Q1 2021 SunPower Corp Earnings Call
Welcome to the Sunpower first quarter 2021 results Conference call. My name is Vanessa and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session during the <unk>.
<unk> on an answer session. If you have a question. Please press Star then one on your Touchtone phone. Please note that this conference is being recorded I will now turn the call over to Mr. Bob Okonski.
Thank you I would like to welcome everyone to our first quarter 2021 earnings conference call.
On the call today, we will provide a summary of the quarter on.
Our view on 2021 as well as an update on our growth initiatives for 2022 and beyond.
On the call today is Peter Pharisee CEO of Sunpower, who will open the call followed by Tom Warner Chairman of the Board, who will discuss our Q1 execution and mono Sial CFO, who will review our first quarter results before turning the call back to Peter 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 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 also posted a set of Powerpoint slides, which we will reference during the 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 Peter Pharisee CEO of Sunpower Peter.
Thanks, Bob and good morning to everyone. This is my first earnings call here at Sunpower and I'd like to say that I'm thrilled to be part of the Sunpower T y.
While I've only been on board for a few weeks I'm very impressed with what I've seen so far.
Sunpower has a long history of technology, and innovation, which has allowed us to offer the best solar solutions of the world.
My goal is to build on that history, with new innovations and customer and digital experiences.
In addition, we have of workforce comprised of bright talented and passionate people who are on a mission to change how our world has powered eye.
I believe we can accomplish amazing things going forward.
My focus over the next 100 days will center around diving deep into the residential and commercial and industrial businesses.
We're going to start with the needs of our customers and work backwards with the goal of earning and keeping customer trust.
Finally, I'd like to thank Tom Werner for his passion and commitment to Sunpower over the last 18 years, given his hard work and tireless dedication Sunpower now has a strong foundation for future growth as evidenced by our first quarter results and is well positioned to continue to change.
All of the world's powered.
I look forward to meeting all of you and I'd now like to have time to discuss the results of the first quarter Tom.
Thanks Peter.
Before we get into the specifics of the quarter I would like to formally welcome Peter of Sunpower as <unk> New CEO.
Peter comes to us with significant background, creating exceptional customer experiences and rapid growth environment at both Amazon and discovery Peter.
Peter skills fit uniquely with Sunpower is innovation heritage and per.
<unk> driven culture.
Moving on to our Q1 results overall, we continue to execute on our strategic priorities during the quarter to position the company for success in 2021 and beyond.
We are confident that our continued investment in our growth initiatives and strong financial foundation position Sunpower for long term profitable growth.
Please turn to slide three.
We were pleased with our execution in Q1, as we met our revenue and EBITDA guidance strong saw strong bookings momentum in both of our residential and commercial businesses, while further investing in our growth initiatives.
Specifically, we saw a continued strong residential customer growth as we added 12000 customers, bringing our installed base.
Almost 365000.
As well as seen solid execution.
The execution.
We expect this trend to continue as the overall residential bookings rose more than 30% year over year, because we are benefiting from strong demand and positive industry tailwind.
Commercial demand remained healthy as well as megawatts deployed rose more than 30% for.
Or is this last year, and we had an exceptionally strong bookings quarter year.
Year over year unit economics improved as well as company gross margin reached 60% gross margin dollars compared to Q1 last year.
Additionally, we further deleveraged our balance sheet through the early repayment of our $30 million seat alone book.
Looking forward, given the improving industry trends executing on our strategic growth initiatives to expand our addressable market.
And favorable policy support we continue to expect 2022 EBIT growth to be more than 40%.
As we discussed last quarter, we see significant growth opportunity to drive long term growth through the expansion of our addressable market.
Now I'd like to highlight highlight how we are successfully executing on our expansion initiatives. Please turn to slide four.
First we continue to look at ways to expand our current DG market through storage and services.
And addressing additional market segments like multifamily.
Portable housing.
Second.
Capitalizing on increasing demand for off site for one of the meter storage solutions.
Through continued investment in our helix platform, we now have more than 20 megawatt hours of front of the meter projects under contract with more than 400 megawatt hours in our pipeline.
We are investing in our helix software platform to expand capabilities for front of the meter solutions.
Third we made significant progress on expanding our <unk> services platform to support the extension of our servicing platform to Sunpower of Islands also.
