So we just received that. We just closed that essentially today. And it's a big opportunity for us, and we are going to start delivering on that in the beginning -- in Q1 calendar year 2027. So just we're aligned. That's our goal and so it's through '27, but it's actually, we're going to try to do as much of that in the first half as we can. The opportunity to pull that through to the first half of calendar year '27.

So it's a big step for us, a big growth, and it's brand new, and we weren't really able to talk about it in the pre-record, but here we are to discuss today, lock that -- we just got that locked in. So just so you know, it's not part of anything that we've had before. It's brand new.

Sean Milligan: So now you have that plus the IGC award, I guess, the IGC award still needs to convert to orders, but that...

Henry Johnson: Yes. That's what we've already got, right? And it's a commitment from them. It's going to be over a series of projects in 2027 as it gets deployed. But yes, that commitment was for one larger project with several POs within that project will come over a period of time in next year.

Sean Milligan: And you mentioned prepayments as potential financing vehicle for some of the cell purchases as you build inventory. I guess can you talk about the structure of the new award? Did that include any prepayments? If it didn't, like conversations you're having with additional customers around prepayments?

Henry Johnson: Yes. While we can't go into too much detail about the commercial side of it, you can imagine that for each project we're working on, particularly on the amount with the demand and the ability for us to service it here in the U.S., there are a series of prepayments or commitments over -- for the overall project, they get done. And yes, we're not only negotiating those with customers, but also utilizing these commitments to go for certain financing to support the raw materials and the growth of these projects as well as working with our vendors for favorable terms on supply as well. So we're doing those combinations.

But yes, our expectation is that we will get prepayments for products that we are delivering out of the Georgia facility, yes.

Sean Milligan: And then I know -- I think you originally were talking about maybe 10 systems or something like that between the end of September and the end of December. Can you talk us through what kind of the activities that are going on at the plant this quarter? Do you have cell inventory today? Are you starting to run cells? Kind of how many initial early systems do you expect to deliver?

Henry Johnson: Yes. We are -- the demand -- we procured enough material for the first 10 units. Some of that material is still in transit or hasn't arrived, but we expect it to be arriving. Our deliveries for that is not just dependent on our ability to produce, but also tied to when the customers need it. So the timing doesn't always align. Our goal is to try to get some units built. If you look there today, you'd see some units that are built now, still doing certain tests on them. It doesn't stop our production, our ability to produce. It does -- we've got to get through those final tests, and they're checking the box test, so to speak.

We get those final tests done, which are imminent, and that will give us the ability to then be able to ship. We plan on having the ability to even ship the units that we're going through on the test is our expectation. But we are pushing to have as many of those -- a few of those at least shipped this calendar year, the remaining of this calendar year to get that done. But we've got it lined out with who we'd be working with on those.

It's just -- it's going to come down to timing of when the customers actually want them and our ability to ship them as soon as we possibly can, but also based on their schedule as well.

Sean Milligan: And then one last one, if I can. On the SK On agreement, I think final -- like you've been pretty optimistic on having final docs before year-end.

Henry Johnson: Yes.

Sean Milligan: Is that still sort of the cadence that we're on for the SK -- for seeing final documents on SK On?

Henry Johnson: Yes. I would tell you that we're down to the very, very end of that, what I'd call negotiation, if you want to call it that. It's really more technical than anything else. And a lot of that's tied to the design of what the pipeline will be that we've talked about that will come online in the second half of next year. And both parties are very actively wanting to get the deal done, but we're also being very conscientious of making sure that we get everything done now versus having to go back into the contract and make changes on the technical side.

So the teams are working really hard on that to get it done and the expectation is imminent that we get that contract done. And so like I said, both parties, both sides are very active and have a desire to get it done. We knew that earnings announcement was coming today, and we're pushing very hard for that. And ultimately, we have a couple of big trade shows coming up, and we all want to be there as partners and have those conversations and be able to talk to customers as partners. But at the same time, we both recognize that we want to do it the right way.

