Q4 2023 and Q1 2024 Maxeon Solar Technologies Ltd Earnings Call
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Operator: Good morning, ladies and gentlemen. Welcome to the Maxeon Solar Technologies fourth quarter 2023 and first quarter 2024 earnings call. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Mr. Robert Lahey of Maxeon Solar Technologies. Sir, you may begin.
Speaker Change: Good day, ladies and gentlemen, welcome to the Max and so.
Speaker Change: Technologies fourth quarter, 2023, and first quarter 2024 earnings call.
Speaker Change: Currently all participants are in a listen only mode.
Speaker Change: Later, we will conduct a question and answer session and instructions will follow at that time.
Speaker Change: As a reminder, this conference call is being recorded.
Speaker Change: Turning the call over to your host Mr. Robert Lee of Maktoum Solar technologies, Sir you may begin.
Robert Lahey: Thank you, operator. Good day, everyone.
Speaker Change: Thank you operator, good day, everyone and welcome to Maxion fourth quarter 2023 in first quarter 'twenty 'twenty four earnings conference call.
Speaker Change: With us today are Chief Executive Officer, Belle Mulligan, Chief Financial Officer, Guy stroke back and Chief strategy Officer, Peter actually better.
Robert Lahey: Welcome to Maxeon's fourth quarter 2023 and first quarter 2024 earnings conference. With us today are Chief Executive Officer Bill Mulligan, Chief Financial Officer Kai Strohbecke, and Chief Strategy Officer Peter Aschenbrenner. Let me cover a few housekeeping items before I turn the call over to Bill.
Speaker Change: Let me cover a few housekeeping items before I turn the call over to Bill.
Robert Lahey: As a reminder, a replay of this call will be available later today on the Investor Relations page of Maxeon's website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the Safe Harbor slide of today's presentation, today's press release, the 20-F, the 6-K, and other SEC filings. Please see those documents for additional information regarding those factors that may affect these forward-looking statements.
Speaker Change: As a reminder, a replay of this call will be available later today on the Investor Relations page of vaccine on the website.
Speaker Change: On 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, the 20-F, and 6K and other SEC filings.
Speaker Change: Please see those documents for additional information regarding those factors that may affect these forward looking statements.
Robert Lahey: To enhance this call, we have also posted a supplemental slide deck on the events and presentations page of Maxeon's investor relations website. Additionally, we will reference certain non-GAAP measures during today's call. Please refer to the appendix of our supplemental slide deck, as well as today's earnings press release, both of which are available on Maxeon's Investor Relations website, for a presentation of the most directly comparable GAAP measure, as well as the relevant GAAP to non-GAAP reconciliation. With that, I will turn the call over to Maxeon CEO, Dom Mulligan.
Speaker Change: To enhance this call. We have also posted a supplemental slide deck, I mean events and presentations page of Maxion Investor Relations website.
Speaker Change: Also we will reference certain non-GAAP measures during today's call.
Speaker Change: Please refer to the appendix of our supplemental slide deck as well as today's earnings press release, both of which are available on Maxion Investor Relations website.
A presentation of the most directly comparable GAAP measure as well as the relevant GAAP to non-GAAP reconciliations with that let me turn the call over to Maxion CEO Bill Maughan.
William P. Mulligan: Thanks, Rob. Good morning.
William P. Mulligan: It has been a while since our last earnings call, and we have a lot to communicate. Since the middle of last year, Maxeon has been under significant pressure due to the unprecedented market dislocation caused by worldwide Chinese module oversupply, high interest rates, and policy. Maxeon also suffered from the termination of our Sun Power Supply Agreement and delivery pushouts by two of our primary utility scalers. These headwinds unfortunately coincided with the peak of our utility-scale prepayment amortization, and as a result, the company has been facing a serious cash flow challenge.
William P. Mulligan: Thanks, Rob Good morning, It has been awhile since our last earnings call and we have a lot to communicate today.
William P. Mulligan: Since the middle of last year Maxion has been under significant pressure due to the unprecedented market dislocation caused by worldwide Chinese module oversupply high interest rates and policy changes maxed.
