Q2 2021 SunPower Corp Earnings Call
Good afternoon, welcome to the Sunpower Corporation's second quarter, 2020, 1 and earnings conference call. At this time, all participants on a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press Star then 1 on your touch tone telephone.
And the amount of today's conference call is being recorded.
I'll now turn the call ups and Mr. Bob Koski, Vice President of Investor Relations at Sunpower Corporation. Thank you Sir you may begin.
Thank you I'd like to welcome everyone to our second quarter, 2020.1 earnings conference call.
On the call today, we will start out with comments from Peter Pharisee CEO of Sunpower, who will provide a summary of the quarter, our strategic view on 2021 as well as an update on our growth initiatives for 2020.2 and beyond.
Following Peter's comments mono Sial Sunpower CFO will then review our second quarter financial results as well as provide 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 2020.10-K, and 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 during this call. We have also reported a set of Powerpoint slides, which we will reference during the call on the events and presentations page of our Investor Relations website.
And the same location, we have also push day 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 afternoon to everybody before we get into the specifics of the quarter I want to reiterate how excited I am about the future of Sunpower and.
As I mentioned on our first call together my first hundred days would center around diving deep into each of our business units, starting with the needs of our customers and working backwards with the goal of earning and keeping customer trust.
I can say after the 100 day I'm more confident than ever about the opportunities we have in front of us.
Our focus remains on driving a world class customer experience by investing in strategic areas, such as our industry, leading digital and product offerings to make the adoption of solar easy reliable and affordable.
We believe this long term approach will position us well going forward as customers look to take greater control of their future energy needs.
Please turn to slide 4.
I'm going to focus my remarks today on 4 key areas number 1 our strong Q2 execution and what we're doing to position sunpower to capitalize on the significant long term solar growth opportunity.
2 they.
And the continuing improvement and our balance sheet.
Number 3.
Our increased emphasis on the fast growing residential market due to the tremendous Tam expansion opportunity.
And finally number 4 our strategic initiatives to drive new customer growth.
Expanding the lifetime value of those customers.
These strategic initiatives include.
1, creating a world class customer experience to relentlessly, providing our customers with the highest quality and best value products and the markets.
3 further leveraging and expanding our best in class dealer network.
And for continued investment and our industry, leading digital and financial products to innovate on behalf of customers.
Please turn to slide number 5.
I'd now like to provide an overview of our Q2 performance and.
And why we remain confident and our forecast for 2021.
As well as our ability to drive growth and 2022 and beyond.
We were pleased with our execution and Q2 as we met our revenue and EBITDA guidance and saw strong bookings momentum, while further investing and our growth initiatives.
Specifically, our Q2 performance was driven by strong residential execution, where we continue to see increasing demand for our industry, leading solar and storage solutions as Q2 residential bookings rose, 67% versus Q2 of last year.
New customer adds were also up sequentially and year over year as we are benefiting from increasing demand and residential solar dealer expansion and positive policy tail winds benefiting both residential and our commercial and industrial business.
Strong execution also led to further improvement and profitability as overall gross margin increased to 21% up sequentially as well up 800 basis points versus last year.
We continue to execute on our initiatives to convert component sales to full system and loan and lease sales.
And Q2, we increased the proportion of full system loan and lease bookings by 500 basis points to 63% of our total volumes.
Full system on and lease sales provide not only better unit economics, but a closer relationship with the end customer than our component sales.
These trends give us the confidence and our second half targets, while providing better visibility as we look into 2022.
We also remain very bullish about the future of our son volt storage solution as domain.
Demand remains quite high with attach rates, reaching 23% and our direct sales channel.
As we mentioned last quarter, we took actions to improve the customer experience and have made significant strides and reducing lead times over the past few months.
As a result, we expect sunbelt growth to accelerate and the second half of the year.
And as we have resumed the full rollout of the product to additional dealers beginning of June.
Please turn to slide number 6.
We've also made significant progress on improving our balance sheet last quarter and we are pleased to say that our financial foundation is the strongest it has been and our history.
We have significantly de Levered, our balance sheet over the last 24 months and as of the end of the second quarter net debt is now below $300 million and we're ahead of our leverage target of less than 2.5 times 2021 EBITDA.
Also we are very comfortable with our liquidity, given our cash position and and face sales shares.
With strong demand trends, our cost reduction programs and further margin expansion, we are confident and the continuing to drive positive business unit cash flow.
