Q2 2020 SunPower Corp Earnings Call
[music].
Ladies and gentlemen, Tunis cops is scheduled to begin shortly please continued standby and thank you for your patience.
[music].
Good afternoon, welcome to Sunpower Corporation second quarter 2020 earnings Conference call.
At this time, all participants size aren't in listen only mode. After the speakers presentation there'll be a question answer session.
The question during the session when you to press Star one of your telephone. Please be advised to today's conference is being recorded in your question first assistance. Please press star zero.
I would now like turn the call over to Mr., Bob Okunski, Vice President Investor Relations at Sunpower Corporation. Thank you Sir you may begin.
Thank you Shannon I would like to welcome everyone to our second quarter 2020 earnings conference call on the call today, we'll start out with the strategic overview from Tom Werner CEO of some power will also provide an update on our S.P.S. business, followed by Jeff waters, CEO of S.P.T., and Maxion, who will discuss our international business.
Monocyte dollar ship all of them redo, our second quarter 2020 financial results before turning the call back over to Tom for our 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 of today's presentation. Today's press release, our 2019 10-K, and our quarterly reports on form 10-Q, Threec 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 were reference during the call the events and presentations page of our Investor Relations website. Please note. We have provided a number of additional data slides in the appendix of our presentation deck.
In the same location, we have also posted a supplemental datasheet detailing some of our other historical metrics.
Finally, I would like to highlight that Sunpower, we'll be hosting our two 2020 <unk> capital markets day on September 10, and we will provide details on timing as we get closer to the event with that I'd like to turn the call over to Tom Werner CEO of Sunpower Tom.
Thanks, Bob and thank you for joining us.
On this call we will provide an overview of our second quarter performance in a brief update on our strong competitive position in the second half of the year and beyond.
Let's start with a recap of our second quarter performance. Please turn to slide three.
We executed well in the second quarter, despite the koby disruption as we exceeded our guidance and all of our key financial metrics, while generating 30 million in cash.
Are you S. channels business contributed to outperform continued to outperform with strong demand residential retrofit and new homes businesses.
We're seeing I'd business also exceeded plan posting positive EBITDA off with a corridor.
Well, let's Ptcs Q2 performance was impacted by factory shutdowns, we exceeded our shipment guidance and saw improving demand trends.
Very proud of our employees diligent execution during the quarter, making sure employees and customers stage say, while transitioning effectively to a new way of doing business.
We continue to invest in our industry leading solutions.
We're pleased to launch a number of new products in the second quarter, It will drive growth and margin expansion.
Finally, we also recently closed all financing requirements for our maxion transaction, including a 200 million dollar.
Green bond offering and a 125 million in working capital term loan facilities.
As a result Maxion 20-F is now the effective reflects a record date of August 17, with you expected distribution of vaccine shares on August 26.
Now I'd like to spend a few minutes highlighting our strong performance in S.P.S., which will be known as Sunpower post spin.
Please turn to slide four.
Our channels business delivered a very strong quarter, primarily driven by residential retrofit as we benefited from our successful transition to an online sales model.
We saw both demanding installation activity increase beginning in the second half of April with these trends continuing through the ended the quarter.
Regrew first half revenue doubled gross margin year over year benefiting from cost reduction initiatives.
Vessel transition to online sales and a lower cost of capital for lease and loan.
As a result, our channels business posted adjusted EBITDA of 7 million well generating 32 million in cash.
New homes also performed well, adding to our backlog of more than 180 megawatts or 45000 pounds and maintained our industry leadership with more than 50% market share.
We're pleased to announce our partnership with bank of the West which is focused on providing financing solutions to our fast growing commercial dealer business.
We are confident we have sufficient tax equity project finance capability.
To meet our residential and commercial financing needs for the right. So the next year.
[noise] Sunpower has always been in innovation leader in solar and we continue to invest aggressively to evolve our business model into storage and services.
Second quarter, we launched two new important products are equinox residential storage solution called Sunvil.
In our one route products for the new homes market. We believe we believe that both of these solutions will be cornerstones of our future growth.
Please turn to slide five.
Some focus in next major addition to our equinox energy platform, giving homeowners more freedom from utility Aldric is an extensive peak electric rates with Sun vault homeowners have access to greater back or capacity during blackouts and reduced daily peak electricity consumption.
He only solution that is a fully integrated residential system designed engineered warranted by single company.
Sunsilk is a clean tupac solution it doubled to discharge cycles of our competition.
