NeoVolta Inc. ($NEOV)

Greetings, and welcome to NeoVolta Third Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ardes Johnson. Thank you. You may begin.

Thank you, operator. and good morning, everyone. Welcome to NeoVolta's Third Quarter Fiscal 2026 Earnings Call. I'm Ardes Johnson, Chief Executive Officer, and I'm joined today by our Chief Financial Officer, Steve Bond. 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 a number of risks and uncertainties that could cause actual results to differ materially from what we discuss today. For more information, please refer our full safe harbor statement on Slide 2 of our investor presentation as well as the risk factors described in our Form 10-K for the year ended June 30, 2025, and our Form 10-Q for the quarter ending March 31, 2026, filed with the SEC. We do not undertake any obligation to update these forward-looking statements, except as required by law. With that, let me turn to the quarter. On our last earnings call in February, we spent a significant amount of time walking investors through our strategy and vision. The transformation of NeoVolta from a residential-focused storage provider into a vertically integrated energy solutions platform spanning residential, C&I and utility scale markets. We laid out the road map in detail. We explained why we believe this is the right moment to build this platform and why NeoVolta is uniquely positioned to capture the opportunity. This quarter, the story shifts from vision to execution, and I'm pleased to report that the progress has been real and meaningful across every dimension of our platform. Before I walk through that progress, I want to address a leadership announcement we made this week alongside our earnings release. We have appointed Jane [indiscernible] as NeoVolta's new Chief Financial Officer, effective May 18. Jane brings more than 20 years of financial leadership experience with deep expertise in the energy transition, technology and manufacturing sectors. Most recently, she served as the CFO of [ SES AI ] Corporation, where she led the company through a period of significant information in growth, raising substantial capital, expanding operations and establishing multiple revenue-generating business units. Jean joins at exactly the right moment. We are ramping a domestic manufacturing platform, expanding commercial operations across multiple verticals and pursuing 1 of the most significant growth opportunities in the U.S. clean energy sector. Her experience navigating this complexity is precisely what the phase of NeoVolta's growth requires. I want to take a moment to recognize Steve Bond. Steve has been a cornerstone of NeoVolta since the beginning as Co-Founder and CFO, he helped build the financial foundation that has made everything we are doing today possible, and how grateful for his contributions. Steve is not going anywhere. He is stepping into a critical new role as Executive Vice President and President of NeoVolta Power LLC, where he will lead our Georgia manufacturing facility through the production ramp and into mass output. Getting that plant to commercial production on time is mission-critical for NeoVolta, and there's no one I would rather have running it. Steve, thank you for everything, and I know the best is still ahead. Now let me turn to the key highlights from the quarter and our progress sets. Let me start where I believe the focus belongs, the Georgia facility. Our manufactured joint venture, NeoVolta Power LLC is on track. This is what the investment community has been watching closely, and I want to be direct about where we stand. I am pleased to report that our manufacturing equipment has started to arrive on site at our Georgia facility. Installation is targeted for June and we expect initial production to begin ramping in Q3 of this calendar year. I want to put this into perspective. We formed this joint venture in January of this year. In less than 6 months, we have secured a facility, finalized our production design, accepted equipment and are weeks away from installing that equipment and commissioning our production line. That is a significant pace of execution. I also want to remind investors is something that is increasingly important in this market. NeoVolta Power being structured to be fully FEOC-compliant. We are one of only a handful of best suppliers in the United States that could offer [ FEOC-compliant ], domestically assembled systems that qualify for the IRS Section 45x, advanced manufacturing production credits and Section 48E, investment tax credits, including potential [indiscernible] treatment. As best demand continues to ramp and as procurement decisions increasingly turn on incentive qualification and supply chain compliance, this is a meaningful and durable competitive advantage. In April, we further strengthened that platform by increasing our ownership interest in the Volta Power from 60% to 80% and and [indiscernible] new cash cost while beginning full Board and operational control. At the same time, we expanded our commercial agreement with PotisEdge to support business development, customer engagement as we approach production. These are deliberate steps to deepen our economic stake and commercial reach as we mirror first output. Turning to our C&I platform. This quarter marked a defining commercial milestone. In March, we received [indiscernible] purchase order from Luminia LLC. The initial order valued at approximately $1.9 million for 40 units of our [ NBGIN, 125K61 ]commercial industrial battery storage system is the first concrete transaction under the strategic supply collaboration framework we announced in December of 2025. Luminia is 1 of the most active C&I synergy storage developers in the United States, with contracted demand for approximately 160-megawatt hours and additional pipeline of approximately 640-megawatt hours. This initial purchase order is the first step in what we expect to be a sustained, multiyear commercial relationship, representing approximately $39 million in potential equipment revenue under the broader collaboration framework. On the utility scale front, we are in active discussions with prospective customers and partners as we build our commercial pipeline in this market. We are encouraged by the early engagement we are seeing and believe our integrated platform and domestic manufacturing capabilities position us well to compete. We will provide updates as this business develops further. Residential remains our foundation. We continue to expand our national installer and distributor network during the quarter with activity across Texas, Puerto Rico and additional new markets. Demand in the quarter was affected by the expiration of the federal solar investment tax credit for individuals at the end of December 2025, which created a near-term headwind across the residential solar and storage market. We believe this is a temporary dynamic. The underlying drivers of residential storage adoption, resiliency, energy independence and cost savings remain firmly placed. We continue to prepare for the commercial launch of NVWave module platform, which we expect to improve the per system economics and install our throughput as it ramps into the market. In parallel, we are advancing a third-party ownership or TPO financing model for the residential market in collaboration with Luminia. This structure will enable homeowners to deploy NVWave systems with little to no upfront cost, lowering barriers to adoption and generate recurring revenue streams for NeoVolta over time. We will share further updates on this initiative as it develops. Before I turn it over to Steve, I want to highlight an important external validation of the platform we are building. In April, NeoVolta was named the 2026 Energy Storage Company of the Year by [ CleanTech Breakthrough ], selected from thousands of nominations across more than 16 countries. This recognition reflects the progress we have made in building a differentiated product portfolio and expanding our market reach. and reinforces what we hear directly from our channel partners and customers. With that, I will turn the call over to Steve to review the financial results. Steve?