But in terms of commercial and everything else, we're really aligned with them right now. It's more on the technical side. But expectation is we get it done in very short order. Yes.

Sean Milligan: And it's exciting to continue to watch this thing ramp up. It seems like the next quarter or 2 is going to bring a lot of news and results that we'll be able to see in the financials.

Henry Johnson: Yes, thank you, Sean, I appreciate it.

Operator: Your next question comes from Rob Brown from Lake Street Capital Markets.

Robert Brown: I just want to follow-up a little more on the kind of expected order cadence as you get into next year. As you look at your pipeline, how do you sort of think the order cadence plays out? Do you need to sort of get these tests and certifications done before you get orders? Or is it a matter of just kind of customer need and timing?

Henry Johnson: Yes. It's -- I wouldn't say that it's more aligned with the testing. What we're doing is nothing that our customers are unexpected. They realize what we're doing and they understand it. It's really going to come down to aligning with projects that are being done and how we can secure that with where their needs are. Some customers, again, when we talk about testing and other things, they will want to come in with some third-party folks to look at it. I wouldn't say that it's stopping any of our activities or opportunities.

We're, quite frankly, looking at with some of the stuff that we're getting lined up now to understanding what our ability to serve above and beyond our ramp schedule, which is -- hasn't changed and that expectation. So right now, it's more aligned with some of our customers and the timing of when they need product and when we're going to be able to deliver that product. Some of that is also aligned coming into the second half with some of the U.S. supply with the SK agreement that we have and the combination of those 2. But we expect to start getting that backlog as soon as possible, even going into the second half of next calendar year.

So we really feel that it's going to be more aligned with customers' needs and the timing for what they need the product and when they need the product. And we're working really diligently with those partners to try to make that aligned with our needs from a quarterly basis and our growth plans as well so that we build smartly and are stewards of cash flow in a way that makes sure that we are doing what we need to do from a financial perspective to keep the company moving in the right direction. But it is around customers' timing of demand and how we're working with them with some of their projects.

As you guys are probably well aware, our industry is one tied to projects that get caught up along the way very often in certain phases of the delivery status. But we're working with really tied in deals that are being done now and looking to get that executed in a timely manner. But we feel very good about the pipeline in and of itself. Along with that pipeline on the utility scale, which is the large DC blocks, we're also feeling very highly bullish on the C&I side, and we will be able to start delivering that product in the second quarter of next year out of the Georgia facility.

And we're lining up a lot of opportunities there for multiple units across different -- not only opportunities, but more the platform, some larger installers who are looking at larger MSA type agreements for multiple units. So both of those are kind of tying in, and we're aligning those with our production as well as our certifications. But it's around -- long story short, Rob, it's around customers' demand.

Robert Brown: And then just sort of following on SK On, is that -- the agreement you're discussing, is it on both sides of that agreement, both the supply and the production, sales side of it as well?

Henry Johnson: Right now, we've -- from the sales side from our capacity and what we're going to be taking from them, we pretty much locked that down. It is tied into the design of the pack, the pack design tools that we will be procuring and installing in the first half of next year for delivery in the second half of next year of product. But most of it is right now the technical aspects of not only the cell design, which is a little bit -- it's different than the existing cell right now. It's a little bit newer cell design and our pack design.

We're working really closely together on what that's going to look like and from the form, function, and features of those packs. So that's what we're securing that second half, which includes the pack portion that we've been talking about earlier on for SK. And as we've said, that product in and of itself back to SK is likely going to be a 2028 calendar year delivery is kind of what we've had planned all along. So the rush of what we're trying to do to get the signatures done don't really impact any of that. Nothing has been impacted by any delay in the signing of documents. We're all working really well together.

We're just making sure that we have everything aligned as we secure the agreement on both sides. But the sub agreement is done, and we are now moving on to the pack side.

Operator: Your next question comes from Ted Jackson from Northland Securities.

Edward Jackson: Jing and Ardes, congrats on a great quarter and the outlook looks fabulous as it always has. I wanted to start on the master purchase agreement. Is that -- is there full orders behind that? I mean is that actually, for all intents and purposes, backlog, that $116 million?