In summary, we believe this strong financial position now and it gives us sufficient capital and business flexibility to invest and the initiatives that will drive long term growth.
Please turn to slide number 7.
I'd now like to shift and the performance of our individual business segments.
Our residential business continued to outperform as we saw strong new customer growth margin expansion and improvement and our son volt lead times.
Specifically, we added 13000 and new customers during the quarter as demand for our industry, leading solutions remains high.
This brings our total customer count to over 375000.
Residential gross margin for the quarter was 23% up 630 basis points year over year as we benefited from both a lower cost of capital and the continuing shift to system sales.
New homes also performed well.
Year over year megawatts grew 50% with strong bookings.
Our current backlog is now more than 220 megawatts, which now includes our multifamily homes initiatives.
And finally as I mentioned before demand for Sun volts is high we exited the quarter on a 70 million dollar bookings run rate and expect a rapid ramp and the third quarter.
Son volt remains a key driver of our growth starting in the second half of this year.
Moving on to our commercial and industrial business. Please turn to slide number 8.
Our <unk> solutions segment performed well.
Year to date revenue grew 13% due to higher volumes with installs up approximately 30% year over year as well as increased storage deployments.
For the quarter, we continued to see strong demand trends as we added to our significant backlog now above 216 megawatts of solar.
This includes our recent contract from the California Resources Corporation to develop up to 45 megawatts of behind the meter storage projects, including a 12 megawatt project at Mount Postal oilfield.
We continue to see solid demand for on site storage as we now have more than 230 megawatts of storage projects under contract are awarded.
Finally, we are making strong progress on our commercial growth initiatives, including the expansion of our off site storage efforts for front of the meter and community solar market.
Turning to slide 9 we highlight what we see as some of the key drivers of why we are so bullish on the residential market and why we are increasing our investment and this market.
First we see a very large and growing Tam on the residential space.
Not only from increased solar demand, but also opportunities and adjacent markets.
As customers look for ways to consolidate and control of their energy footprint.
Second as discussed last quarter, we expect solar to benefit from strong policy tailwind from the federal level through a potential ITC extension and Standalone storage credits as well as the increasing state level support for both solar and storage.
We believe these tail winds will materially expand the share of growth from outside of California.
Third.
We will continue to invest and storage energy services and adjacent technology initiatives, including Evs with our recently announced partnership with ballparks.
We believe that more than 40% of EV customers have solar today and.
And we're just getting started more on this opportunity and a bit.
Please turn to slide number 10 in summary, our near term strategic focus will be on those initiatives that we feel offer us the greatest opportunities for growth.
First creating a world class customer experience by using our best in class technology to make the process of buying solar as easy as it is to buy a book on line.
Second focusing on developing and selling the highest performing and more.
Most affordable product offering for all segments of the market.
This includes a product suite that combines solar storage and EV Chargers and smart home solutions on.
All driven by clean energy.
Third continuing to expand our world class dealer network to new markets.
With a focus on providing not only a superior customer experience.
But also enhanced solutions to our dealers.
We will also continue our investments to drive new market penetration, including new states accessing a greater share of the long tail market as well as expanding our direct channel took a true.
Finally, increasing investment and our digital and financial products, we see that upfront costs and financing remain major barriers to solar adoption.
And we will therefore continue to develop new financial offerings in order to make the purchase and financing of solar easier.
On slide 11, we highlight the advantage of our flexible model to meet the growing demand for and interconnected energy ecosystem.
This approach will allow us to acquire customers at any stage and the value chain.
For example, we are expanding our focus to evs and exploring other smart home energy services. As we believe we are uniquely positioned to serve these customers with our best in class highest efficient products and services.
Customer experience remains a top priority for Sunpower and each of these customer segments and our expanded focus enables us to approach customer value from multiple entry points, such as EV energy services storage and solar with the ability to move up and down the value change depending on the salute.
<unk>.
We believe this strategy enables us to capture and more than 2 times the lifetime customer cash flow.
Clothes compared to solar on.
Before I turn the call over to Mike I'd like to and by talking about how excited we are about our recently announced partnership with Walmart.
Please turn to slide 12.
This partnership will enable us to offer a seamless and simple charging and solar solution for sunpower solar customers, giving those customers that convenience with adding EV charging while we're already on site.
As part of the partnership we are also wall boxes preferred solar partner and charging installation partner this will help us reach additional customers.