So in conjunction with Hannon Armstrong, we plan to add commercial asset portfolios to Sunshine.
Finally, we continued to invest in those initiatives that will enable us to expand our footprint into the long tail.
Solar market.
I'd now like the shift to the performance of our individual business segments. Please turn to slide five.
Our residential and light commercial segment continued to outperform.
As momentum builds in this business gross margins for the quarter were 22%.
780 basis points year over year.
As we discussed last quarter, we put in place on a number of initiatives.
We expect to shift our cash mix overtime.
To more financing full system sales versus cash equivalent sales.
These efforts include expanding our loan partnership with TCU.
As well as new lease financing programs.
We're already starting to see start to this shift in Q1, it was 55% of our volume with system sales compared to 50% last quarter.
We also saw solid year over year.
Growth in residential value creation as this metric rose to 41.
From 25 cents in the first quarter of last year.
New home sales also performed well as year over year megawatts grew 50% with record bookings, resulting in the current backlog of more than 200 megawatts, which now includes our multifamily homes initiatives.
Our market share remains above 50%.
We also remain bullish about the future of our simple storage solution as demand remains high for the quarter. We continued the ramp of our dealer channel is we now have close to 1000 individuals who have completed some vault training.
We saw consistent attach rates of 20% in California, and the substantial increase in bookings outside of the state.
Our annualized April bookings run rate is approaching $50 million, we expect to reach 100 million of bookings run rate before the end of this year.
However.
Installation on lead times have been longer than expected due in part to efforts to improve our install firmware and the commissioning customer experience.
We are highly focused on shortening the regionally times the <unk> returning closer to expected levels by the end of the second quarter.
Finally, we are working on several new product features for the second half of the year, including the ability to combine multi multiple sun vaults.
For larger system sizes as well as expanded.
Compatibility with legacy Inverters for our Standalone storage efforts.
I would now like to discuss one of our key strategic initiatives to expand our addressable market for the long tail by leveraging our robust financing platform. Please turn to slide six.
We view of the long tail is dealers who have.
Annual average install volume of less than one megawatt and currently makes up 70% of the residential market. This is the significant growth opportunity for sunpower, given our indirect channel experience and ease of natural extension of our current model.
We are evolving our shop for software platforms to enable the services for this group of dealers as well.
Currently 85% of our 500 dealers install of less than one megawatt and we see a significant opportunity for growth by increasing share of accounts at the Steelers.
We are also exploring various partnerships to expand our reach to a wider dealer network.
These partnerships will enable us to lower our customer acquisition costs, while offering the potential to expand into adjacent markets.
Moving on to <unk> on slide seven.
Our <unk> solutions.
The segment also performed well and we remain excited about our growth prospects for this business, especially in storage.
For the quarter, we continued to see strong demand trends as we added to our significant backlog now above 275 megawatts of solar as well as more than 250 megawatt hours of onsite storage projects under contract are awarded.
We've also significantly improved the financial performance of this business given the initiatives, we put into place last year.
On a year over year basis, we saw a material improvement in revenue and gross margin, while continuing to build bookings momentum.
Additionally, we are making strong progress on our commercial growth initiatives.
<unk> expansion of our off site.
Storage efforts for front of the meter and community and the community solar market.
We also see two distinct parts to how we approach our commercial business.
Origination and development.
Leveraging our storage and services platform.
While both offer significant opportunities ultimately over time.
We expect storage and services to become a much greater focus of our <unk> business.
Please turn to slide eight.
For origination of development.
Half for key areas of focus first.
<unk> on to expand our origination pipeline as demand for our industry, leading helix solutions.
Continue to grow.
The trends remained strong and we expect to maintain our market share leadership as our pipeline now exceeds towards the 75 megawatts.
Second.
Our focus remains on improving profitability through better project execution.
On increasing helix storage installations.
Third we continue to add to our community solar pipeline, which now exceeds 115 megawatts.
Finally, we are continuing to work with the financing partners to reduce risk proof of linearity for betting better working capital management.
We also.
Significant progress in relation to our storage and service initiatives during the quarter.
We remain the leader in behind the meter per onstage onsite storage with more than 125 megawatt of megawatt hours installed and under contract.
Our investment in Offsite front of the meter solutions to expand our Tam is also of paying off as we now have 20 megawatt hours under contract with more than 400 megawatt hours either awarded for short listed.
