Q4 2022 Maxeon Solar Technologies Ltd Earnings Call
Yeah.
Good day, ladies and gentlemen, and welcome to the Maxion Solar technologies fourth quarter 2022 earnings call.
Currently all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, this conference call is being recorded.
I would like to turn the conference over to your host Mr. Robert Lee of Maxime Solar technologies, Sir you may begin.
Thank you operator, hey.
Good day, everyone and welcome to <unk> fourth quarter 2022 earnings Conference call.
With us today are Chief Executive Officer, Bill Wogan, Chief Financial Officer, and Chief strategy.
G Officer, Peter Ashram butter.
Let me cover a few housekeeping items before I turn the call over to Bill.
As a reminder, a replay of this call will be available later today.
Esther relations page of <unk> 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, the 20-F 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 in the events and presentations page of Maxion Investor Relations website.
Also 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 <unk> Investor Relations website.
A presentation of the most directly comparable GAAP measure as well as the relevant GAAP to non-GAAP reconciliations with that let me turn the call over to <unk> Maxion CEO Don Mulligan.
Thank you, Rob and Hello, everyone. This is my first earnings call as Maxion CEO and it is great to be back following over 20 years of experience, leading sunpower is R&D and operations team.
During my first month and a half as CEO I spent time at our California R&D headquarters both of our South Fabs in Asia, with our sales and marketing team in Europe , and with employees and customers at our Mako is in Mexico.
I was reminded by these visits that maxion has two strong competitive advantages one of the global distributed generation market and the other in U S utility scale.
These markets offer exciting profitable growth opportunities with strong customer demand for high performance panels, and we have a well established presence in both of them.
I give great credit to our executive leadership team and to our board for putting maxion and are positioned to take advantage of these opportunities by executing bold transformation initiatives over the last two years.
And I would also like to give credit to my predecessor, Jeff waters for leaving behind the high performing cohesive management team.
So their efforts today, we have an updated and expanded manufacturing fleet strong sales channels in the highest margin markets.
Spanning beyond the panel revenue streams and the latest generation of the world's highest efficiency panel technology ready to ramp.
Technology innovation has been a legacy strength of ours for decades.
We look forward one of my highest priorities will be to accelerate development and deployment of more efficient and cost effective solar panel technologies that can be scaled quickly.
We will continue to invest in beyond the panel offerings that will improve end customer experience and provide additional differentiation and strength in our DG channels.
We will also aggressively pursue manufacturing cost reduction and operational excellence and our existing manufacturing facilities.
I believe that this combination can make maxi on one of the most profitable companies in the solar industry.
And now I'll provide an update on our fourth quarter key initiatives and accomplishments through the lens of our distributed generation and utility scale businesses.
Guy will then review our financial performance and outlook and will conclude with Q&A.
Let me start by reporting that Maxion delivered financial results in Q4 that were well above plan driven by strong shipment growth solid asps.
And outstanding work by our operations group to significantly beat our Cogs targets.
As a result, we generated over $20 million of gross profit in Q4 and are well positioned for positive adjusted EBITDA in the current quarter.
Our DG business was led once again in volume and revenue by our European team and Theyre strong direct to installer channel shipments.
Shipments in Europe grew more than 25% year on year. We are now approaching an annualized deployment run rate of roughly one gigawatt in our European DG business.
Our European sales network comprises over 1000 partners and incorporate services such as direct shipping credit and person sales training and strategic business planning that make this channel fundamentally different from our competition.
We gained market share in several key countries, including the Netherlands, France, Germany, and Belgium, driven largely by increased shipments from our <unk> joint venture.
Belgium was a particular bright spot with shipments up roughly 40% year over year and market share in the double digits, joining other long term maxion strongholds, such as Italy and France.
Lending DG Isps in Europe increased more than 5% sequentially on stable module pricing and a higher mix of power electronics shipments and were up more than 30% year on year.
In the fourth quarter, our AC module attach rate was about 20% of total DG shipments outside the United States led by France, and the Netherlands, where AC continues to account for a majority of sales.
We expect our AC mix to continue to increase this year driven by growth in markets, where AC modules are relatively new.
We also expect increasing revenue and profit contribution in 2023 from our Sunpower reserve storage solution and Sunpower drive EV Chargers.
The first storage orders were received last quarter in Australia.
And our products team is launching storage in Europe soon starting in Belgium, Italy and Spain.
Turning to our United States DG business, we are seeing an excellent 2023 demand environment in terms of volume growth and price. Unlike some segments of the U S. DG market better experiencing cooling demand Maxine products are positioned in segments of the market where demand for our premium products is healthy led by high cost of power.
Occasions, including California, and the northeast.
Our product's value proposition is particularly strong in these markets because of the relatively small room sizes commentary saving conditions, both factors, leading to constrained roof areas and playing to the ability of our products to deliver more power on our customers' Rus.