This agreement is part of our larger strategy to offer customers a fully integrated solar storage and EV solution that provides a 100% clean EV charging at home.
Both companies will also collaborate on differentiated charging project products for the home that will further expand our addressable market.
We expect to start rolling out this program the second half of this quarter and are encouraged by the early feedback from both our customers and dealers.
With that I'd like to turn the call over to monitor CL CFO Sunpower Mani.
Thanks, Peter Please turn to slide 14, we and we have provided on our consolidated financial results and select metrics.
We are pleased with our financial performance for the second quarter as we materially increased adjusted EBITDA compared to last year and drove drove positive cash flow at the business unit level.
We saw strong demand during the quarter and residential as bookings were up 67% year over year.
And it also starting to see the benefit of our <unk> expansion efforts as we added 125, new dealers and the first half of the year.
And our dealer base to more than 700 partners. In addition C and.
And I solutions backlog grew more than 20% versus 2020.
This gives us increased confidence on the balance of 2021, and we expect this strength to continue into 2020.2 and beyond.
Consolidated deck on non-GAAP gross margin was 51 cents per watt up approximately 100% whats the second quarter of 2020.
Residential gross margin was 66 cents per watt up sequentially, given our cost improvement and supply chain initiatives as well as lowering of our cost of capital.
Non-GAAP Opex Boardwalk was 36, and if you exclude on investments and digital and products, which we see as more of capital deployment, rather than Opex Opex Boardwalk was 2009.
And also increasing our digital and product Opex investments and the second half of year to fund customer experience initiatives that we believe will enable sunpower and expansion and improve long term cash flows.
We are focused on long term customer relationships and see residential storage and the addition of on EV partnership S.
Key driver of long term margin growth with new customers and with our large installed base.
In addition, we launched our loan servicing and combined with our lease servicing capabilities, we will materially improve but residential servicing revenue in 2022 and beyond.
We continued to improve on capital efficiency and exceeded analyst day target of a 25% return on invested capital and second quarter 2021.
Also repaid $90 million of recourse debt and hey.
Analyst day target.
Tabled by business unit cash generation.
And we added incremental loan capacity.
Lower cost of capital and see further room for improvement and a blended residential cost of capital of 5.5%.
Given our strong balance sheet and project finance initiatives.
Speaker mentioned on <unk>.
Balance sheet strength is a key enabler to drive significant growth and Tam expansion and a fast growing residential business.
I would now like to discuss on our guidance. Please turn to slide 15.
Third quarter, we expect sequential volume and margin improvements.
<unk> business with volume expected to grow 40% versus prior year, specifically the company expects third quarter GAAP revenue of 325 million to $375 million and megawatts recognized of 125 megawatts to 150 megawatts.
Third quarter, adjusted EBITDA will be in the range of $21 million to $31 million as linearity has significantly improved compared to the previous 2 years.
For fiscal year, 2020.1 on.
Full year adjusted EBITDA guidance remains unchanged and will be in the range of $110 million to $130 million up 3 times versus 2020, and inclusive of up to $10 million of incremental spend on customer experience and digital initiatives that will further accelerate.
The growth of our residential business in 2022 and beyond.
For fiscal year 2021 the company expect GAAP revenue of 1.41 billion.
The $1.49 billion.
And megawatts recognized a 540 megawatts to 610 megawatts.
Residential and megawatts recognized I'd expect it to be in the range of 340 megawatts to 380 megawatts on.
At quarter, and total year, 2020, 1 megawatts recognized and revenue guidance includes the impact of CNI solutions and project timing and increasing investment in new residential growth initiatives.
Day to a light commercial business.
We continued to see strong tailwind in both of our businesses and have increasing confidence in achieving adjusted EBITDA growth of greater than 40% in 2022 with that I would like to turn the call over for questions.
Thank you, ladies and gentlemen, as a reminder to ask a question you will need to press Star then 1 on your telephone to win.
Joel Your question press the pound key.
And Thats Star 1 to ask the question.
And that while we compile the Q&A roster.
Our first question comes from the line up and Taylor with Baird. Your.
Your line is open.
Thank you Bob Thanks for taking my question, Peter I guess, you only get a few chances to ask questions.
What are your observations from the first 100 days, what do you think it's.
Sunpower and the industry can approve on maybe across.
The business model and then maybe if you want to dive into the.
And the different businesses residential and commercial.
And then I have a follow up.