Finally, we are increasing our investments helix storage software to bring more capabilities to our front of the meter storage offering.
Overall, we remain very excited about the opportunity in C&I going forward with.
With that I would like to turn the call over to monitor C. L.
Foe of Sunpower Manav, Thanks, Tom <unk>.
Turn to slide nine we have provided our consolidated financial results and select metrics.
We are pleased with our financial performance for the first quarter, we have the significantly improved EBITDA compared to first quarter 2020.
And on executing on our balance sheet improvement ahead of plan.
We had a strong execution in both our segments as the meta of megawatts recognized revenue and EBITDA guidance for the first quarter.
The residential saw strong bookings growth of 25% in the first quarter on continued strong demand with CNS solutions bookings growing 50% year over year.
Visibility for the balance of the year, the strong and we are well positioned with the strong run rate going into the second half of 2021 and expect this trend to continue in 2022 and beyond.
Consolidated non-GAAP gross margin and debt was 42 cents per watt and up more than 50% from 2007 per watt in the first quarter of last year.
Residential gross margin for what was <unk> 65 per watt driven by improving mix towards food systems and lower cost of capital.
Non-GAAP Opex for work with 30 <unk>.
And if you exclude on investments in digital and product, which we see as more capital deployment, rather than Opex Opex Boardwalk was 2007.
For 2021, we've got however, increasing net investments in digital and product for qui Tam expansion initiatives at the front of the meter storage debt.
Could help improve long term value creation for Sunpower.
Outside of the as the customer and that focus helps us grow long term revenue streams.
First quarter services pipeline is at $644 million and ahead of our capital markets day expectation.
You've also made the decision to build out diverse it into loans servicing capabilities.
This is a natural extension of our already successful residential lease servicing organization and will contribute to further improving our margins on our loan product and drive an increase in long term customer value.
We are also expanding the scope of the Sun's strong joint venture to include the first set of commercial project portfolios.
This would not only increased the net retained value attributable to sunpower from such strong, but also expand our services pipeline.
Finally, our business units generated cash.
Seasonally weak first quarter and on net debt is down 50% from value in April the further strengthened our balance sheet as we rebate on <unk>.
5% interest see the alone ahead of our capital markets day target.
I would now like to spend a few minutes on value creation, which we see as a key indicator of the performance and trajectory of our business.
Belief this metric captures the impact of all of our initiatives and provide the data point that is more comparable to our competitors.
Please turn to slide 10.
Value creation is defined as adjusted EBITDA of our residential and commercial business units.
Excluding any products and digital investment plus Sunpower is share of net retained value.
We have provided details of the digital and product spend in the appendix, which few view as GAAP spent for lowering customer acquisition costs and driving long term customer value.
In 2021, we expect approximately 65% of the spin to be on digital and product programs and the balance of the infrastructure spend that will not scale with the growth of the business.
As you can see from the chart, we expect the essentially doubled the value creation in 2021 compared to 2020 and approximately 90% of the value creation is driven by day, one cash margin.
The significant growth expected in residential revenue and margins in 2021 makes it a greater contributor to sunpower value creation compared to its percentage of megawatts recognized for this year.
Given the residential is the fastest growing part of our business.
Expect this trend to continue beyond 2021.
We also expect the residential value creation on of Boardwalk basis to further increase in 2021 and beyond.
Shift to more full systems and loading of cost of capital, which is now below previously communicated 6%, thereby.
<unk> the significant increase in value creation in 'twenty, two and beyond with that I will turn the call back to beat up on our guidance Peter.
Thanks, Bob.
I'd now like to discuss our guidance, please turn to slide 11.
For the second quarter, we expect continued strength on our residential business with Q2 residential and light commercial volume growth of approximately 20% sequentially and over 50% increase versus prior year, partially offset by the timing of certain project milestones in our large commercial business, which is expect.
To be in line with Q2 2020 results.
Specifically, we expect second quarter GAAP revenue of between 295 to 345 million.
GAAP net loss of between $12 million to $1 million and megawatts recognition between the 120 to 150 megawatts.
Second quarter, adjusted EBITDA will be in the range of $16 million to $27 million as linearity has significantly improved in the first half compared to the previous two years.