We are seeing a strong cash business in these states based on long term savings with utility rate inflation observing part of the cost increases on loans and competitive leases and ppas as alternatives to loans.
Also in these more mature markets installers, often have sales processes engineered around the long term value of solar rather than a simple focus on year one savings.
Even in states experiencing some cooling demand for solar due to higher interest rates. We are seeing cases, a countercyclical growth from installers, who sell long term value.
We are pleased to have recently announced the expansion of our Sunpower relationship with new commercial terms for 2023 and mutual exclusivity for <unk> in the U S through 2024.
And as we discussed last year, we see opportunity in large segments of the U S residential market, where sunpower isn't present, and where demand for our premier modules has increased due to the abrupt exit of LG.
We're excited to take advantage of this opportunity with our new U S channel partnering with Green Tech renewables in this relationship we expect to leverage green tax unparalleled distribution capabilities and focus our energy on training installers on the benefits of our technology and how to translate those benefits into improved financial outcomes for <unk>.
Installers and homeowners.
During 2023, we plan to rollout elements of a multi tiered channel program in the United States similar to our European structure.
We are planning to exit 2023 with over 100, New Maxion channel partners in the U S. All incremental to Sunpower as channel.
We're selling our maxion three technology in this channel, which boasts industry, leading efficiency and our new 40 year warranty, which offers installers another unique selling proposition and provides homeowners with enhanced peace of mind.
In summary, our confidence in the strength of our global DG business is high we expect strong ongoing demand in Europe increased availability performance line panels from Hs PV and meaningful contribution from our reserve and dry products will support continued growth in Europe , and Australia and the U S.
We believe that the addition of our new U S channel through Green Tech on top of our contracted minimum volumes with Sunpower set us up for strong <unk> volume growth in 2023.
Let's now transition to our utility scale business, we remain primarily focused on the United States market, where our uniquely positioned north American manufacturing footprint allows us to provide our customers with reliable supply of leading edge technology.
We also have a unique corporate profile anchored in strong ESG values, which is becoming increasingly important to various stakeholders.
Earlier this year, we are honored to be the sole silicon module manufacturer named on the corporate Knights list of the world's 100, most sustainable corporations.
Welcome recognition of our focus on becoming an industry leader in sustainability.
Our value proposition has been validated by a number of key customers who have contracted for four two gigawatts of supply backlog extending deep into 2025, plus options with advanced deposits for an additional one five gigawatts through 2027.
Since our last earnings call all new bookings have been secured with repeat customers and in some cases include adjustments to 2023 commercial terms, which <unk> will discuss in his guidance commentary.
With a solid and growing multiyear backlog in place our attention in this business is primarily focused on completing the ramp of our mono PERC cell and module production and driving cost reduction or.
Our performance line is expected to ramp to the full one eight gigawatt of capacity by this summer.
On the supply chain front, we are finally seeing cost decreases on key input materials, which contributed to our better than expected fourth quarter results and which support the trajectory toward achievement of our long term financial model targets within 2023.
We continue to progress with the planning of our U S manufacturing facility and are in due diligence with the department of Energy loan program office, which is the final stage of the <unk> process.
Subject to successful completion of this process, we expect to significantly benefit from the IRA incentives in future years, as we ramp our planned U S manufacturing capacity.
There is a lot of excitement at maxion currently as we expect to deliver our first adjusted EBITDA positive quarter at the end of this month and are on plan to achieve our long term financial model within the next 10 months and with that I'll turn it over to Kai.
Thank you Bill and Hello, everyone.
We'll discuss the drivers and details of last quarter performance and then provide guidance for the current quarter and the full year.
Total shipments for the fourth quarter were 734 megawatts up 21% sequentially and slightly above our guidance range of $680 to 720 megawatts.
The growth is attributable to strong DG demand as well as operational progress from our internal performance line capacity for the U S utility scale market.
Revenues for the fourth quarter with $324 million.
Near the high end of our guidance range of $290 million to $330 million.
Primary driver was strong output from our Mexico performance line muscle as well as healthy Asps in DG.
ASP for our top of the line IDC panels were up by 17% quarter on quarter supported by incremental volume shipments into the U S for sunpower as well as the new U S DG channel.
non-GAAP gross profit in the fourth quarter was $21 million.
Up $36 million from the previous quarter, and 45 million higher than our margin trough in the second quarter of last year.
It represents a six 4% gross profit margin and is the highest ever since maxion became a standalone company.
Well as the positive gross margin since Q1 of 2021.
While we forecast that being gross margin profitable in the quarter the reside.
Either the expectations embedded in our zero to $10 million guidance range.
The primary reasons for this outperformance where operational improvement that our performance line factories in Malaysia, and Mexico, as well as supply chain costs.
<unk> freight falling faster than expected.
