Q1 2020 Earnings Call
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Good afternoon, welcome to Sunpower Corporation first quarter 2020 earnings call.
This time, all participants are any listen only mode. After the speaker presentation, there will be a question and answer session.
Good question during the session you will need to press star one in your telephone.
Please be advised that today's conference maybe recorded.
If you report any further assistance please press star zero.
I would now like to turn the call over to Mr., Bob Okunski, Vice President of Investor Relations that Sunpower Corporation. Thank you Sir you may begin.
Thank you would see I would like to welcome everyone to our first quarter 2020 earnings conference call on.
On the call today, we will start off with the strategic overview from Tom Werner CEO Sunpower.
Cool to provide an update on our S.P.S. business.
Followed by Jeff waters, CEO of SPG, and Maxion who'll discuss our international business.
I want to say, how our CFO will then review our first quarter 2020, <unk> financial results before turning the call back to Tom for guidance.
As a reminder, a replay of this call will be available later today on the Investor Relations page of our website.
During today's call we will make forward looking statements that are subject to various risks and uncertainties that are described in the safe Harbor slide today's presentation today's press release.
Our 2019 10-K, and our quarterly reports on form 10-Q.
She those documents for additional information regarding those factors that may affect these forward looking statements.
To enhance this call. We have also posted instead of Powerpoint slides, which will reference during this call on the events and presentations page of our Investor Relations website.
Please note we have provided the number of additional data slides in the appendix of our presentation deck.
And the same location, we have also posted a supplemental data sheet detailing some of our other historical metrics.
Finally, I'd like to highlight that Maxion solar technologies is planned to Jose capital markets day prior to the close of the spin transaction and will we will provide details on the timing as we get closer to the event.
With that I would like to call turn the call over to Tom Werner CEO of Sunpower Tom.
Thanks, Bob Thank you for joining us.
This call we will provide an overview of our first quarter performance address how we are managing during the Kobe 19 disruptions and highlight why we are well positioned to emerge from the current environment the strong.
Precision.
Let's start with a recap of our first quarter performance. Please turn to slide three.
We executed well in Q line exceeding our guidance by posting positive EBITDA seasonably weak quarter or U.S. channels business continued to outperform its strength in all three segments residential new homes residential retrofits, Nick commercial dealer channel.
Nationally, we saw strong year on year shipment growth despite of the Cobi impact starting late in the quarter, we took rapid actually both internally and externally to manage our cost structure and ensure supply chain continuity tight unique.
I might have been destruction, we continue to invest in our industry, leading technologies, including next generation Maxion technology equinox storage and digital.
Finally, I want to reiterate that plane spinoff of backyards is expected to be completed by the end up to second quarter pending regulatory approval assigning a financial facilities.
Now I'd like to spend a few minutes highlighting the actions we've taken to address the current Colgate disruption.
Please turn to slide four.
First our primary focus during this pandemic is at stake in wellbeing of our employees, while working closely with our partners to continue to serve our customers. Some of our key actions include implementation.
Oh the work from home program for over 1500 employees, a rapid comprehensive transition to online sales residential business.
Continued investment in.
Industry, leading technology to position the company for future growth.
Finally, implementing actions to streamline our 2020 cash flow cost structure by up to $100 million with up to 500 million.
Yes available liquidity over the next 12 months.
I'd like to spend the balance of my time, explaining why you Sunpower is well positioned for success after the backend span.
Please turn to slide five for a review of Q1 performance in our Sps channels business.
Our channels business delivered a very strong quarter.
Primarily driven by our us residential business stalls rose, 50% year over year.
Delivered strong gross margins and where do you see historically a seasonably.
Residential bookings bookings increased 10% year over year, our new homes backcourt expanded to greater than 45000 homes.
Our installed base now exceeds 2.5, Gigawatts 370000 customers.
Finally, we're confident we have sufficient tax equity project finance capability to meet our residential and commercial financing needs.
2020, including.
Our recently announced 1 billion dollar loan partnership with technology credit Union.
On slide six we outlined our leading position in the transition to online sales as well as our success digitizing the customer process from again.