For fiscal year 2021 of our guidance remains unchanged with 2021 GAAP revenue growth of approximately 35% megawatts recognized growth of approximately 20, 25% and our adjusted EBITDA guidance remains unchanged.
We continue to see margin strength on our residential business, given our improving mix and visibility into our commercial business continues to improve.
We have therefore made the decision to increase our investment in digital and products for qui Tam expansion initiatives like front of the meter storage that will improve the long term value creation for sunpower, while still maintaining our 2021 forecast.
We continue to see strong industry and policy tailwind.
As well as increasing demand for our residential and commercial storage solutions, which will drive expected adjusted EBITDA growth of greater than 40% in 2022.
Before I turn the call over to questions I'd like to briefly discuss a couple of the positive tailwind we see for 2022 that we see as incremental upside to our current forecast.
First is how we are best positioned to capitalize on the Bayou Harris, the administration's recently announced infrastructure plan.
For more details on that please turn to slide 12.
On the left side of the page we highlight what we believe are the top renewable initiatives on the plan as well as the proposed funding for each.
Based on this we see incremental market opportunity of more than $225 billion.
The biggest opportunity for Sunpower is the benefit of of long term ITC extension, which we see as a strong catalyst in driving continued cash and loan demand.
Second we are well positioned for a standalone storage ITC given our approximately three gigawatt installed base in residential and commercial while potential refund of ability, we will help our light commercial business for the most.
Finally, we see a tremendous opportunity in the federal building mandate given our leadership position in this space as we have installed more than 150 megawatts over the last 15 plus years.
We are also best positioned for the education sector mandate as we remain the market leader in the space also with more than 150 megawatts of installed across close to 40 school districts.
I would also like the highlight some of the areas, where we see tremendous future opportunity.
Please turn to slide 13.
Over the last 24 months, we have fundamentally changed sunpower from a vertically integrated global solar provider to a more focused profitable cash.
Cash generating distributed generation energy solutions company, while Delevering, our balance sheet and growing our industry leading installed base.
At the same time, we've continued to invest in those initiatives that we feel offer the greatest growth opportunities Tam expansion, our digital financial and services platforms as well as looking to adjacent markets for future growth.
As we look ahead, we remain excited about our future.
Growth of renewable energy in the end will be driven by making solar easy reliable and affordable.
We believe our exceptional customer service and digital innovation will lay the foundation for future growth.
With that I would like to turn the call over for questions. Thank you.
And thank you we will now begin our question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the queue. Please press the pound sign or the hash key if youre using a speakerphone you may need to pick up the handset first before pressing the numbers one.
Again with your question. Please press Star then one and our first question comes from Ben <unk> with Baird. Please go ahead.
Hey, good morning, everyone.
Tom.
It was calculated I think the slides.
The.
The quarterly call with you of 56.
So thank you.
Uh huh.
Peter.
The.
Just given your background and take it over.
Amazon discovery.
How do you see the.
The matches up with Sunpower what are the differences.
Do you see the changes in the current model.
The current book of.
Smaller level of question.
Good morning, Ben and thanks for recognizing Tom isn't.
Incredible 18 year career has laid the foundation for.
For all of Us and were so.
So excited as we look forward, it's an honor to be the CEO of Sunpower and.
From a personal standpoint. This is the mission I'm very passionate about renewable energy and particularly solar.
Is so critical for all of us on for our future, but particular for me as I took a look at Sunpower and this opportunity I was so amazed by the leadership and technology that this company has had over the last 20 years and my plan is to preserve this wonderful heritage and build upon that over time and there is.
Three areas in particular, it's early days, but there's three areas in particular, the I think we can look forward to building with this technology expertise. We have one is how can we continue to build world class customer experiences how can we be the leader in providing this ease reliability.
And resiliency.
The two how can we develop new innovations for consumers that help them take advantage of all of the things that renewable energy and storage and beyond the offer and then three how can we continue to scale this company efficiently through.
Through automation and self service and all the ways that you would think of technology company would approach of a problem like this so so looking forward to our future and.
And we're ready to get started.
My second question is we've heard lots about supply constraints.
So across the board Bob.
Enphase in particular could you talk about.
What you guys are seeing there.
I didn't really hear you guys call of any of that out but could you talk about.
How you guys are deal with what we said the split.