Yes, Thanks, Ben well first of all.
I think the big surprise for me and my first 100 days.
Is the opportunity not only to accelerate the number of customers, but to accelerate the lifetime value for each of those customers. So if I use the wall box partnership as an example.
And third party data research would suggest the number of electric vehicles is going to grow from $2.5 million last year to over $30 million at the end of this decade, 40% of those people have solar and it kind of creates 2 opportunities on the consumer side.
1 how do we help consumers install high speed Chargers.
Because it isn't easy today, so how do we develop the easiest to offer that includes installation and the charger itself. So as soon as they buy their electric vehicle. They are often running and ready to go but the bigger issue is 1 that you may be aware of which is the grid isn't ready for $30 million more electric vehicles by the time, we get to the.
And of the decade and.
And we really want to be the company that helps everything get powered by the Sun.
How can we help consumers power everything and their life and that includes their vehicles and their appliances and all of their power needs from the Sun and and the case of electric vehicles. It is not an option.
Central So we're really excited about how big the market is as we go forward and.
To me that partnership is a catalyst for recognizing a pretty big change for Sunpower and historically, we were primarily focused on solar and we really had a 1 time relationship with the customer and as we look forward. We really think this is a game changer for us because we're going to be and solar storage.
EV Chargers and beyond.
And hope to have a lifetime relationship with those consumers. So very excited about the partnership and very excited about the potential for future growth I think your second question, Ben was about commercial and industrial and I will say both businesses.
We believe are well positioned for great growth I mean, the same conditions interestingly enough exists for both solar prices are declining.
Policy.
Incentives are likely to be increasing and.
And frankly, theres more demand from both consumers and commercial businesses to change the way they power things. So we really see both businesses and having great demand and the reason we talked about and this call are doubling down on residential is really those.
2 of these are more near term.
They are more right in front of us. So that's the area, we're going to focus on for now, but we're still very optimistic about the growth potential of both and I think Ben you said you have 1 more question as well, yes, yes, yes.
Lastly, with your.
Fresh eyes, what do you think about consolidation and the space.
Further appetite for consolidation and where do you think it would occur and what's parts.
Thank you.
Well our primary focus has really been on customers.
I would think about acquisition from the standpoint of if there was an opportunity for us to acquire a product service or scale that we thought would help us serve customers better we'd be excited to go do that but.
Right now I think we feel well positioned because this is the strongest balance sheet, we've had and our history, we really feel like we're in a very flexible position in and advantageous position. If you will we're really well positioned to choose how and where we want to grow as we go forward.
Thank you.
Thank you.
Our next question comes from the line of Brian Lee with Goldman Sachs. Your line is open.
Hey, guys. Thanks for taking the questions on.
Maybe first 1 just on the guidance on.
Well, maybe this is for them on new but.
And the revenue outlook for 2021 at the new range, I think it's coming and a little bit shy of what you had and for before.
35% year on year.
And for.
1 billion and a half plus so just wanted to.
Parse that out a little bit just can you walk through the drivers there is it a timing issue or are you seeing projects pushing out.
Getting cancelled and and in this.
More a reflection of.
<unk> weakness and CIL storage and our LC or can you kind of give us a little bit more color as to the segment exposure and then I'll follow up.
Yeah, Brian I'm going on I will turn it over to mind, you, but I will say as you take a look at our revenue. It is a little bit of 2 different worlds on the residential side, we are quite pleased with our revenue growth.
And the growth prospects as we go forward <unk> has been a little slower than we expected and the commercial business has a little bit of Lumpiness as you know from following and over time. So we have.
Pleased with the backlog as we go forward, but I will say less of that backlog came through in Q2 and more of it will come through in Q3 Mono do you want to add some more color to that as well.
Yes, Brian and I'll make 2 comments I think Peter covered it well on resident.
<unk> business is growing quite rapidly and and yard as well as sequentially.
With increasing tail wins on the <unk> side of the house.
And while the business has scale wins and the business is.
And has got mix of projects and we are seeing some of those projects moving to 2022 more importantly on EBITDA.
<unk> is really strong on the backs of the residential gross margin and Thats also allowing us to invest incremental opex that it bodes really well for both businesses, but specifically residential as we go into 'twenty 2 and beyond.
Okay Fair enough and then on <unk>.
Good question.
I guess related to Peter's comments around having the 2 different segments and kind of.
And.
