Q2 2022 SunPower Corp Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Good day and thank you for standing by welcome to the Sunpower second quarter 2022 results. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one one on your telephone.
Please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your Speaker today, Michael Weinstein Investor Relations for Sunpower. Some power. Please go ahead.
Good afternoon, I would like to welcome everyone to our second quarter 2022 earnings conference call on the call today will begin with comments from Peter Pharisee CEO of Sunpower, who will provide an update with the second quarter announcements and business highlights followed by our expectations for the remainder of 2022.
Sure.
Following Peter's comments, John Powers CFO will then review our financial results and guidance for the year as a reminder, a replay of the 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.
The press release, our 2021, and 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 posted a set of Powerpoint slides, which we will reference during the call on the events and presentations page of our Investor Relations website.
And at the same location. We've also posted a supplemental data sheet detailing additional historical metrics with that I'd like to turn the call over to Peter <unk> CEO of Sunpower Peter.
Thanks, Mike and good morning, everyone.
First a comment on the recent announcement of the inflation reduction Act before I review, our Q2 business highlights.
The newest gave me an increased hope that the United States can lead the world in the energy transition.
The bill could ensure that all Americans could access to clean energy technology, and the cost savings resiliency and peace of mind that comes with it.
It has the potential to boost our economy with well paying jobs and communities across the nation.
As we keep working every day to make renewable energy accessible to everyone.
<unk> urge our legislators to pass this bill so we can get to the future we envision quickly.
People need clean affordable and reliable electricity now.
Please turn to slide number four.
I am pleased to report that customer demand continues to be strong and then we added 19700, new customers in the quarter.
51% increase year over year, and a record all time quarter high.
Just as impressive has been revenue accelerating at 63% more than a year ago, a solid increase over the 41% year over year growth we saw in Q1.
This is a clear indication of how higher pricing is working its way into our results without dampening customer appetite.
We continue to see strength across all our sales channels.
Note, the 117% year over year customer growth from the Sunpower direct channel.
Our backlog set a new high versus recent quarters at 19000 retrofit customers with another 34000, new home customers in backlog as well.
Within new homes, we see multifamily and rent to own segment that had been strengthening under the current home market conditions.
Our sunbelt energy storage solution continues to attract strong customer interest with a 19% sunpower direct bookings attach rate.
<unk> also benefited this quarter from improved profitability as we raise pricing.
So power financial increase loan bookings, 87% year over year, driven by strong customer interest in our new home products.
Please turn to slide number five.
The strength of customer demand as illustrated all the way up the sales funnel, while we are experiencing more than 70% growth across lead generation gross appointments and bookings revenue.
These numbers are also impressive sequentially versus Q1 with a 10% increase in lead generation and a 16% increase in bookings as we start to increase prices for the first time in over a year.
Please turn to slide number six.
Consumers are already burdened with levels of energy cost inflation and haven't occurred in a decade.
Need relief and they need it now.
<unk> residential solar remains one of the most meaningful ways to reduce home power bills, even considering the rising cost of supply chain and labor.
Our main competition has been <unk>.
Traditional electric utility and their costs are rising more rapidly than the solar industry.
According to the U S Energy information agency electric bills have already increased 9% year over year as of March.
More electric bill inflation could be coming.
Their cost of capital and conventional generation fuels continue to rise rapidly this year.
Utility capital spending for an aging Lee aging and increasingly less reliable grid is also forecast to grow significantly in the next few years. According to the Edison Electric Institute.
All of these factors add up to a strengthening customer incentive to add rooftop solar while simultaneously, providing the residential solar industry with more pricing power than we've seen in years.
Turn to slide number seven.
I imagined some of you are wondering about the possible impact that the current economic conditions may have on our customers.
I want to take a moment here to highlight some of the specific comments, we read on why they are going solar with us that.
Among the most important reasons cited are number one to lower their monthly electric bills.
To have a positive impact on climate change with clean and renewable energy and.
And finally number three the peace of mind that comes from knowing that they will have power, even when the grid fails, which unfortunately has been happening with increasingly frequency in the recent years. We believe these drivers of demand are important to consumers regardless of the economic forces.
Please turn to slide number eight.
We create a subpar financial late last year to offer a full choice between a suite of loan and lease products whatever suits with customers' needs best.
We continue to innovate in this area with loans that keep monthly payments well.