Yes, I think it's a terrific question and this is as you know been much bigger than of solar industry issue. This is really across all industrial companies, particularly in electronics area. There's a couple of things I guess I'd highlight one is.
Through our terrific partnerships with both maxion and Enphase.
We've been pleased that we've been able to continue to serve customer demand and we feel really comfortable with those partnerships being able to do that this year and then secondly, the team has done an incredible job of managing all of these different changes across the globe and I'd love to ask norm. If you could to the offer a little bit of color commentary on what we've been doing to make sure.
For that.
We continue to meet customer demand.
Yeah, Thanks, Peter kind.
As you mentioned, there's really two issues here on the supply chain side of it and it definitely is.
Challenging out there one is of course, the ability to support your growth.
But also there is the cost impacts on materials and freight.
I would say, we definitely have seen cost increases in freight and some materials I would say that frankly makes our gross margin performance even more impressive.
And we've been able to because of the strength of the business both sustained growth strong gross margins and we expect to do that throughout the remainder of the year from.
From an availability perspective.
Feel very good about where we're at we're managing this very very closely with multiple suppliers and we remain confident that we have access to the components, we need to meet our growth plans this year.
Got it welcome aboard Peter Thank you Tom.
Thanks for that the expense.
We have our next question from Brian Lee with Goldman Sachs.
Hey, guys. Good morning, Thanks for taking the questions.
Welcome on board of Peter and.
Yes, I don't know, what's more impressive timing of career at Sunpower and in the industry.
Pulling out of calculator.
To figure out on the quarters he has been on.
With you Jack Kudos to you.
And I know you could have that.
But yes, it's been an auto working with you and best of luck Tom.
The future endeavors.
On questions I guess, the first one just.
Keeping.
The the.
Lead time issues and battery storage are the leading to a change here in the guidance. It seems like you had said.
The battery revenues of $100 million in 2021, I think that was the target.
It seems like the semantics of change of talking about the bookings now of the $100 million. So as the revenue target pushing a bit on is that all of the due to some of the lead time issues youre, calling here coming on here.
Yes, Thanks, Brian let me start by saying I'm going to broaden your question a little bit I think on the the storage opportunity for us in southern vault in particular.
A couple of the things that happened in Q1, one is we're very pleased with the reaction so far from our dealers.
The positive feedback has inspired us and we really.
We feel more and more confident about how big this opportunity is and then we're quite pleased with the demand from consumers and we think Thats representative of the fact that this is a really important product for consumers, particularly as they try to make their energy more resilient over time. The orb do you want to comment more specifically on Bryan's question about.
How we're managing the sunbelt product.
Yes, absolutely.
I think as the.
As you kind of inferred.
Our pace of install is falling a little behind our plans there while the bookings are growing very nicely.
I think our storage plants always included.
The second half ramp and we're still hopeful we can hit our 2001 of our goals, but our primary focus is making sure we deliver a superior customer experience. So really a lead time issue. There is more related to us managing the install pace, while we focus on improving the commissioning commissioning times and really the whole installation and turn on process for our.
<unk>.
As we alluded to we did received some feedback from dealers and partners, saying that they'd like to see some improvements in those areas and we've rolled out most of the changes for all of the eastern firmware to already for most of that although we have some other fixes coming in to improve that aspect before the end of this month our.
Our expectations are commissioning will be less of an hour and that the customer install and turn on a process of seamless for our customers. So that's our primary focus.
But we are seeing demand grow nicely.
And really confidence in the overall growth of Sunpower.
Non volte excuse me and I'd also like to reiterate.
Most of that is men who indicated we.
We still are highly confident of meeting our overall ILC margin of profit targets for the year.
Okay, Great. That's super helpful. I appreciate the clarification and then I guess just staying on the top of the batteries.
So on Volte I think you guys have been pretty clear on sort of the ramp timing and outlook for that.
I think what doesn't get as much attention for you guys, even though it's becoming a much bigger business and has the big pipeline here as the.
The sort of commercial.
<unk> side of the business. So any kind of quantification you can provide on sort of the.
The revenue potential in.
In 2021 for sort of non res.
Battery side of the business not sure if you've ever broken that out by segment just.
If you have the view, there and if theres any supply chain constraints or sort of lead time commissioning installation issues at your house experiencing there other than maybe I had one follow up that I wanted to squeeze in thank you guys.
