Q3 2023 SunPower Corp Earnings Call

Speaker 1: Press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

One on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

Speaker 1: please the advice of today's conference is being recorded.

Please be advised that today's conference is being recorded.

Speaker 1: I would like to turn the call over to Mr. Mike Weinstein, Vice President of Investor Relations at SunPower Corporation. Thank you, sir. You may begin.

I would now like to turn the call over to Mr. Mike Weinstein, Vice President of Investor Relations at Sunpower Corporation. Thank you Sir you may begin.

Good morning, I would like to welcome everyone to our third quarter earnings conference call on the call today will begin with comments from Peter Pharisees CEO of Sunpower, who will provide an update third quarter announced on some business highlights followed by an update on 2023 guidance, including recent sales trends backlog operating expense from the financing.

Speaker 2: Good morning. I would like to welcome everyone to our third quarter 23 earnings conference call. On the call today, we will begin with comments from Peter Ferris, CEO of SunPower, who will provide an update, third quarter announcements and business highlights. Followed by an update on 2023 guidance, including recent sales trends, backlog, operating expense, and the finance.

Speaker 2: Following Tiers comments that ED, some power CFL will then review our financial results. As a reminder, a replay of the call will be available later today on the investor relations page of the web.

Following Peter's comments that Phebe Sunpower CFO will then review our financial results as a reminder, a replay of the call will be available later today on the Investor Relations page of the website.

Speaker 2: During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that describe in the safe harbor slide today's presentation. Today's press release are 2022-10K and are quarterly work on form 10Q. As we disclosed on October 24th in a form 8K filing, the company plans to restate as soon as practical financial statements for the 2022-10K and the first and second quarter 10Qs for 2023.

During today's call we will make forward looking statements that are subject to various risks and uncertainties are described in the safe Harbor slide of today's presentation. Today's press release, our 2022 10-K, and our quarterly reports on Form 10-Q as.

As we disclosed on October 24th in a form 8-K filing the company plans to restate as soon as practicable.

Statements for the 2022 10-K in the first and second quarter 10, Qs for 2023.

Speaker 2: Please see those documents for additional information regarding those factors that may affect these toll of the-

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.

Speaker 2: Also, we will refer to certain non-gat metrics during today's call. Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate gaps in non-gat for reconciliation.

Speaker 2: Finally, to enhance this call, we've also posted a set of PowerPoint slides, which will reference during the call on the events and presentations page of the Investor Work Coalition.

To enhance this call. We have also posted a set of Powerpoint slides, which we will reference during the call on the events and presentations page of the Investor Relations website for prior periods. We have presented our best preliminary estimate of historical period financial information pending the outcome of the aforementioned restatement. We're also delaying the reposting are the posting of our SUS.

Speaker 2: So prior periods, we have presented our best preliminary estimate of historical periods, financial information, tending the outcome of the aforementioned restatement. We are also delaying the reposting or the posting of our supplemental data sheet, detailing additional historical metrics.

Elemental data sheet detailing additional historical metrics.

And so we have completed this restatement of historical financial information.

Speaker 2: So we have completed this restatement of circle finish.

Speaker 2: And with that, I'd like to turn the call over to Peter Farisi, CEO of SunPower. Peter.

That I would like to turn the call over to Peter <unk> CEO of Sunpower Peter.

Thanks, Mike and good morning, everyone.

Today, I will discuss our Q3 2023 results.

Speaker 3: Today I will discuss our Q3 2023 results are up.

Our app.

Speaker 3: to our full year 2023 guidance based on the latest information on markets and our progress with cost reduction and our view of the important factors that could affect 2024.

Two our full year 2023 guidance based on the latest information on markets and our progress with cost reduction and our view of the important factors that could affect 2024.

Speaker 3: In the third quarter, we continued to see difficult market conditions with a contraction in customer bookings and installations that it's more persistent than we had previously forecast as a result of the higher impact of higher interest rates.

In the third quarter, we continued to see difficult market conditions with a contraction in customer bookings and installations that are more persistent than we had previously forecast as a result of the higher.

The impact of higher interest rates on consumer behavior. While these trends have continued longer and deeper than we expected. This year. We will highlight some of the early positive signs that our sales channels that began materializing in September.

Speaker 3: While these trends have continued longer and deeper than we expected this year, we will highlight some of the early positive signs that our sales channels that began materializing in September .

We continue to anticipate our growing value proposition for our customers as traditional energy costs rise and we expect an improved picture for Sunpower and the entire residential solar industry in 2024.

Speaker 3: We continue to anticipate a growing value proposition for our customers as traditional energy costs rise. And we expect an improved picture for some power and the entire residential solar industry in 2024.

We reported a negative $1 million of adjusted EBITDA. This quarter from 18800, new customer additions slower bookings. This summer in higher installation expenses were the primary drivers of lower results this quarter.

Speaker 3: We reported a negative one million of adjusted EBITDA this quarter from 18,800 new customer additions, slower booking this summer and higher installation expenses with the primary drivers of lower results this quarter.

Speaker 3: And as we will discuss in more detail later, we have reduced our 2023 guidance to reflect current market conditions to new ranges of 70,000 to 80,000 new customers.

As we will discuss in more detail later, we have reduced our 2023 guidance to reflect current market conditions to new ranges of 70000 to 80000, new customers 600 to $700 of adjusted EBITDA per customer before a platform investment platform investment of $70.

Operator: You will then hear an automated message advising your hand is raised.

Speaker 3: $600 to $700 of adjusted EBITDA per customer before platform investment, platform investment of $70 to $90 million, and adjusted EBITDA of negative 35 to negative $25 million.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

$90 million and adjusted EBITDA of negative $35 to negative $25 million.

Michael Weinstein: I would now like to turn the call over to Mr. Mike Weinstein, vice president of investor relations at SunPower Corporation. Thank you, sir. You may begin. Good morning. I would like to welcome everyone to our third quarter 23 earnings conference call on the call today. We will begin with comments from Peter Faricy CEO of SunPower, who will provide an update, third quarter announcements and business highlights followed by an update on 2023 guidance, including recent sales trends backlog operating expense and financing following Peter's comments that Eby some power CFL will then review our financial results. As a reminder, a replay of the call will be available later today on the investor relations page of the website.

Speaker 3: These new ranges reflect the impact of lower than expected consumer demand and the delayed revenue recognition as cycle times have increased under higher lease.

New ranges reflect the impact of lower than expected consumer demand and the delayed revenue recognition as cycle times have increased under higher lease volumes.

Speaker 3: We expect that our actions in the out today to deepen our cost reduction will result in the realization of meaningful improvement to our operating expenses in 2024 as we aim to maintain financial strength through the weaker near-term market conditions.

We expect that our actions announced today to deepen our cost reduction will result in a realization of meaningful improvement to our operating expenses in 2024, as we aim to maintain financial strength through the weaker near term market conditions.

Please turn to slide four.

Speaker 3: We added 18,000, 800 new customers in Q3. And while we are currently facing stormy seas, we are highlighting some of the more notable pockets of strength in the business here.

We added 18800, new customers in Q3, and while we are currently facing stormy seas, we are highlighting some of the more notable pockets of strength in the business here.

Michael Weinstein: During today's call, we will make forward-looking statements that are subject to various risks and uncertainties are described in the safe harbor slide. Today's presentation, today's press release, our 2022-10K, and our quarterly work on form 10Q. As we disclosed on October 24 in a form a K filing, the company plans to restate as soon as practical financial statements for the 2022-10K and the first and second quarter 10Qs for 2023. Please see those documents for additional information regarding those factors that may affect these full-of-looking statements.

Speaker 3: Some powers new home business continues to perform above expectations with installations growing 26% in Q3 versus Q2 and a 38,000 new homes in backlog.

Some powers new home business continues to perform above expectations with installations growing 26% in Q3 versus Q2, and a 38000 new homes in backlog.

Speaker 3: Sales continue to be driven in part by the growth of solar standard communities outside of California and a strong market for builders despite higher mortgage rates.

Sales continued to be driven in part by the growth of solar standard commodities outside of California, and a strong market for builders despite higher mortgage rates.

Speaker 3: Some powers retrofit backlog stands at 18,100 customers, while higher lease volumes have increased the average time from booking to revenue recognition, we expect to complete the installation of substantially all of our California M2.0 backlog this year.

So sunpower is retrofit backlog stands at 18100 customers, while higher lease volumes have increased the average time from booking to revenue recognition, we expect to complete the installation of substantially all of our California NIM to no backlog this year.

Michael Weinstein: Also, we will reference certain non-gap metrics during today's call. Please refer to the appendix of our presentation, as well as today's earnings press release for the appropriate gap to non-gap reconciliation. Finally, to enhance this call, we've also posted a set of PowerPoint slides, which will reference during the call on the events and presentations page of the investor relations website. For prior periods, we have presented our best preliminary estimate of historical periods, financial information, tending the outcome of the aforementioned restatement.

Speaker 3: adjusted EBITDA per customer was $1,000 before platform investment. With room to improve next year, as average inventory costs and installation costs are expected to continue their decline.

Adjusted EBITDA per customer was $1 before platform investment with room to improve next year as average inventory cost and installation costs are expected to continue their declines.

Speaker 3: SunVolt Energy Storage System Sales continue to show strength with a California attach rate greater than 60% and an overall attach rate of more than 25% across our sales.

Michael Weinstein: We are also delaying the reposting or the posting of our supplemental data sheet, detailing additional historical metrics, and so we have completed this restatement of historical financial information.

<unk> energy storage system sales continue to show strength with a California attach rate greater than 60% and an overall attach rate of more than 25% across our sales channels. We.

Michael Weinstein: And with that, I'd like to turn the call over to Peter Ferris, CEO of SunCower. Peter? Thanks, Mike, and good morning, everyone.

Speaker 3: We expected the Pleadar inventory of Sunvolt V1 models by early 2024.

We expect to deplete our inventory of Sunbelt. The one models by early 2024.

Speaker 3: Battery storage costs are declining rapidly, and this is an important part of the value proposition for customers, especially in California, where NEM 3.0 reduced the benefits of net metering with the utility.

Battery storage costs are declining rapidly and this is an important part of the value proposition for customers, especially in California, where NIM three no reduce the benefits of net metering with the utilities.

Peter Faricy: Today, I will discuss our Q3 2023 results. Our up date to our full year 2023 guidance, based on the latest information on markets and our progress with cost reduction and our view of the important factors that could affect 2024. In the third quarter, we continued to see difficult market conditions with a contraction and customer bookings and installations that have more persistence than we had previously forecast as a result of the higher impact of higher interest rates on consumer behavior.

Some of our financial reached a 56% customer attach rate for lease and loan products in the third quarter well on its way to achieving the 65% to 75% target that we highlighted at last year's analyst day.

Speaker 3: Some higher financial reached a 56% customer tax rate for lease and loan products in the third quarter, well on its way to achieving the 65 to 75% target that we highlighted at last year's analyst day. Least demand continues to grow with a 217% increase in contracted volumes in Q3.

Lease demand continues to grow with a 217% increase in contracted volumes in Q3.

As noted previously further growth for leasing is expected in 2023 and beyond due to a combination of lease payment competitiveness versus higher utility bills and bonus tax incentives under the inflation reduction Act sunpower remains customer centric and agnostic towards lease or a loan financing and.

Speaker 3: As noted previously, further growth for releasing is expected in 2023 and beyond due to a combination of lease payment competitiveness versus higher utility bills and bonus tax incentives under the inflation reduction.

Peter Faricy: While these trends have continued longer and deeper than we expected this year, we will highlight some of the early positive signs that our sales channels that began materializing in September. We continue to anticipate a growing value proposition for our customers as traditional energy costs rise, and we expect an improved picture for some power and the entire residential solar industry in 2024. We reported a negative $1 million of adjusted EBITDA this quarter from 18,800 new customer additions, slower bookings this summer and higher installation expenses for the primary drivers of lower results this quarter.

Speaker 3: Some power remains customer centric and agnostic towards lease or loan financing. And we believe that our current access to capital markets as a top tier residential solar company is a major competitive advantage.

We believe that our current access to capital markets is a top tier residential solar company is a major competitive advantage.

Please turn to slide number five.

Speaker 3: With over 60,000 new customers so far this year, we've tightened the guidance for our full year, 2022 range, two steps.

With over 60000, new customers. So far this year, we've tightened the guidance for our full year 2023 range.

270% to 80000 customers, while it may be early to call a turnaround trend we want to highlight that we're seeing in September as bookings appeared to improve sharply versus prior months, particularly in key states, such as California, Texas, Florida, Colorado.

Peter Faricy: As we will discuss in more detail later, we have reduced our 2023 guidance to reflect current market conditions to new ranges of $70,000 to $80,000 new customers, $600 to $700 of adjusted EBITDA per customer before platform investment, platform investment of $70 to $90 million and adjusted EBITDA of negative $35 to negative $25 million. These new ranges reflect the impact of lower than expected consumer demand and the delayed revenue recognition as cycle times have increased under higher lease biomes.

Speaker 3: While it may be early to call a turnaround trend, we want to highlight that we're seeing in September as bookings appeared to improve sharply versus prior months, particularly in key states, such as California, Texas, Florida, and Colorado.

We continue to see some of these same improvement trends in October.

Speaker 3: We continue to see some of these same improvement trends in October .

Speaker 3: The bottom line is that the steep year over year sales contraction that we've been seeing since May has improved marketably in September and October . We're optimistic that these booking trends will continue and help boost the installation and customer recognition figures in the first half of 2024.

The bottom line is that the steep year over year sales contraction that we've been seeing since may has improved markedly in September and October we are optimistic that these booking trends, we'll continue and help boost the installation and customer recognition fingers in the first half of 2024.

Please turn to slide number six.

Peter Faricy: We expect that our actions announced today to deepen our cost reduction will result in the realization of meaningful improvement to our operating expenses in 2024 as we aim to maintain financial strength through the weaker near-term market conditions.

Speaker 3: We've reduced our 2023 Guidance Discoord, and I will disclose the factors that led us to take the faction as well as some of the remedies as we continue to pursue as we aim for a better outcome in 2020.

We've reduced our 2023 guidance this quarter and I will disclose the factors that led us to take this action as well as some of the remedies as we continue to pursue as.

As we aim for a better outcome in 2024.

Speaker 3: As I mentioned earlier, we've tightened the customer range to 7080,000. Why September and October booking trends are in depositive. We are nonetheless affected by the slower pace of booking this past summer. That will slow our customer wreckage.

As I mentioned earlier, we've taken the customer range to 70 to 80000 why September October booking trends R&D positive. We are nonetheless affected by the slower pace of bookings this past summer that will slow our customer recognition.

Peter Faricy: Please turn to slide 4. We added 18,800 new customers in Q3 and while we are currently facing stormy seas, we are highlighting some of the more notable pockets of strength in the business here. SunPower's new home business continues to perform above expectations with installations growing 26% in Q3 versus Q2 and a 38,000 new homes in backlog. Sales continue to be driven in part by the growth of solar standard communities outside of California and a strong market for builders despite higher mortgage rates.

Speaker 3: We continue to face some delays in the California System Activation from the state's utilities, although we've seen recent significant improvements from earlier this year.

We continue to face some delays in the California system activation from the state's utilities, although we've seen recent significant improvements from earlier this year.

Speaker 3: New homes backlog and customer bookings have exceeded our expectations. And we had our best Q3 for customer bookings for new homes in the company's history. New homes is on track to comprise 15 to 20% of our total 2023 customer.

New homes backlog in customer bookings have exceeded our expectations.

And we had our best Q3 for customer bookings for new homes and the customer in the company's history, New homes is on track to comprise 15% to 20% of our total 2023 customers.

Peter Faricy: SunPower's retrofit backlog stands at 18,100 customers while higher lease biomes have increased the average time from booking to revenue recognition. We expect to complete the installation of substantially all of our California M2.0 backlog this year. Adjusted EBITDA per customer was $1,000 before platform investment with room to improve next year as average inventory costs and installation costs are expected to continue their declines. SunVault Energy Storage System Sales continue to show strength with a California attached rate greater than 60% and an overall attached rate of more than 25% across our sales channels.

Speaker 3: We do skydads for 2023, EBITDA of negative minus 35 million to negative 25 million, and EBITDA for customer before platform investment of 600 to 700 reflected the higher cost of goods sold and the amortization of an installation spread across lower than expected by.

Reduced guidance for 2023, EBITDA negative minus $35 million to negative $25 million and EBITDA per customer before a platform investment of 600 to 700 reflected the higher cost of goods sold and the amortization of installation spread across lower than expected volume.