Earlier in 2022, there were opportunities to slightly reduce freight costs in the near term by entering into long term contracts.
Why are these opportunities we're attempting at the time, we believe but prices would ultimately pullback and maxion could realize greater cost savings over time with a more flexible strategy.
Last quarter shipping rate declines sooner and faster than anticipated and hence contributed to our better than expected results for all our P&L.
Polysilicon spot price declines in China have also been positive for our trend surprises with HFF, PV, which track market indices.
On a year over year basis, the impact of total supply chain cost inflation on our cost of goods sold was favorable $2 million.
This is materially improved from the prior seven quarters, when we saw an average unfavorable impact of more than $30 million per quarter.
At the same time, increasing asp's resulted in an uplift of $43 million, providing a significantly favorable contribution to our bottom line.
Because our performance line product for the U S utility scale market were introduced less than a year ago. The excluded as no year on year comparison.
Underutilization charges totaled $9 million in the quarter, demonstrating sequential improvement as we approach completion of the capacity ramp all performance line product.
Our fourth quarter cost of goods sold included a small amount of out of market polysilicon cost, which were below our guidance of $1 million.
These costs were related to a long term contract executed 13 years ago that ran until December 31 of 2022.
With this contract knowledge by us and any remaining impact expected to be immaterial. We are happy to announce that we will now cease reporting on this metric going forward.
non-GAAP operating expenses were $34 million in the fourth quarter compared to our guidance of $36 million plus or minus $2 million.
Adjusted EBITDA in the fourth quarter was negative $4 million and.
And significantly better than our guidance of negative 17% to $27 million based on the previously mentioned favorable development that impacted our gross margin.
GAAP net loss attributable to stockholders came in at $76 million.
Compared to $45 million in the previous quarter, mainly driven by a $42 million quarter on quarter swing in the mark to market valuation of our prepaid forward as well as $26 million.
Higher income tax provision quarter on quarter.
Moving onto the balance sheet.
We closed the fourth quarter with cash cash equivalents restricted cash and short term investments of $344 million.
Compared to $314 million at the end of the third quarter.
<unk> was flat sequentially at 91 days.
Capital expenditures in the fourth quarter was $7 million.
Which was below our guidance range as we maintain payment discipline, while continuing to spend on our performance line capacity and other ongoing initiatives.
We are very pleased to have exited 2022 with a positive gross margin trajectory, particularly in DG, which now enjoys a much improved cost structure. Thanks to the successful ramp of Mexico capacity and improved Asps based on our geographic.
Asian strategy and execution by the sales team.
Our next financial milestone to post an adjusted EBITDA positive quarter and to achieve our long term financial model, including a gross margin of error.
At least 15% and adjusted EBITDA margin of at least 12% of sales by the end of 2023.
Previously, we indicated that getting from gross margin breakeven to 15% assumed the following key lever.
Transitioning to higher ASD utility scale contract.
Fully ramping our one eight gigawatt performance nine facility.
Increasing U S residential sales.
<unk> growing beyond the panel in Europe .
While benefiting to some degree from supply chain cost improvement.
Many of these leave us are already now showing substantial progress in ongoing momentum for us.
A portion of our previously below market utility scale asps.
Has been adjusted as part of a broad package of supply renegotiations.
And as Bill mentioned some of the expected supply chain cost reductions have been realized sooner than expected.
And our DG business is benefiting from a combination effect us on both the cost and Asps sites.
As a result, we now expect significant margin improvement to occur in the first quarter with further progress expected in the second half of the year as we progress towards our long term financial model.
With this context in mind I'll now turn to our guidance for the first quarter of 2023, and then lay out our view for the full year.
We project first quarter revenues of $305 million to $345 million.
The mid point of these numbers and of our shipment guidance are a product of continued ASP increases for our IDC products offset by a higher mix of utility scale shipments due to ongoing ramp up performance line shipments to our U S utility scale customer.
non-GAAP gross profit is expected to be in the range of $30 million to $40 million.
At the relevant guidance mid point this represents an 11% gross profit margin.
The largest contributor with respect to sequential improvement as the unit cost reduction on our performance line due to ramp effects.
We also expect to see ASP improvement due to adjustments in some of our utility scale supply agreement as well as the impact of our first quarter of shipments through maxion, new residential channel together with improved pricing with Sunpower.
non-GAAP operating expenses are expected to be $37 million, plus or minus $2 million.
This includes the slight increase in our spend for beyond the panel in the U S residential channel both of which are expected to enable significant incremental gross margin.
Adjusted EBITDA is expected to be between 10 and $20 million.
Driven largely by improvements in our gross profit.
At the relevant guidance mid point this represents a 5% adjusted EBITDA margin and would be maxion first adjusted EBITDA positive results.
First quarter capital expenditures.