Thanks, Brian and we agree with your assessment by the way, we do think that battery is equally as a big opportunity on the commercial side I'm going to turn it over to Eric for a little bit more detail on how we're thinking about it and then over to <unk> to give you a little bit more detail on how that impacts of our plan for this year on beyond go either.
Great. Thanks, Peter.
Out of.
As mentioned throughout the day, we of some really strong growth in a couple of different areas within the storage. One is when we pair of storage with solar and our traditional behind the meter.
We've also seen really nice growth in Standalone storage, where we're upselling to existing customers and the.
On the new the newer frontier for us and it's starting to participate in the front of the meter market can you can see.
Combination of megawatts under the contract and then also of megawatts that had been awarded of Shortlisted.
We are building.
40% to 50 megawatt hours this year of storage and expect that to significantly increase beyond.
From a supply chain and lead time perspective.
We are seeing.
The <unk> manageable lead times, our project schedules allow us a little bit of extra visibility and don't expect any significant changes to our ability to execute on the storage projects going forward.
Alright, and just from a.
From a financial perspective.
On the way to think about it is.
Of the helix storage efforts of the commercial business showing up and improving margins as you can see on margins out of 900 basis points in the commercial business year on year.
Those those tailwind of sustainable margin improvements will continue the story of the tax rates of 30% as you've talked about and that will show up in improving the revenue.
The other than as we go into 2022.
Okay, that's great and then.
Maybe one last one price for Peter I'd hate to put you on the spot.
But you had the slide 13.
Sorry, the slide 12 about the bite and planning sort of policy catalysts I think of lot of investors are also focused on Paul.
Policy in California with respect to net metering you guys, obviously have a ton of exposure there any initial thoughts on proceedings there what you.
Yes.
What's your sort of expecting out of that process.
We move through the rest of the year. Thanks, guys.
Yes, just a quick comment on that I would turn it over to Tom to talk more about the specifics on California, but the policy piece of your Brian I think you're hitting on an excellent point. This is the pivotal time for all of US on the policy for US there's never been a better opportunity for this industry to take advantage of of the momentum we have here in my first week of met with the Governor's.
California, Michigan.
I have a meeting of two hours with secretary of grant homes, the department of energy and.
Expect to be meeting with a couple of centers before the weeks over so it's something that we're spending a lot of time on of investing and because of that make it as an important part of the future. Tom do you want to give a quick comment on as it relates to California.
Yes, as you know all of the staying is chairman of the board for six months.
One of the things that we will continue to work on these policy specifically the endpoints three no.
The one of the things on a coordinated with Peter working on.
I don't think theres been any surprises on how things evolve.
Hi.
And sort of that predictable opening salvo from the ious.
We're going to be super engaged throughout the year.
I think the fixed charges are.
It's not going to be popular with customers and on.
Therefore at the PUC is unlikely to.
On our debt part of the request from the idea of use rate changes or are likely big sales will be part of the process and anything that gets implemented into 'twenty to 'twenty two of the earliest.
Here on Iot partners with our policy team.
Actively engaged.
Alright, thanks, everyone I'll pass it on.
Thanks, Brian.
And we have our next question from Michael <unk> with Credit Suisse. Please go ahead Sir.
Michael Your line is open please remember to you on mute.
I apologize there sorry about that hey, good morning, guys. Good morning, Peter Good morning, Michael Good morning.
Hey, Bob could you help quantify the impact you think you might see from for the commercial business from ITC Refundable Litty.
Net.
That's coming I think you identified bottlenecks right.
Is there any.
Further explanation you could get there.
Yes, Eric do you want to take that.
Sure I think.
Ill talk about both parts of our commercial business, both the commercial direct business, but also on light commercial.
In terms of commercial direct we offer the full suite of <unk>.
Project types of Ppas in traditional cash projects, but I think the business make a.
The offering for the traditional customer a little bit bigger.
Of an ownership opportunity even if they don't have the tax liability.
So expect Tam to increase that could also improve deal velocity of that could put a little less constraints on tax equity providers. So it's the general positive movement there.
From a light commercial perspective, where we're working with.
Our dealer and oftentimes smaller customers.