The increase in lease volumes, which is a positive trend that ultimately boost sales origination fees. Nonetheless results, an extended cycle times for revenue recognition versus loans and cash sales.

Speaker 3: the increase in lease volumes, which is a positive trend that ultimately boosts sales origination fees, nonetheless results in extended cycle times for revenue recognition versus loans and cash.

Speaker 3: The range for platform investment of 70 to 90 million is still well below our original plan earlier this year. And now reflects primarily the higher legacy business unit costs and the restatement of prior period inventory value.

The range for platform investment of $70 million to $90 million is still well below our original plan earlier this year and now reflects primarily the higher legacy business unit costs and the restatement of prior period inventory values.

Peter Faricy: We expected to complete our inventory of SunVault V1 models by early 2024. Battery storage costs are declining rapidly and this is an important part of the value proposition for customers especially in California where NM3.0 reduced the benefits of net customer attached rate for lease and loan products in the third quarter well on its way to achieving the 65 to 75% target that we highlighted at last year's analyst day. Least demand continues to grow with a 217% increase in contracted volumes in Q3. As noted previously further growth for leasing is expected in 2023 and beyond due to a combination of lease payment competitiveness versus higher utility bills and bonus tax incentives under the inflation reduction.

Speaker 3: We plan to continue reducing operating expense in order to maintain financial strength through the near term economic and market uncertain.

We plan to continue reducing operating expense in order to maintain financial strength through the near term economic and market uncertainty.

Speaker 3: Long-term, we continue to expect substantial tailwinds for the U.S. distributed solar market, including low market penetration, climbing utility bills, a strain to electrical grid, plus a decade of tax benefits under the inflation reduction.

Long term, we continue to expect substantial tailwind for the U S distributed solar market, including low market penetration climbing utility bills are strained electrical grid, plus a decade of tax benefits under the under the inflation reduction Act Platt.

Speaker 3: Platform investment is intended to continue positioning some power to gain market share as market conditions continue to develop. We plan to adjust our investment pace, traditionally as conditions change.

Platform investment is intended to continue positioning sunpower to gain market share as market conditions continue to develop we plan to our adjustment to adjust our investment pace judiciously as conditions change.

Finally, we are projecting an improvement in cash from operations. During 2024, we intend to manage this with reductions to fixed and variable costs continued inventory reduction and continued expansion of customer financing capacity.

Speaker 3: Finally, we're projecting an improvement in cash from operations during 2024. We intend to manage this with reductions to fixed and variable costs, continued inventory reduction, and continued expansion of customer financing capacity.

Peter Faricy: Chanak. SunPower remains customer centric and agnostic towards lease or loan financing, and we believe that our current access to capital markets as a top-tier residential solar company is a major competitive advantage.

Please turn to slide number seven.

Conventionally electric utility rates are the primary competition for our industry.

Speaker 3: Conventionally electric utility rates are the primary competition for our industry.

Speaker 3: The U.S. Energy Information Agency reports that average U.S. retail electric rates remain near all-time highs as of August , despite the moderating cost of bulk wholesale power and key fuels such as natural gas.

The U S energy information agency reports that average U S retail electric rates remain near all time highs as of August despite the moderating cost of bulk wholesale power and key fuels such as natural gas.

Peter Faricy: Please turn to slide number five. With over 60,000 new customers so far this year, we've tightened the guidance for our full year, 2020-23 range, to 70 to 80,000 customers. While it may be early to call a turnaround trend, we want to highlight that we're seeing in September as bookings appeared to improve sharply versus prior months, particularly in key states such as California, Texas, Florida, and Colorado. We continue to see some of these same improvement trends in October.

Price increases continued to hit the northeastern and mid Atlantic States in California, with nine states seeing increase was greater than 10% year over year.

Speaker 3: Price increases continue to hit the Northeastern and Mid-Atlantic States in California. With nine states seeing increases greater than 10% year-over.

Peter Faricy: The bottom line is that the steep year-over-year sales contraction that we've been seeing since May has improved marketably in September and October. We're optimistic that these bookings trends will continue and help boost the installation and customer recognition figures in the first half of 2024.

Speaker 3: We estimate that more than 40 million potential customers reside in states with electric rates rising faster than it plays.

We estimate that more than 40 million potential customers reside in states with electric rates rising faster than inflation.

Speaker 3: in California, PG&E rates are set to rise 9 to 13% in January of 2024.

In California, <unk> rates are set to rise 9% to 13% in January of 2024.

Speaker 3: We believe that these steep cost increases and the impact of gridded stability on residential customers continue to elevate the value proposition of residential solar as one of the most powerful ways to stabilize and reduce the amount of energy bill.

We believe that the steep cost increases and the impact of grid stability on residential customers continue to elevate the value proposition of residential solar is one of the most powerful ways to stabilize and reduce home energy bills.

Peter Faricy: Please turn to slide number six. We've reduced our 2023 guidance this quarter, and I will disclose the factors that let us take this action as well as some of the remedies as we continue to pursue as we aim for a better outcome in 2024. As I mentioned earlier, we've tightened the customer range to 70 to 80,000. While September and October booking trends are in deep positive, we are nonetheless affected by the slower pace of bookings this past summer that will slow our customer recognition.

Speaker 3: Despite lower fuel prices, the Edison Electric Institute is projecting a 20% increase in electric utility capital investment from 2023 to 2025 compared to the previous three years. As these investments are recovered through electric bills, we continue to believe that the value of rooftop solar is likely to continue rising. Please turn to

Despite lower fuel prices.

Edison Electric Institute is projecting a 20% increase in electric utility capital investment from 2023% to 2025% compared to the previous three years.

As these investments are recovered through electric bills. We continue to believe that the value of rooftop solar is likely to continue rising.

Please turn to slide number eight.

Next I'll share.

Peter Faricy: We continue to face some delays in the California system activation from the state's utilities, although we've seen recent significant improvements from earlier this year. New homes backlog and customer bookings have exceeded our expectations, and we've had our best Q3 for customer bookings for new homes in the company history. New homes is on track to comprise 15 to 20% of our total 2023 customers. We've reduced guidance for 2023, EBITDA of negative minus 35 million to negative 25 million, and EBITDA for customer before platform investment of 600 to 700 reflected the higher cost of goods sold and the amortization of an inflation spread across lower than expected volume.

Speaker 3: The most important progress we've made in Q3 is we move forward with the five pillars of our long-term strategic plan.

The most important progress we've made in Q3 as we move forward with the five pillars of our long term strategic plan.

Speaker 3: For customer experience, some power remains. The top-ranked US Home Solar Installer is indicated by our ratings and reviews on multiple planets.

For customer experience Sunpower remains the top ranked U S home solar installer as indicated by our ratings and reviews on multiple platforms. We've also launched a new self help center experience within but my Sunpower App and on our website to help resolve questions faster with less friction.

Speaker 3: We've also launched a new self-help center experience within my SunPower app and on our website to help resolve questions faster with less friction.

For products on vault attach rates reached new highs in Q3 with sales up 163% versus Q2 at our best ever sales month in September.

Speaker 3: For products, SunVolt and TASRH reached new highs in Q3 with sales up 163% versus Q2, and our best ever sales month in September .

Speaker 3: For growth, September Richard Fibbookings grew 59% in September versus August , and New Homes expanded outside California. With new communities signed with home builders such as C.C. Homes in Florida, 12 brothers in the Van in New York and Massachusetts, and Maritaj and Colorado.

For growth September retrofit bookings grew 59% in September versus August and new homes expanded outside California, with new communities signed with homebuilders, such as Cc homes in Florida toll brothers in Nevada, New York and Massachusetts.

Peter Faricy: The increase in lease volumes, which is a positive trend that ultimately boosts sales and regeneration fees, nonetheless results in extended cycle times for revenue recognition versus loans and cash sales. The range for platform investment of 70 to 90 million is still well below our original plan earlier this year and now reflects primarily the higher legacy business unit costs and the restatement of prior period inventory values. We plan to continue reducing operating expense in order to maintain financial strength of a near-term economic and market uncertainty.

<unk>, Colorado, We also added 97, new dealers in Q3, the most onboard in a single quarter.

Speaker 3: We also added 97 new dealers in Q3, the most onboarded in a single quarter.

For digital Sunpower released a new sales proposal tool for new homes customers and completed the rollout of new scheduling software, which is designed to increase appointment reliability and reduced utilization costs.

Speaker 3: for digital sum power release, the new sales proposal tool for new homes customers, and completed the rollout of new scheduling software, which has designed the increase of point-man reliability and reduced utilization.

Speaker 3: And finally, some power financial completed the first phase of the ADP Solar launch using some power financial, enabling lease and PPA sales in seven states.

And finally Sunpower financial completed the first phase of the ADP solar is launch using sunpower financial enabling lease and PPA sales in seven states.

Peter Faricy: Long-term, we continue to expect substantial tailwinds for the U.S, distributed solar market, including low market penetration, climbing utility bills, a strain to electrical grid, plus a decade of tax benefits under the inflation reduction act. Platform investment is intended to continue positioning some power to gain market share as market conditions continue to develop. We plan to adjust our investment pace traditionally as conditions change. Finally, we're projecting an improvement in cash from operations during 2024. We intend to manage this with reductions to fixed and variable costs, continued inventory reduction, and continued expansion of customer financing capacity.

Please turn to slide number nine.

Subpar financial continues to grow its business. Despite the impact of slower sales when sunpower overall in Q3, we launched as an exclusive lessor for ADP solar customers choosing to finance with a lease or a power purchase agreement.

Speaker 3: SunPower Financial continues to grow its business despite the impact of slower sales on SunPower overall. In Q3, we launched as the exclusive lessor for ADT solar customers choosing to finance for the lease or power purchases.

Speaker 3: loan financing is expected to launch in Q4, and the program has the potential to be a meaningful contributor to 2024 volume and profitability at gross margins that are roughly in line with the existing finance.

Loan financing is expected to launch in Q4, and the program has the potential to be a meaningful contributor to 2020 for volume and profitability at gross margins that are roughly in line with the existing finance business.

As mentioned earlier, our least net bookings continued to grow strongly in the third quarter and leases currently enjoy a cost of capital advantage compared to loans. We continue to work on agreements with financing partners to increase our lease financing.

Speaker 3: As mentioned earlier, our lease net bookings continue to grow strongly in the third quarter, and lease is currently in joy and cost of capital advantage compared to law.

Peter Faricy: Please turn to slide number seven. Conventionally electric utility rates are the primary competition for our industry. The US Energy Information Agency reports that average US retail electric rates remain near all time highs as of August, despite the monitoring costs of bulk wholesale power and key fuels such as natural gas. Price increases continue to hit the northeastern and mid-Atlantic states in California, with nine states seeing increases greater than 10 percent year over year.

Speaker 3: We continue to work on agreements with financing partners to increase our lease financing capacity and facilities are in place to access ABS funding in the future.

Capacity and facilities are in place to excess ABS funding in the future. We are excited by the opportunities in this space. So stay stay tuned for more to follow.

Speaker 3: We are excited by the opportunities in the space. So stay tuned for more to follow.

Speaker 3: With that, I'll now turn it over to Beth for more details on our Q3 results. Beth. Thank you, Peter. Please turn to slide 11.

With that I'll now turn it over to Bert for more details on our Q3 results Beth thank.

Thank you Peter please turn to slide 11.

Speaker 4: Before I begin, I want to say a few words about our recent 8K. We are working expeditiously to file amended financial statements for the 2022-10K, and the Q1 and Q2 2023-10K.

The prior to begin I want to say a few words about our recent 8-K, we are working expeditiously to file amended financial statements for the 2022 10-K, and the Q1 and Q2 2023 10-Qs.

Peter Faricy: We estimate that more than 40 million potential customers reside in states with electric rates rising faster than inflation. In California, PG&E rates are set to rise 9 to 13 percent in January of 2024. We believe that these steep cost increases and the impact of gridded stability on residential customers continue to elevate the value proposition of residential solar as one of the most powerful ways to stabilize and reduce home energy bills. Despite lower fuel prices, the Edison Electric Institute is projecting a 20 percent increase in electric utility capital investment from 2023 to 2025 compared to the previous three years. As these investments are recovered through electric bills, we continue to believe that the value of rooftop solar is likely to continue rising.

Speaker 4: We expect to file our Q3 form 10Q as soon as back.

To file our Q3 Form 10-Q as soon as practicable.

Speaker 4: The restatement of prior microinverted cost reduces the inventory and increases the cost of revenue. It does not change our cash.

The restatement of prior micro inverter cost reduces the inventory and increase the cost of revenue it does not change our cash position.

We are also working to improve Sunpower is reporting procedures, particularly around the issues, we've identified around inventory and cost of goods sold.

Speaker 4: We're also working to improve SunPower's reporting procedures, particularly around the issues we've identified around inventory and cost of goods.

Speaker 4: Furthermore, as we previously disclosed, the company and Bank of America are currently negotiating the terms and conditions of a consent and waiver to address the effects of the restatement under our January 2023 amended credit

Furthermore, as we previously disclosed the company and Bank of America are currently negotiating the terms and conditions of a consent and waivers to address the effects of the restatement under our January 2023 amended credit agreement.

Speaker 4: While we can make no assurances regarding if and when the consent and waiver will be received, we are working productively and seek a positive outcome.

We can make no assurances regarding if and when the consent and the waiver will be received we are working productively and seek a positive outcome.

Speaker 4: For the third quarter, we are reporting negative $1 million of adjusted EBITDA and $432 million of non-GATRIF.

For the third quarter, we are reporting negative $1 million of adjusted EBITDA and $432 million of non-GAAP revenue. We have added 18800, new customers in Q3.

Peter Faricy: Please turn to slide number eight. Next, I'll share the most important progress we've made in Q3 as we move forward with the five pillars of our long-term strategic plan. For customer experience, some power remain. The top-ranked US home solar installer has indicated by our ratings and reviews on multiple platforms. We've also launched a new self-help center experience within my some-power app and on our website to help resolve questions faster with less friction.

Speaker 4: We have added 18,800 new customers in Q3.

Speaker 4: with reduced customer demand, but continue to be driven largely by the effect of higher interest.

Reduced customer demand continues to.

Be driven largely by the effect of higher interest rates.

Speaker 4: However, as Peter mentioned, we are buoyed recently by stronger sales in September and October as well as persistently strong customer interest in lease financing.

However, as Peter mentioned, we are point recently by stronger sales in September and October.

As well as persistently strong customer interest and lease financing.

Peter Faricy: For products involved, the tax rates reached new highs in Q3 was sales up 163 percent versus Q2 at our best-ever sales month in September. For growth, September retrofit bookings grew 59 percent in September versus August and new homes expanded outside California with new communities signed with home builders such as CC homes in Florida, 12 brothers in the van in New York and Massachusetts, and Maritajan Colorado. We also added 97 new dealers in Q3, the most on-boarded in a single quarter. For digital, some power released a new sales proposal tool for new homes customers and completed the rollout of new scheduling software which has designed the increase appointment reliability and reduced utilization costs.

Speaker 4: The suggested EBITDA per customer was $1,000 in the third quarter, lower year-over-year due to delayed revenue recognition from longer cycle times, as well as higher year-over-year installation costs.

Adjusted EBIT per customer was $1000 in the third quarter lower year over year due to delayed revenue recognition from longer cycle times as well as higher year over year installation costs I.

Speaker 4: adjusted gross margin improved in Q3 versus Q2, the result of cost reduction.

Adjusted gross margin improved in Q3 versus Q2.

A cost reduction sequentially improved amortization of installation cost as well as the absence of the Q2 inventory write down.

Speaker 4: when truly improved amortization of installation cost, as well as the absence of acute to inventory rights.

Speaker 4: Platform investments is primarily product, digital, and corporate.

Platform investment is primarily products digital and corporate Opex, while this increased slightly year over year, we continue to work towards matching our investment in opex levels to slower market conditions.

Speaker 4: All this increased slightly year over year, we continue to work toward matching our investment and our tax levels to slower market.

Speaker 4: Our aim is to maintain financial strength through this challenging period as we look to position the company for continued gains in market share under stronger future market conditions.

Our aim is to maintain financial strength through this challenging period as we look to position the company for continued gains in market share under stronger future market conditions.