A scalable modular footprint and superior warranty.
Yes over 100000 operating hours in the field in dozens installed in July we're very confident so involves performance capabilities.
We have already started to ramp installations in California demand is very high attach rates are above.
Our 2020 target of 20%.
We expect sunbelt to have a positive impact on our residential business as robot this solution nationwide to our dealer network.
Now, let me turn to our one route product to the new homes market.
We have a strong number one position in the solar new homes market with more than 50000 installations over the past 15 years.
Backlog of 45000 homes and more than 50% market share.
This product.
Gulped in collaboration with Kb homes.
Offers customers and efficient durable and cost efficient roofing product, which is ideal for new homes, especially in California as homebuilders work to meet the new solar mandate.
One roof features in a walkie roof trace we integrated clips enable panels to be installed directly on the roof deck, creating a watertight solar roof with the ability to install faster and easier than traditional rack mounted solution solutions. It reduces cost for the buildings.
Feedback so far has been very positive.
We have already booked 19 communities across six builders in the first two weeks following the product launch.
Please turn to slide six.
Well I'll provide an update on our commercial direct business.
We restructured or commercial direct business in second half of last year.
We were pleased with our results today.
In Q2, we achieved a number of important milestones performance was ahead of plan and we posted positive EBITDA for the quarter, primarily driven by improved project execution platform cost reductions.
Our origination volumes has risen significantly over the past year with more than 100 megawatts, where did year to date and our opportunity pipeline has increased by more than a billion dollars over the last six quarters.
We added to our backlog and now have approximately 100% of our forecasted 2020 business under contract.
We're on track to achieve our target model, a greater than 15% gross margin exceeding 2020 remain confident in achieving sustained profitability and positive cash flow by the end of the year.
[noise] demand for our helix storage product remains high with attach rates approaching 50% for the second half of 2020.
In addition, we secured greater than 50% market share in the recent California storage incentive program.
In closing with the spinoff of Maxion later this month I want to briefly highlight why we feel both companies will be well position.
To the transaction, please turn to slide seven.
The rationale for this transaction is straightforward.
The significant Tcs investment maxion combined with the recent close of dead.
In bank financing provides maxion with sufficient capital to rapidly expand its international manufacturing downstream footprint.
Additionally, this.
Transaction successfully repositioned centers of reading.
Sure play DG company in North America, who can now leveraged their asset light model to significantly improve their return on invested capital starting in second half of this year.
With that of White turn the call over to Jeff watered CEO of SPP and future CEO of Maxion, Jeff.
Thanks, Tom.
Let me start with a quick review of Sunpower technologies second quarter performance.
Please turn to slide it.
Oh first like to thank the S.P.T. team for their efforts and navigating what was an unprecedented operating environment during the quarter.
As the cobot pandemic swept across the globe, our employees were forced to react in real time to disruptions on both the supply and demand side of the business.
I'm very proud of the teams adaptability and perseverance and of the fact that they deliver financial results ahead of expectations.
We were able to exceed the midpoint of EBITDA guidance and to be breakeven on cash while paying for capex and legacy liabilities.
On the supply side of the business by far the largest factor in the quarter was the shutdown and eventual reopening of all seven of our global factories.
Such events are highly complex projects involving thousands of people.
But our manufacturing teams rose to the challenge and deliberate on volume cost and cash flow metrics and did so with no safety incidents.
On the demand side of the equation, our sales teams were able to capitalize on faster than expected recovery in several of our core DG segments and delivered volume and revenue ahead of plan.
Of note, we achieved record Q2 volume shipments in both our European and Australian DG businesses. Despite cobot.
This is a testament to solid underlying demand and share growth in these markets as well as to the resilience and strength of our global sales and installation partner channel.
We were able to partially mitigate the EBITDA impact of our factory closures through careful cost management and higher Asps.
We delivered EBITDA head of midpoint of guidance as a result.
I want to remind our investors of our recent announcement relating to our partnership with Enphase on AC modules.
We're very excited to be launching these new products over the coming months as a concrete first step in maxion strategy to deliver value beyond the panel to our global DG customer base.
Please turn to slide nine where I will give a short update on progress and the large scale for power plant side of the business.
As we explained during the Maxion capital markets event, our hsp the joint venture is in the process of ramping to new three gigawatt factories to produce the latest generation of our shingles sell panels.
These factories are highly automated and designed around the latest large area GE 12 wafer format to produce a range of products with power ratings of up to 625 watts.