Henry Johnson: Yes. The way that I would articulate it is when we sign a master service agreement, there's tied in commitments and payments that need to be made so that even though it's secured in that sense, right? So we've secured that with reservation. And now we would really come down to getting POs, which are based on timing of when they need it. So they will be giving us POs and they have a little bit of time to come up with those decisions here in the next month or so.

And so then we will start getting POs, which will be tied to the actual deliveries of when they want to get that, which is going into the tail end of Q1 of next year, calendar year. So that's really what we do. But we consider that to be a committed master service agreement. And by -- what I say that is it's -- they've committed to that, they've committed to this, and they have time to put in POs, but they have put in -- they are committing to down payments to reserve that capacity.

Edward Jackson: And then how much of that is tied to tangible products, products - no, it's projects, projects that saying like you can look through and say, this is circle to go here. I mean is it that firm that there are actual projects that you know about?

Henry Johnson: Yes. We can't -- I can't go into too many details about what the use of those are going to be for them. But we do know that they're working with their customers, and we've seen the throughput of that conversation in those. So we understand what it looks like in terms of each amount and where it's going to be going. We have line of sight to that. But for us, it's more about delivering them the product and then they have an end-use customer that they're working with for final delivery. Yes.

Edward Jackson: Could you -- do you have any color or could you provide any commentary on the application? Is it kind of backing of solar? Is it data center kind of anything along those -- that kind of?

Henry Johnson: Yes. From what I'm seeing and what I can tell, is it's kind of a combination is what I would say at this point. There's some utility scale connections there, mostly is what I would say is to that. And yes, that's probably about as much detail I can give.

Edward Jackson: And then can you comment with regards to channel? I mean your main channel for this kind of stuff really would be kind of LONGi and PotisEdge. Is it fair to assume that this is coming through them? Or is it outside of that?

Henry Johnson: No, no. This is -- no, this is -- we're just totally separate, I mean, we'd be a more forthcoming, obviously, if we're working with those guys. But yes, this is a different channel than -- from them. At least we think about taking LONGi...

Edward Jackson: That makes it even more exciting.

Henry Johnson: I'm sorry say it again, Ted.

Edward Jackson: I said that makes it even more exciting because actually, I mean, it's like actually a little bit of an expansion. So I think that's kind of neat.

Henry Johnson: Yes, thank you.

Edward Jackson: And then my final topic that I'll get out of line. I wanted to talk about the TPO because you clearly are showing some enthusiasm, more enthusiasm with regards to the residential products and the growth prospects for it. I mean if you're able to generate this kind of revenue when you just kind of put that structure in place. How do we think about that business and how it rolls out for the remainder of this year and rolls into next?

Henry Johnson: Yes. On our side, we've kind of always been very bullish on all 3 of the verticals. The residential market took a real hit last year or the beginning of this calendar year in terms of the rules and the changing of the guard, and we had a redesign of our product and the launching of the NVWAVE, which gave us all the compliance that we needed from FEOC and gave us domestic content and those things that are needed in that third-party ownership model when everything transitioned. It took us a while to get there. We're very confident. It's a very strong market in terms of the desire for tax equity. It's a multibillion dollar market out there.

And we are capturing that -- some of that with our TPO. We're working with partners who obviously have the tax equity and who are bringing the money to the table. But we see a demand there, and we see a dropping off of many of the competitors as the FEOC compliance has kind of worked itself through the system. So we think with the combination of our compliant product and the application of our own TPO, we can kind of control our own destiny. And we look at it like it's almost a spigot that we can open up or close as much as needed, and we want to use that to support our overarching business.

Our primary focus, of course, is going to be the factory and what we're doing there. But this is also a very important play in what we're doing. And it ties -- the TPO is not going to just tie into residential, right? It's going to roll into the C&I market.