William P. Mulligan: Maxion also suffered from the termination of our Sunpower supply agreement and deliberate push outs by two of our primary utility scale customers.
William P. Mulligan: These headwinds unfortunately coincided with the peak of our utility scale prepayment amortization and as a result, the company has been facing a serious cash flow challenge.
William P. Mulligan: To address this, we recently negotiated commitments for significant liquidity support from our largest shareholder, TZE, and we successfully restructured our 2025 convertible bonds, with the majority of the debt expected to be converted into equity later this year. However, these transactions will require the issuance of a large number of new shares, resulting in substantial dilution to existing shareholders. I'll now provide further commentary on the market dynamics that caused us to take these actions and provide additional details on the financing transactions. Kai will then review our fourth quarter 2023 and first quarter 2024 results and provide our outlook for the second quarter and the rest of 2024. We'll then conclude with Q&A.
William P. Mulligan: To address this we recently negotiated commitments for significant liquidity support from our largest shareholder cheesy. He and we successfully restructured our 2025 convertible bonds with a majority of the debt expected to be converted into equity later this year.
William P. Mulligan: Unfortunately, these transactions will require the issuance of a large number of new shares resulting in substantial dilution to existing shareholders.
William P. Mulligan: I'll now provide further commentary on the market dynamics that caused us to take these actions and provide additional details on the financing transaction.
William P. Mulligan: I will then review our fourth quarter 2023, and first quarter 2024 results and provide our outlook for the second quarter and the rest of 2024.
William P. Mulligan: Well, then conclude with Q&A.
William P. Mulligan: First, as a reminder, Maxeon initiated a series of capacity restructuring initiatives last October. We initiated the shutdown of our Maxeon 6 cell capacity in Malaysia and pivoted the Maxeon 7 commercialization plan from incremental capacity to a retrofit of our Maxeon 3 capacity in the Philippines. While these actions are on track and projected to enhance profitability when completed, we're now fighting battles on a few additional fronts. In DG, our efforts to grow volume in the U.S. through our new U.S. dealer channel have been impacted by the general market slowdown, particularly in California.
William P. Mulligan: First as a reminder, maxion initiated a series of capacity restructuring initiatives last October we initiated the shutdown of our maxion cell capacity in Malaysia, and pivoted. The maxion seven commercialization plan from incremental capacity to our retrofit maxion three capacity in the Philippines.
William P. Mulligan: While these actions are on track and projected to enhance profitability when completed.
William P. Mulligan: Now fighting battles on a few additional fronts.
William P. Mulligan: In DG, our efforts to grow volume in the U S through our new U S dealer channel have been impacted by the general market slowdown, particularly in California.
William P. Mulligan: In Europe, the abundance of modules being sold at prices in the low teens has challenged our margin profile and further curtailed demand for our product. The dramatic market shift that started in mid-2023 left us with large amounts of inventory that tied up cash. And so far, our efforts to work down these inventories have been at a slower pace than we initially anticipated.
William P. Mulligan: In Europe, the abundance of modules being sold at prices in the low teens has challenged our margin profile and further curtailed demand for our products.
William P. Mulligan: The dramatic market share that started in mid 2023 left us with large amounts of inventory that tied up cash and so far our efforts to work down these inventories have been at a slower pace than we initially anticipated.
William P. Mulligan: On the utility scale side, two of our large customers experienced significant project delays, and we have been unable to quickly reallocate the affected volumes, and as a result, our financial output for 2024 will reflect the impact of these continuing headwinds. In addition to these challenges, our liquidity was also impacted by a utility scale prepayment amortization, where we have been amortizing customer prepayments that were received in 2021 and 2022 and are now collecting only a portion of the associated sales revenue as cash.
William P. Mulligan: On the utility scale side two of our large customers experienced significant project delays and we have been unable to quickly reallocate the affected volumes and as a result, our financial output for 2024 will reflect the impact of these continuing headwinds.
William P. Mulligan: In addition to these challenges our liquidity was also impacted by our utility scale prepayment amortization schedule, where we have been amortizing customer prepayments that were received in 2021 and 2022 and are now collecting only a portion of the associated sales revenue as cash.
