Q4 2020 SunPower Corp Earnings Call
Good afternoon, and welcome to Sunpower Corporation's fourth quarter 2020 earnings call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask the question. During the session you will need to press star one on your telephone.
I would now like to turn the call over to Mr. Bob Kaminski, Vice President of Investor Relations of Sunpower Corporation. Thank you Sir you may begin.
Thank you I'd like to welcome everyone to our fourth quarter 2020 earnings Conference call.
On the call today, we will start off with the strategic summary of the quarter and 2020 performance from Tom Warner CEO of Sunpower, followed by Manu Sial, Our CFO, who will review our fourth quarter 2020 financial results before turning the call back over to Tom for guidance.
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 debt.
The describing the safe Harbor slide of today's presentation today's earnings press release, our 2020 10-K, and our quarterly reports on form 10-Q.
Please see those documents for additional information regarding those factors that may affect these forward looking statements.
Also we will reference certain non-GAAP metrics during today's call. Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate GAAP to non-GAAP reconciliations.
Finally to enhance this call we have posted a set of Powerpoint slides, which we will reference during this call on the events and presentations page of our Investor Relations website.
In the same location, we have also posted a supplemental data sheet detailing additional historical metrics.
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 fourth quarter performance as what lines. The brief update on our individual business segments.
'twenty 'twenty was a transformational year for Sunpower.
We completed a number of strategic priorities.
<unk> the company for success in 2021 and beyond.
We are confident.
Our focused strategy following the successful maxion split.
Positions us for long term profitable growth.
Please turn to slide three.
In Q4, we saw a strong residential customer growth, adding 13000 customers and bringing our installed base to more than 350000.
Commercial demand remained healthy as well as megawatts rose more than 40% sequentially across both businesses.
The unit economics improved its gross margin per watt rose approximately 50% quarter over quarter.
Additionally, we also significantly de Levered, our balance sheet, achieving our net debt target ahead of our analyst day forecast, while also lowering our cost of capital.
We also further strengthened our balance sheet through our successful 'twenty 'twenty, one convert tender and reduced our net debt to EBITDA ratio to less than two five times.
Finally, we exceeded the top end of quote.
Our GAAP net income and adjusted EBITDA guidance.
Consumers and businesses continue to see cleaner more affordable energy more resiliency in the face of increased great Audi Jason share counts.
These factors as well as others are driving strong industry tailwind.
Please turn to slide four.
U S residential solar growth is set to accelerate over the next five years driven by the recently.
Tension of the I T T.
The increasing affordability of solar.
As well as the broader acceptance of solar as an integral part of combating climate change.
The new homes market post the California mandate is growing rapidly.
We expect our new homes growth rate to exceed 40% over the next few years, given our leading market share and strong backlog.
As far as in storms challenge the grid and rolling blackouts shut offs increase storage demand continues to rise we expect to see rapid adoption over the next several years in both commercial and residential markets. The storage offers custom.
Customers improved economics, and resiliency to power outages.
Finally, we see significant opportunity in the electrification of buildings and transportation.
We believe our investments in storage digital solutions, and our broad D. G services platform will give us a distinct advantage in offering a seamless integration of future energy services, giving customers more control of their energy use and cost.
In addition to the strong industry tailwind I just discussed we see significant opportunity to drive long term growth through the expansion of our addressable market. Please turn to slide five.
Sunpower has long been a leader in the distributed generation solar and storage market, which we expect to grow to $65 billion market over the next 30 years.
As we look to 'twenty 'twenty, one and beyond we see three key areas to expand the markets we serve.
First capitalize on increasing demand for front of the meter storage solutions to the C&I segment through continued investment in our helix storage platform.
Second we have developed developing new digital services and enable customers from solar and storage to monitor and take control of energy use in their homes and larger vehicles.
Finally, we will use our power of one platform to extend our industry, leading marketing software financial product offerings to capture incremental business from.
From the long tail of sugar installers.
I'd now like to discuss the top three priorities for this year, please turn to slide six.
First is to execute on our growth plan for 2021, which we expect to drive overall revenue growth of 35% year over year.
In residential we expect to exceed 40% revenue growth driven by strong momentum exiting 'twenty 'twenty rapid new homes growth expansion of our Tam through our direct channel and accelerating storage sales.
The machinery segment, we expect the delivered 20% revenue growth with at least a 10% improvement in gross margin per why should we expand our behind the meter.
And community solar effort.
Okay.
Our second priority is to improve our profitability through margin expansion.