Peter Faricy: And finally, some power financial completed the first phase of the ADP solar launch using some power financial enabling lease and PPA sales Please turn to slide number 9. SunPower Financial continues to grow its business despite the impact of slower sales on SunPower overall. In Q3, we launched as the exclusive less order for ADT solar customers choosing to find answer the lease or power purchase agreement. Loan financing is expected to launch in Q4 and the program has the potential to be a meaningful contributor to 2024 volume and profitability at gross margins that are roughly in line with the existing finance business.

Turning to the balance sheet, we ended the quarter with $104 million of cash and $143 million of net recourse debt with improved management of working capital, we reduced inventory levels to $328 million at the end of the quarter and generated positive cash from operations of <unk> 40.

Speaker 4: Turning to the balance sheet, we ended the quarter with a 104 million of cash and 143 million of net recourse debt. With improved management of working capital, we reduced inventory levels to 328 million at the end of the quarter and generated positive cash from operations of 48 million. We have plans in place to bring inventory levels down further through the remainder of 2023 and 2021.

The $8 million, we have plans in place to bring inventory levels down further through the remainder of 2023 and 2024.

Sure.

Speaker 4: We continue to value our ownership of lease renewal met retained strong using a 6%

We continue to value our ownership of lease renewal net retained.

Strong using a 6% discount rate with.

Speaker 4: with growth in the portfolio, we now estimate the value of our state at about 295 million. That will do, you can see.

With growth in the portfolio, we now estimate the value of our stake at about $295 million.

Peter Faricy: As mentioned earlier, our lease net bookings continue to grow strongly in the third quarter and lease is currently in joy across the capital advantage compared to loans. We continue to work on agreements with financing partners to increase our lease financing capacity and facilities are in place to access ABS funding in the future. We are excited by the opportunities in the space, so stay tuned for more to follow.

Please turn to slide 12.

As Peter already discussed we reduced our 2023 guidance to a new range of negative 35 to negative $25 million of adjusted EBIT.

Speaker 4: Peter already discussed, we reduced our 2023 guidance to a new range of negative 35 to negative 25 million of adjusted EBIT.

Speaker 4: driven by an anticipated 70,000 to 80,000 incremental cuts.

Driven by an anticipated 70 to 80000 incremental customers.

Speaker 4: with adjusted EBITDAQ per customer before platform investment of $600 to $700.

And EBIT.

Her customer before our platform investment of 600 to $700.

Elizabeth Eby: With that, I'll now turn over to Beth for more details on our Q3 results. Thank you, Peter.

Platform investment of $70 million to $90 million. This year is higher than prior guidance due to higher legacy costs and the impact of prior period adjustments. Although this is still significantly lower than our original guide this year.

Speaker 4: Platform investment of 70 to 90 million this year is higher than prior guidance due to higher legacy cost and the impact of prior period of just

Elizabeth Eby: Please turn to slide 11. Before I begin, I want to say a few words about our recent 8K. We are working expeditiously to file amended financial statements for the 2022 10K and the Q1 and Q2 2023 10Qs. We expect to file our Q3 form 10Q as soon as practical. The restatement of prior microinverted cost reduces the inventory and increases the cost of revenue. It does not change our cash position. We are also working to improve some powers reporting procedures, particularly around the issues we've identified around inventory and cost of goods sold.

Speaker 4: Although this is still significantly lower than our original guide.

Speaker 4: We will continue our efforts to reduce our platform investment through 2020.

We will continue our.

To reduce our platform investment through 2024.

Before we return the call before we turn the call over for Q&A I want I want to turn you back over to Peter for closing comments and a review of factors. We are considering as we look ahead towards 2024.

Speaker 4: Before we return the call, before we turn the call over for Q&A, I want to turn you back to over to Peter for closing comments and a review of factors we are considering as we look ahead toward 2024. Thank you, Beth.

Thank you Beth please turn to slide 13.

This slide is largely the same one we showed you last quarter and continues to lift out our view of the future as we reset and launch forward into 2024. After a difficult 2023, we typically don't provide guidance for next year until February.

Speaker 3: This slide is largely the same one we showed you last quarter and continues to list out our view of the future. As we reset and launch forward in the 2024, after in difficult 2023. We typically don't provide guidance for next year until February .

Elizabeth Eby: Furthermore, as we previously disclosed, the company and Bank of America are currently negotiating the terms and conditions of a consent and waiver to address the effects of the restatement under our January 2023 amended credit agreements. While we can make no assurances regarding if and when the consent and waiver will be received, we are working productively and seek a positive outcome. For the third quarter, we are reporting negative $1 million of adjusted EBITDA and $432 million of non-GAG revenue.

Speaker 3: From a macro perspective, we continue to expect an increasing utility rates and lower equipment price thing will be tailwinds for the industry. We also anticipate a more stable interest rate environment as well as improved clarity on the bonus tax credit available under the inflation reduction.

From a macro perspective, we continue to expect that increasing utility rates and lower equipment pricing will be tailwind for the industry. We also anticipate a more stable interest rate environment as well as improved clarity on the bonus tax credits available under the inflation reduction Act.

Speaker 3: For some power specifically, we expect to benefit from lower product costs. We intend to reduce our platform investment in the near term, and we expect this to benefit financial results in 2024, as we keep an eye on long-term opportunities for growth and investment.

For Sunpower, specifically, we expect to benefit from lower product costs, we intend to reduce our platform investment in the near term and we expect this to benefit financial results in 2024, as we keep an eye on long term opportunities for growth and investment style.

Elizabeth Eby: We have added 18,800 new customers in Q3 with reduced customer demand that continue to be driven largely by the effect of higher interest rates. However, as Peter mentioned, we are buoyed recently by stronger sales in September and October, as well as persistently strong customer interest in lease financing. Adjusted EBITDA per customer was $1,000 in the third quarter, lower year over year due to delayed revenue recognition from longer cycle times, as well as higher year over year installation cost.

Speaker 3: Stronger than expected new homes bookings growth with a large backlog this year are expected to add to customer recognition in 2024. With additional lease financing capacity expected to close this year, we expect sales to benefit in 2024 from the growing popularity of lease financing and bonus tax credits from the inflation reduction.

Stronger than expected, new home's bookings growth with a large backlog. This year are expected to add to customer recognition in 2024.

With additional lease financing capacity expected to close this year, we expect sales to benefit in 2024 from the growing popularity of lease financing and bonus tax credits from the inflation reduction Act.

Elizabeth Eby: Adjusted gross margin, improved in Q3 versus Q2, the result of cost reduction, eventually improved amortization of installation cost, as well as the absence of a Q2 inventory right now. Platform investments is primarily products, digital and corporate OPEX. While this increased slightly year over year, we continue to work toward matching our investment and OPEX levels to slower market conditions.

Speaker 3: Some part of financial continues to grow its financing, origination, and attachment rates with some of our customers. And we plan to continue to seek additional opportunities for growth through partnership like the one we announced recently with ADT.

Empire financial continues to grow its financing origination attachment rates with some of our customers and we plan to continue to seek additional opportunities for growth through partnerships like the one we announced recently with ADT.

Speaker 3: We also expect to begin seeing financial benefit from our collaboration with General Motors in 2024 as we start selling EV Charger and solar equipment to solar robocuts.

We also expect to begin seeing financial benefits from our collaboration with General Motors in 2024, as we start selling EV charger and solar equipment to silverado customers.

Speaker 3: With that operator, I'd like to turn the call over for questions. Thank you.

With that operator, I'd like to turn the call over for questions. Thank you.

Elizabeth Eby: Foundation. Our aim is to maintain financial strength through this challenging period, as we look to position the company for continued gains in market share under stronger future market conditions. Turning to the balance sheet, we ended the quarter with 104 million of cash and 143 million of net recourse that with improved management of working capital. We reduced inventory levels to 328 million at the end of the quarter and generated positive cash from operations.

Speaker 1: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Speaker 1: To withdraw your question, please press star 11 again. Please stand by when we compile the

Please standby, while we compile the Q&A roster.

Speaker 1: Our first question comes from the line of Tristan Richardson from Scorsia Bank.

Our first question comes from the line of Tristan Richardson from Scotia Bank.

Elizabeth Eby: We have plans in place to bring inventory levels down further through the remainder of 2023 and 2024. We continue to value our ownership of lease renewal, net retained thousands on strong using a 6% discount rate. With growth in the portfolio, we now estimate the value of our state at about 295 million.

Hey, good morning, guys, just really kind of curious if you could drill in on some of your comments around September October it sounds pretty encouraging.

Speaker 2: really kind of curious if you could drill in on some of your comments around September October . It sounds pretty encouraging. Peter, you mentioned bookings are deep in the positive. I wanted to be curious if that specific to new homes are just across the country. And then, you know, curious about some of the activity you're seeing in the states you mentioned specifically California Colorado Texas.

You mentioned bookings or deepen the positive wanted was curious if that's specific to new homes or just across the country and then.

I'm curious about some of the activity Youre seeing in the States, you mentioned, specifically, California, Colorado, Texas et cetera.

Elizabeth Eby: Please turn to slide 12. As Peter already discussed, we reduced our 2023 guidance to a new range of negative 35 to negative 25 million of adjusted EBITDA driven by an anticipated 70,000 to 80,000 incremental customers with adjusted EBITDA per customer before platform investment of 600 to 700 dollars. Platform investment of 70 to 90 million this year is higher than prior guidance due to higher legacy cost and the impact of prior period adjustments, although this is still significantly lower than our original guide this year. We will continue our efforts to reduce our platform investment through 2024.

Yes, good morning, Tristan Thanks for the question so on the <unk>.

Speaker 3: Yeah, good morning Tristan. Thanks for the question. So on the comments we made around September and October , you know, the best leading indicator of our business is consumer interest at the top of the funnel. And then right down from there is actual sales booking. That's where the rubber meets the road, so to speak. So we were pleased that September turned out to be such a strong month. And October has been, you know, of similar velocity from a sales booking point of view.

Comments, we've made around September and October the best leading indicator of our business is consumer interest at the top of the funnel and then write down from there is actual sales bookings. So that's where the rubber meets the road. So to speak. So we were pleased that September turned out to be such a strong months.

And October has been.

Of similar velocity from a sales bookings point of view coming into the end of the year. We're comping in November and December from last year that were pretty weak.

Speaker 3: Coming into the end of the year, we're comping a November and December from last year that we're pretty weak. So, you know, we're cautiously optimistic that we can end the year in a more positive note.

So we're cautiously optimistic that we can end the year in a more positive note that was followed by what was a very challenging summer. So if you go back to the last call. We were on we did think that may was going to be the low point of the year and that turned out to be true.

Speaker 3: That was followed by what was a very challenging summer. You know, so if you go back to the last call we were on, we did think that May was gonna be the low point of the year and that turned out to be true.

Peter Faricy: Before we return the call, before we turn the call over for Q&A, I want to turn you back to over to Peter for closing comments and a review of factors we are considering as we look ahead toward 2024. Thank you, Beth. Please turn to slide 13. This slide is largely the same one we showed you last quarter and continues to list out our view of the future as we reset and launch forward into 2024 after a difficult 2023.

Speaker 3: But what also turned out to be true is that June , July and August were very challenging months from a sales booking point of view. And that's reflected in our updated guidance for 2023.

But what also turned out to be true is that.

June July and August were very challenging months from a sales booking point of view and Thats reflected in our in our updated guidance for 2023 from a new home standpoint.

Speaker 3: From a new home standpoint, it's really almost a banner year for new homes. New homes bookings have been better than expected. Just to give you a feel, our new homes backlog is actually up 10% year over year. So if you took a look at the backlog last year, Q3, and compared it to the backlog right now, we're up 10% year over year. We came into the year, you know, with a cautious realistic view of that business.

It's really almost.

A banner year for new homes, new home's bookings have been better than expected.

To give you a feel our new homes backlog is actually up 10% year over year. So if you took a look at the backlog last year Q3, and compared it to the backlog right now were up 10% year over year, we came into the year.

Peter Faricy: We typically don't provide guidance for next year until February. But on macro perspective, we continue to expect an increase in utility rates and lower equipment pricing will be tailwinds for the industry. We also anticipate a more stable interest rate environment as well as improved clarity on the bonus tax credits available under the inflation reduction act. For some power specifically, we expect to benefit from lower product costs. We intend to reduce our platform investment in the near term and we expect this to benefit financial results in 2024 as we keep an eye on long-term opportunities for growth and investment.

With a cautious realistic view of that business and we're ending the year I think with a very optimistic view of where that business is going as we go forward. The backlog we have just to give you a feel.

Speaker 3: and we're ending the year, I think, with a very optimistic view of where that business is going as we go forward. The backlog we have just to give you a feel, that backlog is worth, you know, two years worth of installation.

That backlog is worth.

Two years' worth of installations, so we feel pretty confident in our new homes business on our plans for next year and I'd say as of right now we're cautiously optimistic that that's a business that's going to grow as we head into 2024.

Speaker 3: So we feel pretty confident in our new homes business and our plans for next year. And I'd say as of right now, we're cautiously optimistic that that's a business that's gonna grow as we head into 2024.

Peter Faricy: Stronger than expected new homes bookings growth with a large backlog this year are expected to add to customer recognition in 2024. With additional lease financing capacity expected to close this year, we expect sales to benefit in 2024 from the growing popularity of lease financing and bonus tax credits from the inflation reduction act. Some power financial continues to grow its financing origination attachment rates with some power customers and we plan to continue to seek additional opportunities for growth through partnership like the one we announced recently with ADT. We also expect to begin seeing financial benefit from our collaboration with General Motors in 2024 as we start selling EV Charger and solar equipment to Silverado Customers.

Helpful. Appreciate it Peter and then maybe with respect to inventory you talked about.

Speaker 2: helpful. Appreciate it Peter and then maybe with respect to inventory you talked about.

Kind of working through some <unk> inventory by early next year.

Speaker 2: working through some 1.0 inventory by early next year. Curious on the microside with respect to.

Curious on the micro side with respect to either.

Speaker 2: existing inventory or pace of additions to inventory with respect to my

Existing inventory.

Our pace of additions to inventory with respect to micros.

Yes, So I think we're pleased with.

Speaker 3: Yeah. So I think we're pleased with battery inventory levels, with the comments we made about selling through SunVol, through, through, through time in Q1. We're also pleased with micro-unfurter inventory levels. Really, the inventory levels that we were wanting to work on, that we talked about in the last call, were really all about panels.

Battery inventory levels with the comments, we made about selling through Sun volt through through some time in Q1. We're also pleased with micro inverter inventory levels really the inventory levels that we were wanting to work on that we talked about on our last call. We're really all about panels and we're pleased that we were able.

Speaker 3: And we're pleased that we were able to before the restatement bring down inventory $77 million in one quarter. So that's good progress. We're still not where we want to be. There's still more room for improvement to get leaner in panels.

Operator: With that operator, I'd like to turn the call over for questions. Thank you. Please press star 1-1 again. Please stand by where we compile the Q&A roster.

Two before the restatement bring down inventory $77 million in one quarter.

Good progress, we're still not where we want to be there is still more room for improvement to get leaner and panels, but we're pleased with that progress in a single quarter and Beth and I talked about in the last call. We're committed to get into a healthy position by the end of this calendar year and I think we'll kick off 2024.

Speaker 5: but we're pleased with that progress in a single quarter. And as Beth and I talked about in the last call, we're committed to get into a healthy position by the end of this calendar year. And I think we'll kick off 2024 in a much better position from a product standpoint across inventory levels across all products. Thanks Peter.

Tristan Richardson: Our first question comes from the line of Tristan Richardson from Scotiabank. Thank you for joining us. Just really kind of curious if you could drill in on some of your comments around September, October. It sounds pretty encouraging. Peter, you mentioned bookings are deep in the positive. I wanted to be curious if that specific to new homes are just across the country. And then, you know, curious about some of the activity you're seeing in the States, you mentioned specifically California, Colorado, Texas, etc.

Okay.

A much better position from a product standpoint across inventory levels across all products.

Appreciate it thanks Peter.

Thank you.

Thank you.

One moment for our next question.

Speaker 1: Our next question comes from the line of Colin Rush from Oppenheimer and Company Inc.

Our next question comes from the line of Colin Rusch from Oppenheimer <unk> Company, Inc.

Thanks. So much you guys can you talk about obviously this is so fluid.

Speaker 6: Thanks so much, you guys. Can you talk about, you know, obviously this is still fluid, the discussions around the credit agreement, and what you might need to potentially be carrying in terms of restricted cash and some of the key variables that you guys are worth.