We are originating loans using purchase agreements that provide up to $2 5 billion dollar source from depository capital with a cost of 150 to 200 basis points lower than the ABS market.
We remain ready with facilities in place to shift towards ABS, if that market becomes more attractive to us.
Higher interest rates could have an impact on customer savings.
Flexible terms and the abundance of customer choice, we are working to mitigate that effect, especially in comparison to the rapidly rising utility bills.
While we stand ready to expand our lease offering if needed we arent seeing a push for that from our customers loans have been roughly 80% of our financing originations over the past year and as we look at bookings happening right now we expect that same level in the second half.
Please turn to slide number nine.
Another topic I want to address is the new homes market and what we're expecting as the sector deals with the impact of higher mortgage rates.
Sunpower is a leader in this segment in Q2, we set an all time record high of more than 4600, new installations, we continue to bring in new homebuilders in their communities that are planned and under construction.
In Q2, we saw a 46% increase in contracted active construction communities, where solar is a standard offer on every call.
This brings our contracted backlog in new homes to 34000 customers with another 40000 potential customers in the pipeline, including a growing multifamily segment.
When we look beyond 2022, we see the potential for a slowdown in single family construction due to slower monthly sales rates being reported by that industry.
There is more to the story here.
Number one typically any slowing of home sales typically takes about six months to affect solar installations.
Based on homebuilder construction progress for their previously sold backlog, we expect most of this second half solar installations to pay similar to the first half.
Even number two even as single family homes slowdown we are increasingly engaged in the multifamily and single family build to rent categories, both of which are growing rapidly.
Number three over the long run the U S still faces an underlying shortage of new homes by one estimate this deficit is $3 8 million homes, that's been building ever since 2008 mortgage crisis.
And finally number four we continue to add new homebuilders in communities to the portfolio as we've broadened our scope nationally beyond California, which should help mitigate some of the effect of any slowdown in new home sales and construction within each community.
Please please turn to slide number 10.
Finally, I will share with you the progress we've made executing against the five pillars of our strategy.
For customer experience, we continue to make significant progress in Q2.
Our net promoter score improved to 51, a 38% improvement year over year service levels improved further with customer wait times reduced 45% to 31 seconds and average query resolution time reduced 36% year over year.
This is a journey not a destination and the constant improving of our customer experience ensures that sunpower continues to earn the title of best in the business.
Our new products. We're pleased to report that we have secured additional panel supplies for 2022 from a variety of sources that will help us meet soaring customer demand.
We continue to make progress towards signing a deal with first solar with an expected completion date in Q3 to develop a domestically produced residential tandem thin film module as well as a long term supply plan.
For growth, we launched our new homes solar program in partnership with Ikea for select California markets and the new home segment, we extended our contract with Kb homes nationwide and we signed a new deal with Dream finders homes in Colorado.
And our digital innovation, we're happy to announce the completion of a multiyear redesign of our remote monitoring system that saves $4 million of opex per year and improve the customer experience with the app.
Sunpower users have more than doubled last year since last year to 107000.
Monthly active users.
And finally, Sunpower financials continues to innovate and grow with low APR loans expanded eligibility up to 150, K and favorable cost of funds.
I'll now turn it over to mono for more details on our Q2 results Barak. Thank you Pierre eastern to sidetrack.
As Peter mentioned earlier strong demand remains the key story for Sunpower and the second quarter and this combined with continued healthy gross margin and declining platform investment per customer.
Well for a strong second half.
The second quarter.
$15 million adjusted EBITDA at $440 million of.
Of non-GAAP revenue, an increase of 63% year over year, which you will note is an acceleration over the 41% year over year growth, we saw in the first quarter.
Added 19700, new customers in the second quarter, a 51% increase year over year that was also nearly 20% higher in the first quarter, putting us on track to achieve our 2022 guidance per unit.
<unk> non-GAAP gross margin remained above 20% as we passed along to customers higher power freight and labor costs that continue to be felt across the industry broadly.
As sales and marketing Opex, but new customer decline from the first quarter to second quarter. We saw a sequential increase of adjusted EBIT up a customer before platform investment to 90 to $100 for the second quarter.
As we highlighted at the analyst day platform investment of $23 million.
It's primarily product digital and corporate Opex and on a per customer basis platform expenses beat and we expect this to decline in the second half as customer growth companies. We believe that this will help us achieve our full year EBITDA guidance.