So we feel very strongly that it's going to support us as we start to establish our product as a beachhead for FEOC compliant American made, made here in America product that we're going to be able to utilize that TPO and work with some of those behind-the-meter projects that we are looking at and some of our work and our partnership historically with many others as a developer that they bring that to the table and they're bringing in projects. Those are things we're going to start working across the board with others as well and being able to deliver that product. But the residential piece, we think, can be a real growth engine for us.

We are always very conscientious of our need to be focused. And we feel right now, we can stay focused in all 3 of those verticals as we continue to grow out. And it can bring us near-term needs and success, but it could also -- we can continue to ramp that up. Like I said, we just kicked it off last quarter. And right now, what we're mastering and working through is the inner workings of a TPO on the financial project management side of the business. So we're working through that.

We could go a lot faster, I believe, but we feel like we want to do it in the most risk-averse way as possible by bringing value to the company and value to our shareholders. We want to make sure that when we open it up, that it is opened up and we don't get, as I say, too far ahead of our skis. So right now, we are controlling that somewhat on our side. But at the same time, we're always looking at how we grow that and how we pivot that as we move into next year when we have the product that we can use the TPO for on the C&I side coming out.

So I would say more things to come there. We could probably, in the next few months, really have some detailed indication of where the residential business is going to go. But I definitely feel that it's going to be growing over what you've seen so far coming out in this past quarter.

Operator: Your next question comes from Steve Ferazani from Sidoti.

Steve Ferazani: Thanks so much for all the commentary on what was obviously a nice bounce back quarter on the resi side. Ardes, I do want to talk about the numbers you reported in the quarter because, certainly, I think it was stronger than most of us were expecting, and congratulations for that. Was there any pent-up demand as you got the TPO started that maybe boosted this number, is the first part? The second part would be related to market education around the benefits of NVWAVE and how much progress you have made there? And throw in one other piece, sorry, the margins. Is this really the starting point of what you think are reasonable margins with this project-based approach?

And as you ramp up volume, that can improve from here? Is that a reasonable way of thinking of it?

Henry Johnson: Yes. Yes. So thanks for the questions. And the way that I would look at it is, was there pent-up demand? Well, I can tell you this. We definitely felt internally that we had gotten to a place last quarter to have some form of revenue. There was a slight delay in the TPO in terms of making sure we're aligned from an auditing perspective, and it did cause a delay. And unfortunately, it showed up pretty sharply in the results. However, that being said, I wouldn't say that we took 2 quarters of demand and put it into 1 quarter this quarter per se.

I think for us, it's really more of how we throttle the growth of that right now. And the good news for us is we're doing this a little bit differently. We're a manufacturer, and we're also having the TPO. It's fairly rare in our industry, either one or the other. And the fact that we are a manufacturer and we are going to start deploying our new product into that, I think that it really is up to us to control that space. But we get the project level margins that you've seen there.

There's also some product margin inside of that, that's not necessarily reflective in some of that, but can help us grab portions of that as well. But at the same time, in terms of the growth of it, I think for us, that was just the beginning. If you really go back and look at that quarter, that was -- it was really back-end loaded into the last 6 weeks of that quarter with the projects. I think for us, now that we've got some rhythm and moving forward, we expect to have a decent clip of growth.

But we're controlling that growth in the sense that we're going to limit ourselves to certain known, what I'd call friendly installers and partners that we're working with that ensure us to do the right quality way that we can do it to control that a little bit. We're not just opening it up to the broad industry at this time. It's really supporting us in developing and launching and delivering on the NVWAVE as we go forward. And so that's something that we're beginning to do now, and we'll continue to do that and, hopefully, it will support that.

And in terms of getting that out in the marketplace, the good news about this is in the residential industry, most of the time, people go invest and develop a product. They spend tens of millions of dollars in marketing that product and then they try to get that product, get some engagement in there. With the TPO, we have set engagement that we can control, right? So we control and created that engagement because our installer partners, they need the finance platform. And inside that finance platform, we have the wave ready to go and start delivering it as we are right now, that we will control what they can use to install. It will be our product, right?