Tristan Richardson: Good morning Tristan. Thanks for the question. So on the comments we made around September and October, you know, the best leading indicator of our business is consumer interest at the top of the funnel. And then right down from there is actual sales booking. That's for the rubber meets the road, so to speak. So we were pleased that September turned out to be such a strong month and October has been, you know, a similar velocity from a sales bookings point of view.

Discussions around the credit agreement and what you might.

Need to potentially be carrying.

The restricted cash in some of the key variables that you guys are working through at this point.

We're still in discussion with bank of America, and our lenders.

Speaker 4: We're still in discussion with Bank of America and our lenders. So it's a little premature to talk about what the terms would be on the consent and waiver to address our restatement.

So it's a little premature to talk about.

What the terms would be on the consenting.

Consenting flavor to address a restatement.

And I guess as a follow up then do you have a sense of timeline on how long that's going to take before you reach a conclusion with them.

Speaker 6: And I guess as far up then, do you have a sense of timeline on how long that's going to take before you reach a conclusion with them?

Tristan Richardson: Coming into the end of the year, we're comping a November and December from last year that we're pretty weak. So, you know, we're cautiously optimistic that we can end the year in a more positive note. That was followed by what was a very challenging summer. You know, so if you go back to the last call we were on, we did think that May was going to be the low point of the year and that turned out to be true.

The discussions are ongoing and productive.

Speaker 6: Okay, perfect. And then I guess on the technology side, as you guys look at the energy storage opportunity and the evolution of your platform, I guess the Keynes of evolving the product, can you talk about how many adjustments to performance you might see here over the next couple of years and whether you need to really change the design of that product to meet some of the new market conditions that we're seeing with the...

Okay perfect.

And then I guess on the technology side as you guys look at the energy storage opportunity in the evolution of your platform.

Yes.

Tristan Richardson: But what also turned out to be true is that June, July and August were very challenging months from a sales booking point of view. And that's reflected in our updated guidance for 2023 from a new home standpoint. It's really almost a banner year for new homes. New homes bookings have been better than expected. Just to give you a feel our new homes backlog is actually up 10% year over year. So, if you took a look at the backlog last year Q3 and compared it to the backlog right now, we're up 10% year over year.

The kings of.

Evolving the product can you talk about how.

Many adjustments to performance you might see here over the next couple of years and whether you need to really change the design of that product to meet some of the new market conditions that we're seeing with the rule changes.

Speaker 3: And sorry, Colonel, are you referring to Sunvolt specifically? Or sorry, just clarify your question.

And sorry comment are you, referring to Sun volt, specifically or sorry, just to clarify your question.

Speaker 6: Yeah, yeah, exactly. An instant hop. Yeah. Okay. Yeah. So. Bye.

Yes, yes exactly on sunbelt.

Okay, Yes.

So but yes.

Speaker 3: Yeah, sorry, yeah, no, that's a great question. So on SunVold, here's how we're thinking about the battery storage world as we go forward. So we're pleased that SunVold sales growth, we talked about September was our best sales month ever. We've really gained a lot of velocity, interestingly enough across all of our sales channels. A lot of it has been California based, and consumers are economically, they really benefit from having battery backup to better manage these Nim rates.

Yes, sorry, yes.

Great question, so on Sunbelt, Here's how we're thinking about the battery storage world as we go forward. So we're pleased that Sunvil sales growth. We've talked about September was our best sales month ever we've really gained a lot of velocity interestingly enough across all of our sales channels a lot of it has been California based and.

Tristan Richardson: We came into the year, you know, with a cautious realistic view of that business. And we're ending the year, I think, with a very optimistic view of where that business is going as we go forward. The backlog we have just to give you a feel that backlog is worth, you know, two years worth of installations. So, we feel pretty confident in our new homes business and our plans for next year. And I'd say as of right now, you know, we're cautiously optimistic that that's a business that's going to grow as we head into 2024.

Consumers are economically they really benefit from having battery backup to better manage these NIM rates, but also many of them what's the.

Speaker 3: but also many of them want the, you know, the assuredness of having a battery backup and resiliency with the grid outages.

The assuredness of having battery backup and resiliency with the grid outages.

Tristan Richardson: I hope we'll appreciate Peter, and then maybe with respect to inventory you talked about. You know, kind of working through SunVolt 1.0 inventory by early next year. Curious on the microside with respect to either existing inventory or pace of additions to inventory with respect to micros. Yeah, so I think we're pleased with battery inventory levels with the comments we made about selling through SunVolt through through some time in Q1. We're also pleased with microinverter inventory levels.

Speaker 3: that we've had, particularly in California. So I think we're pleased with where that's going. But as we look ahead, there's two things that have changed that will be reflected in what we do going forward in the battery space. One is it's really important for our customers to be able to manage storage, panels, EV chargers.

That we've had particularly in California. So I think we're pleased with where that's going but as we look ahead. There are two things that have changed.

That will be reflected in what we do going forward in the battery space. One is it's really important for our customers to be able to manage storage panels EV Chargers all seamlessly in a single app and have them integrated together.

Speaker 3: all seamlessly in a single app and have them integrated together. Historically, we believed the primary way for us to be able to do that would be to to assemble our own batter.

Stork Lee we believed the primary way for us to be able to do that would be the to assemble our own battery.

Speaker 3: Now we've been able to negotiate partnerships that will permit us to have that data, manage this for the consumer, but not have to do the actual battery assembly.

Now we've been able to negotiate partnerships that will permit us to have that data manage this for the consumer but that has to do the actual battery assembly. So as we look forward. We're quite excited I don't have anything to announce on this call, but I would say stay tuned, but we're excited to work with.

Tristan Richardson: Really, the inventory levels that we were wanting to work on that we talked about in the last call were really all about panels. And we're pleased that we were able to before the restatement bring down inventory $77 million in one quarter. So that's good progress. We're still not where we want to be. There's still more room for improvement to get leaner in panels, but we're pleased with that progress in a single quarter.

Speaker 3: So as we look forward, we're quite excited. I don't have anything to announce on this call. I would say state two, but we're excited to work with a number of other battery partners. And I think once we sell through SunVol 1.0, we're looking forward to participating with other battery makers. And I think...

Number of other battery partners and I think once we sell through some of our one point.

We're looking forward to participating with other battery makers and I think.

Tristan Richardson: And Beth and I talked about in the last call, we're committed to get into a healthy position by the end of this calendar year. And I think we'll kick off 2024 in a much better position from a product standpoint across inventory levels across all products. Appreciate it. Thanks, Peter. Thank you.

Speaker 3: You know, the world in batteries has really become a game of scale. And we're not going to have the size and scale. I think you need to compete effectively. So we've made the decision to stop working on Sunnable 2.0 and to really focus on who are the world class partners that would want to work with us as we go forward to serve consumers well in the space.

The world in batteries is really become a game of scale and we're not going to have the size and scale I think you need to compete effectively. So we've made the decision to stop working on <unk>, two <unk> and.

Peter Faricy: One moment for our next question.

And to really focus on who are the the world class partners that would want to work with US as we go forward to serve consumers well in the space. So more more to do we talked about in future discussions, but that's sort of how we're thinking about the battery world as we go forward.

Speaker 5: So more to be talked about in future discussions, but that's sort of how we're thinking about the battery world as we go forward. Thanks so much, appreciate it.

Colin Rusch: Our next question comes from a line of Colin Rush from Oppenheimer and Company Inc. Thanks so much, you guys. You know, can you talk about, you know, obviously, this is still fluid, the discussions around the credit agreement and what you might need to potentially be carrying in terms of restricted cash and some of the key variables that you guys are working through at this point. We're still in discussion with Bank of America and our lenders.

Thanks, so much I appreciate it.

Thank you.

One moment for next question.

Our next question comes from the line of Philip Shen from Roth.

Speaker 7: Our next question comes from the line of Philips Shen from Roth MKM. Thanks for taking my questions.

Yeah.

Hey, guys. Thanks for taking my questions.

Looking out to 'twenty for Peter.

You haven't given official guidance, but given.

Where we are in the year and what you see so far it looks like.

Colin Rusch: So it's a little premature to talk about what terms would be on the consent and waiver to address our restatement. And I guess it's followed then. You know, do you have a sense of timeline on how long that's going to take before you reach a conclusion with them. The discussions are ongoing and productive. Okay, perfect.

Q4 bookings have improved.

That said the Q4 customer ads are still down maybe 15% quarter over quarter. So what kind of run rate should we expect for <unk> and then what kind of activity should we expect for Q1 and two of next year.

And what that cadence might look like as we get through 'twenty four.

Colin Rusch: And then I guess on the technology side, as you guys look at the energy storage opportunity and the evolution of your platform, you know, I guess the, the kinds of, you know, evolving the product, you know, can you talk about how, how many adjustments to performance you might see here over the next couple of years and whether you need to really change the design of that product. To meet some of the new market conditions that we're seeing with the rule changes. And sorry, Colin, are you referring to Sunvolt specifically or sorry, just clarify your question. Yeah, yeah, exactly on Sunvolt. Yeah, I mean. Okay, yeah. So, yeah, sorry, yeah, no, that's a great question.

Speaker 3: Thanks Phil. Yeah, let me give you some color around how we're thinking about growth and the kinds of factors that impacted. One of the big positives this year is that because we've always been agnostic between lease loan and cash, we were real position to pivot as the market pivoted. So last year at this time, we were...

Thanks, Phil Let me give me give us some color around.

How we're thinking about growth and the kinds of factors that impacted one of the one of the big positives. This year is that because we've always been agnostic between lease loan and cash we were well positioned to pivot as the market pivoted. So last year at this time, we were roughly 80 20 loan on financing.

Speaker 3: Roughly 80-20 loan on financing in this year is exactly the opposite. We're roughly 80-

This year, it's exactly the opposite where roughly 80 20 lease why does that matter on customers well for leases. The revenue recognition is about 30 days plus later than it is for cash and loans and Thats, because we don't recognize revenue and EBITDA until we get to permission to operate stage.

Speaker 3: Why does that matter on customers? Well, for leases, the revenue recognition is about 30 days plus later than it is for cash and loans. And that's because we don't recognize revenue and EBITDA until we get to provisioned operate state.

Peter Faricy: So on Sunvolt, here's how we're thinking about the battery storage world as we go forward. So we're pleased that Sunvolt sales growth, you know, we talked about September was our best sales month ever. We've really gained a lot of velocity interestingly enough across all of our sales channels. A lot of it has been California based and consumers are, you know, economically, they really benefit from having battery backup to better manage these name rates.

Speaker 3: And as you know, in California, the utilities have really struggled to keep up with the demand that came out of NEM 2.0 booking.

And as you know in California, the utilities have really struggled to keep up with the demand that came out of them two point or bookings and so that normal 30 day delay has been more like 60 to 90 day delay. So it has really slowed down our customer recognition this year.

Speaker 3: And so that normal 30 day delay has been more like 60 to 90 day.

Speaker 3: So it has really slowed down our customer recognition this year.

Speaker 3: and we'll work through most of that, you know, as we end through this calendar year.

And we will work through most of that as we end through this calendar year as we take a look at 2024 as you mentioned, we're not giving out guidance yet we give our guidance every year on our first quarter call. I think we're cautiously optimistic that the new homes business looks like it's trending positively and will be in a position to grow next.

Speaker 3: As we take a look at 2024, as you mentioned, we're not giving out guidance yet. We give out guidance every year on our first quarter call. I think we're cautiously optimistic that the new home's business.

Peter Faricy: But also, many of them want the, you know, the assuredness of having battery backup and resiliency with the grid outages that we've had particularly in California. So I think we're pleased with where that's going, but as we look ahead, there's two things that have changed that will be reflected in what we do going forward in the battery space. One is, it's really important for our customers to be able to manage storage panels, EV chargers, all seamlessly in a single app and have them integrated together.

Speaker 3: Looks like it's trending positively and will be in a position to grow next year.

Each year and then I think it's too early on the retrofit business I like the signals of September and October, but I think if the volatility of this year has taught us anything it's we need we need a longer proof.

Speaker 3: And then I think, you know, it's too early on the retrofit business. I like the signals of September and October , but I think if the volatility of this year has taught us anything, it...

Speaker 3: You know, we need, we need a longer proof that there's, you know, that this is a trend that's going to continue before we make any

That there is.

But this is a trend thats going to continue before we'd make a.

Speaker 3: Comments on what that looks like as we go forward just to put them perspective, you know last year in 2022 We grew revenue at 56% grew our customer base at 48% so the dramatic change

Comments on what that looks like as we go forward just to put it in perspective last year. In 2022, we grew revenue at 56% grew our customer base at 48%. So the dramatic change this year.

Peter Faricy: Historically, we believed the primary way for us to be able to do that would be to assemble our own battery. Now we've been able to negotiate partnerships that will permit us to have that data, manage this for the consumer, but not have to do the actual battery assembly. So as we look forward, we're quite excited. I don't have anything to announce on this call. I would say stay tuned, but we're excited to work with a number of other battery partners.

Speaker 7: is one that you normally don't see in consumer businesses. And so I think given that volatility will be thoughtful, we'll see how bookings play out for the remainder of this calendar year, and then we'll be better prepared when we talk to you in February to give you our guidance for 24. Okay, thanks, Peter.

Is one that you normally don't see and consumer businesses.

So I think given that volatility will be thoughtful we will see how bookings.

Play out for the remainder of this calendar year, and then we'll be better prepared and we talked to you in February to give you our guidance for 'twenty four.

Peter Faricy: And I think once we sell through Sunvall 1.0, you know, we're looking forward to participating with other battery makers. And I think, you know, the world in batteries has really become a game of scale. And we're not going to have the size and scale. I think you need to compete effectively.

Okay. Thanks Peter.

<unk> to balance sheet and liquidity.

I was wondering if you could.

Help us understand the liquidity at the end of Q3, and then also share any thoughts on potential need for external capital under what conditions might you need to pursue external capital and then.

Colin Rusch: So we've made the decision to stop working on Sunvall 2.0 and to really focus on who are the world class partners that would want to work with us. As we go forward to serve consumers well in the space. So more to be talked about in future discussions, but that's sort of how we're thinking about the battery world as we go forward. Thanks so much, I appreciate it. Thank you. One moment for our next question.

Inventory can be a lever for you how much do you think you need to work down by year end.

To avoid external capital.

So.

Speaker 4: We ended with 104 million of cash, 143 million of net recourse debt in the quarter. Cash from operations was good. The inventory drawdown, so we're pleased with how we ended in Q3.

We ended with $104 million.

Cash 143 million of net recourse debt in the quarter.

Cash from operations was good.

On the inventory drawdown. So we're pleased with how we ended in Q3 going forward. We are working multiple options to improve cash and liquidity and there are multiple options.

Philip Shen: Our next question comes from the line of Philip Shen from Roth and KM. Thanks for taking my questions. Looking out to 24, Peter, I know you haven't given official guidance, but given what we are in the year and what you see so far, it looks like Q4 bookings have improved. But that said, the Q4 customer ads are still down, maybe 15% quarter of a quarter.

Speaker 4: Going forward, we are working multiple options to improve cash and liquidity, and there are multiple options. But our first priority is, same thing as I said last quarter, is to improve our own working capital management and continue to draw down inventory.

Our first priority is same thing as I said last quarter is to improve our own working capital management and continue to draw down inventory.

I think I mentioned last quarter.

Speaker 4: I think I mentioned last quarter that target days of inventory for us is about 60 days.

Sure.

Target days of inventory for US is about 60 days.

Speaker 8: We'll get there and then we'll set a bigger target. But at a 60 day target, we'd be at about 200 at the moment, we'd be at about 250 million of inventory. So we've got some drawdown left to do. Okay, thanks, Beth.

We will get there and then we'll set a bigger target.

But at a 60 day target we'd be at about 200 and at the moment, we'd be at about $250 million.

Peter Faricy: So what kind of run rate should we expect for and what kind of activity should we expect for Q1 and 2 next year and what that kid might look like as we get through 24. Thanks. Thanks, Phil. Yeah, let me give you some color around how we're thinking about growth and the kinds of factors that impacted one of the big positives this year is that because we've always been agnostic between lease loan and cash, we were real position to pivot as the market pivoted.

Inventory so we've got some drawdown left to do.

Okay. Thanks Pat.

Peter Faricy: So last year at this time we were roughly 80-20 loan on financing and this year it's exactly the opposite, we're roughly 80-20 lease. Why does that matter on customers? Well, for leases, the revenue recognition is about 30 days plus later than it is for cash and loans. And that's because we don't recognize revenue and EBITDA until we get to permission to operate stage. And as you know in California, the utilities have really struggled to keep up with the demand that came out of 2.0 bookings.