Our balance sheet remains strong with the highest cash balance and lower net recourse debt, which continues to provide us with the flexibility to invest in the business.
Also have $1 5 million unsold enphase shares at the end of the second quarter.
Please turn to slide 30.
We are affirming guidance for 2022, and a target model for 2025 that we most recently discussed at the analyst day.
Continued strong customer growth operating leverage and discretionary platform investment all contribute to our confidence in meeting full year EBITDA guidance.
The effect that that has us this year.
It towards second half and next I will walk you through an update of the bridge between first half results and full year guidance for EBITDA per customer.
Turning to slide 14.
On this slide we highlight our biggest factor that lead to our 2022 full year guidance for $2000 to $2400 EBITDA per customer before platform investment starting from a base of <unk> hundred $50 in the first half. These figures that I will give a presentation.
First we expect to see continued improvement of gross margin from higher customer pricing to offset cost inflation that could result in an incremental improvement of between $145 to $325 EBITDA per customer for the full year metric.
We remain in a strong position for this especially as utility bid right this summer and fall.
Second because of our target model from the Analyst Day also assumes sandbox financial attach rates grow from 35%, 45% by the end of 2022 the.
The target model also assumes a storage attach rate per installed system that grows modestly through 2022, assuming up to a $1000 to $3000 of incremental margin, but each customer.
Customer, we ultimately expect a broad incremental improvement of between $25 to $225 EBITDA per customer for the full year.
We've largely achieved enough improvement from reducing sales and marketing opex for customer to put us on a path to achieve full year guidance.
Altogether it nets out to an expected improvement of roughly between $150 to $550 EBITDA per customer for the full year metric bridging the gap between the $850. We are reporting for the first half and our annual guidance for 'twenty two off too.
<unk> thousand dollars through $2400.
As customer acquisition built into Q4, you should think about <unk> EBITDA as seasonally weighted towards the fourth quarter.
We exited the first half of 2022 with strong residential demand.
Completion of our strategic transformation to a destination only company and a cash and balance sheet position that is in the best shape. They have been in years sets us up very well, but a strong second half of the year and continued expansion of our market share and the <unk> com with that I would like to turn the call.
All over for questions.
Thank you.
And as a reminder to ask a question. Please press star one one on your telephone.
Please standby, while we compile the Q&A roster.
Okay.
Our first question comes from Sean Morgan with Evercore ISI. Your line is open.
Hey, guys good morning.
I had a question on the.
The first solar partnership so the first solar has their Ohio manufacturing in this recent IRI Bill that's kind of.
So likelihood of them being able to capture some production tax credits and I think theyre, probably not going to do it on the capex through the through the facilities rather on the actual flow modules being produced so is it too much of a stretch to think that with the JV you guys might be eligible for some of those PTC and then just a follow up on that.
How big do you think the addressable market is for these.
Tandem Crystal lines, Tim film products is in the rest of the residential market.
Good morning, Sean Thanks, Yes.
We are continue to be excited and optimistic about our opportunity to develop a commercial partnership with first solar.
Just to clarify it is a commercial partnership it's not a JV per se and as you pointed out they've got a terrific set of manufacturing facilities in Perrysburg, Ohio.
<unk> had a chance to visit there and tour their factories and they are quite impressive the amount of automation and the amount of domestic content. They are able to combine together are terrific. So in this.
Bill being considered by the federal government I think we are quite excited about this adder for domestic content I think it's a little early to speculate as to whether or not these products would qualify I think it would be wonderful if they did I personally because I think you would be open up new market segments across the U S and it would.
Give us.
A unique advantage in having a potential 10% adder for leases and Ppas I think on the on the thin film products were thinking about it.
Addressing the market in two ways. We've had success at the premium segment of the market and we would imagine that the.
The highest efficiency panels that we might produce together would be targeted towards that segment and set a new innovation standard, but we're also thinking.
Quite broadly about how do we also produce a module that maybe it would be at the very top end of the mass market segment core mainstream segment that allow us to have that same kind of innovation lead and affordability for that segment as well so as we as we work together and we think about what we want to do in the future.
We're really thinking about developing products that will address both of those market segments.
Okay. Thanks, and then I think I saw in the.
It was in the release or the presentation of 150000 is the upper limit for the financing packages.