<unk> to be in the range of $13 million to $17 million.
We expect total capex for the year to be in the range of $100 million to $120 million for the completion of manufacturing capacity for performance line panels to be sold into the U S market completion of manufacturing capacity for all Nexium.
Product platform further developing <unk> seven technology and operating our pilot line preparation of the capacity expansion for our <unk> technology as well as various corporate initiatives.
This annual Capex guidance.
Spending for any U S manufacturing, which we plan to finance, primarily with the U S Department of energy loan and customer co invest.
Previously we have not provided annual guidance.
With the majority of our transformation behind US. We are pleased that we are now in a position to do so.
We project 2023 revenues to be in the range of 1352 155 billion.
About half of these revenues are based on volumes and prices that are contractually state for the entire year.
While those parts of our business that are not contracted at fixed terms.
We are well positioned due to diversified and growing demand in Europe and the U S.
2023 full year adjusted EBITDA is expected to be between 80 and $100 million.
Achieving margin levels consistent with our long term financial model before we exit the year.
As these targets in our first quarter guidance imply we expect margins to increase further from current levels with the fourth quarter expected to be our best quarter on both margin dollars and percentage.
The ramp of our performance line facilities and related operational improvements our primary lever followed by A&P expense and utility scale.
<unk> shipping on our 2023 bookings as well as incremental margin contribution from all new residential channel plus beyond the panel products.
With that I.
I'll turn the call back to Bill to summarize before we go to Q&A.
Thank you Cai as I mentioned in my opening remarks, my goal is to help make maxion one of the most profitable companies in the solar industry by driving aggressive manufacturing cost reduction and operational excellence, while capitalizing on our leadership in panel technology and global channels.
Company has a strong start in 2023 with positive adjusted EBITDA guidance for the first quarter than expected increasing profit throughout the year.
As we look beyond the current year, we are pursuing several significant growth opportunities that we expect to drive future top and bottom line expansion.
Now, let's go to Q&A operator. Please proceed.
Thank you Anza reminded me to ask a question simply press star one on your telephone and wait for your name to be announced.
To withdraw your question simply press Star one again.
Please standby, while we compile the Q&A roster.
Yes.
And our first question comes from the line of Alexander <unk> with Bank of America. Please proceed.
Duly noted thank you hey, good afternoon.
Julien most of us here.
Hey, Thank you guys very much truly.
Impressive I got to say, so do that and I just wanted to talk a little bit about the margin inflection we're seeing here in the fourth quarter and obviously you're talking about here in the first quarter I mean, what's the cadence as we think through the course of the year here I mean, you're already achieving a good chunk of what you want to do in 2003 from a gross margin perspective in the first quarter as far as you're suggesting.
Here on the guidance can you talk a little bit about how you get to that 15% in the course of the year here into the exit run rate.
And then also similarly can you talk about what the outlook it looks like even for the year ahead, considering the utility scale comments that you made and what that might imply for your domestic manufacturing effort.
Yeah, Hi, Julien Belle Mulligan.
Yes. Thanks for the question, Yes, we're obviously starting off 2023 strong and we expect that business to continue to improve throughout the year.
As you probably know Q4 is typically seasonally our strongest quarter.
But we also expect some maxion specific parameters to come into play here.
Perhaps I could say a few words about that.
Absolutely high data in and thankfully our targeting work.
Well, we put a little fly together also on page six of our slide deck that you want to reference you may want to reference in terms of the gross margin trajectory and Youre right to point out that we had quite a steep improvement here in Waltham.
Profit margin on a non-GAAP basis in the fourth quarter, a few things came together, we already guided for breakeven.
Above breakeven levels.
We outperformed that guidance as I mentioned before.
Partially because of outperformance in our operations for the U S.
Forming line and also because of the best grade cough drop.
Being in faster than we had anticipated.
And then as we look into the fourth quarter, you'll see some you'll see one.
Further improvements.
And those improvements are going to come from continued improvement in all our U S performance periods, we continue to ramp cost I want to come further down.
We are expecting to for the rebirth some of the low of a market.
Inventory write downs that we've had that always.
A bit of a boost there when we do these <unk> and honestly, we have heard from economic benefit from some of the.
Renegotiations that we have done with our customers for chemical delivery contracts that are going to kick in in the fourth quarter.
Are there more.
I would point out the strong U S business, we have.
Renegotiated, our supply and expanded and extended.
Our supply agreement with Sunpower, we got our new U S.
Residential channel.
<unk> you.
Europe is.
Very very strong area, we have seen strong RBC.
ASP increases in the fourth quarter.
Expect to continue to do so in the fourth quarter for this quite a lot of things coming together, yes, we will get us to the level that we.
We are guiding and then we expect further improvement.
Through the year.
Then kind.
Kind of has the highest expected performance for the year in the fourth quarter and also expect to achieve our long term financial model within 2023.