Yes.

Clarify so you have to.

Can you quantify.

To get to that 60 days.

Might that mean for inventory how much in terms of dollars.

So we're at about $3 27, right now.

Speaker 4: So we're at about 327 right now. So another 75 millionage.

So that's another $75 million ish.

Got it great. Okay. Thanks, very much Ed.

Speaker 4: We're shooting for that for year end, but some of it might bleed over in the Q1, but it's a focus on the whole.

Seating for that for year end.

It bleed over into Q1.

Peter Faricy: And so that normal 30-day delay has been more like 60-90 day delay. So it has really slowed down our customer recognition this year and we'll work through most of that as we end through this calendar year.

But it's a focus.

Speaker 1: Thank you. One moment for our next question.

Thank you one moment far next question.

Our next question comes from the line of Laval more channels from Raymond Raymond James.

Speaker 1: Our next question comes from the line of Pavel Molchanov from Raymond James.

Yeah. Thanks for taking the question going back to the loan versus lease dynamic.

Speaker 9: Thanks for taking the question. Going back to the loan versus lease dynamic, given that in the final analysis.

Given that in the final analysis.

Speaker 9: There is, you know, let's call it $20,000 a capital per rooftop system that needs to be sourced from...

There is let's call it $20000 of capital per rooftop system that needs to be sourced from some capital provider.

Peter Faricy: As we take a look at 2024, as you mentioned, we're not giving out guidance yet, we give out guidance every year on our first quarter call. I think we're cautiously optimistic that the new home's business looks like it's trending positively and will be in a position to grow next year. And then I think it's too early on the retrofit business. I like the signals of September and October, but I think if the volatility of this year has taught us anything, we need a longer proof that this is a trend that's going to continue before we make any comments on what that looks like as we go forward.

Speaker 9: some capital provider. Why does this matter so much from your perspective, whether the customer chooses one flavor of financing versus the other?

Why does it matter so much from your perspective, whether that customer chooses one flavor of financing versus the other.

Well I guess thats the point that we've made which is that we really believe we're the only residential solar company. That's agnostic, we really our goal is to talk to consumers.

Speaker 3: Well, I guess that's the point that we've made, which is that we really believe we're the only residential solar company that's agnostic. You know, we really, our goal is to talk to consumers.

Speaker 3: get to know them and their needs and really figure out the best option for them, including cash by the way. So 20% of our business today is still cash sales. But when it comes to financing, we always offer both options.

Get to know them and their needs and really figure out the best option for them, including cash by the way so 20% of our business today is it's still cash sales, but when it comes to financing we always offer both options.

Peter Faricy: Just to put it in perspective, last year in 2022, we grew revenue at 56% through our customer base at 48%. So the dramatic change this year is one that you normally don't see in consumer businesses. And so I think given that volatility will be thoughtful, we'll see how bookings play out for the remainder of this calendar year. And then we'll be better prepared when we talk to you in February to give you our guidance for 24. Okay. Thanks, Peter.

Speaker 3: and try to talk through the consumer of the pros and cons of both. You know, typically loans require down payment, leases don't.

Try to talk through the consumer the pros and cons of both you know typically loans required down payment leases don't.

Speaker 3: Historically, last year loans were a little better value. That's actually flipped. Leases are a better value this year. So I think the fact that leases are growing is very rational. Consumers like the fact that they're saving a little bit more than they would with versus alone and no down payment required. It's an easier vehicle to give people into and

Historically last year loans were a little better value, that's actually flipped leases are a better value this year. So.

I think the fact that leases are growing is very rational consumers like the fact that they are.

They are saving a little bit more than they would with versus alone and no down payment required it's an easier vehicle to get people into in and get them off into rooftop solar.

Elizabeth Eby: Chifting to balance sheet and liquidity was one of you could help us understand the liquidity, at the end of Q3, and then also share any thoughts on potential need for external capital, you know, under what conditions might you need to pursue external capital, and then, you know, and then Jory can be a lever for you, you know, how much do you think you need to work down by your end to avoid external capital? Thanks.

Speaker 3: and get them off into rooftop solar. For those, just as a friendly reminder, we've been in the least business since 2008. So it's not a new business for us.

For those just as a friendly reminder, we've been in the lease business. Since 2008, so it's not a new business for US we've been in this business for a long time, we have a number of great partners on the tax equity side and on the regular lease capital side. So it's a business that we're excited about and plan to continue to grow as we go forward.

Speaker 10: We've been in this business for a long time. We have a number of great partners on the tax equity side and on the regular lease capital side. So it's a business that we're excited about and plan to continue to grow as we go forward.

Elizabeth Eby: So we ended with 104 million of cash, 143 million of net recourse debt in the quarter. Cash from operations was good on the inventory drawdown, so we're pleased with how we ended in Q3. Going forward, we are working multiple options to improve cash and liquidity, and there are multiple options, but our first priority is same thing, as I said last quarter, is to improve our own working capital management and continue to draw down inventory.

Okay, Let me follow up on.

Speaker 9: We need to follow up on another inventory question.

Another inventory question.

Speaker 9: benchmark price of modules and you said this is the bulk of your inventory base is down roughly 30% between April and October .

Benchmark price of modules and you said this is the bulk of your <unk>.

Inventory base is down.

Roughly 30% between April and October.

Speaker 9: At what point would you get into a situation where, just as a matter of accounting, you would have to recognize a write-down on the paper?

At what point would you get into a situation, where just as a matter of accounting you would have to recognize the write down on the value.

Yes.

Speaker 4: So, accounting rules are if you're selling it at above cost, you do not take a right then.

Counting accounting rules are if you're selling it at above cost you do not take a write down.

Elizabeth Eby: I think I mentioned last quarter that target days of inventory for us is about 60 days. We'll get there and then we'll set a bigger target, but at a 60 day target, we'd be at about 200 and at the moment, we'd be at about 250 million of inventory, so we've got some drawdown left to do.

Speaker 4: And we are still selling all of it above cost.

And we are still selling all of it.

<unk> cost.

Speaker 10: The color I'd add is that, you know, from a panel perspective, and this is really true across all equipment, by the way. So it doesn't matter whether it's panels and verters, EV chargers.

The color I'd add is that from a from a panel perspective, and this is really true across all equipped them by the way. So it doesn't matter, whether it's panels Inverters EV Chargers.

Speaker 10: quality has gone up this past year and prices have come way down. You're focusing on the 30% drop in panels, which is really, really important.

Quality has gone up this past year and prices have come way down youre focusing on the 30% drop in panels, which is which is really really important what does that play out going forward well for 2024, I think it is going to be great for consumers.

Elizabeth Eby: Okay, thanks, Beth. Just to clarify, so you have 255, can you quantify, you know, to get to that 60 days, what might that mean, and how much in terms of dollars? So we're at about 327 right now, so that's another 75 millionish. We're shooting for that for year end, but I bleed over into Q1, but it's a focus. Thank you.

Speaker 10: what does that play out going forward well for 2020 four i think it's going to be great for consumers you know this it's going to be uh... for those who've been on the the edge of whether or not they believe this is affordable because it's a big ticket item you know we're going to be in a better position to provide more affordable options for consumers

I mean.

For those who have been on the edge of whether or not they believe this is affordable because it's a big ticket item.

To be in a better position to provide more affordable options for consumers and I think given the volatility we've had in the market. This year, that's going to be terrific.

Speaker 10: And I think given the volatility we've had in the market this year, that's going to be terrific.

Speaker 10: We're selling through panels that I would say are

We're selling through panels that I would say our.

Speaker 10: you know, close to market right now, and then I think there's no question in 2024 we'll have a greater and greater share of panels that are world-class quality and world-class price competitive. And those are the two pieces we focus on the most. We really, you know, for our dealers and our customers, we wanna provide them the best panels in the world, but they have to be at affordable prices, and we think we can do both.

You know close to market right now and then I think there's no question in 2024, we will have a greater and greater share of panels that are.

Pavel Molchanov: One moment for our next question. Our next question comes from the line of Pavel Molchanov from Raymond Nakes, Raymond James. Yeah, thanks for taking the question. Going back to the loan versus lease dynamic, given that in the final analysis, there is, you know, let's call it $20,000, a capital per rooftop system that needs to be sourced from some capital provider. Why does matter so much from your perspective, whether the customer chooses one flavor of financing versus the other?

World Class quality and World class price competitive and those are the two pieces, we focus on the most we really for our dealers and our customers we want to provide them the best panels in the world, but they have to be at affordable prices and we think we can do both.

Alright, thanks very much.

Speaker 1: Thank you. One moment for our next question.

Thank you.

One moment for our next question.

Speaker 1: Our next question comes from the line of Joseph Oshar from Guggenheim.

Our next question comes from the line of Joseph Osha from Guggenheim.

Speaker 11: Good morning, everyone. A couple of questions. First, we've heard a few comments about reducing equipment costs. Obviously, buying in cheaper panels helps. I'm wondering what. You can say about your philosophy for procuring inverters as we move through 2024 and then I do have another question. Thanks.

Good morning, everyone a couple of questions.

First we've heard a few comments about reducing equipment cost, obviously buying and cheaper pales helps.

I'm wondering what.

You can say about your philosophy for procuring and burgers as we move through 2024, and then I do have another question. Thanks.

Pavel Molchanov: Well, I guess that's the point that we've made, which is that we really believe we're the only residential solar company that's agnostic. You know, we really, our goal is to talk to consumers, get to know them and their needs and really figure out the best option for them, including cash, by the way. So 20% of our business today is still cash sales, but when it comes to financing, we always offer both options and try to talk through the consumer, the pros and cons of both.

Speaker 10: Sure. Yeah. Well, first of all, I think most of you know we've had an exclusive relationship with Enphase. It's been in place for a number of years.

Sure Yeah, well first of all I think most of you know we've had an exclusive relationship with Enphase.

It's been in place for a number of years that goes through the first quarter of 2024 and.

Speaker 10: that goes through the first quarter of 2024 and face the company that we respect a lot. They make high quality products. We respect the engineering team and the quality team and the support we've gotten from them. So we have nothing but if you were doing a customer survey, we're in the, you know, we give positive reviews. We're pleased with those products and so are our customers and dealers.

And phase.

A company that we respect a lot they make high quality products, we respect the engineering team and the quality team and the support we've gotten from them. So we have nothing but if you were doing a customer survey were in the.

Pavel Molchanov: You know, typically loans required down payment, leases don't historically, last year loans were a little better value. That's actually flipped. Leases are a better value this year. So I think the fact that leases are growing is very rational. You know, consumers like the fact that they're saving a little bit more than they would with versus alone and no down payment required. It's an easier vehicle to get people into and get them off into rooftop solar for those, you know, just as a friendly reminder, we've been in the lease business since 2008. So it's not a new business for us. We've been in this business for a long time. We have a number of great partners on the tax equity side and on the regular lease capital side.

We'd give positive reviews, we're pleased with those products and so are our customers and dealers, but I would say forward looking what you would expect broadly is what I mentioned earlier, which is whether it's inverters or panels.

Speaker 10: But I would say, you know, forward looking what you would expect broadly is what I mentioned earlier, which is whether it's inverters or panels, you know, the markets going to a place where the expectations on quality are increasing and the expectations on value or prices, you know, prices are decreasing and the expectation as their value is gonna increase.

The market's going to a place where the expectations on quality are increasing and the expectations on value or prices.

No.

The prices are decreasing and the expectation is that value is going to increase and I would say that's certainly true in the <unk> market. So we would expect that to be true as we go forward.

Speaker 10: And I would say that's certainly true in the inverter market. So we would expect that to be true as we go forward. I would say that market from our point of view has gotten more competitive recently. I think there's a number of new entrances, a number of options.

I would say that that market from our point of view has gotten more competitive recently.

Peter Faricy: So it's a business that we're excited about and plan to continue to grow as we go forward.

There's a number of new entrants there was a number of options.

Pavel Molchanov: Okay, let me follow up on with another inventory question. Benchmark price of modules, and you said this is the bulk of your inventory base is down roughly 30% between April and October. At what point would you get into a situation where just as a matter of accounting, you would have to recognize the right down on the value. The accounting rules are, if you're selling it at above cost, you do not take a right down.

Speaker 10: that have been introduced this past year that I think are interesting from our dealer standpoint. And at some point, I think consumers would benefit from as well. But having said all that, I do expect it will continue to have a good partnership within phase.

That had been introduced this past year that I think are interesting from our dealer standpoint, and at some point I think consumers would would benefit from as well, but but having said all of that I do expect that we will continue to have a good partnership with Enphase and.

Speaker 10: And I look forward to discussing that more in future calls as we go.

Look forward to discussing that more in future calls as we go.

Speaker 11: I'm sure Bob read us too. It's just following up a little bit on some of your bookings, comments, obviously. There's some sequential improvement, but you know, I'm just wondering if you can maybe walk us, give us, you know, a year on year walk in particular in California, trying to understand what the progression for that look has looked like in Q3 and what you think that might look like, look like in the Q4 and Q1, given some of the unique dynamics of the state.

Sure Bob you guys too.

Just following up a little bit on some of your bookings comments. Obviously, there is some sequential improvement, but I'm. Just wondering if you can maybe walk us give us.

Year on year walk in particular in California.

I'm trying to understand what the progression for that book has looked like in Q3, and what you think that might look like look like into Q4 and Q1.

Pavel Molchanov: And we are still selling all of it above cost. The color I'd add is that, you know, from a panel perspective, and this is really true across all equipment, by the way. So it doesn't matter whether it's panels and verters, EV chargers, quality has gone up this past year and prices have come way down. You're focusing on the 30% drop in panels, which is really, really important. And what does that play out going forward?

Given some of the unique dynamics of this.

State.

Yeah, So, California has been interesting.

Speaker 10: Yeah, so California's been interesting. We were actually pretty close in our forecast for the year to how it's turned out. The law, I guess, lasted a little longer in the summer than we probably would have thought it would have based on the transition from them, one to them two. But I think the September and October recovery are kind of in line with our expectations on the California side. What's been frankly a lot more difficult to forecast this year was the outside of California business.

Were actually pretty close on our forecast for the year to how it's turned out.

The lull I guess lasted a little longer in the summer than we probably would have thought it would have based on the transition from them wanted them too, but I think the September and October recovery are kind of in line with our expectations on the California side, what's been frankly, a lot more difficult to forecast. This year was the outside of California business.

Pavel Molchanov: Well, for 2024, I think it's going to be great for consumers. You know, it's going to be for those who've been on the edge of whether or not they believe this is affordable because it's a big ticket item. You know, we're going to be in a better position to provide more affordable options for consumers. And I think given the volatility we've had in the market this year, that's going to be terrific.

I think we've mentioned on previous calls we were struggling in kind of the southeast and southwest part of the U S. Some.

Speaker 10: I think we mentioned on previous calls we were struggling in kind of the southeast and southwest part of the US.

Pavel Molchanov: We're selling through panels that I would say are, you know, close to market right now. And then I think there's no question in 2024 will have a greater and greater share of panels that are, you know, world class quality and real class price competitive. And those are the two pieces we focus on the most. We really, you know, for our dealers and our customers, we want to provide them the best panels in the world, but they have to be at affordable prices. And we think we can do both.

Speaker 10: Some of those places like Arizona and Florida have low utility costs

Some of those places like Arizona, and Florida have low utility costs.

Speaker 10: so the the there's still benefit there but the benefit does become a little bit more marginal uh... if you totally cost remain low so air zone of florida been a struggle uh... same thing for texas call a rattle so the reason i think uh... it in on the slide that we talk about the retrofit booking increase

There's still benefit there, but the benefit does become a little bit more marginal.

Peter Faricy: All right.

If utility costs remain low so Arizona, Florida been a struggle same thing for Texas, Colorado. So the reason I think.

Peter Faricy: Thanks very much.

The slide that we talk about the retrofit booking increase is that there is an increase in California, but we're really beginning to see some of these other southern states begin to get some traction.

Operator: Thank you.

Speaker 10: is that there is an increase in California, but we're really beginning to see some of these other southern states begin to get some traction, which I think is a positive signal. Now, I think it's two early September and October , you know, do not yet make up a long enough trend that we feel comfortable saying.

Joseph Osha: One moment for our next question.

I think there is a positive signal now I think it's too early September and October.

Not yet make up long enough trend that we'd feel comfortable saying.