As we discussed at our analyst day last year. In addition to ramping storage in 2021, we see of full year impact.
The impact of our significantly improved lease and loan financing.
This strategic shift from straight cash products sales to more finance product.
Enable more people to adopt solar at Haile attack.
Attractive rates and the economics are improving due to our lower cost of capital.
Given these trends we see adjusted EBITDA.
Tripling from 'twenty 'twenty one.
On growing at more than 40%.
In 2022.
Our third priority is.
Is to thoughtfully deploy capital for longer term growth, we plan to leverage innovations careening, EV and smart home segments to offer additional services to new and existing customers.
As well as further investing in our power of one platform to extend its reach.
Two of wider partner and customer base.
Additionally, within the C&I segment, we will expand our helix software platform to per part.
<unk>, the fast growing energy as a service market.
And the address front of the meter demand.
We are also continuing to further integrate our ESG efforts into our corporate strategy, we're making significant progress on this front and expect to release, our 2020 sustainability report this spring.
I would now like to shift the to the performance of our individual business segments.
Please turn to slide seven.
Our residential and light commercial segment continued to outperform as momentum builds in this business.
The addition of strong sequential megawatt growth.
Gross margin gross margins rose to 24% up from.
On April 18% in Q3.
And these of record since adopting cash based accounting.
Our overall mix between cash loan and lease sales remained relatively stable for the quarter.
However, starting in Q4, we put in place of number of initiatives that are expected to shift our cash mix over time to more financed and full system sales versus cash equivalent sales.
These efforts include our highly successful in expanding loan partnership with tea sheet TCU.
As well as our new lease financing programs, both of which can drive long term expansion, while improving economics for our customers.
We are already starting to see this in Q4 as residential value creation rose to 46 cents.
From 30 cents per watt in the quarter more on this in the bed.
New homes also performed well as sequential megawatts grew for the 40% the strong quarterly bookings, resulting in the record backlog of more than the 180 megawatts.
Our market share remains of about 50% with significant interest in our one roof and sun vault products for many of our builder partners.
Finally, we are very bullish about the future of our some vault storage solution.
With our high efficiency completely integrated storage solution, we are uniquely positioned.
To serve customer needs.
Drive revenue and build the foundation for future services, we expect to not only benefit from the sales to new customers, but also through our 350000 strong.
Customer installed base.
For the quarter, we continued the ramp in our dealer channel and saw consistent consistent sales attach rates of 20%.
Where are we also saw strong interest in our larger 26 kilowatt hour some vault solution raising the increment.
On a revenue per share above 30% on average.
As we highlighted at our capital markets day, we expect non vault to contribute $100 million in revenue in 2021 and remain confident our supply chain can meet the school.
On slide eight.
We are providing a more detailed look at our residential unit economics, which we expect to continue to improve.
Go through 2021.
We look at residential value creation, it's margin per watt installed, which can come from storage services, our improvement and our financing structures to lower our cost of capital.
As we look into 'twenty 'twenty one M. P. On we expect a mix of cash versus finance system to continue to shift towards more finance systems, which improves our residential unit economics.
We expect about two thirds of of residential systems to be financed.
By the end of Q4, 'twenty 'twenty, one driven primarily by growing demand for our attractively priced pounds offered through the TCU program.
And while were cost completions.
We continue to invest in digital tools that result in long term benefits for our dealer partners and customers.
Over the past several years, we adult very robust.
The very robust dealer platform of some of the leading digital marketing and operations solutions many of.
Helped our dealers generate more sales.
Lower cost.
In the future we plan to incrementally monetize the digital what this digital platform.
By extending some of the elements to long tail customers.
Excluding these digital investments our Q4 residential Opex was 20 cents per watt.
Moving on the C&I on slide nine our CNI solutions segment also performed well and we remain excited about our growth prospects for this business for the quarter, we posted 8 million and adjusted EBITDA.
Added to our record pipeline of more than $4 billion and position ourselves to deploy more than 90 megawatts of community solar over the next few years.
Gross margin per watt rose to 40, <unk> driven by solid execution increased storage installs and improved cost structure.
We expect gross margin per watt to increase another 10% to 20% in 2021.
Also demand for helix storage remains high as Q4 attach rates were above 30%, while installing 18 megawatt hours for the year.
Long term, we believe we are well positioned to capitalize on the rapidly evolving landscape in the C&I space.
Please turn to slide 10.
The C&I landscape continues to evolve as more and more projects are looking to integrate storage offerings from behind as well as the front of the meter.