We have been we've been investing to digital tools for years significantly ramped our investment in this area two years ago.
For a year ago, we began direct to customer online sales and refined it technology.
And process to improve close rates.
This headstart has positioned us well for the Kobin same debt right now.
As we were able to quickly training over 2000 members of our dealer network using our existing tools training procedures.
As a result, our channel it's been able to transition quickly comprehensive rates right interrelate online approach.
More than 95% Sunpower generated appointments are now conducted virtually subsequent installations quick with little or no customer contact.
Additionally, we recently rolled out a silly serum downing plus six months nice lease in lung programs to drive further demand you are online channels.
Our rapid transition to online sales was enabled by the Sunpower design studio application.
Last promoters to design solar systems on their own group in real time.
Since rolling this out in Q3 of last year, Sunpower customers, who have already completed more than 40000 designs.
Second our design studio reduces design turnaround times.
30 minutes 30 seconds, allowing homeowners in their virtual sales representatives to create and review a variety of solar designed options real time.
Finally, we recently launched.
Our my Sunpower Keeler portal.
Across all our channels at any point digital signatures on all documents necessary to complete system sale also we are working closely with local jurisdictions to accelerate remote site inspection and permitting as part of my Sunpower platform.
In summary, our investments in digital are driving lower customer acquisition cost.
Streamlined sales and installation process.
And providing our customers with the superior experience.
As we look forward to the current quarter, our digital platform is playing a key role at our efforts to manage the business through the current destruction.
While we expect Q2 to be challenging we encourage it demand trend stabilize by mid April you have shown improvement over last few weeks.
I'd now like to review some key elements of our strong competitive position us residential small commercial channel and new homes markets. Please turn to slide seven.
First our unmatched residential and commercial dealer network.
Our dealer network now exceeds 500 partners nationwide, including 35 cents curve crane, good branded aster dealers.
Our master dealers accounted for a record 50% of our revenue into first quarter.
We added three new Master dealer partners during the quarter you expect this group of oil partners will continue to drive a large portion of our sales.
We also continued to see significant expansion of our unique small commercial dealer network, where Q1 20 volume points to place the same quarter last year.
Next let me review our continued leadership in the new homes market.
Our market share in the new homes.
Market remains above 50% with strong growth driven by the California, new homes mandate.
Or contracted new homes backlog exceeds 150 to 80 megawatts.
This leadership decision spill time sales to 18 at the top 20, California Homebuilders.
We have over 600 active communities in development right now.
This past quarter reached a major milestone kb homes, where we installed our 10000 10000 system.
Despite the current disruption.
New home installations are proceeding we expect to top 50000 cumulative installations by the end of second quarter.
To further early in this market we are developing at a rate new products, specifically designed for the new homes market. It we will be announcing shorten.
Please turn to slide eight.
Well, our where I'll provide an update on our equinox storage solution.
You, perhaps storage its next major evolution of our equinox energy platform.
Giving homeowners more freedom from utility outages inexpensive peak electric rates with equinox homeowners can store energy for full or partial backups during blackouts and reduce daily peak electricity consumption.
Most importantly, equinox storage is the only fully integrated residential systems design engineer warranted by a single company.
Equinox storage also offers residential customers significant advantages compared to our competition, including longer lifetime fewer boxes on the wall modular footprint superior warranty.
Equinox stories is expected to have a significant incremental impact on our residential business beginning the second half of this year.
Customer demand for our Solutioning very high.
Typically in California.
We are beginning salesmen installations through our direct channel this quarter will expand to our dealer network early in Q3.
Finally, I'd like to briefly cover our commercial direct business on slide nine.
When you took a major restructuring of our commercial direct business starting in the second half of last year, we're beginning to see the benefits as the business outperformed our forecast first quarter.
We expect sequential improvement through Twentytwenty.
For the quarter, we achieved a number of important milestones.
Business was close to breakeven EBITDA basis, we expect profitability in the second half of the year.
We significantly improved the overall cost structure the patients.
We continue to add to our backlog now have more than 90% for our forecasted twentytwenty business currently contracted.