Got it guys.
Want to talk a little bit on the sustainability of the Asp's here I mean, obviously.
Given the backdrop given the trends here.
A nice benefit here, how do you think about cost input and.
And the ability to hold onto some of that.
Proven yourself are passing along to your customers here through the course of this year if you will.
Well, we have yes, we have really really good confidence in our predict Cynthia that that he put out and as we said in our prepared remarks about half of our <unk>.
ASP.
Marc in for the year based on the based on both projects.
So it gives us some of Hong Kong, but also we have from.
Very very strong positioning product positioning really with our product income market.
No.
We think the protections that we have put out here a really high confidence.
Got it excellent.
The build out on the utility scale side, just any comment on status with Doa.
Et cetera, just considering how much demand there seems to be I mean.
Quick quite quite a statement on the prepayments.
Yes, sure Julien Bill again.
Yes, I'm really excited about the <unk> project as you May know.
<unk> been working to battery industry for the last few years.
We've been following what became the IRA legislation very closely for a while there we didn't think was going to happen, but we applaud the administration for getting it done and do for their mandate.
Enable the funding.
The Iras, a real game changer for renewable energy in the U S, bringing back good manufacturing jobs, increasing national security by controlling our energy economy.
Given maxion Silicon Valley Heritage, our strong North American footprint long experience in the U S market, we believe maxion really well positioned to benefit from this.
And we believe the project.
Got out there is really consistent with the administration's objective.
The project Economics, I think really quite favorable given the higher incentives.
As I mentioned in my prepared remarks, we're now into the due diligence phase with Doe.
And this is the last the last step in the loan program office.
<unk>.
And we're working to bring this capacity online as soon as possible.
Got it excellent well congrats again speak to you guys soon.
Youre welcome Bill.
Thank you Dan.
Thank you Angela moment for our next question. Please.
And it comes from the line of Philip Shen with Roth and km. Please proceed.
Hey, guys. Thanks for the questions I'll Echo the congratulations as well.
On the margin improvement in outlook there.
Wanted to dig into the updated relationship with Sunpower you guys had that announcement earlier this year.
Seems like a strong and healthy one I think on the last quarter you guys talked about.
Somehow I might be.
Can you maybe 50% of your DG mix.
Down in 2023 down from maybe 75% in 2022.
With the expansion of that relationship and I got to imagine.
And somehow it's going to take a larger chunk of that.
Your RBC volumes. So I was wondering if you could share what that might be.
And I'll have a.
A few follow ups here as well.
Yes, Hi, Phil.
Yes.
Some part of course is extremely important customer for us.
All excited about this relationship.
I think it's mutually beneficial.
We hope to keep it going for.
A long long time.
I think in terms of the specific.
Contribution towards overall volume or something.
Generally don't disclose but.
I don't know if theres any more color you could add there.
No not so not really much we.
We don't we don't break down our business by five customers I can refer you to our prepay a deck, where you can see.
The DG business overall on a revenue basis and growing in the fourth quarter.
$244 million revenue from 228 in the third quarter and we also see some of the.
Regional breakdown.
With part D America, USA and Canada concerned.
A combination of all of our.
U S utility payout last fall off and you will do sdd channels.
Got it guys.
And I totally get it but as a quick follow up there.
Is it share a little bit last quarter and just on a forward looking basis given.
The announcement earlier this year I got to imagine incrementally theres more volume to Sunpower than you guys had expected perhaps from.
The end of two.
2022 is that a fair statement.
Hey, Phil This is Peter maybe I can I can take that one.
So again as Bill said, we don't want.
Typically breakout volume by customer.
Or price for that matter I think it's fair to say that Theres more volume there is more demand for our product procure IPC product then we can serve and we've been in the process.
Shifting some of the allocation around to Optum.
Optimize overall ASP.
In general I think that means more of the product going to the U S.
Where asps are the highest in there, though we have we have two options of bringing up our.
Our own new channel.
Which is.
Very healthy Asps and also strategically important in the long term. So there is a balance there between.
The slides some parents will slide to.
The new Green.
<unk> Chandra.
Great got it thank you Peter.
Then I think you guys started your dealer network recently as well, maybe a month ago or so.
What's the risk or potential there is that dealers may jump from Sunpower to your network is that something that you do not expect at all or is that something that might happen and then as it relates to the Green Tech can you just talked about it.
How is that volume looking.
With.
We're writing and identifying module price decreases in residential solar.
From the end of last year until now I think thats dropped out recently.
Has that lower as the price reduction there impacted you guys in any way I'm guessing that the premium segment, maybe not much at all but perhaps a little bit. So just curious if you can talk through some of those dynamics. Thanks.
Yes.