Thanks, Ardes, and good morning, everyone. In an honor to help build NeoVolta from round up and serve as CFO through this transformational period. I'm excited about what lies ahead in my new role leading NeoVolta Power, and I have full confidence in [indiscernible] and in this team. Now let me turn to the numbers. I'd like to flag at the outset that this is NeoVolta's first quarter reporting on a fully consolidated basis, which includes the financial results of NeoVolta Power LLC our manufacturing joint venture in which we held the 60% controlling interest during the quarter and subsequently increased to 80% in April. As a result, our income statement and balance sheet for the quarter ended March 31, 2026, reflect the consolidated operations of both the parent company and NeoVolta Power, with the minority interest reflected separately in stockholders' equity. Investors should keep this context in mind when reviewing current results relative to prior periods, which did not include NeoVolta Power. Turning to the results. For the 3 months ended March 31, 2026, revenue was approximately $2 million, compared to approximately $2 million in the same period last year. Revenue in the quarter was impacted by the expiration of the Federal Solar Investment Tax Credit for individuals at the end of December 2025, which created a market-wide slowdown in residential solar and storage demand. While this was a near-term headwind, our 9-month revenue of $13.3 million was up approximately 262% year-over-year from $3.7 million and reflects the strong underlying growth trajectory of the business. Gross profit for the quarter was approximately $0.9 million, representing a gross margin of approximately 46%, compared to gross profit of approximately $500,000 and gross margin of approximately 26% in Q3 of last year. The improvement reflects a higher margin product mix during the quarter. I want to note for transparency that the reported Q3 margin include the correcting entry related to inventory cost recognition in the prior quarter. Excluding that adjustment, [indiscernible] gross margin was approximately 36%. The Total operating expenses for the quarter were approximately $3.6 million, compared to approximately $1.9 million in Q3 of last year. The increase reflects continued investment in commercial and operational infrastructure, R&D associated with the NVWave platform and NeoVolta Power operating expenses as a manufacturing facility advances towards production. These are deliberate investments in our growth platform. Net loss for the quarter was $3 million or $0.08 a share compared to a net loss of $1.4 million or $0.04 a share in Q3 of last year. Turning to the balance sheet. As of March 31, 26, we had cash of approximately $11.5 million and net working capital of approximately $19.5 million. This represents a meaningful improvement from December 31, 2025, when we had cash of approximately $212,000 and working capital of approximately $3.4 million. reflecting the equity financing transactions completed during the quarter. On the joint venture funding, our Phase 2 capital contribution of $8 million is targeted for May 31. We are actively evaluating a range of funding options, including equity, debt and project financing to support this milestone and our ongoing growth capital requirements. In April, we also established a revolving credit facility of up to $3 million with our depository bank to provide additional near-term liquidity and flexibility. With approximately $11.5 million in cash and $19.5 million in net working capital as of March 31 and with the multiple financing options under active evaluation, we believe we have the financial stability to fund our near-term obligations and support the bids as we approach this major inflection point. With that, I will turn it back to Ard for closing remarks before we open the line for questions.

