Q2 2021 Maxeon Solar Technologies Ltd Earnings Call

Good day, and thank you for standing by. Welcome to the maxeon Solar Technologies. Second quarter 2021 earnings conference. Call at this time. All participants are in listen-only mode. After you speakers presentation. There will be a question and answer session. Do you ask questions during the session? You will need to press star one on your telephone keypad. If you require any further assistance, please press star zero as a reminder. This conference call is being recorded. Oh, no, like to turn the call over to Robert Ley.

Relations, please go ahead.

Thank you, operator.

After today everyone, welcome to maxeon second quarter 2021 earnings conference call. This is my first earnings called maxeon and I'm excited to be part of this exceptional team with us today, our chief executive officer, Jeff Waters, Chief Financial Officer Castro, Beck and chief strategy officer Peter ashenbrunner.

Let me cover a few housekeeping items before I turn the call over to Jeff.

As a reminder, a replay of this call will be available later today. On the investor relations page of maxeon website.

Right 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 to these press release the 6K and other SEC filings.

Please see those documents for additional information. Regarding those factors that may affect these forward-looking statements to enhance this call. We have also posted a supplemental slide deck on the events and presentation page of, maxeon Zin best relations website.

Right, we will reference certain non-gaap measures during today's call. Please refer to the appendix of our supplemental slide deck, as well. As today's earnings, press release, both of which are available on maxeon investor relations website for a presentation of the most directly comparable Gap measure as well as the relevant gaap to non-gaap reconciliations.

I also want to remind everyone.

Few changes that we started last quarter in the presentation of our numbers. First, we report and guide adjusted eat at the excluding the mark-to-market fair value measurement of our prepaid forward, and physical delivery forward second. We report and guide non-gaap gross profit and non-gaap operating expenses by excluding stock-based, compensation expenses and restructuring Chargers.

Finally, we want to point out that comparisons to the second quarter of 2020, reflect a carve-out of maxeon results. Well, it was still part of SunPower last year.

We begin operating as an independent company on August 27th, 2020 with that. Let me turn the call over to maxeon CEO. Jeff Waters.

Thank you, Rob. And good day. Everyone. I'll start by giving a business overview and covering recent accomplishments. Kyle will then review our financial performance and Outlook and we'll conclude with QA.

Before we get to the results. I have some comments on employee health.

Malaysia is currently experiencing a difficult wave of the COVID-19, pandemic. And proactive testing at our Malaysia facility has revealed an increasing number of positive cases.

You have therefore temporarily pause production in line with government regulations will be deep clean the facilities and focus on our highest priority, the health and safety of our employees.

All other maxeon facilities including Mexico, France and the Philippines are undergoing proactive testing and we're pleased to report. There are no indications of material positivity rates.

I continue to be proud of the work done by our teams globally as we defend against this Global pandemic.

Moving the second quarter results. The quarter was very productive operationally in our push to drive growth and solidify. Our balance sheet results were in line, with Guidance with revenue of a hundred, seventy six million and strong bookings. That put us in a solid position for growth in the second half of the year.

Are distributed generation business in Europe performed, especially well, posting record revenue for the quarter while laying the foundation for be on the panel strategy.

We're seeing strong growth in both our maxeon and Performance Products. And we believe that we will continue to grow our share in 2021 in nearly every European market, we serve with especially significant share growth in Italy, France in the Netherlands.

European d g is important to us for many reasons, not the least of which is that it is among our most profitable markets.

It supply chain cost normalize and we grow Revenue be on the panel. We believe that our European business will be a key driver of profitable growth.

Addition to posting quarterly Financial results consistent with our targets. The company also executed well, on key operational initiatives, we posted strong positive operating cash, flows in the second quarter. A couple of the successful Equity raised in April. We are firming up our balance sheet.

With respect to.

Martin drivers, we completed the phase-out of our oldest cell Technologies during the second quarter. We produced our last maxeon to solar cell it commenced installation of maxeon Six Equipment.

It's our new technology will deliver significantly higher margins than maxeon to we are on scheduled ship our first panel of later this year.

We're this shift will also be coincident with Logistics savings from the optimization of our Factory Network where by the end of the year will be servicing, Asian and European, maxeon 3 and 6 customers from Malaysia rather than Mexico.

The company is focused on our three, strategic pillars for profitable growth that we believe will transform the company.

Our execution on these three pillars will enable us to achieve our Target business model. With in 2023, at least twenty percent Revenue growth greater than 15 percent gross margin in greater than 12 percent adjusted ebitda not

In our panel, Innovation, pillar the highlights. This quarter or the progress on our maxeon 7 cell development in the announcement of our disruptive. New maxeon are technology platform.

We've been manufacturing. The solar Industries, highest efficiency commercially available solar panels for over 15 years. That Legacy is solidly intact today with maxeon five and six and we expected maxeon 7 will extend our module performance lead. We took successful steps this quarter to demonstrate critical maxeon 7, performance Milestones on the pilot line being built in our Fab Four.