We are well positioned to capitalize on this trend given our experience of installed base and the industry, leading solar and storage solutions.
We are focused on three strategic initiatives that will enable us to significantly expand our C&I.
Pam first.
Changing to serve the behind the meter market, while laying the foundation for our front of the meter offerings, given our strong origination and development experience.
Second further builds on our 4 billion dollar pipeline in both solar and storage by expanding our partner relationships and customer base and third leverage our industry, leading technology and experience.
Chad additional functionality to our helix platform to expand our addressable market.
Overall, we remain very excited about the opportunity of C&I going forward.
With that I'd like to turn the call over the miners Xiang CFO of of Sunpower.
Thanks, Tom Please turn to slide 11, <unk> provided on consolidated financial results and select metrics.
We are pleased with on financial performance of the fourth quarter as the exceeded on GAAP net income and adjusted EBITDA guidance on.
Business units generated cash and the significantly reduced recourse debt.
Moving on to the specifics of the quarter.
We saw continued performance in both of our segments and overall and megawatts recognized rose more than 40% sequentially without the residential and light commercial segment could.
So it would be 5% sequentially.
The solutions segment was also up approximately 65% compared to the third quarter. We expect the strong volume trend to continue at least through 2022.
Consolidated non-GAAP gross margin in that book was 50 cents per watt and up 50% from 34 cents per watt in current quarter.
The <unk> at 64 cents per watt and fourth quarter.
We benefited from improvements in our residential loan and lease economics in the fourth quarter and expect our gross margin per watt improvements adjusted action to accelerate in 2021 from these initiatives.
Non-GAAP Opex per work was 27 cents per watt.
13% sequentially as we are seeing the benefit of cost initiatives and scale.
If you exclude net investment in digital and product, which we see as more capital deployment in Opex.
Opex per work was 21 cents per watt.
As Tom had mentioned, we created 46 cents per watt and residential value in the fourth quarter 'twenty.
And on driving initiatives to enhance project economics, and improved business mix to significantly increase the residential value creation for sunpower.
You are of very strong fourth quarter EBITDA run rate going into 2021.
While our business is seasonal with the stronger second half performance compared to our first half.
We have done significant work in 2020, improving linearity.
We expect of profitable first quarter 'twenty, one for both of our businesses. The C&I will be less linear given its longer project type of day.
Political metrics that we made out of capital markets, great tracking well with services pipeline that include future revenues from asset management services grew sequentially and was $637 million at the end of fourth quarter, giving us confidence in achieving 2021 the revenue.
Good.
The traction in storage that Don mentioned earlier, not only add incremental margin to the system, but along with investments in digital sets us up well to build out recurring revenue streams.
So in order to improve transparency for the investors were now disclosing sunpower share of net retained value residential leases for the quarter on net retained value was $211 million and ahead of forecast.
Given increasing strength of our balance sheet, we are committed to loading the residential cost of capital from the current the 6% mentioned in the last earnings call as well as we look to increase a shade on project economics going forward.
Finally, we ended fourth quarter with significant strength in our balance sheet with materially reduced net debt driven by business unit gas generation and a successful tender offer for 'twenty and 'twenty one can book.
Head of capital markets day targets.
We expect continued cash generation from our business units through 2021.
Given our balance sheet strength and cash model, we expect to further invest in initiatives to expand on total addressable market in 2021 and be on build out of digital and software strategy to enable future services, while expanding our platform reach to a wider partner and customer base with.
I've done the gone back to them, but our guidance call.
Thanks, Marni, please turn to slide 12.
The company's first quarter and fiscal year 2021 guidance is as follows.
First quarter, GAAP revenue of $270 million to $330 million.
GAAP net loss of $20 million to $10 million.
And megawatts recognized of 115 to 145.
As we stated at our capital markets day, we expect to be non-GAAP profitable every quarter in 2021.
We see first quarter adjusted EBITDA in the range of $10 million to $20 million.
For fiscal year 2021.
Given the confidence in our business coming into the year.
We expect to see a stronger performance than we forecast the the other 2020 capital markets Day company now expects GAAP revenue growth of approximately 35%.
The megawatts recognized growth of approximately 25 per share and adjusted EBITDA at or better than our previous indications at our capital markets day of last year.
Finally, given strong industry tailwind continued continued federal policy support as well as increasing demand for its residential and commercial storage solutions. The company expects revenue and adjusted EBITDA growth of more than 40% in.
In 2022.
In summary, Q4 was a solid quarter from the company and we remain confident that we are well positioned for success for 2021 beyond.