William P. Mulligan: In response to this perfect storm of cash and profitability challenges, the company and our advisors assessed all potential sources of funding and found that the only viable option involved new liquidity from our largest shareholder and secured creditor, TZE. TZE has agreed to invest $97.5 million into the company via a debt instrument and has also committed to an additional $100 million equity investment, in each case subject to regulatory approval. In addition, substantially all of the holders of the $200 million 2025 convertible notes have agreed to exchange their bonds with accrued interest into new bonds due in 2028, which are convertible into equity at the note holder's option starting July 2, and $137.2 million of which must be converted into equity upon TZE's equity investment.
William P. Mulligan: In response to this perfect storm of cash and profitability challenges the company and our advisors assess all potential sources of funding and found that the only viable option involve new liquidity from our largest shareholder and secured creditor GCE.
William P. Mulligan: Following the $100 million equity investment by TZE, their ownership of shares outstanding is planned to be at least 50.1%. While we believe these transactions are necessary to stabilize our balance sheet and allow management to focus on returning our business to profitability, they will also result in substantial dilution for existing public shareholders. I'll now provide an update on our utility scale and DG business. In utility scale, we established solid momentum heading into 2024 with our module operations running well and a solid backlog extending deep into 2024.
William P. Mulligan: GCE has agreed to invest $97 $5 million into the company.
William P. Mulligan: That instrument and has also committed to an additional $100 million equity investment in each case subject to regulatory approval.
William P. Mulligan: In addition, substantially all of the holders of that $200 million 2025 convertible notes have agreed to exchange their bonds and accrued interest into new bonds. Due in 2028, which are convertible into equity and note holders option, starting July 2nd and $137 2 million of which must be converted into.
Speaker Change: Equity upon <unk> equity investment.
Speaker Change: Following the $100 million equity investment by TCE.
Speaker Change: Ownership of shares outstanding is planned to be at least 51%.
Speaker Change: While we believe these transactions are necessary to stabilize our balance sheet and allow management to focus on returning our business to profitability. They will also result in a substantial dilution for existing public shareholders.
Speaker Change: I'll now provide an update on our utility scale and DG businesses.
Speaker Change: And utility scale, we have established solid momentum heading into 2024, with our module operations running well and a solid backlog extending deep into 2025.
William P. Mulligan: However, in early Q1, we were informed by two large customers that they were experiencing project delays and would be unable to accept module deliveries based on the contracted schedule. We recently terminated one of these contracts for cause and are seeking damages, and we are working with the other parties to find a mutually acceptable solution.
Speaker Change: However in early Q1, we were informed by two large customers that they were experiencing project delays.
Speaker Change: Unable to accept module deliveries based on the contracted schedule.
Speaker Change: We recently terminated one of these contracts are costs and are seeking damages and we are working with the other party to find a mutually acceptable solution.
William P. Mulligan: Due to the long sales cycles associated with this market and the broad availability of low-priced modules from Southeast Asia and India, we were unable to replace the lost demand in the immediate term and have had to curtail production at our utility-scale solar cell and module factories as a result. This not only increased our product costs due to unabsorbed manufacturing overhead but also meaningfully impacted our near-term top line and cash generation capability.
Speaker Change: Due to the long sales cycles associated with this market and the broad availability of low priced modules from southeast Asia and India. We were unable to replace the lost demand in the immediate term.
Speaker Change: It had to curtail production at our utility scale solar cell and module factories as a result.
Speaker Change: This not only increased our product costs due to unabsorbed manufacturing overhead, but also meaningfully impacted our near term top line and cash generation capability.
William P. Mulligan: Going forward, we are seeing an improving price and demand environment driven by recent changes in the U.S. trade policy landscape, including increased tariff risk due to the imminent removal of the Section 201 bifacial tariff exclusion, as well as potential new AD-CBD tariffs. We believe Maxeon is not, and should not be, a target for such import tariffs, and we are actively engaged in both processes in expressing our view that our supply chain should be outside the intent of these proposed tariffs. Finally, we are making continued progress toward launching domestic manufacturing in Albuquerque, New Mexico.