It will be our product as we grow that. And so those things will be very aligned in that sense. But at the same time, we will continue to market our product out there into the channel to the distribution networks out there and to other installers and, ultimately, other third-party ownership platforms that are out there. There are others out there that have TPO platforms, and we like our product on those platforms, and we think that we can get those. Those generally take a long time to get on, and it takes a lot of work to get on.

And so that's why we made the investment in our own TPO and so that we can do that in a way that allows us to launch our product, not have to spend that tens of millions of dollars of marketing, right, to get our product out there and engaged and then also bring the demand and desire for other TPOs because once they see it working on our own, they're definitely going to pick up the phone and have a conversation with the client. This has been my experience to date. So yes, that's really the driver. Yes.

Steve Ferazani: Great start with it. If I could switch over to Pendergrass. It sounds like you're derisking some of the issues that could run into -- you could run into as you get into this production ramp, which sounds like you're ready to go here, but I'm thinking about derisking, one, the financial side. And then two, the supply chain side. If you could address that. It sounds like you're managing prepayments. It seems like as you build up working capital, it opens up other financing avenues. It sounds like you're on top of that.

But you can just address your comfort level, both on the supply chain and the financing side, nothing that's going to hold you back from getting the ramp that you may have in place as these POs start coming through.

Jing Nealis: I can probably -- I'll address the financing side first. Yes. So on the financing side, as you can see from the last few quarters, I joined 6 months ago, I think we're building up a stronger liquidity for sure, and the JV funding is no longer an issue. At this point, I think the funding requirement is really to fund the growth, right? And then we are in active conversations on the supply chain side from a payment term perspective. And then when we take orders from our customers, like the one we just signed, they are usually a capacity reservation fee and then down payment and payment milestones.

What we're trying to do is to try to tie that as much as possible to our payables to our suppliers and any gap will be working capital requirements, and we're working actively on line of credits and have a few term sheets we're evaluating. And then with cash in hand, prepayment line of credit and, of course, the capital market as well, I think we're very well positioned to fund our growth in the coming year.

Steve Ferazani: And then just in terms of the supply chain in terms of meeting your needs with cells and equipment, given the ramp and knowing the demand for some of these pieces, where you are in terms of getting everything you need timed towards the POs and making sure you can be timely in completing any of these projects?

Jing Nealis: Yes. I think we're well positioned for any factory, right? Managing the supply chain lead time with different suppliers and what we make the parts. There are many, many parts. So we know exactly where we're going to order in from and who has the longest lead time. That's why we've spent some working capital in the current and last quarter to procure certain longer lead time items to make sure that we have enough to procure -- to make the initial units.

And with the 2027 orders, and we will, of course, as part of the process, look into longer lead time versus shorter lead time, and that's all part of the factory planning process that we're building up the capability of.

Operator: This does conclude our question-and-answer session. I'd now like to turn the conference back over to Ardes for any closing remarks.

Henry Johnson: Okay. Yes. Thank you very much. And I really appreciate the questions and everyone being on the call today. So I'll say, we've spent the past year building this platform, right? We talked about this before, the facility, the team, the products, and strategic relationships that we're starting to build out, and we talked about this. And our focus is now on executing against that and all the investment that's been made in us and these customer commitments that we're securing, it's about execution, right? The recent agreements that we have a more defined base of business heading into calendar year '27.

We talked about the residential side recovering and establishing those initial commercial industrial base of customers on the C&I side. These are real steps forward. Commercial commitments, as we all know, are only part of the work. We still have to manufacture the product, meet our customers' requirements, deliver on schedule and convert all of that to revenue, and ultimately cash flow. And that's how we intend to measure our progress as we move forward. And as we grow, we'll stay disciplined about production. We're going to stay disciplined about working capital and the investments that we make to support our customers' demand.

We see substantial opportunity here in the U.S., for U.S.-made energy storage, and our priority is to execute well on that and what's in front of us. I want to thank our employees again and our customers and our partners for all their support and our shareholders, of course, for their continued confidence in NeoVolta. And with that, operator, I'll turn it back over to you. Thank you very much.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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