We are on track to achieve our target model of margins in excess of 50% and are driving to positive cash flow by the ended the year.
Demand for our helix storage product remains tight with a catch rates in excess of 30%.
We expect that this program will drive material adoption storage with new customers.
Across our one and across our 1.5 gigawatt installed base.
Finally, we are seeing minimal covidien Packer commercial business given the longer lead times, just essential services status with local authorities.
With that I'd like to turn the call over to Jeff waters, CEO SPT future CEO Maxemail Jeff.
Thanks, Tom Let me start with a quick review of Sunpower technologies first quarter performance. Please turn to slide 10.
SPT delivered strong year on year growth with over Q overall, Q1 shipment volume up close to 30% versus the previous year, and then increasing mix a P series products.
Overall revenues were up 9% driven primarily by DG market revenue, which increased 28% in comprised over 70% of total Q1 revenue.
This growth speak the long term fundamentals of our business as of the strength of our more than 1000 Global channel partners.
Our Q1 performance felt the impact of books supply and demand reductions caused by cobot 19 disruption in our core markets beginning in March.
I do with all of our factories that we ended the quarter as a result.
I'd like to now elaborate on the current status of our global manufacturing fleet. Please turn to slide 11.
With the exception of our Hsp the P series joint venture, China, which is currently operating at full capacity all of our factories were warm idle for the majority of April.
Just this week, we have resumed production in our factories and Malaysia brands in Oregon, and we expect that we will be resuming production in our remaining factories in the Philippines and Mexico. This month.
We're working closely with local governments on the safe reopening of our factories and based on current projections have sufficient inventory on hand to meet the vast majority of our customer commitments for the second quarter.
Now let me cover capacity expansion plans, please turn to slide 12.
2019 shipments totaled approximately 2.5 gigawatt split evenly between IB CMP Slurries technology.
Looking forward. These chart show plant capacity expansion through 2021 compared to our 2019 capacity.
Let's start on left hand side of the paid with our IVC technology.
Capacity will increase only slightly we will be converting our 10 year old next to technology that three to our latest Max five technology, increasing the supply of are highest margin product by a factor for.
Funding for Tvs as part of the Maxion source spin off transaction will allow conversion of Q further lines and we expect to have Formax five lines are in place by the end of 2021 with the capacity of around one gigawatt.
The chart on the right shows our plant expansion of our P series technology through our HF PV JV.
This expansion will more than double P series production to five gigawatts with our supply allocation from the JV increasing to over three gigawatt in 2021.
We're working closely with Tcs on a highly automated mako designed to handle the new eight inch GE 12 wafer format.
This technology will enable us to produce industry, leading 500 600, what panels targeted at the global power plant work.
Finally, the capacity expansion shown on this slide will be achieved with a total capex expenditure that has a small fraction of the investment in our legacy Thats.
We have dramatically improved our historical capital productivity. The a combination of process innovation reuse of existing Fabs and use of capital light manufacturing partnership model for our P series technology.
Looking forward, let me articulate some of Maxion key objectives post spin.
Turning to slide 13.
First we believe that we are well positioned for rapid growth once we exited the current industry disruption.
We serve Bart we serve large and growing markets with differentiated products that we believe will allow us to gain share those IEG and large scale applications.
The infusion of liquidity associated with our spin off will provide capital to upgrade our factory, Malaysia higher value technology. We will also benefit from the capital light multi gigawatt expansion of our Hs PV JV.
Second we remain committed to expanding margins starting with the transformation of fat three from our legacy Max capacity to our new lower cost higher efficiency Max biotechnology.
We also plan to leverage our global go to market channels to expand our product offering while extending our dealer channel footprint into new markets.
Finally, we believe that risk mitigation is a key attribute industry as dynamic of solar power.
Going up of Maxion solar will allow us to accelerate our technology development and deployment cadence, maintaining our historical technology differentiation versus our competition.
We believe that the diversification of our customer base, both geographically and by market helps insulate us from country or application specific policy driven disruptions.
With our strong base of global investors of partners provide deep industry insight supply chain visibility and global demand market access.
With that I'd like turn the call over 200, PCL CFO of Sunpower.