As both residential and Commercial consumers, get more educated on sustainability in the benefits. Their panels are creating both locally. And for the planet, they are increasingly thinking about panel lifetime. Mainly, how long will those panels to stay insufficient? Power output. And how long will they reliably and safely work on their Rooftop in this area? No, other commercially produced Technologies come close to our products performance. Both are maxeon and performance series offer outstanding loans.

Penile performance is about more than efficiency. You can expect to hear more on this later this year.

We also announced our new maxeon are technology, a super thin, super Light Panel that we believe will enable an annual Market of around for gigawatts worth of commercial rooftops in Europe alone.

We expect to begin shipping. Maxeon are in 2022.

For RDG Channel pillar. We're seeing strong growth as a reminder that represent our technology and brand. And who have the ability to convey the value of our industry best panels to their customers.

These relationships built on trust that are developed over time and we're building on a decade plus of investment. Our Channel sits at the foundation of our be on a panel strategy as our partners are in a position to effectively communicate the value of new technologies like microinverters and Storage.

George with the introduction of

Product in July. We target exiting the year with about 20% of our non us, DG sales attributable to AC modules. Storage will be one of our next key areas of focus be focused. You tillett escale pillar as a reminder, our approaches to pursue markets, where we have a unique value proposition.

As a US publicly listed company with global operations, a trusted reputation for our business practices and a deep commitment to ESG for an especially attractive partner, too many developers across the globe.

This led to our announcement of 1.8, gigawatts of production expansion for the US market where our corporate culture and experience are especially important.

Aunt in the near-term. Our early success in winning primaries, one gigawatt, Gemini power plant in Nevada has put us in a strong position to selectively fill out our remaining 2022 available capacity and to focus primarily on booking 2023 and Beyond.

And since our announcement in April regarding our P-Series capacity expansion Supply to US market. We have seen some sustained strong interest from utility-scale developers, which has led us to accelerate our planning for a second phase of capacity.

We're very encouraged by the recent us, legislative proposals with incentives, that support domestic solar manufacturing. We believe that. If enacted, they provide a great platform for maxeon to help the US government achieve their goal to re-establish, a domestic solar manufacturing value chain, and to do so deploying cutting-edge solar technology at critical scale.

We recently submitted to the Deo, he's loan, programs office, and applications to support the deployment of a three gigawatt, performance, series, solar cell and module Factory. We intend to move forward with this project ending successful negotiation of a deal alone guarantee and the passage of enabling legislation including the solar energy manufacturing for America Act and the America jobs in energy manufacturing Act of 2021.

The goal is to start solar panel production in the US as early as 2023.

Shipping outside of the US in the rest of world, utility-scale business. Supply chain costs are still elevated but customer pricing. Expectations are getting more in line with these higher costs. Give a map. We expected begin converting, our sales pipeline in the book business in the near future.

Combined with the continuing scale-up of our bifacial P5. Performance series capacity. We're increasingly confident in renewed shipment growth in our rest of world, utility-scale business, as we enter 2022.

As a reminder, rjb structure enabled maxeon to largely reallocate, our volumes of the Chinese market. During the first half of 2021. We expect to provide an update regarding our utility scale backlog in Q4.

Before I turn the call to Chi a quick mention about our ESG effort in June. We published our inaugural sustainability report highlighting our initiatives achievements and plans related to the key ESG themes.

Our commitment to responsible manufacturing and supply, chain sourcing goes back to the Inception of some power. Now is maxeon, we aim to establish our leadership and driving a holistic approach to sustainability in our industry.

This report online.

And long-term goals that the United Nations Global compact, the world's largest voluntary, corporate sustainability initiative, which we joined in December 2020.

Why We believe We generate long-term value for our employees customers shareholders. In the communities where we operate by holding ourselves to a higher standard in the way, we conduct our business as highlighted in these sustainability report.

Art, I will turn the call over to Chi to review our financial performance.

Thank you, Jeff, and hello, everyone. And then provide guidance.

It's just mentioned are Leo total revenue for the second quarter came in at 176 million dollars consistent with our guidance range of 165 to 180, five million dollars. Our Revenue was up six percent sequentially. Mainly thanks to our exposure to the growing, European DG markets.

It's total shipments for 2q..434 megawatts in line with our guidance range of 415 to 475. Megawatts. Asps, held, mostly steady, and the second coffee scent Court of 2021.

ASP decline is mainly attributable to product, mix SP series products, accounted for 47 percent of total shipment compared with 36 percent in the first quarter of twenty. Twenty-One overall sales revenues for the second quarter were again dominated by the DG business with utility-scale accounting for only 11 percent.

Aunt, as a reminder like in recent quarters, we intentionally reduce our exposure to utility scale as industry. Price trends have not been supportive of our margin targets for that just these Trends started to change in the second quarter, but due to fairly long sales Cycles. This does not fit not affect our 2q revenues.

Gross not came in a 2.8 million dollars or negative one point, six percent of sales, that is better than our guidance range.