With that I would like to turn the call over to questions.
As a reminder to ask a question you wanted the press star one on your telephone to withdraw your question press the pound key.
The standby, while we compile the Q&A loss share.
Our first question comes from the line of Brian Lee from Goldman Sachs. Your line is now open.
Hey, guys. Thanks for taking the questions.
And kudos on the on a solid quarter and year end.
Maybe first on the.
The guidance I wanted to just try to squeeze something up I know you guys of raising the revenue view versus the capital markets day gross margin it sounds like they are doing better as well.
On slide six it says youre going to do three times the EBITDA in 'twenty, one versus 2020, I guess that implies something like $120 million.
But you had talked about of greater than 10% EBITDA margin in 'twenty, one of the capital markets day, I would assume that's still intact, if not even going higher given the gross margin view on revenue here. So can you can you kind of square square that up why the.
Adjusted EBITDA margin growth would it be better than that given the 10% deal or is that is there something changing on the margin target there.
So I'll say, a few words and I'll, let manu comment.
On the.
It should square up on <unk>.
So we appreciate the question on as you know really late in the year, we got the on.
Investment cash credit extension and so we got the sort of positive impact of the step down in 2021, I'm sorry 2020.
But then it was extended show.
On theirs.
The impact of the extension is not favorable to both revenue and earnings in on.
2021, but it is a sign of the strength of our business, we're actually thinking of would be the same or better and that gave us confidence to give color on 2022 in terms of the comparison of margin and EBITDA as a percentage of sales monitored your amount of content.
Yes, I think Brian the way to think about it as book on.
Megawatts growth.
And revenue growth is better than.
On implied guidance at the capital markets day on.
Gross margin is also stronger specifically on the residential business. So the gross margin rate should be better than.
What was what you did I hear that from the capital markets day of metrics.
And that should translate into a stronger EBITDA performance.
We can clean up the specifics on the call back.
Yeah, Brian I would only add.
But there is some level of incremental opex investments for 2022, because we do have the.
The ITC extension, so theres, a little bit of incremental investment and paused some of our marketing further R. L C channel.
And the Canadian solar.
Effort on.
Going into 2022, so there's a little bit of impact from that.
Okay fair enough I'll take that offline just to kind of square up the numbers.
And then just second question I'll pass it on after this the.
The new homes opportunity in California, you guys have obviously been very.
Pioneering in terms of leading that vertical can you talk.
A bit more about sort of the visibility here for 'twenty one.
In the midst of kind of of the ongoing pandemic has that impacted that opportunity at all and then with respect to the synovus Lin our announcement today just wondering what are you working with Linda or at all and do you have anything exclusive of near homebuilder relationships or could you see of similar arrangement with any of your partners.
In that channel.
In the future have you contemplated something to that effect at any point thanks guys.
I'll start the in terms of this question and then I'm going to hand, it over to norm.
And just say a few things.
First visibility is great it's inherent to the channel.
And were they have such long term relationships from 18 of the top 20 filters that we benefit from that in terms of visibility, but I'll, let norm give any specifics there.
Hats off to Sunoco.
And on our from their transaction.
We do not do business with them we did.
Conception, Mike 10, or 15 years ago.
But there is no business today. So there is no business launched.
And.
Hi.
In terms of exclusivity with 18 of the top 20 builders from returned to norm for any specifics.
Comment on visibility.
Yeah, Thanks, Tom Yeah.
Just to Echo what Tom said as Tom mentioned, we have.
18 of the top 20 of builders, while one of the two that's not in the 18 of course has been lennart. So we have not on business. So we don't expect it to impact our business at all on the fact, our new homes business is growing at a terrific clip, we indicated we have record backlog and interestingly.
Right now we're on pace in Q1 to set of bookings record, which is very unusual for what is usually a seasonally weaker quarter and new homes.
Actually expect this quarter to end up at of bookings record. So so that business is accelerating with US we don't have exclusive arrangements with our dealers I think.
Our strength in that business frankly has been 10 year relationships with the top builders who are.
Absolutely confident that Sunpower is going to deliver on time and execute this is very much an execution of installation as well as the sales and product business.
So we've always been very successful because we built up those relationships. They also love. The fact, we have a very.
Very high efficiency panels, so we need less panels per roof and now they are quite interested in adopting sunbelt per storage and solar.
So we remain very very bullish.
In the new homes business have excellent visibility to it and expect it to outgrow our overall business in 2021.
Alright, thanks, guys.