Thank you, Steve. Let me close with a brief summary of where NeoVolta stands and why we are excited about the second half of 2026. The transformation we described on our last call is translating into real tangible progress. We received our first C&I purchase order from Luminia. We continue to have a robust pipeline for utility scale. We increased our ownership in NeoVolta Power to 80%. We were recognized as a 2026 Energy Storage Company of the Year and our Georgia manufacturing facility is on track, with equipment starting to arrive on site installation in June and production ramp beginning in Q3 of this year. We are approaching an inflection point for this company. when that facility goes into production, NeoVolta transforms from a platform under construction into an operational vertically integrated energy solutions provider with domestic manufacturing capacity and the ability to compete at scale across all 3 of our market verticals. And I want to close on this point. We are one of only a handful of companies in the United States that we'll be able to offer [indiscernible] compliant domestically assembled best products qualified for IRA manufacturing and investment tax credits. That distinction is becoming a decisive factor of procurement decisions across every customer segment we serve. We built this platform with that reality in mind. I want to thank our employees partners and shareholders for their continued support. And I want to again welcome Jane [indiscernible] to the NeoVolta team. We are ready for this next chapter. Steve and I are happy to take your questions. Operator, please open the line for Q&A.

[Operator Instructions] Our first question comes from Steve Ferazani with Sidoti & Company.

Ardes, Steve, I know you got a lot going on. So congratulations on reaching certain milestones. But Ardes, Steve, I mean I think the big question here is the pushout on the Phase 2 capital contribution. You had $11.5 million on the books in cash at the end of March, what's the challenges there in meeting these 2 capital contribution. And then behind that Phase 3 is supposed to be a commissioning, which isn't that far off. What's your ability in hitting those? And you're saying targeted May 31. And if you can just provide some general color, I think it's the big question.

Yes. Steve, thanks for the question. It's a great one. The way that articulated, it wasn't necessarily a push out. We were working with our team and the joint venture, and we were coming to closure on some documents that was actually what was a little bit pushed out, and we've gotten into a blackout period, and we were working with them and said, "Hey, guys, can we just move it from April to May". It makes it very a lot simpler for us our goal right now, we have a lot of options that we're looking at, a lot of different ways of funding not only the next tranche, but getting all the complete funding through, and we should have that in the coming days. We're working with people on that, and we feel very confident that we're going to be able to reach that. But it wasn't that we weren't able to raise the money. It was more of a grid between us and our joint venture partner, PotisEdge and LONGi because those dates, I don't want to say they were arbitrary, but they were put early into the negotiation process. And when we got into this, we said, hey, guys, this would be easier for us to push this out a month. They fully agreed with that, not a problem.

Got it. I think that's a really important point and very helpful. Thanks, Ardes for adding that color. In terms of the quarter, we knew it obviously going to be impacted by the temporary slowdown in residential solar. One pleasant surprise, I expected to see costs ramping up more out of the plant start and getting way ready for NVWave. How are you thinking about costs ahead of those 2 big steps?

Yes. Well, we're very conscientious on any cost right now in relation to getting ready and cash in the door. So we've been very -- we've had the ability to be very efficient when it comes to launching the NVWave, and not only the product now, but even the further step 2 and 3 of the products in the future associated with the NVWave. Our goal right now is to get that product launched and product delivered to customers by the end of the current quarter that we're in now. And we're working right now again as well with our partner, Luminia on a third-party ownership model that we hopefully to be able to get out there at some point, and we're looking at ways to help deploy that product, and we want to do it in the most efficient way possible. doing it that way will allow us to kind of have a better easier predictor to timing of needing the product to be shipped. So we're being very efficient on the front end on finalizing that development, but we're also being very efficient in how we spend money for raw materials as well.

Is it tough to be launching a product like this, which obviously is significantly transformational from your previous residential products in a tepid market, a temporarily tempered market?