And I think thats pretty well in excess of the average.
Cost of an install so it was kind of wondering like what exactly would be the sort of included in that upper limit.
Our customer care.
Capex Bill that ran at 150 Grand like would that include storage like some sort of.
Super extra generation or how would you get to that to that level of kind of the upper end.
Customer costs, yes.
Yes, Sean you hit it exactly right. We do have homeowners that have large homes big roofs wanted to have the maximum number of panels their roof will support.
If you think of places like Hawaii, and California, where it really does make sense to sort of maximize.
The amount of cube space, you can get in solar panels, but also increasingly attaching batteries in EV Chargers is becoming more and more common for our customers on the battery side as we introduce later this summer or two invertor hold backup product some of those products you could spend.
$20 $30 $40, depending on what size battery you want to have with your home. So it really does increase.
The the budget I guess, if you would for solar plus battery plus EV charging. We're also imagining that it'll be helpful for consumers to qualify for a large amount so that they have the ability to easily buy stuff from us in the future. So we've talked about we really have a view of our of our customer base our long term.
Term view lifetime view, so we really think of ourselves as we want to be their partner for the lifetime. If they qualify for a large amount and only use part of that you might imagine us being able to make it very easy for them to add on a couple more panels are add on a new battery or whatever it might be so we're quite excited about the innovations that we're developing.
The Sunpower financial side, and a lot more to come as we go forward there.
Alright, Thanks Peter.
Thanks, Sean Thanks, Ron.
Okay.
We have a question from Ben <unk> with Baird. Your line is open.
Hey, good morning, guys. Thanks for all the information congratulations.
Could you talk about maybe just geographic.
Mix in the quarter.
No follow up.
<unk>.
Yes, I think the thing that we're looking for Ben is are we continuing to see signs of growth spread across the United States. As you know we've been a company that had a very strong presence in California that we're very proud of in California is a terrific business, but we're also looking to see if we continue to grow the business in the northeast.
In the southeast and I am pleased to say that in Q2, we had another good quarter of growth outside of California, So and particularly if you take a look at Texas, Florida, North Carolina, Illinois.
And then the Newark, New Jersey, Massachusetts, Connecticut corridor.
All of those states continue to grow quite well as well and then interestingly enough Blue Raven is in these.
I would call them I guess more off the radar states. They go through the middle of the country and when you take a look at their customer growth rate in Q2, we don't break that out separately, but to give you a color I would say.
<unk> growth rate was even faster across those states than our overall growth rate was just to give you a feel for how strong the solar business is all across the country. So I really feel like we're getting closer to reaching an inflection point, where it's becoming more common knowledge that you can really save a great deal of money that of your solar cost.
Every month, you saw the customer feedback that we stuck in our presentation and that was purposeful because we want to kind of share with everybody how our customers describe to us why they are choosing to buy solar and I think youre seeing that more and more across the country.
Thank you and then just.
You talked a lot about increasing utility prices.
Could you just talk maybe you have the leverage to that I think maybe.
Maybe.
It seems like you're more levered than some others.
The near term.
I'm, just wondering how that squares with deal reiterated guidance versus maybe raising a bit how are you guys thinking about that thanks guys.
Yeah, well I think we feel.
We feel like if I just take a break after the first half of the year were in line, maybe slightly ahead of where we said we would be when we were at analyst day. So from a customer perspective, if you take a look at the midpoint of our guidance, we're about 47% of the way there. So we expect it to be about this time.
We've got a strong second half ahead of US and then from an EBIT perspective, we had kind of described it as one third two thirds one third in the first half two thirds second half and I think where we're at.
Solid position to deliver that for the year. That's why we reaffirmed our guidance I think what we're seeing Ben is the ability to pass along where we are getting price increases whether it would be cost of capital on the financing side or where it would be.
Product or or labor costs, increasing we've been able to successfully pass those along without slowing down demand one of the reasons that we put the page and they're comparing this is page five of our deck Q2 to Q1 is to sort of directly address this this topic of whether or not the business is luiz.
<unk> any momentum and from our perspective, we began to raise prices at the end of Q1, you saw those prices begin to have an impact in Q2 and yet the business continued to accelerate and so far in Q3 I think we're seeing this continued pretty strong growth as we go so we're.