I'm very pleased to report that the first of these factories, which we call smart Fabs is already in operation.
The photo on the right at this slide shows one of the first 500 watts five facial panels being robotically package for shipment.
The first manufacturing line is already exceeding yield and power output distribution objectives, and hsp the expects to ramp the balance of the production lines into you seeing smart fab over the next few months.
As a reminder, we can purchase two thirds of hsp these output and more if needed selling this out put into large scale solar projects as well as to our DG channels.
Consistent with the progress of our new JV manufacturing facility. We recently officially launched our new line of P. five bi facial panels, and we're already seeing significant customer interest in these new products.
With that I would like to turn the call over to money, who see all CFO of Sunpower.
Thanks, Jeff I'd now like to discuss the financial results for the quarter Keystone disliked it.
Easily that financial performance for the second quarter.
Exceeded revenue margin or do you forgot guidance and generated cash in the corporate environment.
Moving onto the specifics of the quarter non-GAAP revenue exceeded guidance as we saw solid recovery in both segments in Sps outperformance was driven primarily by John's business, where we added 8000 residential customers for the quarter I.
I see in our direct business executed well on its project commitments and exceeded the midpoint of 100 megawatts recognize targets.
But SPD second quarter shipment stood at 440 megawatts and was above our guidance as it is octuplet quicker than anticipated improvement in the U.S. and European DG business.
Consolidated non-GAAP gross margin was 10% in SBS gross margin almost doubled year over year, driven by improvements in vested pension loan and lease economics overall focus on cost by the Johns team and sustainable improvements in project execution, you're not seeing our direct business, which pool.
Stood up profitable quarter.
SPD gross margin was in line, but up forecasts.
Non-GAAP Opex was $58 million for the quarter.
15% sequentially as we benefited from a cost reduction initiatives, we expect a double digit decreasing 2020, opex well since 2019, and we will continue to benefit in 2021 from our investments in digital business simplification and moved to a shift from Mexico.
Capex for the quarter was $5 million in line with first quarter and consistent with that maxion five that.
Factory.
Adjusted EBITDA was negative $9 million head of guys.
I would now like to discuss some additional financial highlights for the quarter.
John's business, we are seeing improving booking trends in residential retrofit and increases in new homes installs that rules in second quarter was society.
Additionally, we expect that China's gross margin to approach, 20% as we exit 2020.
Your next CNR direct business, we are confident of generating sustainable positive EBITDA in the second hospitals 2020 and beyond the continued improvements in project margins are bookings remained strong with the balance of our 2020 forecast currently in backlog.
Our SPD, we exited the quarter with on Fox factories fully online that enabled us to exceed shipment guidance and capitalize on good comedy indisputable DG market looking forward Mxsix hundred remains focused on expanding that EG footprint post spin as evidenced by announcement of the partnership that answers.
In relation to the balance sheet, we generated approximately $30 million in cash in second quarter, driven by strong China's performance in SPD gasoline breakeven.
We have approximating $500 million in identified liquidity for Sunpower over the next 12 months, both skin and are confident in that ability to fully address sunpower was 2021 can book.
Maxion post spin, we'd have a better capitalize davinci.
Hundred $98 million, an equity investment from Dcs and $325 million from the recent get completed finance.
Finally, we continue to build and would be screens and on downstream business that create future value beyond the one customer coming back.
At the end of second quarter, we had approximately $400 million future service revenue attribute to go to Sunpower and approximately $358 million in next weekend value and sounds fun, but third quarter. We expect next we didn't values on song to be up to 365 million Bucks.
Somebody you believe sunpower and maxion, a rent position given the capital efficient business models, new products and a strong balance sheet with that I were done to call back to gone, but our guidance.
Thanks money moving onto guidance, please turn to slide 11.
Companys third quarter 2020 guidance is as follows revenue of $360 million to $400 million on a GAAP and non-GAAP basis, GAAP gross margin zero to 5% and net loss of 110 to 95 million [noise].
The company's third quarter 2020 gross margin adjusted EBITDA guidance on a combined basis now includes an approximate 40 million dollar impact as a result of its out of market poly contract in the S.P.T. segment for the third quarter [noise].
As a result.
On a non-GAAP basis, the company expects third quarter gross margin absurdist, 6% and adjusted EBITDA in the range of negative 35 to negative 20 million with SPT in the range of negative 38 to negative 28 million.