And sort of vantage points there it seems like that's true of the margin profiles as well our LC is tracking above where we would expect it to be.
It seems like maybe there's a new medium to longer term target that could be achieved there versus.
Hitting.
Hitting lows again.
Should we be thinking about in terms of margin profile for the 2 segments and the back half and then specific to our LLC as you see sudden box shipments.
Starting to ramp into <unk> and <unk> can you speak to the margin impact.
And we see any sort of near term headwinds just given this is a newer product and newer ramp maybe full cost achievements haven't been.
And then seen there, but just 1 wanted to.
Fleshed that out abated, while the impact of sunbelt.
Volumes in the back half thanks, guys.
Yeah, Brian Let me start off I'll give you a quick comment on some bolt on and I'll turn it over to Martin for your 2 different questions on guidance, so from a sunbelt perspective.
Very pleased on the demand side in particular, when we talk to both our consumers and dealers.
There's a lot of demand for the product right now and we anticipate that growing as we head into the fall and the winter months, given the instability of the grid and some of the examples we had from last year, and Texas and beyond so that's $70 million bookings run rate, we exited with we anticipate exiting Q3 and $100 million run.
Right and the number 1 thing we're focused on is how do we get more and more of our dealers.
Ready to commission more and more Sunbelt unit and so from a from a sunbelt perspective.
It's all systems go and we're looking forward to good growth rest of the year do you want to comment a little bit on the guidance for both sunbelt and.
Also on the <unk> business as well.
Let me cover the CIA is first and then I'll cover the rest.
Second plan and that order so from a <unk> perspective, I think the second quarter.
Margins on reflective of the inherent.
Lumpiness and the business.
We knew that going into the into the second quarter, having said that I think the business is significantly better year on year.
And both from a topline perspective asthma and as a margin point of view and then more importantly, we expect the Sis business.
2 to be profitable in the back half of the which you recall is a significant done it on from the last couple of theaters and that stuff. The <unk> business from a revenue perspective, we're really pleased with.
With the margin performance on the residential business.
Sequential increase in gross margin per watt and the cash.
And markets day, we talked about exiting the year at <unk>.
70 cents of water gross margin.
Not off that as I had mentioned in my script and that bodes really well.
As you think about the tailwind does business has in terms of the volume growth going into 'twenty 2.
And just 1 more thing on Sun vault, Brian we're really pleased that most of our son volt attached sales.
Come along with solar and the reason that's important is that and a business like solar where the customer acquisition costs are relatively high.
There's no real incremental customer acquisition cost for solar and so from a margin perspective.
It's accretive and we're very pleased with that.
Okay I appreciate the color thanks, guys.
And as Brian Thank you.
Our next question comes from the line of Mohit Mandela with Credit Suisse. Your line is open.
Yes.
Hey.
And thanks for taking our questions.
And maybe if you can probably talk more about diebold books partnership here.
What does that exclusivity and tier 2 either you or vault bulks on.
What do each of you bring to the table and how should we think about revenue contribution.
And maybe just on this year then from me.
On next year.
Sure well the.
Both of US have established what I would call a preferred working partnership so theres not any exclusivity per se.
But we're their preferred installation partner and there are preferred EV charging partner 1 of the reasons that we're attracted to work with Wal boxes. They have a product that's in line with how we think about products, we really want on offer the highest performance best value products and the world and if you take a look at our solar products through maxion.
We have the best panels, and the world and we provide great value to consumers. So we sort of think about every product and service we offer how do we be the performance leader and the innovation leader and how do we also provide great value at the same time. So as we look forward with Wal box. There are also a company that's very focused on.
And as you think about where EV battery storage is growing.
And you begin to see opportunities for 2 way Chargers, you begin to see and opportunity for.
Battery storage being not only from a product like Sun volt, but in addition, also having the opportunity to leverage your electric vehicle for that as well so.
Stay tuned I would say we are working on more.
Parts of the partnership together as we go and we're very excited about the opportunity, obviously and the EV space and told them.
Got it and does it.
Maybe just a follow up.
And on somewhat unrelated on the batteries.
So maybe if you can talk about that.
How much revenue growth do you expect for batteries I think the prior guidance was 100 million on revenues for the year, So where are we on that target and now and you're already at the 25% attachment rate of penetration rates on talking about increased bookings and rates. So.
Longer term how.
How much.
What's the penetration rate youre looking for and this industry and it can be.
Because at a 50 and 100, what do you think we should settle down and pure he is now.