We're excited for the second half of the year, we reaffirm our guidance and we feel like we've got the plans in place to deliver those results.
Thank you.
Yes, the only thing I'd add is if you go to page 14 of our deck, we laid out that EBITDA per customer growth from the first half. The total year. So we are expecting to see operating leverage in the back half of the book price in excess of inflation as well as increasing attach rates of sandbox and actual and modest increase in our assets.
Our sand mode.
Yes.
Thanks, Ben Thanks, Mike.
Our next question comes from Pavel <unk>.
Well channels with Raymond James Your line is open.
Thanks for taking the question you touched on.
Kind of geographic footprint, a bit earlier, maybe I'll ask it this way.
For all of the inflation.
In the past year, the rule of thumb wise.
Rooftop solar make sense, where utility rates are at or above 15 cents per kilowatt hour, which is about maybe a little over a dozen states.
How is that.
Changed in last year.
So I think if you take a look at the I think using that metric I think is a fair way to take a look at it I think part of the reason we gave the customer feedback we did in the deck is that there are multiple reasons that people consider buying solar.
One of them is the one that you pointed out which is the pure economic reason and we think of it as the spread between solar and traditional utility costs those have gotten bigger over this past year and therefore, we see that addressable market is gotten as it hasnt gotten larger on the lower your electric bills, but I would also say.
I'm surprised and delighted to see the number of people, who identify with wanting cleaner energy and wanting to contribute to that.
Middle bucket of feedback.
And then maybe not a surprise if you live in California, or one of these states where there is regular outages.
Outages, but we're seeing more and more people, who really want to have more control over their energy resiliency and so people talking about both solar and battery storage as being essential to avoid these outages is increasing and our customer footprint. So I do think the economics look more and more favorable if we can get this bill.
<unk>.
We think the addressable market will grow dramatically over the next four years, but I think in addition to the economics you probably ought to consider there are other reasons that people are buying right. Now that's one of the reasons I think demand is so strong Monday, what would you add.
To point that out as one.
We put some data in our deck as well you're seeing.
About 9% increase.
And utility business year on year that was asset margin with <unk>.
Gas is gas prices, increasing I think that that probably accelerates as we head into the back half of the year right. So that's point number one if you link that to what we are seeing in terms of growth we are seeing growth in all our channels.
Whether it's our dealer channel.
China, including Blue River, and so we are seeing growth not just in our in the northeast are in in California, but also in the areas that <unk>.
So I think the same incomes of rising interest on solar given what's happening in the backdrop of the utility prices in natural gas prices is probably more secular throughout the year and youre seeing that eni bookings growth despite increasing prices.
Just a small housekeeping question to follow up.
Why did depreciation expense.
Triple from Q1 to Q2.
Yes.
As we've talked about that we are investing in.
In our platform and the platform investment happens both in terms of investment in Opex that shows up in our EBITDA, but also in some of the digital tools, including our ERP system that can be upgraded.
And went live.
In the second quarter.
Our late first quarter of <unk>.
That's what's causing the increase in depreciation quarter on quarter. We also have a little bit of work associated with our.
Sungard.
In that in that capitalized number that impacts depreciation. So overall as a company we are investing heavily in technology, whether it's product or our software and that is consistent with.
Our approach.
From a from a capital allocation perspective.
Thank you.
Our next question comes from Julien Dumoulin Smith with Bank of America. Your line is open.
Hi, This is Morgan on for Julian here, just wanted to ask you.
You've given some comments about some of the cost reduction dynamics through the rest of the year.
As well as the price increases can you maybe just talk about the latitude about think through next year your expectation for the pricing.
Primarily and then.
So.
Cost reduction plan sort of cadence through the rest of the year like what specifically is driving is within pizza.
Yes, let me start off with.
Talk a little bit about the pricing piece first I think.
In this environment, where supply chain costs are increasing.
We have been able to increase our prices by that amount and actually a little bit more throughout the year, but if you said, what's the what's healthy for the long term I don't think that dynamic is healthy for the long term. So our goal would be that we manage our supply chain prices in a way that keeps them flat or actually improve them over time.
I do think we don't want to put ourselves in a position where solar becomes.
Such a big ticket item that appears to be an affordable for people and I think it's more about the appearance of the reality because between leases loans.
There's lots of good financing opportunities, but we have to be careful we don't.
Become perceived as a premium product.