Thanks, Jeff I'd now like to discuss the financial results for the quarter these tend to cycle.
Overall, we were pleased with our financial performance for the quarter as we exceeded our EBITDA guidance added toward backlog and further de levered balance sheet. He believes that a differentiated business model industry, leading technology and strong balance sheet BB competitive advantage independent environment and for when conditions are Duncan normal.
Additionally, we have put into case, a number of cash cost initiatives to manage the business due to the disruption while continuing to invest in technology that increases that often start customers and execution efficiencies. Finally, we continue to focus on improving transparency, adding incremental data metrics on key value drivers.
Business into will be funds from JV.
Moving onto the specifics of the quarter non-GAAP revenue rose more than 10% versus Q1 19, as we benefited from strong execution in both segments in Sps revenue rose year over year with particular strength in our China business, it CNNX, improving and making significant progress on.
Initiatives, we expect cninety be more resilient independent assumption given the longer project technique times the value proposition for customers as good as the economics of storage, but SPP, we shipped approximately 580 megawatts up 29% year on year consolidated non-GAAP gross margin.
It was 13% in Sps gross margin was up year over year, given by excellent performance. Congrats again should intend to execution NFC and add to that business, we expect CNN AD business to the Duncan profitability in the second Hostopia.
SPP gross margin was in line with forecasts and up year over year on solid BG demand and a better mix.
Non-GAAP opex $69 million for the quarter as we continued to invest in a next generation technology. We have taken a number of steps get lower expenses and expect double digit degrees in 2020 Opex versus 29 Pete.
Capex for the quarter was $6 million consistent to the Mexican five rapid fab feet with our second line now in production post split we expected new Sunpower, good had minimal capital needs and Maxine solar Capex, maybe more than covered by available liquidity and enhanced capital efficiency adjusted EBITDA.
With $9 million and ahead of guidance I would now like to discuss key financial highlights of the quarter on slide deck.
We exceeded our margin and EBITDA guidance for the quarter showcasing the strength of our underlying businesses in Sps. He benefited from strong execution in the China's business as it gets financial installed rose, 20% year over year, it fever megawatts more than doubling new loan installs also too.
The quarter by bookings doubled we remain confident in our going up second half profitability, but a CNHTC business given its first quarter execution and a significant portion of our 20 can be forecast is in backlog at the end of the quarter. Finally exiting first quarter you believed that the assumption back equity and project financing.
Capacity to meet at 2020 need for SPD you would also be used up performance. Despite the leadcore the impact of global shutdowns, which hurt international demand and fab utilization that being said you've been able to mitigate the situation given our strong backlog and ability to meet the needs of customers to effect.
Its supply chain actions and existing inventory finally in response to the cobot 19 disruption, we instituted a number of initiative that impute SAGD introductions, reducing discretionary spending and rationalizing of Capex as a result of these programs. We expect we realized cash and cost savings of 200 million.
Got it but 2020.
That's good news also hey, with the with the solar <unk> storage alone financing deal how many megawatts of loan or at least financing do you have and also just in general are you seeing any kind of changing customer preference for loans versus leases in the crisis, Yeah should also keywords.
Norm.
I you Michael why we we've always.
A lot our customers to choose and.
Direct them in one direction to the extent that we have a program like she wrote down six months on some power of course that changes <unk> <unk> <unk> and that's happened.
Place for.
A short time, a dorm you want to come expert artifacts.
Oh, Yeah have you to Michael Sars. The mixed goes I think Tom <unk> right commentary, which is we we pride ourselves so giving the customers that option. We certainly chose to make a introduction of a product with the zero.
Yeah, no peanuts for six months for bone loan at least because we anticipated customers wouldn't want to conserve cash more than usual, but yeah. We frankly have always had a a fairly strong contingent of cash you may not be quite as high but I think it'll still be strong and then we expect it to come back.
Like during the year.
From a standpoint of your first question was around the kind of how much capacity, we have I would say on the with the long deal. You know we have I would say virtually unlimited capacity between our existing partner and of course now or new partner I don't think we're gonna have any capacity issues for years on alone because we just add it to 1 billion dollar financed.