S.P.E. out in the range of positive eight to 14 million.
Upon completion of the Maxion spinoff expected August 26.
The out of market marquee poly obligation will be retained by maxion into 2022.
[noise] megawatts recognize will be in the range of 500 to 560.
And we also expect positive cash generation for Sunpower and the third quarter.
Fourth quarter and after the company's expected spin off of Maxion solar technologies.
Both companies expect to continued improvement corvels solar demand environment, and our financial performance.
Through the ended the year.
Finally, I would like to highlight that Sunpower, we'll be hosting our 2020 capital markets day on September 10th we will provide details on timing as we get closer to the event.
In summary, Q2 was a solid quarter for the company as we executed on our strategic initiatives positioning the company for successful spin off of Maxion and laid the foundation for improving profitability.
With that I'd like to turn the call over for questions.
Yeah.
As a reminder to ask the question you when you tapas style wanting a telephone.
So your question press the pound key he send out what we compile the kewaunee roster.
My first question comes from Michael Weinstein with Credit Suisse. Your line is open.
Hi, guys.
Hey, Michael.
Hey, I'm just to start off can you.
Confirmed that the inclusion of the 40 million dollar.
Impact from the legacy poly silicon liability.
That's a that makes this guidance not comparable to prior guidance correct answer.
Okay.
I'm, assuming you're doing that because of the to make a max out a little more.
Visible or transparent.
Oh, I Wonder you want to explain real quick.
Yes, I I can take that so Michael as we were finalizing the 20-F form actually on.
We determined that.
I'll begin the presentation to not exclude the losses I'm not that long term contract thought hemlock up in ER.
In the margin and the EBITDA presentation from actually onto what do you see for Sunpower and first quarter is consistent with what the presented in Mac sounds 20 half a glass boardwalk the contract and retained and 2022, we go in Maxion and Sunpower results will not be impacted by the contract.
Spin.
And then add slice aggregate that quarter guidance compared to the second quarter actually there's over $20 million off volume and operational improvement between quarter to quarter from a second quarter and actually to the midpoint of guidance.
Gotcha.
How much visibility do have into fourth quarter for S.P.S. why not give a full.
Full year 2020 guidance at this point and also what kind of cash cash sources from asset sales might occur and Sps in the second half this year.
Oh I Michael This is Tom on me.
As we all right I think our visibility into the fourth quarter is good it's great in the commercial business the.
Our channels business is a shorter cycle business, but the trends are quite strong and debt to work all right in your great confidence are strong confidence going into the back half year, including Q4, we're doing in analyst day in September 10th.
Right and so we're saving it for that on would be what I'd say, we will have a lot more to say that it yeah, Dan what was the second part of your question Michael.
Oh, I know there any cash sources from like asset sales are not yet.
So my new can you take that.
Yeah, there's about $40 million to $50 million off Oh gosh from asset sales over the next online.
Gotcha.
Thank you know how long that's in the back of the Kim Thank you great. Thanks.
Our next question comes from Brian Lee with Goldman Sachs. Your line is open.
Hey, guys. Thanks for taking the questions on maybe just following up on the prior one on the.
The poly silicon out of market cost nine new Tom is there a technical reason that you're no longer excluding it from from non gap or I guess, adding it back to non-GAAP. The way you have done historically I know, it's consistent with the way you reporting it into 20 AD for Maxion, but is this an FCC requirement.
There is there some strategic reason you're doing it this way versus historically, having you know put it back into the adjusted EBITDA metrics and then on the $40 million itself I think you've had.
10 million or so in Q1 in Q a in Q2, so why the step up in Q3 to 40 and is that the quarterly run rate going forward until expiration in 2022.
Okay. So.
Let me update to the peak questions. Just so felt on the first one why imputed and.
Third quarter really dollar based on the discussions or that we had in and around today the off the 20.
Yeah.
The staff, we wanted to be consistent for Sunpower visit be what was reported in 2000, yet. So so that was the discussion I found that topic, a with the SEC. So.
That was one second the 40 million up.
<unk> million daughter, a of out of pocket Bali in context with Oh, good second quarter was this quarter I think.
The volumes are going to be lumpy up but as you think in terms of Duke University Q2, Q was on Louis production quarter four Max on given the the factory shutdowns that all the factories that back online now so the $40 million is reflective of what we've historically been.
In 2019 and box of 2018.
I think the way to think about the liability going forward is there's about $150 million off liability post spin that go through 2022.