Going forward, we are seeing an improving price and demand environment driven by recent changes in the U S trade policy landscape, including increased tariff rates due to the removal of the section 201, bifacial tariff exclusion as well as potential new ADC BD tariffs.
Speaker Change: We believe maxion is not and should not be a target for such import tariffs and we are actively engaged in both progress ive been exerting our view that our supply chain should be outside the intent of these proposed tariffs.
Speaker Change: Finally, we are making continued progress toward launching domestic manufacturing and Albuquerque, New Mexico.
William P. Mulligan: In DG, while we continue to make progress ramping up our U.S. dealer channel, market demand has been sluggish, particularly in California, where many installers are still adjusting to NEM 3.0. We're focused on dealers who are familiar with our product and are skillful at monetizing its unique attributes. Despite increased availability of alternative premium modules over the past few years, our product's reputation as the undisputed world's best module remains very much intact. We see this clearly when dealer-owners install our products in their own homes and offices and choose Maxeon for displays on websites and in customer showrooms.
Speaker Change: And D G. While we continue to make progress ramping our U S dealer channel market demand has been sluggish, particularly in California, where many installers are still adjusting to them three pointed out.
Speaker Change: We're focused on dealers, who are familiar with our product and our skillful monetizing its unique attributes.
Speaker Change: Despite increased availability of alternative premium modules over the past few years, our products reputation as the undisputed world Best module remains very much intact.
Speaker Change: We see this clearly when dealer owners and install our products on their own homes and offices.
Speaker Change: <unk> maxion for displays on websites and in customer showrooms.
William P. Mulligan: We signed up more than 100 U.S. dealers since our last earnings call, including some of the most proficient and experienced sellers of IBC products. However, keep in mind that it typically takes a quarter or two for our recently onboarded dealers to ramp up their booking volumes with Maxeon branded products. We have also been aided in the U.S. market by our successful engagement with some of the leading lease and TPA platform providers, who have added Maxeon to their ADLs and who are helping refer and onboard dealers seeking to combine our premium panel offerings with their financial products.
Speaker Change: We signed up more than 100 U S dealers since our last earnings call, including some of the most proficient and experienced sellers of ITC products.
Speaker Change: Keep in mind that it typically takes a quarter or two for our recently onboard dealers to ramp their bookings volumes with maxion branded products.
We have also been aided in the U S market by our successful engagement with some of the leading lease and PPA platform companies, who have added maxion to their avs and who are helping refer and onboard dealers seeking to combine our premium offerings with their financial products.
William P. Mulligan: Outside of our U.S. channel business, we completed shipments to SunPower on the contract we negotiated last November. We do not currently have any further supply contracts in place with SunPower, and our plan going forward is to address the U.S. market primarily through our own dealer chain. In Europe, our sales team is still working through a continuation of the market oversupply conditions that began in Q3 of last year. Our current focus is on keeping our core channel partners loyal and transitioning our performance line products to the latest TopCon-based version.
Speaker Change: Outside of our U S channel business, we completed shipments to Sunpower on the contract we negotiated last November we.
Speaker Change: We do not currently have any further supply contracts in place with Sunpower and our plan going forward to address the U S market, primarily through our own dealer channel.
In Europe, our sales team is still working through a continuation of the market oversupply conditions that began in Q3 of last year our.
Speaker Change: Our current focus is on keeping our core channel partners oil and transitioning our performance line products to the latest top client based version.
William P. Mulligan: I hosted 23 of our European elite dealers at our Mexico ModCo last quarter and was pleased to find our top partners still very loyal to our product. Just like their peers in the U.S., many of them have Maxeon systems in their own homes and appreciate having a direct relationship with a high-quality manufacturer that has had a stable presence for nearly 20 years. These attributes are helping us maintain our historical price premium levels and percentage terms, but the region as a whole has seen a dramatic price reduction, so our absolute prices have also been affected.
Speaker Change: I hosted 23 of our European elite dealers at our Mexico Mod co last quarter and was pleased to find our top partners still very loyal to our product.