I don't know at least side, we have capacity well through two three and we're we're on our way too signing another extension of that.
<unk>. So we're not concerned about her ability to provide financing options to our customers and residential.
Hey, one more question about the batteries, maybe can you talk a little bit more about the secret sauce that you guys have in your battery systems that are.
Give them an advantage over other battery systems and then you know or are you do you have any plans to sell to third parties or this only going to be a exclusively done through the sunpower a dealer network.
Yeah, I like all she she <unk> normally experts.
We we we were different.
Because yeah, we are just nice.
The hardware or software ourselves so that's a strategic decisions you.
Do it ourselves.
Of course, because we pick the teachers that we're going to differentiate on their normal bounce off though.
Yeah, I think Tom I mean, I think that you know first and foremost one of the benefits of offering a complete solution as we can provide.
I the customers with a unified experience from the software experience to the monitoring to the storage hardware and we can make sure. It all works perfectly.
And very importantly that also means the customer gets a single warranty which covers the entire system. So you don't have if you have an issue there's.
No you know blaming other people are talking to talk to another supplier and that's been superpowers before it's before and will be called equinox and stores really make equinox storage really even stronger and I think it's capability. We think we have a added some unique capabilities such that we can do the solution.
Only with two boxes on the wall and then we emphasize resiliency by the.
[laughter] building systems in such a way and that it came back up more of the home ability to any other solution on the market. So both peak power on and then the ability to cover more of the home or key elements. So we think are super important particularly in.
California.
It also at the side, we've taken a approach we think is sustainable.
[laughter] long-term which is we are battery agnostic, we will have the ability to change batteries and drive as the battery costs curved comes down we can pass those on to our customers. They finally last not to forget your last comment obviously.
Right now the current plan is to sell through our our dealer network and we expect that to be a tremendous opportunity for us from business perspective, and I would say after providing for new systems I think there's a great opportunity to go to our existing over 300000 customers. So next target market.
Well certainly be our existing customer base, we may at some time in the future also pursue selling are stored system to non sunpower customers, but that won't be for awhile right. Now the focuses mostly new customers and then.
And installed base.
<unk>.
Very much.
They say.
Thanks, Michael.
Thank you are next question.
Come from a line Brian lay of Goldman Sachs. Your line is open.
<unk>.
Hey, How's it going this is Alex on for Brian.
Alex.
So quick follow up on that on that commercial can you.
[laughter] martial value added reseller, that's part of the channels business.
Yeah I see.
Large commercial.
Yeah, separating mark Russell might be 20, 25%.
So and she bars vowed that 38 channels.
Oh, great. That's very helpful and I I guess switching gears a bit to this cost saving initiative teamed provide a bit more detail on how much of that is temporary versus structural I guess, both on the cash and the cost that.
Yeah. So.
<unk>, Oh 200 million going is Austin Guy savings about 65% of that is just cost seven factors Huh Oh.
$100 million <unk>, a big portion off gas savings is it's got bass auto anytime you know that's most some advantage push out into a into 2021 from a cost perspective.
I haven't see it is.
<unk> cost savings.
Is structurally nature.
And would be would be <unk>, even back as you think about all facts from 2019, 2020, which is Dan north there can manifest you'd see double digit decline in okay. Yeah.
[noise] great appreciate that.
Thanks.
Thank you are next question comes a lot of still shit broth capital partners lines open.
Hi, guys. This is donovan schaefer onto a filter that thanks for taking our questions.
So yeah, we probably similar to Brian.
We with Alex were navigating five concurrent earnings calls so.
Yeah, a lot going on here the questions I've two main questions revolve around that she was yes and to spend all kinds of action. So the first one just because this is a hot investor topic surrounds or is around the $325 million that facility and 100 million <unk>, that's kind of part of.
You know somewhat it seems to be a contingency in some ways and getting it closed and the mosque com regulatory approval. So on the financing side can you give any color on your confidence and being able to get secured and then on them off com.
Attributes or they're looking at are thinking about <unk>, what are the kinds of things that they as a regulatory body or considering.