Okay. That's super helpful. And then I guess on on the gross margin guidance here.
For the zero, the 6% non-GAAP consolidated the target for Q3, how should we be thinking about a S.P.S. gross margin versus SPT gross margin assumptions embedded in that.
Okay. So my new why don't you said, you where can we might handed over to norm.
Great. So just from a SBS perspective, because gross margins that approach and closer to 20%.
The commercial direct margins are in the in the mid teens, you're seeing some of that play out in second quarter more details on into metric sheet that and Bob posted.
And then I think we'll have norm provide a little bit of color there.
Oh, Yeah, no happy to yes margins for channels, we're actually quite proud of results. We had in a pandemic quarter, where we doubled our margins in Q2, we certainly have a lot more momentum to grow those the back half of this year, both because our volumes increasing and also because some of the financial products.
Like the significant announcement, we made with TC you last quarter.
Don't really hit the bottom line until Q3 in Q4, so very competent confident that the underlying gross margins channels are going to continue to grow through the back half of this year.
Okay. Thank you end up maybe last one if I could squeeze it in just.
I know you said my new volumes in SPP or are you gonna be lumpy you had a better than expected quarter on shipments in Q2 here in the midst of the pandemic and with production being impacted through the quarter heading into Q3. It sounds like production is fully back online.
Ryan and barring any.
Unforeseen circumstances I suppose you your base casing that that production will stay online through the quarter, but the the volume guidance looks relatively flattish, even though it sounds like production could be better what do you shipping out of inventory in Q2 or can you kind of walk us through the dynamic of.
On the flattish volume.
Outlook for SPP, specifically thanks.
Yes, So I think Jeff fighting to cover the volume dynamics from an SPP perspective for Q2, just from a Q2 versus Q3 or find a few in Q2, our shipments were 10% above above our guidance and then that is a bit of the increase in shipments.
I thought SPP between Q2 in Q3, and Jeff Atlantic locally.
Yeah, so with the factory shutdown for more than a month in Q2, we were able to wind down inventory. So lot of the shipments that you saw coming in Q2 did come from inventory.
I didn't see a little bit of that bubble then transfer into Q3 I was it's going through the manufacturing line. So that's why you see our Q3 volumes will be lower than what we would expect to see in Q4.
But it sounds like back to Q4 will be fully up and running and every expectation out of the factories is that even with the pandemic still out into various markets were operating now very safely in a in the local government see that.
So we don't expect any disruption on the supply chain or on the factory side.
Okay. That's good luck guys.
Yes.
Thank you. Our next question comes from Philip Shen with Roth Capital Partners. Your line is open.
Hi, everyone. Thanks for taking the questions.
We understand it I think maxion, we'll be able to ship and sell P series into North America without going through new Sunpower I'm. So was wondering if you could walk through how that dynamic or will play out and what the economics might be what we'll do some power for example, or be able to pursue P series sales.
In the U.S. as well.
Oh, so it'll be segment, driven and Jeff you can add onto this oh it would be segment driven so.
P series and the DG champions, all Black gun biotic Sunpower in P series, you into the Powerpoint channel can be done by next year.
Jeff do you want to add anything.
Yeah, and I think you covered it Tom so the power plant piece is an area, where we'll be looking also at shipping P series, but that would be something coming in from outside of the United States.
Right. So just just to be clear the power plant P series will be revenue booked by Maxion and then some new Sunpower would not have a claim on that is that correct or help us understand if that's not correct. Okay. That's correct.
Okay. Great also you know with coded we've seen pricing come down a fair amount for modules a in the past a few weeks or pricing through the supply chain has recovered a based on the maxion analyst day.
We estimate that 2019 pricing, yes piece for modules was roughly 35 cents per watt for P series, and I think 65 cents per watt IVC.
No.
How has so that's the past what do you expect and how do you expect pricing to trend or for the back half of this year and the first half maybe Q1 of 21.
Are these SP sustainable in the U.S. and internationally and and I know you guys get a premium price, but can talk through also how pricing is changed during 'cause it.
Sure I'll take it most of that analyze norm to comment on pricing I like during cobot on so.
By the.
Hi, Good news is first of all day as Jack mentioned in our press release last night on in our prepared remarks that the Oh I suppose is the company is on track for August 26, and so God development Tibet <unk>, Phil is that after the 26.