Thanks, Brian Thanks, Brian.
Thank you. Our next question comes from the line of Michael Weinstein from Credit Suisse. Your line is now open.
Michael Weinstein from Credit Suisse. Your line is now open.
Yeah.
Please check me on you guys, sorry about that I was on mute.
Hey.
Sorry about that hey in the near.
The profit on your EBITDA growth for 2022, what are you assuming in Sun's strong cost of capital assumptions regarding discount rates were a lease value on profit per watt.
Okay.
Maybe may need a little more.
Clarity there.
On Monday, when it goes straight to it yes.
Yes sure so.
Michael I view as we communicated in the last.
Earnings call on residential cost of capital is 6%, Florida of leases and then we have of favorable cost of capital of four loans has been specifically answering your.
Question regarding Samsung slight improvement on cost of capital going in from 'twenty. One 'twenty. Two I think you will see that improving cost of GAAP across our financing products for both leases and loans and that should bode well for on margin and also in fact.
We believe the mix of.
Between equipment sales and finance going on as you think about the modeling assumptions between 'twenty, one and going to that gives us confidence on increasing on.
EBITDA greater than 40% going into 2022.
Michael Let me add on that.
Pause on mute first Brian.
On froze on.
The <unk>.
On <unk>.
Prove cost of capital.
Is not a significant variable going into 2022 and is not necessarily driven by what we expect rates to do but it's fine.
The actual performance of our leases and loans and further working with our partners to pull out redundancies and cost.
Friction some friction that still exists.
But it's not significant.
Significant variable.
Alright.
Just are you seeing any kind of module constraints on the 180 megawatts of on new home demand on the back.
Log demand.
I guess, it's more of a mass channel question, but just curious if there are any constraints on that especially given the China labor issues.
Yeah the I'll.
I'll make a quick work from their cancers now.
And on.
On.
That's.
One of the advantages of the ROI relationship where you have.
Remember that most of our modules are made the solar cells are made in either of the Philippines from Malaysia and assembled.
In Mexico.
And.
We're in good shape.
Right, but I mean, youre not seeing them.
Okay, I guess of growing demand for non western China module right.
Oh I see on me.
God there is an element of that on.
But the minimal impact on us and so you probably get.
More color on that when you talk to the May actually on book.
Got you.
Okay. Thanks, Jeff.
Thank you.
Okay.
Thank you. Our next question comes from the line of Ben Carlo from Baird. Your line is now open.
Hey, Thanks for taking my question on good evening guys.
Good afternoon, so just on the digital and product.
Investment.
The it stretching back.
The until last year and then throughout this year is this something that the.
We should view as recurring and I apologize if you said this in the Eagle.
How much of the investments should we think of bell.
On that line and then I have a follow up on.
A bigger issue.
Okay Ben.
I'll give a little color on I think norm and money may want to say something as well in terms of the amount of spend.
Yes, it's recurring but we expect it to.
And become more efficient so a lower percentage of revenue on <unk>.
Return on investment we made when we think of digital bank.
Customer tools, obviously, that's monitoring on.
And the App that they have and then think of extensive dealer tools.
As well and of course commissioning commissioning of the solar system in of the.
The storage system, just give some color on.
Net investment goes back probably more like four of five years.
As we've evolved.
Norm you could take it from here and give some sense of scale and whatever else you want to cover.
Yeah, I think the.
As you said I think we've considered you can see it consists of investment going forward in there, which will be as we grow the percentage basis go down.
And the digital tools, we think are core to what makes us different as well as our product solutions. So you know obviously some bolt on the complete solutions, but also the.
The digital tools, it's important to emphasize a lot of those enable our loan and lease products.
Not just offer a tool, but our dealers and our customers can use.
But the one of the key things that really.
Allows us to provide complete solutions to our dealer channel and to the broader marketplace.
The overall.
Great and my follow up question, Bob I think if I heard you say that.
You guys will possibly because of your balance sheet and maybe because of your stock price maybe charles of that debt.
Of that matters that youre going to take more of the economics of.
The lease and low going forward could you just maybe expand upon that a little bit. Thank you guys.
Thanks, Ken.
Yes so.
Yeah.
I think the.
Maybe the best way to talk to that is.
If you look at our slide eight that Bob.
About the residential value creation.
I think what Youll see is.
With the with the.
Improving economics in on.
The leases and loans, we are seeing improving profitability through the year as you can see debt on the beach and you compare that to the.
The value creation coming from on cash product I think the in.
And mix between the two allows for.