The overall strategy with Greentech renewables is really to address portions of the market for Sunpower is not there and if you look at some of the supplemental material. There you can see there's a large set of unaddressed portion of the market that we hope to go there just our dealers out there that can't get the maxion product.
So thats our goal and that opened up when LG left the market fairly recently so.
We're trying to fill that hole.
Stay away from the Sunpower dealers.
Great.
One last one if I may.
Can you talk through.
And what the margin structure looks like for <unk> or <unk> in Europe versus the U S. I know the pricing is better here in the us, but does that directly correspond to higher margins here.
And if not maybe talk us through how Europe is able to kind of maintain this one on margins in the U S.
Well I would say.
On the on the <unk> side.
On pricing we oftentimes.
Talk about it.
As a proxy and.
And Thats why we are optimizing the thing provides is less impactful if you're optimizing for margin wise.
Paul.
And the reason why we.
<unk> been moving more volumes through the U S because not only it but our price, but also put our margin the direction of the the margin is.
That's.
In the U S.
That's why we're doing it.
In addition to that.
No.
Export volume.
Point to make is all beyond the panel business, which include the established micro and <unk>.
We just talked about that we.
Now at a point where again.
More than 20% the tax rate.
They are in Europe , and we are starting with beyond the panel.
Who's going to Europe with storage and then afterwards EV charging product.
These are the initial.
The initiatives that we have that are going to boot.
Margin footprint, but also module dollar.
So maybe I can just add one note to that and that is that the our.
Our product portfolio currently is a little different in Europe , and the U S and that.
In U S and the European DG market, we have not only our IDC products for sale, but also a healthy dose.
Of our performance line, which we source from HSBC joint venture so you've got a different.
Portfolio of weapons there.
And we're able to increase overall volume through our channels there.
In two ways.
And so the optimization that we're talking about really is in a position across not only the relatively.
Constrains ABC capacity.
But also a little bit more of.
Capacity on tap in Europe with performance line.
Great Peter Bill. Thank you guys very much.
Looking forward to working with you more.
Yes, great Likewise.
One moment for our next question please.
And it comes from the line of Brian Lee with Goldman Sachs. Please proceed.
Hey, guys. Good afternoon, thanks for taking the questions I apologize.
I hopped on late so if some of these have been asked I apologize in advance and in the interest of time I'll just ask.
Three questions I had.
<unk> one.
Was on the Doe loan guarantee process. It sounds like there is an update here could you.
Kind of elaborate as to what the next steps are in any kind of a timeframe on that.
Second question would be around Asps and <unk>, they seemed to have jumped up double digits.
Is that just mix related or did you see like for like price increases maybe give us a little bit of color around that and then.
Lastly.
Domestic content I know you guys have been talking about being sold out through 'twenty. Five maybe you have sales event into 26 and beyond have you gone back and embedded any pricing uplift for domestic content adders are your customers, giving you that premium I think.
Pierre for solar talked about three or four cents a lot recently on their call. Just wondering what your status is on kind of capturing some of that value.
Once you have the three gigawatt facility up and running in the U S. Thanks, guys.
Yes, Hi, Brian .
Peter has been managing the Doa project pretty closely so I'll, let him speak to the where we are with the loan program office.
Okay.
Actually let me start with the second question first Brian .
Two are related so.
We did yes, we did mention ASP uplift in Q4, specifically, our IDC prices were up.
Fairly significantly double digits.
So.
Most of the ASP increase you saw there was a factor.
Real ASP strength within the individual product lines not a mix issue.
With respect to the daily loan.
We said on our prepared remarks that we were now in the due diligence phase which is the last phase.
Phase of the process.
And the next.
The next milestone will be a conditional approval of alone.
And so we're working towards that.
Very hard with.
With the DLA.
In terms of the domestic content.
We're not really exposed to that yet.
Since we're not manufacturing anything in the U S and we Havent signed any.
Our supply contracts, yes.
Around.
Our U S factory.
And so that's.
We're going to see how that plays out we are confident that we'll be able to.
Manufacturing both cells and modules in the U S.
Confident that we'll be able to take credit for that domestic content ITC adder, but it's not something that we're contracting for yet.
Yes, I will point out, although we are not able to take advantage of the domestic content yet.
Directly we do benefit from being viewed as a western solar provider.
With reliable supply reliable warranties.
And bankable, so that that does that does give us tailwind in the.
The U S market today.
And our of course, our supply chain out of Mexico is extremely.
Decisions.
Into the into certainly the southwest portion of the U S.
Yes.
Okay I appreciate the color guys. Thanks, I'll pass it on.
Thank you and one moment for our next question. Please.
And it comes from the line of Palo Alto <unk> with Raymond James. Please proceed.
Thanks for taking my question.
Let me stick with the European team.
On the supply side of the equation.
We're hearing more and more about this European Green deal industrial plan, which will subsidize domestic manufacturing a lot like inflation reduction Act.