The agreement as written will kick in right in that has pricing that is market based on and so I would say that both Jeff and are quite comfortable with that I'm quite comfortable with that 35 years experience with with maxion preceding niche that yeah, I'm actually on will do a great.
And with RBC and cost management of RBC, and I think keys quite comfortable we'll do a great job with their delivering that the market in a way that cat is favorable for both companies and we have done that.
For almost 15 years and the DG segments are our confidence in their cost structure and pricing, even north American market is quite high.
In the nature of the agreement post split in terms of <unk> pricing that we see in a coping environment, maybe norm you could comment on that.
Oh sure Yeah, I mean, I think from what we've seen so far is overall are you a piece of staying quite stable covenants in part on the.
Improving gross margins that we have in the business I would echo what Tom said, we very much appreciate the ability to have a highly differentiated panel and it's a big part of her story and it's one of things allows to keep the high higher higher prices out there, but we also have a mechanism to make sure things are very competitive.
From a cost standpoint, so from.
From a pricing perspective.
We think see things quite stable and think that will continue to be the case has.
Shipments grow the latter half of this year.
Great, Thanks Storm and Tom.
One last one in terms of on the AC.
Maxion panel and going out to a international markets can can you give us a sense for what kind of volume we might be able to see I'm in maybe the back half this year or <unk> for 2021, or what do you see a head for for a by product line.
Yeah, well have Jeff take that of course that [laughter] odd relationship started with.
Sunpower and there is very strong partnership or one day, obviously maxion is leveraging and.
Their relationship going forward, Jeff can you take that.
Yeah. So obviously, we're excited about the a the AC module addition, and it is going to be launching in Europe here immediately so expect to see some relatively small volumes over the course of of the second half year as that ramps up.
Expecting it to be up a up.
Good sales growth driver for us going in through 2021, I'm It really fits in nicely with the channels that we have especially the large dealer channel do we have throughout Europe.
We expect to CAC modules going into additional markets, they've been Japan, and Australia here in the future.
But I would say volumes for 2021, probably no specifics right now.
Okay. Thank you all I'll pass it on.
Thank you. Our next question comes from Ben Kallo with Baird. Your line is open.
Hey, guys.
Congratulations on on the split.
What do you what do you think the direction.
Does it change up to the split.
Oh, your assets or or how you position sunpower.
Dealers.
On the commercial side and then also on on residential side do you anticipate.
Changing the model that all up to get through this.
And then my second question is probably better than you do that it for I think you said one of years 30.
And <unk>.
What do you think your timeline is.
As you go forward.
Have you been group.
This restructuring for the past couple of years, so there's a lot and if so what do you think you're talking about his previous sunpower, what should we expect.
Road transition is a leadership.
When you're ready.
Oh, Hey, Ben Thanks for your questions and maybe a first take the direct you changes should reach our allies like indicates a [noise].
Year to year and a half for two years that we put into creating these two separate companies.
Hi is bearing fruit and I were raising.
$625 million for Maxion.
And that sort of an unprecedented level dog food that part of our business.
Right to deploying more capital efficiently than we ever had previously you had looked at the news on power here with the remaining Shankar, but we'd like to call New Sunpower, Oh, we have a profitable cash generating business still manouchehr summarize that is a very high return on invested capital invested capital business.
And therefore, we expect our model, which stayed the same oh I can term joke monetizing leases.
Right and having a pure cash based easy you understand PNM I will point out that or ability to.
To pay off the to converge has gone up dramatically with recent events.
I wish include get better performance.
Oh I better performance you have cash in Q2, alright, our ownership in entities.
In the likely closure of a much of the spin which brings cash into Oh, sunpower, so with an improved balance sheet.
Let me start to have an option to work it or alternatives on so time will tell you need to.
Ah processes these improvements into our balance sheet and time will tell.
I've worked closely with the board as has the whole team that Johnny I call Omnis transaction, as you point habits, and well over a year and a half we've been just.
Working super hard on that.
Right and I have a great relationship with the board and team shut my intention is to continue to lead Shankar and certainly you know some day post spin or will have their conversation with the board, but for now get the screen John improve the balance sheet dramatically right and then you know I have right.
Investors are she would like to spin was all about.
As we deliver what we promised drawn in each of these two businesses. So time will tell them.
Okay sounds good look forward with argue next quarter.
Yeah, I need to <unk>.
<unk>.
Thank you. Our next question comes from Colin Rusch with Oppenheimer. Your line is open.