Creating greater customer value, but also creating greater value for sunpower and thats the impact on mix between just equipment sales and finance systems normally you'd like to add anything.
No I think that I think the main driver is just the the only I would say is the main driver of the improvement is the fact that we have much better both lease and low on economics that really just impacted Q4, and 2020 really for a full year as our cost of capital is coming down and that really drives.
Or it's still cash based economics, but it is getting better and better for lease and loan because of the blur.
The foundation is much better from a cost perspective, so so its not about keeping some of the assets on your balance sheet versus Nokia of them on their balance sheets.
The per se.
Let me take that non.
So I think with the <unk>.
I think on interest is twofold, one is to provide the maximum value to the customer and Keith and keep customer of controlling and second is improved.
Our share in the project economics, and I think what.
Our strong balance sheet does is it allows us to play in.
Different structures that allows us greater flexibility in doing both of the teams I described while reducing the cost of capital that sort of good balance sheet desktop on us.
Great. Thank you for that clarification.
Thanks, Bob.
Thank you. Our next question comes from the line of Julien Dumoulin Smith from Bank of America. Your line is now open.
Hey, good afternoon. Thanks, guys I appreciate the opportunity listen I'd love to hear more about the storage ramp here you guys talked about it several times because of their prepared remarks, but really.
Emphasis on on availability and just being able to execute given the constraints in the inventory channels et cetera, I would love to hear a little bit more on that.
Also the the front of the meter comment you guys made as well on helix.
Okay, Julien Tom wondering here.
I'll share a few words, and then turn to norm and then I'll come back on front of the meter we.
We do have Eric Todd show he may share a few words as well.
There's various elements demand is great.
On on outstripping supply second supply.
The good I'll, let norm go into detail third its installation labor we're ramping.
Training.
And we're able to hire a sufficiently.
Sufficiently.
On that sort of.
On.
A broad overview on Normandy should take it from here.
Yeah happy to we are still on the in the upfront ramp phase, but as Tom said demand is very very strong.
We are managing the supply chain stuff very closely on watching closely right now we don't see that limiting our ability to hit our plans this year and the.
$100 million of income or revenue that we talked about on the call. So we still think we did that although most of that.
The demand is of course at the back half of the year as far as the growth plan goes. So we are watching that closely right now everything.
Looks okay, but it's it's got the attention certainly of our supply chain organization right.
Right now.
Our demand is strictly been California's farnsworth of installing we've just opened up sales outside of California. So we <unk>.
That to be another driver of growth and then importantly later in <unk>.
Starting in second quarter will actually released the ability to sell sunbelt to our installed base right now its only sold with new new installations.
Be it either new homes or retrofit customers, but starting in Q2 actually also be able to attack our installed base with sunbelt. So.
So so far so good the feedback from the dealers and the customers is excellent we're still at the early part of the ramp.
The product itself is being extremely well received.
And just quickly on front of the meter storage all shades of really short a few words in terms of terror thoughts on we.
Started our helix storage three years ago on.
Our software is working great.
And we have a strong now strong behind the meter business.
Is the synergies with front of the meter and all of my error dimension of a little bit.
Sort of thanks, Tom.
Our origination on development platform really allows us with our helix technology to be able to attack the front of the meter market, which as you saw on the Tam slide is sizable.
We have about 25 megawatt hours under contract right now, which you plan on building in 2021, and active and growing pipeline of over 400 megawatt hours. So it's an area where we feel like.
Our personnel and our software enable us to enter that market quite competitively.
Right excellent just a quick clarification guys on the last couple of here on the.
The the drive to 65% you guys have talked about.
How exactly do you do that in terms of your go to market strategy you just elaborate on this.
12 months target.
Oh sure. So norm the question is on.
A shift in mix too.
My own.
And Lisa and the one thing I'd say and then on when it turns the norm is we're actually writing with the current.
On 70 plus percent of the market is.
Cash and loan.
And loan economics have improved dramatically I'm going to turn it to norm noted at the expand on that of a little bit.
Yes.
The biggest thing there is we continue to see even with the ITC extension, even more momentum moving toward loan and then we've introduced some very attractive loan offerings in the past I can give.
I'll give you a hint there'll be more of those coming very very soon more announcements in that area low APR loans that really give the customer tremendous economics versus.
Any other alternatives. So that's certainly shifting our volume we're also working to expand R. R.
The capabilities of our platform and to push and to essentially make it more economical for our dealer channel to use our lease and loan products going forward, we're making those are becoming more and more attractive we still get better economics, but we're also making sure it's more attractive for our dealer partners too.