And if that were to materialize.
Would you for example, revive the factory that you had in France, or perhaps seek to expand your European manufacturing in some other way.
Yes, yes.
Course monitor that situation closely and.
I think it's too early at this point in time to say, how we would respond but.
Yes, where are we are always looking at these things carefully and.
<unk>.
The policies in place and it makes economic sense.
We will consider any option.
Yes, maybe I'll just add one thing.
As you know.
Well or better than many.
Europe is a long term key market for us we've got a very strong position there.
Of course, we'd be interested in.
Bringing the same sorts of kind of local supply chain advantages that we're planning on doing here in the U S and have already put in place in Mexico.
What I would say is that the industry evolves pretty quickly.
And both from a technology perspective, and a scale perspective.
That we would build in Europe would be quite different from historically, what we have in France.
So without <unk>.
Going deeper into into any particular jurisdictions or regions I would say that.
To the extent that we decided to build something in Europe , it would probably be.
Quite different from what we were operating.
In the past few years.
Yes.
Thanks, guys.
Maxion, we believe.
Given our strong global footprint, we have a lot of experience in Europe , well over a decade of experience that we're very familiar we've got lots of talented people on the ground. So.
Or something like that to develop we're well positioned to execute on it.
Understood.
Turning to your guidance.
Obviously, you're looking for this kind of backend weighted.
Ramp in revenue through the second.
Second half of the year.
Given that should we assume that you will be essentially at full utilization.
Of your existing capacity Asia, plus Mexico.
In Q4 of 2023.
Yes.
Although this is kai, yes, I think thats going to be.
Good assumption, we think that sometime around the middle of the year that we're going to achieve full capacity utilization from the south fast and then of course in the multiple of that of course, the transit time in between so by the end of the year I think everything.
The.
Running and humming at full capacity of that.
<unk> performance line capacity.
And so.
Maybe looking a little bit ahead into 2024 will there be additional expansion.
In any of your existing manufacturing facilities.
Into 2024 again, not talking about the U S.
Yeah.
Long term financial target is to show at least 20.
At year on year revenue growth.
If you look back historically.
We did 35% last year and based on our guidance mid point guidance you can expect about the same this year, maybe a little higher so we feel confident we're going to be able to stay on that long term financial model.
We do have.
Things in flight that.
Will allow us to increase capacity.
As probably mentioned will be fully ramped.
With.
The.
The P series capacity by the end of the year. So it will have a full year production as opposed to partial year at full capacity.
You've got some debottlenecking activities going on on our.
Our Max.
Maxion.
Six and six technology, primarily.
So that will be coming online and then we do have our beyond the panel revenue stream that is going to be coming online. So all of those should.
Should really contribute strongly to 'twenty four.
And the only thing I would add to that is we also have of course capacity on tap our <unk> joint venture.
Sales into Europe in particular.
Got it thank you very much.
Thank you.
For our next question please.
And it comes from the line of David <unk> with Morgan Stanley . Please proceed.
Hey, Thanks for taking my question and congrats on the great results.
Yes.
You mentioned the long term financial model I was just wondering.
Getting closer more in the sites at this point.
Wondering if there is a natural.
Timeframe when you might we assess kind of refresh what the long term financial model.
B.
So David.
Would say first of all I would like to point out that the long term financial model state at least 20% growth.
Bill just pointed out we have outperformed that over the past year.
We expect them to outperform at this year and we are expecting to be roughly on it in 2024 and of course, then some other activities.
Upfront or are you going to kick in beyond 2024 to the bank.
I think on a higher growth trajectory again.
So as far as the <unk>.
Profit margin and EBITDA margin is concerned all of them date that these are numbers that we want to at least achieve and.
Hopefully overachieve over time, so we don't see a need right now to restock.
<unk> debt.
Thank you.
I have talked about the target margin profile.
Some of our different businesses.
We actually on the <unk> side.
And on the DG side I would say.
We are already at or above.
Target margin in the fourth quarter.
And moving beyond that in the fourth.
Quarter as far as <unk>.
Performance line from HFC is concerned into DG market.
And then some other businesses like <unk>.
Beyond the panel.
It's still ramping up and it's going to provide topline and bottom line growth over the next quarters to come so right now we stick with our long term financial model.
We expect to achieve it within 2023, and then we're going to talk about other things at the appropriate time.
Okay understood that's helpful.
And then given the strong demand that you've been seeing in the U S. Mark I was just wondering if you could give us latest thinking on within there is the potential to self finance a U S manufacturing facility separate total Doa process, if you might consider.
Self financing or using your balance sheet for additional capacity here.
Yes, that's not something we're looking at right now we feel like we're pretty far advanced with the Doa program. So I think we'll start there.
We think the Doa.
The loan program is a really effective for financing for that.
<unk>.
Got you no that's fair.