Thanks, So much as you can you talk a bit about your expected sales cycle, a post and what you can do to improve that along with your philosophy capital. It seems like are you move into that the new business mom and maybe some things that you can do to.
Generates my returns and along a little bit.
[noise] on so I'll share a few words and then I'll turn it to mine, who I think this is the exciting part about really both businesses are the maxion side of course will be in are strong.
Net cash position.
Right and they have tight rehire capital efficiency compared to historical over twice for I.D.C. and even way more than that so the P series product.
That's from actually onto the huge sunpower.
Sales cycles.
In the residential business are actually talk quite rapid there within quarter. It's important to note that there were agnostic between cash and loan and lease and in fact or less than 40% of our businesses wage.
And we're kinda swimming with the current because a loan in cash or actually shopping over 70% in the market growing rapidly and knows parts.
Business of course, the cash cycle is interesting.
And so.
Why don't you sunpower by virtue of having great products that redesign we create joining in a market Oh I through our 15 your channels will exploit to car strength and passion alone and that will improve the cash cycle that you alluded to.
In terms of lease.
Nor impede warmer monitoring today I say few words about that and then money. If you could say few words about commercial and like shell cycling cash management.
Yeah. So I think just from an overall cash perspective headed how to think about it we had a great second quarter from a cash point of view as we sit at the end of second quarter, we have access or identified over $500 million of liquidity outcome identified a few of those pieces earlier from a modeling perspective, its a capital.
Martin said differently does not really the quite any capex and then from from a working capital perspective, both residential and commercial and have followed what floating instruments that make the working capital cycle quite efficient you put it all together, it's a pretty high.
On invested capital business from a commercial specifically addressing commercial.
Refinance I'm most of our project in commercial through a combination off a construction financing as well as.
Some milestone payments that we get as the as we progress so.
You know commercial project stake.
Three to six bonds, but from a working capital perspective, you know very very efficient.
And then just another one on the the temporary for storage and your expectations around that.
In California outside of California can you just give us an update on on when you're out like that at this point and any real serious demand that we're seeing outside of California.
Oh, Hey, I'll take that that's one this is norm, yeah, so storage or just to recap some of it said earlier, we did begin selling storage in June through our direct sales network now our focus has been in California as we introduce it and then we are printing or installers. So.
Most of the demand insight would have to say is specifically, California, but we will release.
Later, this quarter to the broader areas, particularly Hawaii.
In other parts of the less so we get a we'll get a better feel for outside California attached, but so far frankly, the reaction has been outstanding.
Products installing quickly looks great, it's a integrated completely with or both or warranty, but also our software tools. So the feedback has been terrific I can tell you that our attach rates initial attach rates were seeing in California around 30%.
And I think that as we roll this out to more of our dealer network. This quarter, we're going to see those numbers in California, we expect understand that that kind of area.
As we roll it out later to those other states will get a better feel for the interest beyond California.
So much.
Yes.
Thank you. Our next question comes from Julien Dumoulin Smith with Bank of America. Your line is something.
Hey, good afternoon, guys. Thanks, so much of the time I Hope you all doing well in assays question around cobot impact here for third quarter I eat it for the last quarter. You guys described about a $60 million cobot impact that at the outset here. If you were to put that in kind of comparable terms. How do you think abundant normalized act code that type.
On a run rate here for Threeq, you if that would be a good way to think about it as you roll into two to a 21 outlook and then separately and related how are you thinking about that roadmap and the execution targets tourists that liquidity runway that you described last quarter and.
Comments earlier, but just how are you fearing against that that that waterfall charts towards the 500 million of total liquidity sources over the next 12 months.
Yeah. So let me cover the liquidity piece first of the shock be showed last quarter in comes off the liquidity runway.
We are doing better than that.
On on on victory on our bars that we've talked about.
Approximately $500 million of liquidity last quarter, our second quarter performance is better than what we had what we had guided go you know last quarter earnings call. It and then some of the pieces off of the bars are better than we had we had a big them last time, so overall our liquidity.
Greater than 500 million honest I would say doing better. So that's a that from a from a liquidity perspective, I think just from a corporate Barnes <unk>, Here's how I would think about the optical pieces right. So.
Our second quarter performance compared to.
What be had.
I talked about locked on his call it was better clearly and on Twoq onto one some of the cost initiatives, we did better than or what we had initially plan and secondly, we saw a quicker than anticipated recovery in global BG markets both.
Yes, and and Europe.