Well on SUNS, Bob I guess, a couple of observations 1 is.
We did purposely slowdown our run rate as we mentioned last quarter, because we really want to make sure that customers have a great experience and our dealers are well prepared to roll that out. So we're pleased we're going on we will not hit the $100 million for the year, but we're pleased to have that $100 million run rate for the third quarter.
And for that to continue on through the fourth quarter as we go.
23% attach rate from our point of view looks like its the beginning of a much larger attach rate and time and we havent provided guidance on that and specifics on that but when you talk to our dealers who are talking to consumers every single day, it's easy to imagine over the next few years.
And maybe something like 50% of our customers will want to have storage along with their solar. So we haven't we haven't provided that guidance, but I think thats kind of a good mental model for you to think about as we go forward.
Got you and I appreciate taking my questions. Thank you.
Thanks.
Thank you.
Our next question comes from the line and I'm, Philip Shen with Roth Capital Partners. Your line is open.
Hi, everyone. Thank you for taking my questions.
The first 1 is on Sun volt.
Peter or mono would it be possible to share what the margin profile on sunbelt looks like are you at corporate average for Rajiv.
Or do you think you are below that and if so do you get back to corporate average at some point on near term.
<unk> you want to.
And provide some more color there please sure.
Sure.
And I think from a gross margin perspective.
And would expect the sungard.
On a margin to be slightly better than on average margins and then just because of the operating leverage at the EBITDA level it would be much stronger than the average residential and EBITDA.
Great.
Thanks for that color and then I.
I think.
You guys were talking through guidance with Brian earlier.
And.
You cited projects getting pushed.
Into 2022, and we know this business is lumpy.
But that said.
I was wondering if you could give us a little more color on why we're seeing the push outs is it driven by the.
And thats tough to get.
Module is these days or maybe on trackers or with steel pricing, so high or perhaps just general friction with logistics.
Can you talk through how much do you think might have been pushed out.
And into 'twenty, 2 and it seems like a modest amount and and are you seeing even risk of.
And our projects from 'twenty, 2 getting pushed out into 'twenty..3 my guess is no, but I figured I'd.
Thanks.
Yes, Phil just to clarify I think my comment earlier was not about 'twenty 2 was actually pushed from Q2 to Q3 and as you know and the commercial business. This is not unusual to have a backlog like this because these are some of the most complex projects that we operate Eric do you want to give a little bit more color about the specific ones that move.
From second quarter, and the third quarter, and Thats sort of the dynamics behind that.
Sure Yes.
We have been working on.
Also on the commercial side to add more storage to our solar projects, adding that asset has created some utility and permitting delays.
And which we are working through is this asset becomes more frequent on the grid and.
And in addition, we really are working to make sure that we're perfecting the asset the actual.
Solar and storage project before we.
Before we begin mobilization and before we sell it.
Really haven't seen much.
<unk> from a component perspective, as you mentioned.
Really is around.
And the protection of the asset and we will continue to work on creating greater linearity and our projects moving forward.
Great. Thanks for the color there and then 1 other question Peter.
Peter I think in your prepared remarks, you talked about.
The potential for new financial offerings was wondering if you could share what you might have in mind.
Well I think what we're talking about is when you talk to consumers.
2 of the top reasons, they say that solar as difficult as the upfront cost and and the lack of financing options and the great news for US is we're in different from a consumer perspective, where really we we favor consumer choice and our financing options. So we offer consumers a choice of cash and <unk>.
And loan.
And we've identified a number of improvements you'll see us roll out.
Over the course of the next few years to continue to make those products easier and easier and easier both from a consumer perspective and also from a dealer perspective, our goal is to really simplify the solar process and.
And make this a product that everybody in the United States can afford so.
More to follow on that and stay tuned we've identified a number of opportunities and we think are a big deal.
Great. Okay, Thanks, everybody and I'll pass it on.
Thanks, Bill Thanks Bill.
Thank you. Our next question comes from the line of Kathy Harrison with Piper Sandler Your line is open.
Good afternoon, and thank you for taking my questions.
Just a follow up on 2 interrelated questions today, you're at 23% residential gross margins.
On Volte penetration and your and your profile will increase.
This wall box partnership and so Peter I'm just curious following your 100 day review do you have a long term gross margin target for the residential business and mind that we should that investors should be thinking about over the next several years.