On the cost front, we're constantly looking for things and I think the Best example, I can give you is the one we highlighted under our digital innovation.
This project, where we redesigned our monitoring system, we basically in source the software and built it ourselves not only as a software higher performing at a better customer experience, but savings $4 million annually is obviously, a great annuity for us to take advantage of as we move forward. So we're constantly looking for opportunities.
Where we are outsourcing or using a third party or where there's manual work that could be automated and we will continue to look for those opportunities. This year next year in many years and beyond by no anything else you want to add to that yes, I think a couple of things if you go to slide <unk>.
14 of our deck, we lay out some of the dynamics that go towards how we go from our first half EBITDA per customer to our tortilla EBITDA per customer and there are two things I'll call out in terms of operating leverage one is price in excess of inflation and second is increasing from.
A tax rate.
Perspective, both on sandbox in action and storage, but the other point is I think to get to our guidance.
Do not need to reduce our sales and marketing expense on a per customer experience. So that kind of gets you from a first half to our total year.
As you think about.
Our modeling for 2023, probably peaked.
The back half run rate in terms of.
EBITDA per customer and use that as a good approximation for next year.
Yes.
Excellent. Thanks.
Julien here just a quick follow up here if I can just on the loan product and just what Youre positioning here can you talk a little bit more on whats reflected in the 45% attach rates just given some of the gyrations on that in front of me.
Can you talk about your sort of competitive positioning here, especially on pricing.
Yes, I think Julian on sub power financial one of the most exciting things is we really have an opportunity to invest in technology to make that product easier for our dealers to sell with our customers and someday easier for our customers to be able to buy directly from us along with making.
The technology easier.
We're on this I guess path of innovation, where we're continuing to launch more and more new products each and every quarter. We highlighted a couple of those in our in our release and our comments from.
From a pricing perspective, I think we were one of the early ones to.
Begin to pass along our cost of capital increases into the cost of our loans and I think we're still pleased with.
How strong the businesses is overall and how strong our loan businesses. So right now I think we feel comfortable that we're providing customers with good value.
We're getting a good return on the business and we're looking forward to more and more innovation as we go the key thing and my perspective on increasing the attach rate is because historically, we didn't have as competitive a product as we needed.
Most of our dealers have chosen to seek other financial alternatives, we're really seeing that change pretty dramatically and one of the best test. We've done is we're in the process now of converting blue Raven to become a 100% some power financial.
I have held the bar high for Blu ray because I didn't want them to convert over I wanted them to sort of treat subpar financial as if it was a third party company and not convert their loan business until we had products that were at least as good or better than they had been using previously at rates that were at least as good as better so using our own test case.
I think we feel increasingly good about the subpar financial business and our ability to be competitive both with our dealers and someday I hope beyond that as well, but is there anything else you wanted to add.
Couple of things as you think about sandbox and action relative to some of the pure play.
<unk> one is.
We have access to depository capital.
That's lower than what's currently being financed with the ABS markets and second is because we are we have access to the customer.
Since we sell them the systems, we can leverage our fixed costs across a wider suite of products now includes.
Financial products and then the third thing.
Find out as Peter touched on Blue driven the other opportunity from a sunpower perspective is getting more of our dealers to use <unk>.
<unk> financial finance product, you can see that trend.
Over the last few quarters, we're installing dealer cash as a percentage of total systems is going down.
And we will continue to go down through the years.
Alright, great. Thank you good to hear you guys are on track.
Okay.
We have a question from Kashi Harrison with Piper Sandler Your line is open.
Good morning, everyone congrats on the quarter.
Most of my questions have been asked just just one more for for mono.
I know you all are still early in the new Sunpower story, but I was wondering if you could maybe just give us some thoughts on how to think about EBITDA conversion to cash flow from ops not necessarily for 'twenty, two but as you think about 2023.
You indicated I think in a prior question that we should be thinking about the second half run rate on a EBITDA per customer basis, and so I'm just trying to think through how to how to model that.
From a cash flow perspective, thank you.
Yes, so actually I see nothing.
And the thing just from a margin perspective, you are right. We have transformed the model of the company too.
Hi.
Cash generation and cash conversion model.
You will see that in the back half of the year as.
As we expect to generate operating cash in that business, we call that out in the cash Dave will be put in the appendix I think as you model us long term EBITDA to cash conversion probably team.