Got caught out in particular right you got to see that trend continue in in third quarter and get better in fourth quarter at least that's how I think about it as I mentioned earlier in the call or if you disaggregate, our second quarter third quarter guidance and compared to second quarter, you're seeing a 20 million dollar price improvement.
Both on volume and operation performance.
PQ versus was the second quarter so.
That should give you some sense of how to think about.
The business going from second quarter headquarter, and then tailwinds cutting into fourth quarter.
Can you go to comment quickly what about the trajectory or volumes here right. I mean, we've heard from some of your peers, but some very sharp inflections in recent weeks and months.
In line platforms et cetera, how would you characterize that volume metric trajectory as of today not just for three Q with S.P.S., but you know a warm we were really yeah again trying to get a sense for 21.
Yes.
So I think we'd have norm cover the Sps portion.
Hi, Thanks.
Thanks, I don't think Sterling, Yeah, let me give some color a little bit power systems and trends or to your comment we're seeing a similar trend of quite a impressive bounce back.
If I gave us some numbers the in a recognized megawatts in the coming quarter, we're out looking more than 20%, but if you look at deployed which expecting that to grow more than 30% and Ruybal frankly, 2019, Q3 numbers, so kind of fully bounce back versus.
Not just pre covered but Q3.
And if you look beyond that the growth rate should lead to an even faster Q4, one thing on its interesting on the front end of the funnel.
We track very much we supply appointment.
And we sell those two are dealer channel fill in the big values, we had or dealers.
In July we crossed a thousand appointments sold in a single week for the first time ever and then for the next four weeks we'd be the thousand every time. So we've never seen those milestones before so the last month on the front of the funnel is setting all time records for us So super excited about the opportunity going forward, we definitely see a bounce back which is that levels, we've never seen.
Channels before.
And joining in every just let me clear going on right drilling if I could comment on the commercial business.
First of all reach profitable on Q2 on and I noticed there arent many questions on that show very happy with the profitability in the commercial business Oh I bet business also has the back half the year on your percent book your very close to it and we haven't had that yearish either.
So our demand profile for the commercial business is set for the second half the year, we're heading into 2021 with strength in that business as well thanks for your questions joints.
I think we have developed mix.
Thank you. Our next question comes from them well turn off with Raymond James Your line is open.
Thanks, very much hopefully this issue will be behind us by the time, we get to the capital markets day by what's your expectation realistically for white the solar industry can get from the stimulus conversations in Congress.
And had prevail I think you're going to be our last questioner and we'll certainly take Oh I didn't follow up questions that you have on to the ITC of courses is relevant Medicare's Act that Democrats or <unk> or doing a great job and many or most of them are very supportive and there certainly group.
<unk> can support as well.
I would say realistically I wouldn't be optimistic as an ITC extensions part of the carriers that maybe Oh, there's an ITC.
Hi painting, a that makes it now I should say, it's not a credit yeah that may be realistic.
Right and of course that could happen for certain market segment. So all of that is in play as we look longer term.
I think there's growing support for.
ITC, but that's more likely a 22 then at 21.
Change and that certainly how we're preparing.
Anything in that context, how much pull in of demand should we expect just directionally for the second half a 21.
If the lot does not change in the next 12 months.
I'm sure I'll share a few words in the norm you could add color if you'd like.
I think we're going to see the normal Oh, I, there's a 4% step down you're right I incentives and Oh, what we're seeing that leaves the tailwinds for DG implementation.
Hi, solar DG implementation in United States are quite significant.
People are working from home.
<unk> retail electricity demand is up dramatically, whereas it's down and other markets pregnant people want to control their electricity storage attach rates are up to the Tailwinds I think will cure to mute a trend or a variety of trend of ITC incentive.
But it will have some impact when do you want to anything.
Well I was just a clarification I don't know so the question was referring to this year or the following year I thought I heard you into 21 I think if there is no change to the current ITC modeled into 21, who will be a more substantial a potential for Poland.
Because of the dropping more significant.
So thats the case.
Ugly, specifically model, but it certainly could be even more significant we certainly expect.
2021 to be a bid year regardless.
And we'll have to see how the I'd see poly Sci plays out to how significantly.
Okay appreciate it.
Alright. Thank you up development. Thank you everyone else, who attended the call. We look forward to speaking to all of you on September 10th at the edge Sunpower on analyst day and of course, it our next quarterly conference call.
Thanks, so much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].
[music].
[music].
[music].