To finance the whole solution through us and that's a concerted effort that we've really started mid last year.
Our economics got so much better for our finance products.
And we expect that trend to continue.
It also reflects the growth of things like new homes, where you have a big portion of the market as being the kind of the full stack market with lease.
Already.
And so we've already that also contributes to the to the growth in the finance portion of our business.
Awesome, Thanks, guys best of luck.
Thanks, Sheila asked Julien.
Yeah.
Thank you. Our next question comes from the line of Jeff Osborne from Cowen <unk> Company. Your line is now open.
Yes. Thanks, so much I just had one follow up on the in front of the meter who actually owns of is it kind of the corporate customers are you retaining those on balance sheet.
Submitting them into different ISO programs can you just flesh.
With the business model is there.
Sure Eric can you take that.
Yeah, I'd say, we're still assessing the business model our pipeline as our mix of approaches primarily the ones or the ones we have under contract right now.
Not sunpower on the customer owned facility.
Got it and then Tom can you just touch on the C&I visibility for the guidance for the year is that fully booked at this point or it looks like youre getting off to so let's start in Q1, but it wasn't true after the strong Q4, how do you think about the momentum through the year.
Yeah, Yeah I appreciate that on.
So we actually had a really strong bookings year in 2020 and ended the year on.
With our best booking quarter of the year and probably the best booking quarter quite a while.
I don't remember the exact percentage going into the year, so I'm going to turn to Eric for that.
On it's more of the.
Since this is the projects business its more timing of projects and we've seen this profile the last few years.
Joe It's mostly of profile, we're comfortable with and I think it's important that the economics of the business sort of sustained even though we've got the sort of the ramp throughout the year Eric.
Per cent background.
Yes.
Roughly three quarters, 75% and backlogs and the remaining 25% have been awarded and it's now a matter of signing and then constructing those projects.
Got it. Thank you that's all I had.
Thanks, Jeff.
Thank you. Our next question comes from the line of Philip Shen from Roth Capital. Your line is now open.
Hi, everyone. Thanks for taking my questions had some follow ups on the loan product.
Sunlight and in loan power has been out there for a while and I know you guys launched this.
About six months ago.
You are having some success can you talk about what percentage of your dealer base is using your loan product.
And.
I would expect that the trend going forward some of our deal with the check suggests no. The dealers are comfortable sticking with low and Pal.
Sunlight so.
The economics with your loan offering relative to theirs.
From our conversations sounds like it's similar so.
And then there's us.
Possibly some challenges with the on.
New launch and so forth. So just curious how how do you guys get.
When the business and get a greater mix of the dealer base on to the loan product.
Nor a bunch go ahead and take care directly.
Yes for sure.
Well.
More than half of our dealers use our loan product in some level and so there is opportunity to get more of that but we have very very good penetration in our dealer channel already with their loans and.
And part of that is really one having a good product offering and with the addition of TCU, we've broadened our offerings significantly with low APR loans et cetera, which is has really helped.
And part of it will be continuing to improve that to take more and more of that share, but also part of it is the.
Being able to ride that entire servicing of unified platform, that's a lot of where the digital investment goes.
Giving our dealer channel of the opportunity to offer customers, whether it be cash loan or lease from the same environment be able to do a single credit check too to address and choose which of those options to make the best sense for them on the more we can provide them an easy path to two.
Solving the customer's problem manned.
The customer of the options they want the better off we are and so that's a huge effort for US is to continue to focus on the digital making it easier and easier to do business with us and offering more and more products in both lease and loan.
To increase our share of debt financing business, but it is already.
A significant.
We are already of significant supplier of loans.
Two of our customer base.
Great. That's really helpful. Norm. Thanks, Ken can you help us understand if you're in.
Over half of the dealers what percentage of your loan originations.
Of the dealer loan originations is.
On the TCU Sunpower.
Product and back.
Back at the capital markets Day, you guys talked about on <unk>.
Five cent per watt improvement and your target by the end of 'twenty one.
It sounds like you guys might be making good progress to that.
Help us understand if youre still on track for that and perhaps where you are with the goal of hitting 25 cents per watt.
Now let me take the second part first we're well along the way I would say we're ahead of our plan on delivering that incremental.
Margin per watt I will tell you that the.
TCU percentage of our business has exceeded.
The non our expectations and so as far as the living on that incremental we're very very well along and I think we will.
Probably hit that earlier than we anticipated next year.