So just it's not just super briefly and then handed over to John Waters, Oh, Yes, we do expect.
Too close to each quarter.
Two things that you ask about Oh, I I'm Hot calm, we get feedback from O.G.S. or partner and yeah. I. So Jeff comments will be based on that and Jeff would keep with people are actively on aging again ratio.
Yeah, just sort of given should read the first t. someone sent a regulatory so all indications.
We learned through cheesy s.
Well closing cute too.
You know for financing, we expect to see.
And even now that said certainly Tobin social distancing has me diligence and documentation what suspicion since the teams haven't been able to meet face to face.
Working effectively what was over half a dozen banks and multiple countries.
The teams, including cheesy S. answer what salaries buses are fully engaged we expect to sign that's that's facilities.
Okay, that's great and then follow up.
So you talked about pushing some capital expenditures out into 2021 and I imagine the there's probably also some others that have been delayed just into the second half of this year. So presumably an initial negotiations excuse yes looking at the terms and the the the terms of the deal if you're.
Pushing hatchbacks does that change could there be some adjustments, saying you know they expected you know to purchase equipment, such and such a stage of completion, but now with delayed topics, maybe there'll be less of that completed is that gonna results in any kind of renegotiation their changeable terms.
Yeah [laughter] the I.
What are we being able to do <unk> short answer is going to be nowadays.
<unk> to make adjustments and it would be fair.
Affecting.
I'll, let you out on a color to that it would be for say it almost all the Catholics and the company Nowadays yeah upstream business [noise].
Jeff would be best or.
Yeah, let's see so yeah, Tom Tom exactly right the push on the cap actually we did it was it was relatively small.
And the see the main T. Seuss Katherine extra for 2020 to strategically important didn't deal is the Max five filled out in our status free in Malaysia, and all of that is still on track that as being managed and to the expectations that we had and we didn't deal so no impact on.
Fantastic, but <unk>. Thank you guys are much I'll pass it on <unk>.
Thank you are next question comes from the line of Collen Rush.
<unk> Your line is open.
Great things how much how continued to 10 here. This is kristen on for calling thank you for it to your questions.
First time, you've kept sign in front of couple of different English. They really wanted to ask about it looks kind of capital needs date, feeling from seeing from your dealing at work right now <unk> downtime.
Oh, no okay, <unk>, Tom too few words, and now I turned 18 or yeah.
Hundred dealers 35, which are mastered yours master dealers tend to eat.
<unk>.
Oh, I, there's quite a distribution.
Within the remaining 465.
Nor can mention here, yeah government programs quite attractive with or or do you work based media.
There's more than your decade or.
Oh, Yeah, I think for tough yeah.
Yeah, we we're more concerned honestly at the beginning of the crisis hit that this might be a bigger issue. Then it's proved out to be I do think we are fortunate because we've had a dealer network for over a decade, that's gotten stronger and stronger particularly of late and so now more than 50% of our sales actually come from those master dealers, which are sunpower branded 100%.
Oil and among the strongest we think in the country. So haven't we have not had to provide financial support for those dealers even in terms of A.R. and receivables <unk> a short term we saw a a little bit of a spike into linguist see that as since come down to pre coded levels. So he was appear to be.
Well at Tom pointed out we were happy to see quite several the dealers were able to get funds. The P.P.P. program a relatively quickly and that that also I think helps then bridge that gap, but now as we've seen business start to turn back on they're starting to bring back crews that they may have furloughed.
And of course, we've done the thing with ours are directed installer. So we've we feel like we're to the underside of that in business is starting to turned back up again.
Person I'll, just say something about international Beavers.
I assume needed to market outside of the U.S., we have over a thousand channel partners and that's something flush it has been something we've been monitored closely.
Let's say, we've been very pleased with or or delinquent seasonal receivables held steady or or and what we would normally expect type levels. So I think it's it's a function different jurisdictions, providing some incentives for just over all just a small management buyer channel partners.
That's really helpful. In it and maybe if I can extend out that conversation on an international he could just talk about.
Where's the energy storage part I think <unk> and you know how shall we think about your capacity to ramp on that.