Speaker Change: Just like their peers in the U S. Many of them have maxion systems on their own homes and appreciate having a direct relationship with a high quality manufacturer that has had a stable presence for nearly 20 years.
Speaker Change: These attributes are helping us maintain our historical price premium levels in percentage term, but the region as a whole has seen dramatic price reduction so our absolute prices have also been affected.
William P. Mulligan: Due to the difficult market environment, our volumes are down year on year, with the greatest impact in our lower-tier expansion market, where we work through distributors, and where we have a less direct connection with the channel. While we're not in a position to pinpoint when in 2024 supply and demand will rebalance, we feel good about our position with key dealers who understand the unsustainable nature of the current pricing environment. We're also pleased to report that our first storage product is gaining traction with elite dealers in Italy, where it is sold as a bundled and branded offer.
Speaker Change: Due to the difficult market environment, our volumes are down year on year with the greatest impact and our lower tier expansion markets, where we've worked through distributors.
Speaker Change: And where we have a less direct connection with the channel partners.
Speaker Change: While we're not in a position to pinpoint when in 2020 for supply and demand will rebalance we feel good about our position with key dealers, who understand the unsustainable nature of the current pricing environment.
Speaker Change: We're also pleased to report that our first storage product is gaining traction with elite dealers in Italy, where it is sold as a bundled in branded offer.
William P. Mulligan: We look forward to providing more guidance on our Beyond the Panel products in future quarters. We believe our current strategies in DG and utility scale are on track to return the company to profitability early in 2025, based on our continued transformation activity, as well as our track record of technology leadership and unique go-to-market channels that together enable our premium pricing. Based on our experience over the past year, we also plan to focus on reducing customer concentration across our business to increase resiliency against market volatility.
Speaker Change: We look forward to providing more guidance on our beyond the panel products in future quarters.
Speaker Change: We believe our current strategies and DG and utility scale are on track to return the company to profitability early in 2025 based on our continued transformation activity as well as our track record of technology leadership and unique go to market channels that together enable our premium pricing.
Speaker Change: Based on our experience over the past year, we also plan to focus on reducing customer concentration.
Speaker Change: Ross our business to increase resiliency against market volatility.
William P. Mulligan: And we look forward to an expanded relationship with TZE and their parent company, TCL, whose financial strength, multinational presence, and global operations bring considerable balance sheet support and manufacturing expertise. In the technology arena, we're seeing the industry moving increasingly towards higher-performance platforms where we have strong intellectual property, with patent portfolios covering Shingling, Topcon, and IDC technology. Regarding TopCon, we recently initiated patent infringement cases in the U.S. against Canadian Solar, Hanwha Q-Cells, and REC.
Speaker Change: And we look forward to an expanded relationship with TCE and their parent company, Tcl, whose financial strength multinational presence and global operations bring considerable balance sheet support and manufacturing expertise.
Speaker Change: In the technology Arena, we're seeing the industry moving increasingly towards higher performance platform, where we have strong intellectual property with patent portfolio covering shingling top con and IDC technologies.
Speaker Change: Regarding top Com, we recently initiated patent infringement cases in the U S against Canadian solar Hanwha Q cells and RAC.
William P. Mulligan: This is part of a larger strategy to monetize our TopCon IP through licensing arrangements. While the emergence of TopCon as a mainstream manufacturing platform is a relatively recent development, our innovation around the underlying passivated contact technology dates back over 15 years, and as a result, we have a robust portfolio of early, fundamental patents covering both front- and backside-contact cell architecture. We also plan to vigorously defend our IBC path and have actions against IKO already underway. Now, let's turn it over to Kai to discuss finances.
Speaker Change: This is part of a larger strategy to monetize our top on IP through licensing arrangements.
Speaker Change: While the emergence of top con as a mainstream manufacturing platform is a relatively recent development our innovation around the underlying passivate contact technology dates back over 15 years and as a result, we have a robust portfolio of early fundamental patents covering both front and back side contact style architectures.
Speaker Change: We also plan to vigorously defend our Ibs C patents and have actions against Heiko already underway.