Speaker 10: you know, we know that this will last into 2024. I think again, this has been such a volatile year. I think it's prudent to be cautious and thoughtful here, but we also, you know, we are, we'd rather have a positive signal obviously to end the year than have a neutral or negative signal. So quite a bit of improvement in September and October and our hope is that that lasts for the remainder of the year.

We know that this will last into 2024 I think again this has been such a volatile year I think I think it's prudent to be cautious and thoughtful here, but.

Joseph Osha: Our next question comes from the line of Joseph Oshar from Guggenheim.

Peter Faricy: Good morning, everyone. A couple of questions. First we've heard a few comments about reducing equipment cost, obviously buying and cheaper panels helps. I'm wondering what you can say about your philosophy for procuring in burgers as we move through 2024. And then I do have another question. Thanks. Sure. Yeah. Well, first of all, I think most of you know we've had an exclusive relationship with Enphase. It's been in place for a number of years that goes through the first quarter of 2024.

We also.

We'd rather have a positive signal obviously the end of the year, then going to have a neutral or negative signals. So quite a bit of improvement in September and October and our hope is that that last for the remainder of the year.

Speaker 11: Okay, not not to just put you on the spot. Do you think California can be up here and you're in Q4 and books?

Okay not to just put you on the spot do you think California can be up year on year in Q4 and bookings.

Speaker 10: I don't think it'll be up year over year, but I think it has a chance to get closer to Flatish. You know, I mentioned earlier, we really had a, we had a very, very strong bookings year last year, until...

I don't think it will be up year over year, but I think it has a chance to get closer to flattish.

I mentioned earlier, we really had.

We had a very very strong bookings year last year until.

Peter Faricy: Enphase is a company that we respect a lot. They make high quality products. We respect the engineering team and the quality team and the support we've gotten from them. So we have nothing but if you were doing a customer survey, we're in the, you know, we give positive reviews. We're pleased with those products and so are our customers and dealers. But I would say, you know, forward looking what you would expect broadly is what I mentioned earlier, which is whether it's inverters or panels, you know, the market's going to a place where the expectations on quality are increasing and the expectations on value or prices.

Speaker 10: Mid-November. Mid-November through the end of December was really light.

Mid November mid November through the end of December was really light.

Speaker 10: And you can blame it on the holidays, the weather, you know, all those different factors, but that may have been in retrospect, maybe interest rates finally catching up and consumer confidence finally catching up. And that may have been the beginning of what was really a bigger slowdown that happened into this year. So, you know, from a November and December standpoint, it'll be easier to have flat year over year performance, if you will, because last year was so soft.

And you can blame it on the holidays the weather all those different factors, but that may have been in retrospect, maybe maybe interest rates finally, catching up and consumer confidence finally, catching up and they may have been the beginning of what was really a bigger slowdown that happened into this year. So.

November and December standpoint, it'll be easier to have flat year over year performance. If you will because last year was so soft.

Speaker 1: So that would be our hope and our goal is to get something closer to flat, November and December in California. Thank you very much. Thank you. One moment for our next question.

Peter Faricy: You know, prices are decreasing and the expectation is that value is going to increase and I would say that's certainly true in the inverter market. So we would expect that to be true as we go forward. I would say that that market from our point of view has gotten more competitive recently. I think there's a number of new entrances, a number of options that have been introduced this past year that I think are interesting from our dealer standpoint.

That would be our our hope and our goal is to get something closer to flat November and December in California.

Thank you very much.

Thank you one moment for our next question.

Okay.

Our next question comes from the line of Brian Lee.

From Goldman Sachs.

Peter Faricy: And at some point, I think consumers would benefit from as well. But having said all that, I do expect it will continue to have a good partnership within face and I look forward to discussing that more in future calls as we go. I'm sure Bodry does too.

Hey, everyone. Good morning, Thanks for taking the questions.

Speaker 12: Hey everyone, good morning, thanks for taking the questions. I guess one question I had was more kind of housekeeping factual. I know best you're still working with your creditors on.

I guess one question I had was.

More kind of housekeeping factual I know.

You are still working with your creditors on.

Speaker 12: the waivers and what have you. But could you remind us what the actual covenants are? I believe there might be some either minimum cash and or EBITDA coverage covenants. Could you remind us what those are where you stand relatives to those today?

The waivers and what have you, but could you remind us what.

Peter Faricy: Following up a little bit on some of your bookings, comments obviously, there's some sequential improvement but I'm just wondering if you can maybe walk us, give us a year on year walk in particular in California, trying to understand what the progression for that has looked like in Q3 and what you think that might look like, look like in the Q4 and Q1, given some of the unique dynamics. Yeah, so California has been interesting.

The actual covenants are.

I believe there might be some either minimum cash <unk>.

EBIT coverage covenants could you remind us.

What those are and where you stand relative to those today.

So the.

Speaker 4: So there's four covenants. One is a net net to ebit with all the adjustments of four and a half at.

There is.

For Covenant is a net debt to EBIT.

Uh huh.

With all the adjustments.

<unk> four and a half X.

Speaker 4: And that's all the non-recourse. You take out the non-recourse groups. There's a interest coverage, and there's a minimum liquidity, not minimum cash, and an asset covenant. Okay.

Peter Faricy: We were actually pretty close in our forecast for the year to how it's turned out. The law, I guess, lasted a little longer in the summer than we probably would have thought it would have based on the transition from them, one to them two, but I think the September and October recovery are kind of in line with our expectations on the California side. What's been frankly a lot more difficult to forecast this year was the outside of California business.

And that's all the nonrecourse you take up the nonrecourse groups, there's a interest coverage and there is a minimum liquidity not minimum cash.

And then asset covenant.

Okay.

And all of the debt.

Speaker 13: Well, and being given the final adjustments, but yeah.

Well and Ken given the final adjustment, but yes.

Speaker 12: I'm sorry I cut you off there so it sounds like even given the negative ebit out looked here that you updated the market on this morning You you still plan to be Incompliance with all those covenants through year end

Understood Alright.

Peter Faricy: I think we mentioned on previous calls, we were struggling in kind of the southeast and southwest part of the U.S. Some of those places like Arizona and Florida have low utility costs, so there's still benefit there, but the benefit does become a little bit more marginal. If utility costs remain low, so Arizona, Florida have been a struggle. Same thing for Texas, Colorado. So the reason I think, you know, in the slide that we talk about the retrofit, booking increase is that there is an increase in California, but we're really beginning to see some of these other southern states begin to get some traction, which I think is a positive signal.

Catch up there so it sounds like even given the negative EBIT outlook here that you updated the market on this morning, Hugh you still plan to be in.

In compliance with all of those covenants through year end.

Speaker 4: That's we need to get to the final is of they're always a backward looking and we're fine in Q3 and we're talking to the banks about waivers for the restatement and anything else we need.

That's we need to get to the final.

There are always backward looking and were fine in Q3, and we're talking to the banks about flavors for the restatement and anything else we need.

Speaker 12: Okay, understood. Helpful. And then just shifting gears a little bit.

Okay understood helpful.

And then just shifting gears a little bit.

Speaker 12: I know there's been a lot of focus around growth and inventory, splicing type matters for you. I guess I wanted to hone in on kind of the structure a bit.

I know theres been a lot of focus around loan growth and inventory supply.

Peter Faricy: Now, I think it's too early, September and October, you know, do not yet make up a long enough trend that we feel comfortable saying, you know, we know that this will last into 2024. I think again, this has been such a volatile year. I think I think it's prudent to be cautious and thoughtful here, but we also, you know, we are, we'd rather have a positive signal, obviously, to end the year than have a neutral or negative signal.

Supply chain type matters for you I guess.

I wanted to hone in on kind of the cost structure a bit.

Speaker 12: You did almost 100 million in EBITDA last year on 80,000 new customers at the midpoint this year.

You did almost $100 million in EBITDA last year on 80000, new customers at the mid point this year.

Speaker 12: You're talking about 75,000 customers or so. I know it's off your original view entering the year, but relative to last year, it's not that significantly lower. So, but EBITDA is clearly going to be significantly negative given the new update here. So...

You are talking about 75000 customers or so I mean, I know, it's off share original view entering the year, but.

Relative to last year, its not that <unk>.

Significantly lower so.

Peter Faricy: So quite a bit of improvement in September and October, and our hope is that that lasts for the remainder of the year. Okay, not to just put you on the spot. Do you think California can be up year and year and Q4 in bookings? I don't think it'll be up year over year, but I think it has a chance to get closer to flatish. You know, I mentioned earlier, we really had a, we had a very, very strong bookings year last year until mid November, you know, mid November through the end of December was really light.

But EBITDA is clearly going to be significantly negative given the new update here so wanted to understand better kind of.

Speaker 12: wanted to understand better kind of where you're at in terms of thought process around the cost structure. It seems like you clearly had a higher cost structure coming into the year given a more optimistic view on volumes that hasn't played out. And you haven't been able to pivot quick enough on cost to navigate. But if you think about next year, I don't know if you have a fully formed view, but if it's flat, if it's still honestly down, like what are you thinking in terms of how fast and how much you can do on the cost side of things? Because again, you did 100 million in e-button, 80,000 customers, you know, given where market trends are, I think it wouldn't be that aggressive to assume next year.

Where youre at in terms of thought process around the cost structure. It seems like you clearly had a higher cost structure coming into the year given.

A more optimistic view on volumes that Hasnt played out.

And you haven't been able to pivot quickly enough on costs to kind of.

To navigate but if you think about next year I don't know if you have a fully formed view but.

Peter Faricy: And you can blame it on the holidays, the weather, you know, all those different factors, but that may have been in retrospect, maybe maybe interest rates, finally catching up and consumer confidence, finally catching up. And they may have been the beginning of what was really a bigger slowdown that happened into this year. So, you know, from a November and December standpoint, it'll be easier to have flat year over year performance, if you will, because last year was so soft. So that, that would be our hope and our goal is to get something closer to flat November and December in California. Thank you very much. Thank you.

If it's flat.

It's still modestly down like what are you thinking in terms of how fast and how much you can do on the cost side of things because again, you did $100 million in EBITDA and 80000 customers.

Operator: One moment for our next question.

Given.

Where market trends are I think.

It wouldn't be that aggressive to assume next year.

Speaker 12: is flat and not a growth year. So just kind of wondering what you think the cost structure needs to look like and what maybe targets there could be in terms of achieving some cost reduction.

Is flat and not a growth year. So just kind of wondering what what you think the cost structure needs to look like and what maybe targets there.

Could be in terms of achieving some cost reduction.

Yeah, Thanks, Brian I'll take that so youre.

Speaker 10: yeah thanks brine i'll take that so uh... you're right i think this year if you took a look at our guidance of the you know last year we grew revenue fifty four percent customers forty eight percent uh... we were cautious this year if you recall the very beginning of the year our customer guidance was twenty percent

Youre right I think this year, if you took a look at our guidance.

Last year, we grew revenue 54% customers 48%.

We were cautious this year, if you recall at the very beginning of the year, our customer guidance was 20%. So we thought with the impact of California them, obviously that would slow things down but.

Brian Lee: Our next question comes to the line of Brian Lee, from Goldman Sachs. Hey everyone, good morning, thanks for taking the questions. I guess one question I had was more kind of housekeeping factual. I know best you're still working with your creditors on the waivers and what have you, but could you remind us what the actual covenants are? I believe there might be some either minimum cash and or EBITDA coverage covenants. Could you remind us what those are where you stand relatives to those today?

Speaker 10: So we thought with the impact of California NEM, obviously that would slow things down, but we didn't expect to be in a position where, our revenue will be flatish year over year and customers will be down a little bit year over year. And so we weren't prepared for that scenario, but this is the, in our announcement today, we've announced our second round of cost reduction.

But we didn't expect to be in a position, where our revenue will be flattish year over year and customers will be down a little bit year over year, and so we weren't prepared for that scenario, but.

And our announcement today, we've announced our second round of cost reductions fixed cost reductions and we talked about this on our last call, but the very first thing you attack, our discretionary spending and you look for places to reduce waste. That's the that's the formula that that matters. The most you don't.

Speaker 10: fixed cost reductions. And we talked about this on our last call, but the very first thing you attack are discretionary spending and you look for places to reduce waste. That's the formula that matters the most. You don't wanna take away things that matter to customers and matter to dealers, but you really wanna take away things that are discretionary and things that in this kind of down market are prudent to reduce.

Takeaway things that matter to customers and matter the dealers, but you really want to take away things that are discretionary and things that in this kind of down market our prudent to reduce.

Brian Lee: So there's four covenants. One is a net debt to EBITDA with all the adjustments of four and a half X and that's all the non-recourse. You take up the non-recourse groups. There's a interest coverage and there's a minimum liquidity, not minimum cash and an asset covenants. I'm sorry, I cut you off there. So it sounds like even given the negative EBITDA outlook here that you updated the market on this morning, you still plan to be in compliance with all those covenants through your end? We need to get to the final. They're always the backward looking and we're finding Q3 and we're talking to the banks about waivers for the restatement and anything else we need.

Speaker 10: But we're not done yet. We'll still continue to evaluate our fixed cost structure throughout Q4. I anticipate the possibility that we'll eliminate even more fixed costs.

But we're not done yet we will still continue to evaluate our fixed cost structure.

Throughout Q4, I anticipate the possibility that will eliminate even more fixed cost.

Speaker 10: during this quarter and the key thing for us is to really emerge as a stronger more resilient company for 2020.

During this quarter and the key thing for US is to really emerge as a stronger more resilient company for 2020.

Speaker 10: The point you're making, I think we strongly agree with this kind of volatility. You don't usually see this in consumer markets.

The point Youre, making I think we strongly agree with this kind of volatility you don't usually see this and can consumer markets, but it is what it is so we have to build a company that is resilient and can be prepared for a minus 10, or minus 20 or flat or plus 10 or plus 20.

Speaker 10: But it is what it is. So we have to build a company that's resilient and can be prepared for a minus 10 or minus 20, a flat or a plus 10 or a plus 20. And that's our goal with these cost reductions. It's to put ourselves in a position where we're able to work through the market regardless of how volatile it is.

And that's our goal with these cost reductions is to put ourselves in a position, where we're able to work through the market regardless of how volatile. It is for next year. We do have to recognize from a world standpoint, there are a lot of disruptions happening globally and it is hard to say, how those will have an impact.

Speaker 10: for next year. You know, we do have to recognize from a world standpoint, you know, there are a lot of disruptions happening globally and it is hard to say how those...

Peter Faricy: Okay, understood, helpful. And then just shifting gears a little bit. I know there's been a lot of focus around growth and inventory supply chain type matters for you. I guess I wanted to hone in on kind of the cost structure a bit. You know, you did almost 100 million in EBITDA last year on 80,000 new customers at the midpoint this year. You're talking about 75,000 customers or so. I know it's off your original view entering the year but relative to last year, it's not that significantly lower.

Speaker 10: You know, we'll have an impact on both consumer confidence and interest rates.

On both consumer confidence and interest rates. So it's prudent right now you have to be thoughtful about where you spend and how you spend and that's exactly what we plan to do so the focus we've talked about on the last call deliver results.

Speaker 10: So it's prudent right now. You know, you have to be thoughtful about where you spend and how you spend and that's exactly what we plan to do. So, you know, the focus we talked about in the last call, deliver results.

Speaker 10: manage cash and liquidity, continue to lower our costs, put ourselves in a position where we have a stronger balance sheet, stronger company. That's exactly what we plan to do throughout the remainder of Q4 and be ready for my hope a great recovery year in 2020.

Manage cash and liquidity continue to lower our costs and put ourselves in a position, where we have a stronger stronger balance sheet stronger company.

That's exactly what we plan to do throughout the remainder of Q4 and be ready for my hope a great recovery year in 2024.

Speaker 12: That's helpful Peter, so I guess if I hear you correctly, there's a lot of fixed charge focus. So if we're trying to track your progress over the next few quarters and into 24, is it fair to assume we'd see it more in your gross margins than in your op-ex line?

Peter Faricy: EBITDA is clearly going to be significantly negative given the new update here. So I wanted to understand better kind of where you're at in terms of thought process around the cost structure. It seems like you clearly had a higher cost structure coming into the year given a more optimistic view on volumes that hasn't played out and you haven't been able to pivot quick enough on cost to kind of, you know, to navigate.

That's helpful. Peter So I guess, if I hear you correctly theres a lot of fixed charge.

Focus.

So if we're trying to track your progress over the next few quarters and into 'twenty four.