On the residential side as we've talked about and the prepared remarks, we're very pleased with the progress. We've made the past couple of years and the progress is really got 2 sources..1 is we've driven tremendous efficiency and our process of serving customers and then we've doubled down on financial services.
Those have been the 2 primary our primary areas of margin expansion and the core residential business and my first hundred days I do see some opportunities for further improvement, but I'd say, they're more they're more modest theyre not going to be quite as large as the big gains. We've made these past couple of years I think the big opportunity.
From from my view as a new person and the industry is just the lifetime value of the consumer as you think about where this is headed.
People are going to watch everything powered from the Sun.
We are at the core of that that's what we do.
So whether it's your house your appliances you pool your cars.
We're the place that we would like all consumers to trust and work with and if you think about something like my Sunpower App, which has got such great potential today, we allow people to make changes and how much they put in their battery storage, but think about all the opportunities we have going forward, how can we say people and more money how can we.
Make them more and more and control of their energy needs. So on so.
We look forward I think the bigger margin opportunity is the margin dollar opportunity if you will from.
From a rate perspective, it may not move dramatically, but I think from a margin the margin dollar opportunity here is really attractive.
That's great color. Thank you.
I appreciate that and as my follow up I guess my second question.
On.
Peter it's very evident that the.
The business right now is going and the direction of.
And the margins are better and the Tam opportunities is better.
And response to an earlier question you talked about a long term opportunity perhaps associated with a large commercial business I was wondering if you could maybe dig into more detail.
On the investment thesis associated with maintaining with keeping this business and the Sunpower family and.
And when do you expect this business to contribute more meaningfully to the EBITDA and cash flow.
Yes, I think those are I think those are very fair questions by the way I think as I think about the commercial and industrial business. The most attractive part of it is these are large scale projects.
If you took a long term view of the United States, we need if we're really going to turn the corner on renewable energy.
It's a requirement it's like you can't rely upon only residential you need residential and commercial to deliver and in order to hit the kind of targets, we need to make a material difference and the world as I take a look at the infrastructure package.
And thats being added to the existing infrastructure Bill.
Specifically on the commercial and industrial side targets areas like schools and government buildings, where we have been the historic number 1.
<unk> and solar.
Without question.
So.
I think the biggest investment thesis for me is forward looking this is a really attractive business from a growth perspective and.
And I think it will probably still it's a little bit of a different nature of and residential so it will still probably have some lumpy period by nature of the fact that its commercial and industrial but I think it is a business that's got tremendous growth prospects as we go forward and I think that's the that's the most attractive part of it.
I also want to say I think we have time for 1 more question, we'd love to take 1 more question as well.
Thank you. Our final question comes from the line up to deal with Raymond James Your line is open.
Thanks very much.
California is.
Supposedly tracking too.
Provide their new net metering theme could be within the next 90 days I'm curious if you have any.
Expectations or perspective on what that's going to do and your largest market historically.
Well first of all there's been a number.
Proposals to change the benefits that consumers and California get from solar net metering.
Most recent set of proposals was.
Phil I guess or decline to be the easiest way to say it and I think the reason they failed is that their anti consumer at the end of the day.
How could we support something that takes a benefit away from moving to solar power and moving to renewable energy, we should be doing the opposite across the United States and working arm and arm to move there. The interesting thing is in addition to being anti consumer it's also a job destroyer.
Not just us we have thousands of employees and California, our dealers have thousands of employees and California.
And the renewable energy industry right now is 1 of the best job growth industries, we have on the U S. So.
Our perspective going forward is it will be difficult for legislation to pass that anti consumer and anti job, we really support.
Number of the components that are part of the federal infrastructure, Bill and and other states and various versions of it but we support driving more and more of the manufacturing and production of solar to the United States, and we really support and incentives that allow low and middle income families to make solar and more.
And more affordable at the end of the day there is 1.
100 million homes that could save money today, the bigger those incentives are the more likely it is that lower and middle income families can adopt solar and I think that's critical for the future of the United States and it is critical for those families. So as we go forward.
We will work arm and arm with those who want to maintain these incentives for consumers.
And we really believe that that's the right thing to do as we go forward.
Leave it there thank you guys.
Thanks for the thanks Pavel.
Thank you.
I'll now turn on the call back over to management for closing remarks.
And your growth.
Okay.
Okay, and just closed on okay. Thank you everyone.
And.
You'll see at the next earnings call. Thanks, Bob Thanks.
Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
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