Well two two separate again, Oh I showed competitions two words I'm proud to the assembly of the two boxes.
Okay, Oh, I think there's I mean, all the components are from America, 52 boxes, and one in Minnesota and one in Alabama.
So.
Yeah.
Artwork.
Particularly to battery because it is crying.
Changeable garbage 'cause you read something.
Yeah that pretty much covers I guess the other clarification is at least initially the crack storage is is for the channels the North American business exclusively Hoover bring it all just harder for overall equinox solution as Tom said, it's it's man assembled in the U.S. in a couple of different sites and then put together.
By or do their partners or direct installed team at the customer.
Okay No real.
Complex thing and that supply chain and everything at this time.
No supply chain has done that while they're we're seeing we're not see any issues in terms of being able to ramp course, where the early part of the ramp up right now everything looks good as far as we have in the product.
Right. That's very helpful. Thank you again for a question.
<unk>.
Thank you next question.
<unk>, Oh, Julianne dominant Smith, a bank of America airline is open.
Hi, good afternoon. Thank you so much of the time up you all are doing a well, whereas best you can.
Yeah.
Absolutely.
I wonder to follow up on the two q. guidance here and understand a little bit at the bridge between your adjusted to keep it in in the cash break even stuff that you you put in the release.
Best started read the science I understand there's <unk> count receivables that that reversing the quarter, but I know that there's several to catch items.
And then in that I imagine the clue.
Well he's assumes.
Cash break even if you do have some pivot in that I I suspect you have other liquidity sources to just maybe talking about that bridge and then some of the other elements quite a bit too.
Oh, it's.
Oh, <unk>, you know access to $500 million of liquidity at the end of close quarter looking <unk> got him on top specifically on the second important maybe aren't talking about and popping up operational items that that did you from the even I didn't <unk> to to the budget.
Yes, one or two to the connection receivables you dump right and the second is the optimization.
<unk>.
So both of those items contribution to gosh <unk>, the guy <unk>, the $50 million from the maximum transaction.
<unk>, but just to be clear in terms of other liquidity sort of you have available are you swimming for instance in that bridge further sales of chairs or how do how do you think about just the the remaining items there again, assuming some delay or pets.
The risk on the the June close here.
Sure. So <unk> so let me maybe onto the question <unk>.
The family drive it up a second quarter <unk>. That's one yeah, I think <unk> I can that be be laid out on the page.
But he's not bother to bag and the and fish shares. The next meeting <unk> guidance and then we we we've talked about their transaction elements not being barco.
I'm going to guidance as well so.
Right excellent and then just as you think about the trajectory.
But for the company through the course, the you're obviously you guys would through the guidance, but how do you think about that trajectory of improvement in the business. When you guys. Obviously you have she really good degree visibility at least we'll have seen eyesight given the backlog commentary earlier, what are you seeing as best you can comment sit down on what that trajectory looks like it.
Keeping in mind that things are very fluid too you know things are certainly recovering at a pretty record pace movies weeks, but.
<unk> whatever comments or you can provide on that.
Yeah. So.
First let me acknowledge that k. or so I don't point to a great started to the year profitable corridor, Oh, and [noise] excellent performance year on year in terms of turtles, great progress and commercial.
Oh really strong start to the year of course now things are changing Q.T. would be a pandemic.
Guided cute cute cute three we see returning better.
And of course is a stage come back on line. There's reason to believe that keeps three will be better. We f. Q4, Oh, it's better to q. trees are seen in terms of visibility more importantly, because we're no better predicting the economy I world economies.
That's not our position.
Oh.
S.T.S. part of a business commercialize 90% of your thoughts in all of those projects. We expect to go in a library location with our customers.
Answer yours.
<unk> based off of that it should we still have some business support for the survey into small percentage.
In our channels business.
We have a lot of a indicators you have.
Generation wait conversions, Oh, a number of designs, we do with our Sankar design studio on and those are all trendy and fair way. So much so they in a recent history or actually it's better in pre Kobe Blah blah, Yeah. That's also <unk> zero six months.
Sent our programs on [noise] shall we have leading indicators.
Short cycle business.