Is it fair to assume we'd see it more in your gross margins and in your Opex line.

Speaker 10: Yeah, I think you will. And I think the other lever we have is, one of the key ways to be successful when demand is more volatile is trying to make as many of your costs variables possible. So our goal would be to reduce fixed costs that are truly fixed and then make as many of our fixed costs durable costs so that they really only get occurred if the business is there in the business. Happens.

Yes, I think you will and I think the other lever we have is.

One of the key ways to be successful when when demand is more volatile. It is trying to make as many of your costs variable as possible.

Peter Faricy: But if you think about next year, I don't know if you have a fully formed view but if it's flat, if it's still modestly down, like what are you thinking in terms of how fast and how much you can do on the cost side of things? Because again, you did 100 million in EBITDA on 80,000 customers, you know, given where market trends are, I think it wouldn't be that aggressive to assume next year is flat and not a growth year.

Our goal would be to reduce fixed costs that are truly fixed and then make as many of our fixed cost variable cost. So that they really only get occurred if the businesses they're in the business happens.

Speaker 5: And that's the work that we're doing right down behind the scenes. And I expect that we're going to be in a position where, again, we're much stronger and more resilient company, but at 10, we end this calendar year. All right. Appreciate to call us. Thanks, guys.

That's the work that we're doing right now behind the scenes that I expect that we're going to be in a position where again, we're a much stronger and more resilient company by the time, we end this calendar year.

Alright, I appreciate the color thanks, guys.

Peter Faricy: So just kind of wondering what you think the cost structure needs to look like and what maybe targets there could be in terms of achieving some cost reduction. Yeah, thanks, Brian. I'll think that. So, you're right. I think this year, if you took a look at our guidance of the, you know, last year we grew revenue 54% customer 48%. We were cautious this year, if you recall, at the very beginning of the year, our customer guidance was 20%.

Thank you one moment our next question.

Our next question comes from the line of Ben Carlo from Baird.

Speaker 1: Our next question comes from the line of Ben Calo from Bayer.

Speaker 14: Hey, good morning. Thanks for taking my question. Peter, could you just update us on progress with new panel manufacturers, any relationships there? And then, as you open up to kind of a agnostic technology platform, you know, on the panel side and the battery side.

Hey, good morning, Thanks for taking my question.

Peter could you just update us on.

Progress with new panel manufacturers.

Peter Faricy: So we thought with the impact of California, them obviously that would slow things down, but we didn't expect to be in a position where, you know, our revenue will be flatish year over year and customers will be down a little bit year over year. And so we weren't prepared for that scenario, but we, this is the, in our announcement today, we've announced our second round of cost reductions, fixed cost reductions, and we talked about this on our last call, but the very first thing you attack or discretionary spending and you look for places to reduce waste.

Relationships, there and then as you're opening up too.

<unk> technology platform.

On the battery side.

Speaker 14: How do you balance that with the sun power brand? Which is a great...

How do you balance that with.

Sunpower brands.

<unk> was a great brand value.

Speaker 10: Yeah, great question, Ben. So first I'll back up. I think many of you know we've had a partnership with Maxie on to spin off.

Yes, great question Ben So.

First I'll back up I think many of you know we've had a partnership with <unk> since the spin off we continue to work with Maxion. We're in discussions with them I think those discussions have trended positive and we're cautiously optimistic that we will work out an agreement for both parties that I think is advantageous for both companies. So.

Speaker 10: We continue to work with Maxian, we're in discussions with them. I think those discussions.

Peter Faricy: That's the formula that that matters the most. You don't want to take away things that matter to customers and matter to dealers, but you really want to take away things that are discretionary and things that in this kind of down market are prudent to reduce, but we're not done yet. You know, we'll still continue to evaluate our fixed cost structure throughout Q4. I anticipate the possibility that we'll eliminate even more fixed costs during this quarter.

Speaker 10: have trended positive and work cautiously optimistic that will work out uh... in agreement for both parties that i think is advantageous for both companies so uh... on the maxi on side that's where we stand uh... interestingly enough in q3 we hit a milestone that we've never hit before which is actually we sold more non-maxion panels and we saw maxi on panel

On the Maxion side, Thats, where we stand now interestingly enough in Q3, we hit a milestone that we've never hit before which is actually we sold more non maxion panels and we saw maxion panels.

Speaker 10: That's not purposeful. It really is about what consumers want and what dealers want. And so I think that's a signal that the mainstream segment and more leasing is probably gonna put more pressure to have panels that are high quality, but also really affordable.

Thats not purposeful it really is about what consumers want and what dealers want and so I think that's a signal that the mainstream segment and more leasing is probably going to put more pressure to have panels that are high quality, but also really affordable.

Peter Faricy: And the key thing for us is to really emerge as a stronger more resilient company for 2020. The point you're making, I think we strongly agree with this kind of volatility. You don't usually see this in consumer markets, but it is what it is. You know, so we have to build a company that's resilient and can be prepared for a minus 10 or minus 20, a flat or plus 10 or plus 20.

Speaker 10: From our point of view and from dealer feedback, I think the panel business as it is today, short of any innovations is really becoming more commoditized, it's becoming more challenging to differentiate one panel from another, there's a number of really high quality panel makers out there. We've been engaged with discussions with all of the high quality panel makers. We'll never compromise.

From our point of view and from dealer feedback I think the panel business as it is today.

Short of any innovation is really becoming more commoditized, it's becoming more and more challenging to differentiate one panel from another there's a number of really high quality panel makers out there we've been engaged with discussions with.

Peter Faricy: And that's our goal with these cost reductions is to put ourselves in a position where we're able to work through the market regardless of how volatile it is for next year. You know, we do have to recognize from a world standpoint, you know, there are a lot of disruptions happening globally and it is hard to say how those, you know, will have an impact on both consumer confidence and interest rates. So it's prudent right now, you know, you have to be thoughtful about where you spend and how you spend and that's exactly what we plan to do.

All of the high quality panel makers will never compromise our brand to your point by by selling anything other than panels that meet our quality bar and our quality tests, but we will provide I think increasingly.

Speaker 10: are brand to your point by selling anything other than panels that meet our quality bar and our quality test.

Speaker 10: But we will provide, I think, increasingly high quality, but also more affordable options for consumers. And I think our dealers are excited about that. And I know consumers will benefit from that as well. So we're excited about where this goes going forward. No announcements to make on that today, but that's another area I'd say stay tuned. We're working behind the scenes with a number of different providers.

High quality.

But also more affordable options for consumers.

And I think our dealers are excited about that and I know consumers will benefit from that as well. So we're excited about where this goes going forward no announcements to make on that today, but that's another area I would say stay tuned we're working.

Peter Faricy: So, you know, the focus we talked about in the last call, deliver results, manage cash and liquidity, continue to lower our costs, put ourselves in a position where we have a stronger balance sheet, stronger company. That's exactly what we plan to do throughout the remainder of Q4 and be ready for, I hope, a great recovery year in 2024. That's helpful, Peter. So I guess if I hear you correctly, there's a lot of fixed charge focus.

Behind the scenes with a number of different providers.

Speaker 14: Just to follow up there on the dealers, I saw the guy in a good corner. I think maybe that was the best corner of dealer ads. I'm just wondering if, you know, the conversations on liquidity or kind of the shift to more technology, agnostic have come up in these discussions or how you're managing those relationships.

Just a follow up.

The dealers I saw that you have a good quarter I think maybe you said it was the first quarter of your ads I'm just wondering.

The conversation with a liquidity or.

<unk>.

More technology agnostic come up in these discussions.

Peter Faricy: So if we're trying to track your progress over the next few quarters and into 24, is it fair to assume we'd see it more in your gross margins than in your op-ex line? Yeah, I think you will. And I think the other lever we have is, you know, one of the key ways to be successful when demand is more volatile is trying to make as many of your costs variables possible. So our goal would be to reduce fixed costs that are truly fixed and then make as many of our fixed cost variable costs so that they really only get occurred if the business is there in the business happens.

How you are managing those relationships. Thank you.

Speaker 10: Thank you. Yeah, well, we've had it's interesting, you know, the last dealer conference we had, I recall countless stories of dealers telling me how high our bar is.

Thank you, yes, well we've had.

It's interesting the last dealer conference we had.

Speaker 10: to become a some power dealer. We really, we think of ourselves as having the highest quality dealer network in the world.

Speaker 10: and dealers, particularly our master dealers and the dealers we've made equity investments in.

Speaker 10: They're world-class providers. They have a great customer experience. They're well-run businesses.

Speaker 10: You know, they're businesses that we stand behind and they've been resilient even during this more turbulent.

Peter Faricy: And that's the work that we're doing right down behind the scenes. And I expect that we're going to be in a position where, again, we're a much stronger and more resilient company, but at 10, we end this calendar, here. Alright, appreciate to call us. Thanks, guys. Thank you.

Speaker 10: Stormy seas kind of a year. So the fact that we've been able to, recruit so many in Q3 and set a new...

Speaker 10: I think just goes to show you that even in this more turbulent market, you know, you can find these areas of great opportunity.

Ben Kallo: One moment for our next question. Our next question comes from the line of Ben Kallo, from Baird. Hey, good morning. Thanks for taking my question. Peter, could you just update us on progress with new panel manufacturers, any relationships there? And then as you open up to kind of a diagnostic technology platform, you know, on both panel side and the battery side, how do you balance that with the other SunPower brand, which is a great brand value? Yeah, great question, Ben.

Speaker 10: When you talk to them, I think they're very attracted by the sunpower brand.

Speaker 10: our commitment to have a world class customer experience.

Speaker 10: They know that we're the number one rated solar, residential solar company in the US and it's across every survey and the gap is pretty wide between us and the closest competitor on that front. So people want to be part of that ecosystem. They want to be part of that family.

Speaker 10: And then you add to it the fact that we have attractive lease programs, we have attractive panel options.

Speaker 10: We've got great technology for consumers and the my son power app that they love. You know, we've really got a great package for dealers. So the feedback has been very positive. I expect that we'll continue to be able to add high quality dealers at, I don't know if we'll have the same rate we did in Q3, but we expect to be adding quite a few dealers over the next 12-day team months.

I'm very positive I expect that.

We will continue to be able to add high quality dealers at I don't know if we'll have the same right. We did in Q3, but we.

Peter Faricy: So first, I'll back up. I think many of you know, we've had a partnership with Maxion since it's been off. We continue to work with Maxion. We're in discussions with them. I think those discussions have trended positive and work cautiously optimistic that we'll work out an agreement for both parties that I think is advantageous for both companies. So on the Maxion side, that's where we stand. Interestingly enough, in Q3, we hit a milestone that we've never hit before, which is actually we sold more non-Maxion panels than we sold Maxion panels.

We expect to be adding quite a few dealers over the next 12 to 18 months.

Thank you.

Thank you one moment for next question.

Speaker 1: Thank you. One moment for our next question.

Our next question comes from the line of John Wind Ham from U B S.

Speaker 1: Our next question comes from the line of John Windham from UBS.

Speaker 7: Perfect. Good morning. I said a quick question about the updated adjusted EBITDA per customer guidance of 600 to 700 million. The third quarter was 1,000. I think that was for the run rate this year. How do we think about that in terms of sequential profitability into the fourth quarter? And how much of that is maybe due to some restabements of the previous trying to balance the two moving parts? the new.

Perfect. Good morning, I just had a quick question about the updated adjusted EBITDA per customer guidance of 600 or $700 million.

Peter Faricy: That's not purposeful. It really is about, you know, what consumers want and what dealers want. And so I think that's a signal that the mainstream segment and more leasing is probably going to put more pressure to have panels that are high quality, but also really affordable. From our point of view and from dealer feedback, I think the panel business as it is today, you know, short of any innovations is really becoming more commoditized.

Third quarter was a thousand I think that was for the run rate this year.

How.

How do we think about that in terms of sequential profitability into the fourth quarter.

And how much of that is maybe to to some restatements.

The previous just trying to balance the two moving parts.

Speaker 10: So the way we've thought about it is, you know, the new guidance reflects a couple of things. One is...

So the way we thought about it is you know the the new guidance reflects a couple of things. One is we did have softer bookings and lower consumer demand.

Peter Faricy: It's becoming more challenging to differentiate one panel from another. There's a number of really high quality panel makers out there. We've been engaged with discussions with all of the high quality panel makers. We'll never compromise our brand to your point by selling anything other than panels that meet our quality bar and our quality tests, but we will provide, I think, increasingly high quality, but also more affordable options for consumers. And I think our dealers are excited about that, and I know consumers will benefit from that as well. So we're excited about where this goes going forward.

Speaker 10: We did have softer bookings and lower consumer demand in the summer months we talked about this. So May was the low point, but June , July , and even August were below our expectations. We believe it's due to the high interest rates and low consumer confidence. So that's reflected in the fact that we're getting, there's fewer projects for us to get done in a particular quarter. That's exacerbated by the fact that more and more of our customer base is choosing our choosing.

In the summer months, we talked about this familiar was the low point, but June July and.

August we're below our expectations, we believe it's due to the high interest rates and low consumer confidence. So that's reflected in the fact that we're getting you know there's fewer projects for us to get done in a particular quarter. That's exasperated by the fact that more and more of our customer base is choosing are choosing leases.

Peter Faricy: No announcements to make on that today, but that's another area I'd say stay tuned. We're working behind the scenes with a number of different providers.

Leases Rev. Wreck you know on average during normal times 30 days later, but in California.

Speaker 10: leases rev wreck you know on average during normal times thirty days later but in california where uh... we still do a lot of our business you know it's been more like sixty to ninety days later so that really you know think of it as it pushes out revenue and profit recognition but the costs are still there so it's made the short term i think financials more more challenge

We still do a lot of our business you know it's been more like 60 to 90 days later, so that really you know think of it as a pushes out revenue and profit recognition, but the costs are still there. So it's made the short term I think financials more more challenging and then the final pieces, we have been aggressive it fixed cost reduction.

Peter Faricy: Just to follow up there. On the dealers, I saw the guy in good corner. I think where he said it was the best quarter of dealer ads. I'm coming up in these discussions or how you're managing those relationships. Thank you. Yeah. Well, we've had, it's interesting. You know, the last dealer conference we had, I recall countless stories of dealers telling me how high our bar is to become a some-power dealer. We really, we think of ourselves as having the highest quality dealer network in the world.

Speaker 10: And then the final piece is we have been aggressive at fixed cost reductions. The reduction we announced as part of earnings today is our second major cost reduction in the past two quarters. But as you know, those usually take some time to execute and play out. So they...

<unk> the reduction we announced as part of earnings today is our second major cost reduction you know in the past two quarters, but as you know those usually take some time to execute and play out so they.

Speaker 14: You know, we'll get the full year benefit of those changes in 2024. But for example, the ones we announced today, we're only gonna get partial benefit in Q4. So that gives you a little bit more color. The restatement piece has something impact on the, on the EBITDA for the quarter, but it's, you know, call it five millionish. It's not huge. You know, a modest amount will be reflected in this quarter.

We will get the full year benefit of those changes in 2024, but for example, the ones we announced today, we're only gonna get partial benefit in Q4. So that's that gives you a little bit more color. The restatement peace has some impact on on the.

Peter Faricy: And dealers, particularly our master dealers and the dealers we've made equity investments in, their world-class providers. They have a great customer experience. They're well-run businesses. They're businesses that we stand behind and they've been resilient even during this more turbulent stormy seas kind of a year. So the fact that we've been able to recruit so many in Q3 and set a new record, I think just goes to show you that even in this more turbulent market, you can find these areas of great opportunity.

On the EBITDA for the quarter, but it's it's it's you know call at 5 million ish, it's not it's not a huge you know a modest amount will be reflected in this quarter.

Perfect. Thank you so much for that.

Thank you.

One moment far next question.

Peter Faricy: When you talk to them, I think they're very attracted by the some-power brand, our commitment to have a world-class customer experience. They know that we're the number one rated solar residential solar company in the U.S, and it's across every survey. And the gap is pretty wide between us and the closest competitor on that front. So people want to be part of that ecosystem. They want to be part of that family. And then you add to it the fact that we have attractive lease programs. We have attractive panel options. We've got great technology for consumers and the my some-power app that they love. We've really got a great package for dealers. So the feedback has been very positive.

Our next question comes from the line Julianna <unk> Smith from Bank of America.

Speaker 1: Our next question comes from the line of Julian Dumoulin Smith from Bank of America.