That's been one of the harder places for us to be able to provide that broad suite of financial offerings, and so I think we see larger opportunity in that light commercial space for the ITC refund ability to really drive increase the Tam.
Got you.
And on residential loan servicing.
Is that are you talking about putting loans on the balance sheet.
New business completely or is this more of like a coupon clipping or the base business.
Yes, before I turn it over to mind you to talk more about that I think one of the one of these big advantages I feel like we have on our residential business is that our strategy on financing start which starts with the customer and work backwards. So.
We're really indifferent in terms of providing cash lease of loans, we really want to do what's actually best for our customer and kind of work backwards from there on did you want to talk more about.
Lastly on the balance sheet sure. So residential loans would look similar to our residential leases. So we do not have the exiting two leases on our balance sheet. What it does put US is it gives us a recurring revenues in terms of loans servicing and more importantly, it gives us more deeper relationship with the customer that allows.
Us too.
The upsell.
Enhance the long term customer value for Sunpower.
Bob.
Okay.
Lastly, on Hey can you talk about your expanded supply agreement with Maxion. These P series in the U S market, which segment benefits the most of that product.
Does that drive revenue upside in 'twenty, one or 'twenty two.
Terrific. Yeah. We're so excited first of all I want to say, we've got a terrific partner of maxion.
Obviously, there are part of our history, but they make the best modules on panels in the world on our customers sales of once they love that and sort of our dealers norm do you want to talk a bit more about the P series of opportunity because I think thats also a big opportunity for growth as well.
Yes, no happy to.
And the.
Peter it's really going to help us.
Broaden really the maybe the customer rates really the revenue opportunities, we have in residential and light commercial.
Obviously, our IDC line as the premium line, it's the best panel on the business the <unk>.
The access from axiom to a unique and what we believe is the best kind of mid range performance panel and the.
The industry is really going to help expand our capabilities across residential and it's particularly important for our light commercial business.
Appealing to Eric's business on the commercial direct side, so it really fills out the portfolio with the great quality. The maxion is known for and now really having kind of both good better and best offerings for our customer base.
I think really starting in 2022 is an incremental revenue growth driver for the company.
Got you. Thank you very much.
Thanks, Bob.
Our next question is from Philip Shen with Roth Capital Partners.
Hey, guys. Thanks for taking my questions.
Tom. Thank you for your service, it's been great working with you and Peter Congrats on your new role.
Thanks, So on slide six.
On slide six Thomas.
Tom I think you talked about.
Having and going after a wider installer network I was wondering if you might be able to quantify.
And what that might mean more so specifically.
How many new partners might you be able to bring on.
Perhaps this year and next year as you talked about lowering.
For the customer acquisition cost how much could they go down by with this.
<unk> on particular thanks.
Yep, Thanks, Ed I'll take that question Phil Thank you the.
But let me start at the beginning one of the one of the big blessings for me coming into this role.
To see that we have the highest quality of your dealer network in the world period.
It's incredible I've spent a lot of time on my first three weeks meeting with some of our biggest dealers and plan to spend more and more time there. So as we look behind us the dealers have been a big part of our strategy and as we look forward, we're going to remain at the center of the strategy as we look as we look forward to the future growth over the next couple of decades, but we arent.
And to do is blend together.
Our dealer network and where it makes sense, we think direct to consumer activities and you mentioned the opportunity to improve the customer acquisition cost I think thats, one of the big opportunities but.
But it may also be an opportunity to serve the demand that we expect to see and also begin to really build this world class customer experience nor was there anything else you want to add.
Commentary on that please.
Yes, just little of Peter I think that from.
On.
Brendan the funnel in the acquiring customers, we've seen a tremendous improvement in our efficiency in fact, we've more than doubled the number of.
Dealer appointments, we generate every week for well over a thousand of week.
And those of appointments I can tell you our dealers actually pay for because of the close rates are so much higher on the ones that we find and we've just gotten better and better and more efficient at finding those opportunities through a variety of methods on one other interesting point.
Kind of related.
Storage, we're seeing actually has a significant effect of improvement in customer acquisition costs and what that really comes from is the fact that now on where inquired customers. We're acquiring in many cases not just for our solar system, but we're getting much more revenue for that same customer acquisition. So the percentage of the cost is actually going down quite a bit. It's one of the reasons, we see store.