<unk> are consistent with officer guidance and our thoughts on Q3.
<unk> comment.
You know say from actually on perspective, you know first I'd say for Q. too. We're currently sitting in about 98% of our shipping in backlog of the number that we've we give them for guys feel good about Q2 <unk> for obviously it really just depends on how how well things we're covering two three but we're.
We we haven't line of sight getting back to the same volume that we shipped in 2019 for 2020.
And somebody Hellums frankly from our ability to so we don't the P. series joint venture that we have this is the the joint venture in China, I very low very very capital light approach for US we've got additional filled out of three gigawatt capacity. There that's something that we're actively or passively marketing and selling on the market place.
Okay.
Wrap it up.
Oh, yeah. Thanks to appreciate the chance to comment yeah, just to from a channel business perspective would like to you know all sympathize that's similar to other parts, especially the business. We do have I think it's better position for both going through the the crisis as well as coming out the other.
Side, I mean actually will refer to Hell, let's say is the expectations were 30% to 50% down year over year, and if you look at our guidance, where a guiding better than the 30%. So it just into two obviously businesses come down, but it's coming back quickly part of that it's also just frankly their strengths and in fact, we have a significant new homes business, which will grow.
This year and we expect it will continue to grow even if not quite at the pace <unk>.
Oh, and then the fact that really unlike most of our competitors we've never rely on the the retail or canvassing sales approach to any any significant extent. So yeah, we've been generating our business digitally to our dealer network all along and so yeah my expectation is.
We we already she's impact as much.
And it also frankly, we've been dating share we gainsharing queue for yeah, we beat our guidance in Q1 in in residential I'd be surprised based on what we've seen so far if we didn't gain share again in Q1 and I'm based on the guidance we're getting.
Things turn out that way, we we think we're going to be gaining sure getting too too. So I think fundamentally the channels. As this is very very strong we are actually expecting to be profitable into two and generally cashing keep two in the channels business.
Hey, odd can't keep going through a question. So we're going to have one more place.
Thank you that.
That question comes from a line Pavel marking off of Raymond James Yeah line is open.
Taking the question Youre visibility on a lot of U.S. jurisdictions and each locked down has its own nuances can you talk about which state.
Residential solar is legally restricted.
<unk>, which are seen formal restrictions on installs.
Alright.
Yeah, No I can't and this was a little bit different just two weeks ago, but as of now we're really just down to New York and New York does remain almost entirely shut down there were some restrictions that were <unk> County by County basis, a couple of weeks go in the Bay area, though because then released as has new Jersey in New York.
There is some optimism that with by May 15th we'll see some of upstate New York start to release, but for obvious reasons that has been shut off but other than that we have not been limited right. Now we are not limited outside of the state New York.
And in talking to your installers or any of the unseen <unk> by their workforce to actually.
Do the physical labor in in a crew.
Even in places where it is legally allowed.
Yeah. It's good question it we've seen a little bit initially I think it's pretty minimal and you know frankly as the demand came down most people were just anxious to be able to 16 with their job having said that we did completely changed the <unk>. The approach we take to install to minimize any issue obviously.
You, both the customer and our employees are paramount as well as or installers. So you know, we essentially of criteria that they're using whether it'd be our own installers or indirect installers or channel, they're all wearing masks, but not car pooling their keeping a distance the extent they can on the jobs in there communicating with homeowners.
Really through phone even from the house, they're not.
Cell phone, they're not actually talking in person. So we've taken a lot of restrictions there were a few issues early on but not nothing that I've seen recently I think people are are comforter are happy to have her job and it's a job being that that frankly, you can operate we usually well with the socially distant mindset.
Thanks, very much <unk> no I would say this is an area where the industry's work well together <unk>.
Should we all off to our safety measures inquire clever ways you can shoot for effective.
<unk> no no perfect. Thank you very much hey, hey, Thanks, a lot about you know things are also you makes everybody for calling in English very unique time, we will come after the stronger and we look forward to our call why.
After I based quarterbacks not much.
Well, ladies and gentlemen, as conclude stays conference call Goodbye. Thank you for participating you may now disconnect.
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