On your first one on honestly I would have to go get that number I don't know off the top of my head what the percentage of what I guess, you would say that the low on Tam and our dealer base that is using our loan.
I just don't have that off I, just know the kind of the broad number of dealers using but I can.
We can follow up on and get that that data I, just I don't want to make something of I don't know the number off top my head.
Okay. Thanks norm just as another follow up here.
As it relates to the lease offering you guys gave that 40 cent per watt goes back at the capital markets Day. How are you guys. There are you making.
Healthy progress on that goal and.
Can we have a quick update on that as well thanks.
The normal take that and he's going to say probably very similar.
Yeah, Yeah, Yeah for sure, we're making great progress similar thing the lease.
Once you improve your lease economics takes low longer to flow through the pipeline because lease has a longer cycle time, but we already in Q4, starting to see the impact of much better lease economics.
And again I would say.
We were a little bit on the conservative side, there relative to what we're able to.
To garner our lease economics has.
The most dramatic improvement of all three of our platforms over the last year as far as versus where the where which of course of what we're forecasting and were well along delivering that improvement.
That was forecast.
Great Alright, thanks, Robert.
Detail.
Thanks for all of Okay. I appreciate it we're going to take two more questions Alright, questioners and we're going to try to do it sooner of widening ramps or we hit a timeframe for everybody show next question. Please.
Thank you. Our next question comes from the line of Kashi Harrison from Simmons Energy. Your line is now open.
Good afternoon, thanks for taking the questions I'll keep it quick.
First one on operating cash flow Manu during Q4, you generated CFO of call it $15 million relative to adjusted EBITDA of $39 million.
Given us a ratio of just under 40% just wondering how we should think about the ratio of between operating cash flow on EBITDA guidance for 2021.
Yes, so I think as you.
As you think about our fourth quarter.
Operating cash I think the.
The one of the number at that point you to is on two operating businesses.
On the residential business and the C&I business generated about $35 million of operating cash.
That is a much higher percentage of the EBITDA that these two business generated in the fourth quarter. So what I would do is I would beg debt ratio.
And both.
Both businesses should be seen improving.
Cash performance from EBITDA to cash translation.
And I would use debt.
The way to get to working capital metrics for 2021 on operating cash conversion from from EBITDA.
Got it that's helpful. And then my second question. So some of it looked like Q4 megawatts.
Recognize we're a smidge down a smidge under the midpoint of guidance I was just wondering if you could talk about maybe the GAAP between actuals on expectation and then looking towards Q1 I was hoping you could help us break up.
The megawatts into residential light commercial and C&I.
Just try to think about that split between the three business lines in Q1.
Sure.
The comment I'd make on the megawatt.
The number for fourth quarter is on commercial business.
Has the mix of project so.
Some of that Mega Watt variance to the midpoint was driven off of that I would point out that the book the businesses. The extreme you then from a gross margin and EBITDA perspective.
That resulted in a above above guidance.
EBITDA and in terms of on.
The megawatt.
For our first quarter.
The breakup between.
To ensure light commercial and C&I as of about 80, 515, and I would say the.
The light commercial part of the residential businesses between 25% and 30%.
In line with Okay. Thank you.
Horizon last questioner please.
Thank you. Our next question is from the lineup of Al One channel from Raymond James Your line is now open.
Thanks for taking the question first just quick housekeeping net retained value was barely up during 2020 and the reason for that.
Manav, so yeah I can hop on to that I think.
As you look at the disaggregated the numbers between fourth quarter.
The 19 in first quarter 'twenty the.
The I realize some cash out of the portfolio.
<unk>.
For Sunpower and that reduced the retained value.
That number went up from first quarter 'twenty to the end of fourth quarter.
So you can see that increase from start of the year to the end of the year.
So the the year on year variance was driven by us extracting cash from the portfolio in the first quarter 'twenty as you look forward to next year, we should be in the in the.
The $250 million range in line with what we had committed of the governor of market.
Okay.
Slightly broader question you alluded to the lack of demand pull in the share because of the ITC extension day.
Do you anticipate demand pull in re emerging in 'twenty two.
So on of course that happens in the at the end of the year. So at the end of this year on.
And on I.
I would say frankly, I'm optimistic that the ITC would be further extended.
At 26%.
And I think theres early discussions of.
That being part of an infrastructure Bill on later this year and there's also already been proposals.
On that give us something to focus on.
As we look to 2022 now we did build items.
Thank you very much.
Alright. Thank you so much we appreciate everybody calling in thank you for the questions and we look forward to our next call with you have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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