60% are in the <unk>.
From a long term perspective.
Yes.
Thank you.
We have a question from Colin Rusch with Oppenheimer. Your line is open.
Thanks, So much guys can you talk a little bit about trends and battery size.
That you are seeing right now or have you seen any real significant changes or increases that you see some of the issues around the grid.
Yes, I think the biggest trend that we're seeing as we launched our sunbelt product last year and we describe it as a partial home backup and what that means is that you can identify key appliances that you would like to keep up and running during the course of an outage or you could identify your entire house for a shorter outage.
What we're seeing is that there is more and more demand actually for the much larger batteries as we go forward. So think of the product that we launched that I have in my garage as the entry level product and two invertor multi battery product is where consumers really want to go and I think if you look forward, it's quite exciting actually.
Dia that between the solar battery backup and possibly your EV car or truck backup.
Homes are going to be able to support themselves throughout an outage and maybe even multi day outages of keeping their clients is going I think that's the big trend that are that people are excited about I haven't living area, where the power is relatively stable, but for those who live in areas, where the outages are regular theyre extremely disruptive to People's lives.
And the feedback we get from customers some of which we put in our deck. This week reflects the fact that for some people. It's really the resiliency of its driving them to the table. They are delighted to find out they get to save money.
Probably have it and they're hard to do something good for the planet, but I think the resiliency is becoming a bigger bigger story and I expect our battery sizes to increase over time, one of the things that's exciting about the inflation reduction act is that it does include battery.
And includes battery for 10 years at that 30%. So I think that's that's really terrific because I think we're going to get a chance to really expand that market size as we go forward.
Great and then just the follow up is just I am curious about the difference between some of the more mature markets like California, and some of the.
Emerging markets within the U S in terms of size.
The cycle time for customer acquisition.
Version rates things like that as you look at some of the middle of the country versus some of the costs or can you guys here.
We break out to keep it simple the one metric we take a look at as California, non California for things like cycle times and.
And conversion rates and whats. So pleasing is that we're really beginning to see conversion rates get to the same level as California, all across the nation. So I'm just taking a look at a sheet here I mean, even states. Some of these we've talked about before Colorado, North Carolina, Florida Techs.
Texas those are just very very strong states for solar and I think we're beginning to see building momentum in those states.
Our biggest challenges this past quarter was the high class challenge of keeping up with demand. It's really been how do we get the number of panels, we need and the right skus of panels and the right labor in the right cities at the right time, that's been that's been our challenge but.
We've made some progress on that and we're quite excited about our plans for the back half of the year.
Thanks, so much.
Okay.
Thank you.
We have a question from Mark Strouse with JP Morgan Your line is open.
Yes. Good morning, Thanks for taking my questions most of them have been addressed.
Wanted to come back to slide nine now and when we're thinking about the mix single family versus multifamily.
That something that you can provide or just kind of give us.
A general guideline of how we should be thinking about.
Kind of how big the multifamily business is for you.
Yes, Mark I think we are.
Multifamily is beginning to be material.
Single family build to rent is just kicking off I would say.
I think our comments were interestingly enough as we work with the new homebuilders most of them overlap across these segments across the U S. So theyre not just in one particular channel and although there may be a slowdown.
Still grow, but maybe a little bit of a slowdown in single family New homes were really seeing them accelerate their investments in multifamily and single family build to rent. What's interesting is California's kind of leading the way again I don't know if you are aware of this but the the incentives are strongly aligned for all multi.
Family homes are now required to have solar and at some point there'll be required to have both solar and battery storage.
And what we've seen is what starts in California begins to spread across the U S and many of these same builders find it economically feasible and desirable to do what they are doing a california across the other states. We operate in so I think as we look forward. These three segments single family New home multifamily.
New and single family build to rent our three segments that we expect to grow.
Grow healthy I guess over the next five to 10 years as more and more people are looking for different types of dwellings that meet their economic needs.
A big thanks to all of you for the questions today and thanks for.
Your support of Sunpower, we're really looking forward to the back half of the year. We're cautiously optimistic that the inflation reduction Act will get passed we encourage you to get past.
Quickly so that customers can take advantage consumers across the U S can take advantage of solar and storage and the money savings in the job generation that comes with it and we look forward to talking to all of you next quarter. Thanks.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Okay.
Good.
Yes.
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