<unk> is such a big opportunity to really impact the bottom line, because we can amortize debt that cost over a bigger revenue base. So I think there's great opportunities. There I also think Peter Bruce.
Some incredible capabilities to improve this side of.
Our business.
His experience I think is going to make us.
Significantly better at the marketing and the front end and we can already see that just the first few weeks on the job.
So I mentioned, one more quick thing.
When I led the marketplace business at Amazon, We've worked with third party merchants to help them sell their products on the Amazon platform. It's very similar models of the model, where we use dealers today and one of the things that we did at Amazon as we invested heavily in the technology and tools. So these merchants on small businesses and not sure.
For doors could really focus on what they did the best.
And that became its own positive flywheel of growth over time.
And as I've talked to the dealers in these first few weeks and I've taken a look at the tools and technology I see a lot of that same opportunity year. So I think you should expect to see us really invest in the platform that we use to work with our dealers. So that their lives are easier and they can really focus on doing what they do best which is taking great care of our customers.
We have time for a couple of more.
Thanks.
Thank you. Our next question is from Thomas Boyes with Cowen <unk> Company.
Hi, Thanks for taking the questions but for.
First of all of US just on the mechanics with some strong as of now going to be including commercial when do you think that will start is there going to be like in the media dropdown of assets into that JV or how would that work.
Alright.
Let me, let me take that piece of it so.
The mechanics will be very similar to how we operated on residential businesses, we expect to dropdown for a set of commercial portfolios.
In second quarter.
Sunpower would be doing the servicing of that portfolio through the life of the portfolio on any upsell opportunities come with debt.
Also we will have 50% of the BD and value coming out of that portfolio attributable to Sunpower debt Needham's report as part of.
The net retained value we report every quarter.
Got it.
Thank you and then just to kind of touch upon the does the transformation you guys.
Would you think that debt kind.
Kind of attack parts and secondly, just the largest dealers you go towards long tail of residential or commercial that youre kind of the pricing.
To address each one I would imagine the purchase slightly differently.
Sorry, Thomas you broke up a little bit could you just repeat that question again I couldn't hear you very well.
My apologies it was just on the digital transformation, where you would address that first as it is the largest dealers launch of residential commercial or the mentioned the approach be different for <unk>.
For each one of the market.
Well as we take a look at the footprint in the U S. I mean, the interesting thing to me is if you believe the third party estimates that there's 100 million homes that would save money tomorrow from adopting solar.
And you think about what the implication is for the dealer network I think the implication is we're going to need of wide variety of dealers to serve the entire U S footprint.
We will need some large dealers will lead the small dealers. So we don't necessarily have a goal on.
Size of the dealers and were not necessarily favoring some over the others, but we're really trying to do is pick the dealers who have the highest quality customer experience and who have the ability to scale up and meet what we believe is this increase in demand that we're going to see coming so we're going to continue to work and build the tools and technology that will allow.
For them to be both successful of doing those two things.
Makes sense. Thank you very much on.
And thank you. Our next question is from Colin Rusch with Oppenheimer.
Thanks, So much guys and Tom.
I'll pass on my congratulations as well it's been a tremendous from.
Doug can you talk a little bit about the evolving technology.
Obviously you got.
Nice offerings with solar plus storage growth as you look at providing more comprehensive solutions for distributed resilient power. How are you thinking about integrating some of the other technologies that are marketing Arsenal of all of that it's the technology that you might be able to handle growth.
Yes, I think it's a terrific question Colin.
As I take a look at the experience today in the solar the world I do see a lot of.
Apps that look pretty and provide some interesting information, but I think the next frontier is to go well beyond that how do we really put the tools in place for consumers to act upon it and at the end of the day, if it's really about how easy do we make things like solar storage and EV charging.
How reliable can we make it and how much can we help people save money I think theres a lot of opportunity there for us to be innovative on that site. So probably the best thing I can say is stay tuned we're working on some interesting things and can't wait to talk to you more about that in future calls and I want to thank everybody.
For your participation on today's call and particularly thank all of those who recognize Tom it's an honor to follow on his footsteps. It's been an incredible 18 year period, and we're going to make him proud of as chairman by building upon that and marching forward and of <unk>.
Positive way. So thanks again terrific performance in Q1, and we look forward to talking to you about Q2.
Thank you.
And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
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