Speaker 15: Hey, good morning, team. Thank you guys very much for the time. I appreciate it. Look, maybe just starting off on the cash and the quality front is real quickly. You guys mentioned specifically having some value tied to the Sun strongly. I mean, how do you think about raising further liquidity specifically through further asset monetization and rotation here first off? And then secondly, I got to follow up on some of the constructions. But just what else as you think about sources of capital can you point to? I get the core business here, but on the periphery of that, how do you think about the financing? Up.

Hey, good morning. Thank you guys very much of the time I. Appreciate it look maybe just starting off on the on the cash and liquidity France's real quickly you guys mentioned, specifically, having some value tied to the set as strongly as I mean, how do you think about raising further liquidity specifically through further asset monetization and rotation here.

First off and then secondly, I gotta follow up on some of the cost reductions, but just what else as you think about sources of capital and can you point too I get the core business here, but you know on the periphery of that how do you think about the financing.

Peter Faricy: I expect that we'll continue to be able to add high-quality dealers at, I don't know if we'll have the same rate we did in Q3, but we expect to be adding quite a few dealers over the next 12-day three months. Thank you.

Options on the table.

Speaker 16: The

Specifically <unk> yeah.

Speaker 10: yeah so i mean julien as you know all public companies you're constantly thinking about cash liquidity your debt you're constantly managing those things that's not new involved the times you're still you're spreading time out of it even a good time you're trying to optimize that mix

Yeah. So I've been Julian is you know all public companies, you're constantly thinking about cash liquidity your death [laughter], you're constantly managing those things that's that new and volatile times, you're still you're spending time on it but even a good time, but you're you're trying to optimize that mix. You know the number one thing we were focused on coming out of last quarter were really pleased with the results.

Operator: One moment for our next question.

John Windham: Our next question comes from the line of John Windham from UBS. Perfect. Good morning.

Speaker 10: You know, the number one thing we were focused on coming out of last quarter were really pleased with the result.

Speaker 10: How do we sell through the inventory we have? The $77 million reduction before the restatement is terrific progress.

How do we sell through the inventory, we have the $77 million reduction.

John Windham: I said a quick question about the updated adjusted EBITDA per customer guidance of $600 to $700 million. The third quarter was $1,000. I think that was for the run rate this year. How do we think about that in terms of sequential profitability into the fourth quarter? And how much of that is maybe due to some statements of the previous trying to balance the two moving parts? Thanks. So the way we've thought about it is, you know, the new guidance reflects a couple of things.

A million dollar reduction before the restatement is terrific progress and then the fact that we were positive cash from operations in and positive free cash flow. Those are the kinds of things that if we were to do consistently obviously significantly change our liquidity in our cash position. So that's plan a and then I think you know are there.

Speaker 10: And then the fact that we were positive cash from operations and positive free cash flow, those are the kinds of things that if we were to do consistently, obviously, significantly change our liquidity in our cash position. So that's plan A. And then I think, are there other options for us to pursue, absolutely. And so we're always looking at those options.

Other options for us to pursue absolutely and so we're always looking at those options.

Speaker 10: None of those options are things that we need to pursue right now, but they're always options that we're thinking about pursuing if necessary. But the number one focus of the company is

None of those options are things that you know.

We need to pursue right now, but they're always options that were thinking about pursuing if necessary, but the number one focus of the company is really run the business well generate cash and put ourselves in a position, where we're self sufficient with cash generation.

John Windham: One is we did have softer bookings and lower consumer demand in the summer months. We talked about this. So may was the low point, but June, July, and even August, we're below our expectations. We believe it's due to the high interest rates and low consumer confidence. So that's reflected in the fact that we're getting, you know, there's fewer projects for us to get done in a particular quarter. That's exacerbated by the fact that more and more of our customer base is choosing or choosing leases.

Speaker 10: really run the business well. Generate cash and put ourselves in a position where we're self-sufficient with cash generation.

Excellent and actually Peter to that point, just talk about the running a business well I mean, the opex reductions in just streamlining the variable versus fixed I mean, how.

Speaker 15: And actually, Peter, to that point, just talking about the running business well. I mean, the OptX reductions and just streamlining the variable per versus fixed.

Speaker 15: How much of this is a geographic repositioning versus a platform repositioning? And how do you think about that impacting sales? Right? Because at the same time, you put less dollars into the funnel presumably that decelerates something on the other side. I mean, and again, I get that isn't necessarily linear at times. But how do you think about that kind of translating here? Again, whether that's geographic or through different sales channels.

How much of this is a geographic repositioning versus a platform repositioning and how do you think about that impacting sales may cause at the same time, you put less dollars into the funnel, presumably that decelerate something on the other side I mean I'm in again I get that isn't necessarily linear it's at times, but how do you. How do you think about that you know kind of translating here.

John Windham: Leases rev wreck, you know, on average during normal times, 30 days later, but in California, we still do a lot of our business. You know, it's been more like 60 to 90 days later. So that really, you know, think of it as it pushes out revenue and profit recognition, but the costs are still there. So it's made the short term, I think, financials more challenging. And then the final piece is we have been aggressive at fixed cost reductions.

Whether that's geographic or through different sales channels, and then maybe just related to that if I can help accentuate one more point how much of it is like incense per water you know in your terms EBIT up our customer how do you think about the <unk>.

Speaker 15: and then maybe just related to that if I can help accentuate one more point. How much of a sense per watt or in your term, EBITDA per customer, how do you think about the trend that you're seeing today on manufacturing and COGS reduction?

Friend that you are seeing today on manufacturing Cogs reductions as you trend into through the quarter into 24, and it seems like that's pretty substantive here I'm. Just curious if you can try to quantify some of that and and and help provide some context I'm twenty-four cost reductions.

Speaker 15: as you tend into through the quarter into 24. I mean, it seems like that's pretty substantive here. I'm curious if you can try to quantify some of that and help provide some context on 24 cost reduction.

John Windham: The reduction we announced as part of earnings today is our second major cost reduction, you know, in the past two quarters. But as you know, those usually take some time to execute and play out. So they, you know, we'll get the full year benefit of those changes in 2024. But for example, the ones we announced today, we're only going to get partial benefit in Q4. So that gives you a little bit more color.

Speaker 10: Sure. So on the first set of questions around, how do you think about marketing investment, how do you think about the regionality part of this? The number one thing is, we're still committed to run this business with a long-term focus.

Sure. So on the first set of questions around how do you think about marketing investment how do you think about the regionality part of this <unk>.

The number one thing is we're still committed to run this business with a long term focus so we haven't done the things you sometimes hear about other companies doing like just pulling down marketing spend to try to get a number.

Speaker 10: so we haven't done the things you sometimes hear about other companies doing like just point down marketing spend to try to hit a number

John Windham: The restatement piece has some impact on the, on the EBITDA for the quarter, but it's, it's, you know, called 5 million ish. It's not, it's not huge. You know, a modest amount will be reflected in this quarter. Perfect. Thank you so much for that. Thank you. One moment for our next question.

Speaker 10: We're not running the business that way. So we're still investing appropriately in marketing and sales, and it's important in this business, frankly, to do it, so that you build the backlogs that we have and that you have a base of business to be able to run your business on going forward. So we don't believe in taking shortcuts like cutting marketing and sales. I think those are really fools gold, if you will. And I think it's important for us to continue to run the business thoughtfully and with a long-term investment.

We're not running a business that way so we're still investing.

Appropriately in marketing and sales and it's important in this business frankly to do it. So that you build the backlogs that we have and that you have a base of business to be able to run your business on going forward. So we don't believe in taking shortcuts like cutting marketing and sales I think those are really Fool's gold. If you will and I think it's important for us to continue to run the bill.

Witness thoughtfully and with a long term investment in mind now having said that you are right to point out that on a regional basis, particularly this year.

Julien Dumoulin: Our next question comes from the line of Julian Dumoulinsmith from Bank of America. Hey, good morning, team. Thank you guys very much for the time. I appreciate it. Look, maybe just starting off on the cash and liquidity front just real quickly, you guys mentioned specifically having some value tied to the Sun strongly. I mean, how do you think about raising further liquidity, specifically through further asset monetization and rotation here? First off, and then secondly, I got to follow up on some of the cost reductions, but just what else as you think about sources of capital can you point you?

Speaker 10: Now, having said that, you're right to point out that on a regional basis, particularly this year.

Speaker 10: It's been volatile and we don't have to have the same strategy regionally as we go forward. We can really evaluate what are the best options to serve consumers.

It's been volatile and we don't have to have the same strategy regionally.

As we go forward, we can really evaluate what are the best options to serve consumers and in our case, we really have an advantage because we have a strong direct business some.

Speaker 10: And in our case, we really have an advantage because we have a strong direct business, some power direct in our free operation.

<unk> power direct and our spree operations, we have a strong subsidiary with Blue Raven, We've got a great dealer network. We've got great installing partners that are partners of ours that are not part of any of those ecosystems and so the process that we're constantly going through and will be making changes throughout the fourth quarter.

Speaker 10: We have a strong subsidiary with Blue Raven. We've got a great dealer network. We've got great installing partners that are partners of ours that are not part of any of those ecosystems.

Julien Dumoulin: I get the core business here, but you know, on the periphery of that, how do you think about the financing options? I mean, Julien, as you know, all public companies, you're constantly thinking about cash, liquidity, your debt, you're constantly managing those things. That's not new. Involatile times, you're spending time on it, but even in good times, you're trying to optimize that mix. You know, the number one thing we were focused on coming out of last quarter, we're really pleased with the results.

Speaker 3: and so the process that we're constantly going through and will uh... be making changes throughout the fourth quarter to prepare self for twenty four is you know how do you anticipate how much demand you'll see uh... really it's it's not even state by state it's kind of utility by you told you across the u.s

To prepare ourselves for 24 is how do you anticipate how much demand you'll see <unk>.

Really it's that even state by state, it's kind of utility buys utility across the U S. And then in our case, what's the best go to market strategy that makes the most sense economically I think again the volatility of this year, if there's a big lesson coming out of it is you know you have to build a model that's more flexible and more resilient.

Speaker 10: And then in our case, what's the best go to market strategy that makes the most sense economically? I think the, again, the volatility of this year, if there's a big lesson coming out of it is, you know, you have to build a model that's more flexible and more resilient. And going into next year, our mindset is be prepared for the minus 20 and be prepared for the positive 20 and put ourselves in a position where we could be equally effective. But that's how we think about that as we go forward.

Julien Dumoulin: How do we sell through the inventory we have, the $77 million reduction before the restatement is terrific progress? And then the fact that we were positive cash from operations and positive free cash flow, those are the kinds of things that if we were to do consistently, obviously, you know, significantly change our liquidity and our cash position. So that's Plan A, and then I think, you know, are there other options for us to pursue absolutely? And so we're always looking at those options. None of those options are things that, you know, we need to pursue right now, but there are always options that we're thinking about pursuing if necessary.

And going into next year, our mindset is be prepared for the minus 20 and be prepared for the positive 20 and put ourselves in a position where we can be equally effective but but that's how we think about that as we go forward.

And then on the I think your last question was around Cogs reduction we've.

Speaker 10: And then I think your last question was around COGS reduction. We've made great progress this year on op-x reduction and COGS reduction. I think certainly from materials cross-point of view, we anticipate materials cost.

We've made great progress this year on Opex reduction and Cogs reduction I think certainly from materials cost point of view, we anticipate materials costs coming down year over year between 24, and 23, so that'll be a positive for us.

Peter Faricy: But the number one focus of the company is, really run the business well, you know, generate cash and put ourselves in a position where we're self-sufficient with cash generation. And actually, Peter, to that point, just talking about the running business well, I mean, the OptX reductions and just streamlining the, you know, variable for versus fixed. I mean, how much of this is a geographic repositioning versus a platform repositioning? And how do you think about that impacting sales, right?

Speaker 10: We should also recognize that prices are down, you know, year over year. Consumers are looking for more value, dealers are looking for more value. So that benefit in material costs will split between consumers dealers and will have the potential to keep some of that for ourselves.

We should also recognizes that prices are down year over year consumers are looking for more value dealers are looking for more value so that benefit and material costs will split between <unk>.

Consumers dealers and we'll have the potential to keep some of that for ourselves and then really I think it's around the other areas of Cogs, How do you think about your infrastructure your overhead.

Speaker 10: And then really I think it's around the other areas of COGS. You know, how do you think about your infrastructure, your overhead, your regional operations?

Peter Faricy: Because at the same time, you put less dollars into the funnel, presumably that decelerates something on the other side. I mean, and again, I get that isn't necessarily linear at some times, but how do you think about that, you know, kind of translating here, you know, again, whether that's geographic or through different sales channels? And then maybe just related to that, if I can help accentuate one more point, how much of it is like in sense per water, you know, in your term EBITDA per customer, how do you think about the trend that you're seeing today on manufacturing and cost reductions as you trend into through the quarter into 24?

Regional operations and how do you go through the process I just described to optimize those next year.

Speaker 10: And how do you go through the process I just described to optimize those next year? And I think we feel like we're in a position that by the time we finish Q4, we'll be in a strong position to be ready for 2024. In 2004?

And I think we feel like we're in a position that by the time. We finished Q4 will be in a strong position to be ready for 2024.

Okay excellent. Thank you guys good luck with everything.

Speaker 10: Thanks to everybody for your participation. We look forward to, we hope a strong close for 2023 and talking to all of you early next year about our expectations for 2024. Thank you very much.

Thanks to everybody for your participation and we look forward to we.

We hope a strong clothes for 2023 and talking to all of you.

Early next year about our expectations for 2024, Thank you very much.

Peter Faricy: I mean, it seems like that's pretty substantive here. I'm curious if you can try to quantify some of that and help provide some context on 24 cost reductions. Sure. So on the first set of questions around, how do you think about marketing investment? How do you think about the regionality part of this? The number one thing is we're still committed to run this business with a long term focus. So we haven't done the things you sometimes hear about other companies doing like just pulling down marketing spend to try to hit a number.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker 17: I.

Mmm.

[music].

Peter Faricy: We're not running the business that way. So we're still investing appropriately in marketing and sales and it's important in this business, frankly, to do it so that you build the backlogs that we have and that you have a base of business to be able to run your business on going forward. So we don't believe in taking shortcuts like cutting marketing and sales. I think those are really fools gold, if you will.

Mhm.

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Mmm.

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Mhm.

Peter Faricy: And I think it's important for us to continue to run the business thoughtfully with a long term investment in mind. Now, having said that, you're right to point out that on a regional basis, particularly this year, it's been volatile and we don't have to have the same strategy regionally as we go forward. We can really evaluate what are the best options to serve consumers. And in our case, we really have an advantage because we have a strong direct business, some power direct in our spree operations.

[music].

Peter Faricy: We have a strong subsidiary with Blue Raven. We've got a great dealer network. We've got great installing partners that are partners of ours that are not part of any of those ecosystems. And so the process that we're constantly going through and we'll be making changes throughout the fourth quarter to prepare ourselves for 24 is how do you anticipate how much demand you'll see. Really, it's not even state by state. It's kind of utility across the US.

Peter Faricy: And then in our case, what's the best go-to-market strategy that makes the most fat economically? I think, again, the volatility of this year, if there's a big less than coming out of it is, you have to build a model that's more flexible and more resilient. And going into next year, our mindset is be prepared for the minus 20 and be prepared for the positive 20 and put ourselves in a position where we can be equally effective.

Peter Faricy: But that's how we think about that as we go forward. And then I think your last question was around COGS reduction. We've made great progress this year on op-ex reduction and COGS reduction. I think certainly from a materials cross-point of view, we anticipate materials costs coming down year over year between 24 and 23, so that'll be a positive for us. We should also recognize that prices are down year over year. Consumers are looking for more value, dealers are looking for more value, so that benefit in material costs will split between consumers dealers and it will have the potential to keep some of that for ourselves.

Peter Faricy: And then really I think it's around the other areas of COGS. How do you think about your infrastructure, your overhead, your regional operations, and how do you go through the process I just described to optimize those next year. And I think we feel like we're in a position that by the time we finish Q4, we'll be in a strong position to be ready for 2024.

Peter Faricy: Okay, absolutely. Thank you guys. Good luck with everything. Thanks to everybody for your participation. We look forward to, we hope a strong close for 2023 and talking to all of you early next year about our expectations for 2024. Thank you very much. This concludes today's conference call. Thank you for participating. You may now disconnect. . [inaudible] John Williams, John Williams, John Williams[inaudible] I don't know. I don't know.

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Speaker 17: Of.

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