Lastly from me I was just wondering if you could give an update on what the nexium.
Ramp.
It looks like in terms of the latest outlook there.
Yes, yes no.
Really excited about the <unk> technology.
I was one of the original developers of our IDC technology. So now that I'm back after a few years.
Wei.
I'm, just really proud that our team continues to push the boundaries of photovoltaic technology in.
We're in a position to to increase Maxion technology leadership again so.
The pilot line has been running it's been quite a great success is hitting its yield in <unk>.
Efficiency targets getting better all the time, so we started laying the groundwork for maxion seven expansion in terms of home building and facilities upgrades, we're going to be doing it in one of our existing facilities in the Philippines that is currently not in operation.
And yes.
We will we will.
Be talking more about our plans later is that I think our model.
Okay, Great I appreciate the color. Thanks, so much.
Thank you one moment for our next question. Please.
And it comes from the line of Jonathan Schaffer with Northland Capital markets. Please proceed.
Hey, guys.
Great.
Positive gross margin Jonathan excuse me can you lift your voice.
We can hear you.
Okay Alright.
Is that better yes.
Thank you.
So congratulations.
Congratulations on buzzard gross margin outlook for positive adjusted EBITDA been waiting a long time to get here most of them are finally here. So it's very cool to see that.
I wanted to turn I wanted to dig in on the department of energy loan guarantee I know a lot of people have already asked questions about that.
Yeah.
<unk>.
Could you talk about what kind of led determination do they have to make at this point with the due diligence process.
The estimating number of jobs created are you pitted against.
Other applicants with a limited pool do guarantees for.
And maybe also helping in that context, what are the sort of hoops or milestones or things you've already gotten past, but if you can kind of I know you can't give a good probability like.
Hey, we think.
Andy 783% probability. It's like you may have that internally I'm sure you can't share it but if you can just give us a broader context of.
What the determinations or how far you've already gotten already.
<unk>.
Okay.
And are you kind of put it against other projects and they have a limited pool to work with us although it would be helpful.
Okay. John This is Peter I'll take after that based on.
<unk>.
Our guidance last time.
<unk>.
So.
Theres a couple a couple of parts to your question first of all are we pitted against other projects.
We have heard I think both.
From from the Doe.
And what we can infer from.
The funding that's been committed is that there are there.
There is enough funding.
In their war chest currently to funds.
Yeah.
Good projects that they want to do.
And I think as we've said in the past we were in the <unk>.
Q quite early.
Well before the passage of the IRS, So I think.
We're in a good position.
Both with respect to the quality of the projects.
The risk of the technology.
Jobs et cetera.
I don't think its dealings job too.
Evaluate drove on a job job creation basis per se, but clearly.
Hope that give scores for how many jobs you create.
But clearly, bringing the technology scaling up in the U S and creating jobs. We're doing that is is what's.
What they're trying to facilitate.
The.
I think at the end of the day, you should think of.
Do we think of the deal with this kind of a motivating banker Joe the kinds of evaluations that are going to be doing a similar to.
Any other banker would be doing in terms of the risk of repayment I think is top of their list is what.
As the likelihood of repayment of the loan.
No.
Maybe a little bit biased because we're very close to the project, but I think both in terms of the.
The maturity of the technology as technology practice before we.
We understand the market, we've got customers that are very eager to take across product.
Co invest.
Very strong side on the demand side.
And so as they evaluate technology risk.
Any execution.
Demand solidity I think I would like to think we're going to get we're getting high marks for us.
There is a.
And environmental review of NEPA, which is kind of a parallel path, which is another milestone that we go through.
And so Thats my answer to your question.
We're just at times.
I guess.
Answers to all of the components of your question.
Okay. Thank you.
If I could squeeze in just one more.
Could you talk about the number of megawatts you guys are expecting to ship in 2023.
This would be helpful. In terms of thinking about ftes in Utilizations and Pablo are you kind of asked about that but if there is a rough megawatt number.
It would be helpful.
Hi, this is ty.
So we put out annual guidance at this point for the <unk>.
In our corporate history, and we decided to provide some guidance here on the on the revenue and on the adjusted EBITDA.
Stay away from.
Megawatts guidance for the year, we are obviously getting shipped.
Shipment of megawatts guidance for the quarter, and we will keep that practice for now.
Okay.
And actually I, just forgot to ask.
Very helpful and for everyone is just based on where you're at right now in the process and everything is.
Is there any change in terms of the expectations. We went to the facility could be in production and would that still be within.
2025 or is there a chance that that gets delayed at all.
That's still our expectations on them.
Great. Okay awesome, thanks, guys fantastic quarter I'll take the rest offline.
Thank you asked there are no further questions. We'll now conclude the call. Thank you. All again you may now disconnect.
Two reasons lower Johan during Q&A, you can dial one one.
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