Yes. I think as I was speaking to before, I think the finance models that are out there if you can get locked into that, I think it helps let you rise above the general market slowdown. And I think there's opportunity as well as just general demand in the -- the market has shifted with the loss of the individual investment tax credit for the homeowner. It shifted into this third-party ownership model with the financing. Our goal is to lock into that, and we've had a very strong interaction with customers saying, "Hey, if you can bring both of those, we think we can accelerate our deployment actually". So we feel very good about that piece, and there will be some good news in the coming days, we think on that piece. But for us, I think the understanding that those 2 are [indiscernible] linked. We want to make sure that we engage that way, so we don't get caught in a catch and see in terms of the cash market as they call it in our industry, the cash market is definitely slowing. I do believe in my heart that it will recover itself, it's going to take a little bit more time on that side. But at the same time, we're not going to wait around for that. So we're actively engaged on that piece.

Got it. That's helpful. I get 1 more in. In terms of some color around the customer engagements you're currently having ahead of the plant launch in Georgia.

Yes. Yes. We're having historically speaking, there was opportunities with our partner, PotisEdge in the United States prior to the transformation to NeoVolta Power LLC. So we've been engaging with those clients working with our team members from PotisEdge on that. we've obviously engaged with LONGi and what they're doing on their side of the equation. So we've been having some very deep conversations when it comes to utility scale. We've had some natural opportunities come our way just from the announcements of the factory. So we're working with that. On the C&I side of the business, we've got some -- the industry itself is clamoring for a U.S.-made product. So we've had a lot of generation of opportunities. But a bigger -- even bigger piece of that equation is our partnership with Luminia. Luminia has a programmatic way to go to market and they've got tons of opportunities we talked about in the report that they've got several megawatt hours of pipeline as well as backlog that they're getting in right now. And we're working with them to do that. Those opportunities also will be benefit from a third-party ownership model as well, which we are again engaged with Luminia on that. So we feel very confident on the C&I piece and even more confident about the utility scale. We've got opportunities right now that we're looking at for reference projects, and we've got some internal numbers where we think we can hit this year, and we feel very confident that we'll move all that product that we've got in there.

Our next question comes from Sean Milligan with Needham & Company.

On the utility scale side, you hit on the funding and the demand piece. But can you talk a little bit about some of the other things maybe you have to do between now and first order, whether that's like getting some sign off on the ability to get the tax credits there. UL certification or just bankability of those products.

Yes. So from a UL certification, we're where we need to be, have full confidence that any changes there on the plant and whatnot in the product. The product is something that we're bringing over in and of itself. We're not changing too much of the design at this point. So that, we feel very confident in. From the other piece of it, when you're doing utility scale, what you look for is a few partners that are going to support you on some reference projects at the beginning. That's what we're working towards. But we know over the next coming months, that we're going to continue to have individual engineering reports. So we're going to have a lot of people in the factory looking at our QA QC and that development. And that's all on pace for us to kind of get towards the end of this year to lock in those long-term supply agreements going into next year. So what we're doing is we're working with the big -- the developers, the ones who have multi-gigawatt offtake requirements, and we're working with them on what we need to do to satisfy them, not only financially, but from a bankability perspective in the QA/QC. It's all part of the system, and I don't want to say the game, but it is part of the process. that has to happen. And we feel very confident right now that we've got not only that reference opportunity line up, a few of those, but also going into next year, what what it looks like from a projection on a month-by-month and quarterly basis of supplying product to fulfill at the minimum, the 2 gigawatt hours that we have.

Okay. That's great. And then on cell supply, can you just remind us like what you're eyeing for cell supply more specifically for next year? Like do you have access, tough [indiscernible] are you looking in the U.S.? Like kind of what's your outlook there?

Yes. It's a combination, right? Obviously, we know going into next year, there's going to be a need to change from the Chinese cell capacity. But we're looking at non-Chinese options in places like Southeast Asia to support us than our FEOC-compliant. And we're starting to have and we not even started, we have been having conversations with a few of the U.S. suppliers, some that are just U.S. supply of the product that we need and some of are doing some conversion processes over from EV to stationary storage to look at certain -- meeting certain requirements in the pipeline. We look at it as -- and as everyone is starting to look at as the new IRS guidelines came out this year, or the beginning guidelines looking at a mix of FEOC and domestic content capable product to meet only the FEOC requirements, but the domestic content requirements.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Ardes Johnson for brief closing comments.

Thank you. I would like to say at the end of the day that we were very excited about where we're going. Again, I want to thank Steve for all that he's done for us and all that we will do for us. It's been very important for us at this point to transition ourselves into a company that we can only imagine 1.5 years ago. And at this time, I would just like to say I'm excited about where we're at and where we're going and looking forward to the coming quarters and what we're going to be coming into next year. Thank you, everyone.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.