Kyle: Now, let's turn it over to Kyle to discuss the financials.
Kai Strohbecke: I will discuss the drivers and details of the last two quarters' performance and then provide guidance for the current second quarter and full year 2024. Total shipments for the fourth quarter were 653 megawatts, just above our original guidance range of 610 to 650 megawatts. Deliveries to US utility scale customers accounted for roughly half of total shipments. Primary volume drivers were the ramp of performance line capacity and the settlement of the SunPower contract dispute, which negatively impacted our US residential volume during the quarter.
Kyle: Thank you Bill.
Kyle: I will discuss the drivers and details of the last two quarter performance and then provide guidance for the current second quarter and full year 2024.
Kyle: Total shipments for the fourth quarter were 663 megawatts just above our original guidance range of 610 to 650 megawatts deliveries to U S utility scale customer accounted for roughly half of total shipments.
Kyle: Primary volume drive us where the ramp up performance line capacity and the settlement of the tanker contract dispute, which negatively impacted our U S residential volume during the quarter.
Kai Strohbecke: Shipments of European DG customers remained a material portion of our overall business, accounting for more than 20% of fourth quarter volume. Shipments in this region increased approximately 8% quarter-on-quarter despite oversupply conditions at distributors, though on a year-over-year basis, volume was down more than 20%. Total shipments in the first quarter were 488 megawatts, which represents a 25% sequential decline and a 37% year-over-year decline. The sequential decline is attributable in part to the DG business, which is seeing a combination of overall demand softness impacting our US and European channel business for both IDC and performance line products. On a year-over-year basis, shipments were further impacted by the termination of our previous long-term supply contract with SunPower. Utility-scale shipments were also down meaningfully in the first quarter due to customer project delays.
Kyle: Shipments of European DG customers remains a material portion of our overall business accounting for more than 20% of fourth quarter volume.
Kyle: Shipments in this region increased approximately 8% quarter on quarter, despite oversupply conditions at distributors, though on a year over year basis volume was down more than 20%.
Kyle: Total shipments in the first quarter were 488 megawatts, which represents a 25% sequential decline and a 37% year over year decline the.
Kyle: The sequential decline is attributable in part to the DG business, which is seeing a combination of overall demand softness impacting our U S and European channel business for both ABC and performance nine products.
Kyle: On a year over year basis shipments were further impacted by the termination of our previous long term supply contracts.
Kyle: Utility scale shipments were also down meaningfully in the first quarter due to customer project delays.
Kai Strohbecke: Revenues for the fourth quarter were $229 million, roughly flat compared to the previous quarter and inside our guidance range of $220 to $260 million. We came in lower than our revenue midpoint yet higher than our shipment guidance due to a combination of mixed issues and ASP pressure in DTE. Utility scale revenues were driven by ASPs consistent with our previous quarter and in line with customer contract terms. However, our DG ASPs in Europe declined for the fourth consecutive quarter due to industry price erosion.
Kyle: Revenues for the fourth quarter were $229 million.
Kyle: Roughly flat compared to the previous quarter and inside our guidance range of $220 million to $260 million.
Kyle: We came in lower than our revenue midpoint, yet higher than our shipment guidance due to a combination of mix issues and ASP pressure in DTE.
Kyle: Utility scale revenues were driven by Asp's consistent with our previous quarter and in line with customer contract terms.
Kyle: Our DG Asp's in Europe declined for the fourth consecutive quarter due to industry price erosion.
Kai Strohbecke: Our ASPs in the region were approximately $0.40 per watt in the fourth quarter, and hence, well above market average, thanks to our continued focus on the premium segment, our direct-to-installer channel, and products beyond the panel. ASPs for IBC products remained north of 60 cents per watt globally.
Kyle: Our asps in the region were approximately <unk> 40 per watt in the fourth quarter, and hence well above market average. Thanks to our continued focus on the premium segment, our direct to install a channel and product beyond the panel.
Speaker Change: Asps for RBC products remained north of 60 cents per watt globally.
Kai Strohbecke: For the year 2023, total revenues were over $1.1 billion, up 6% from 2022, driven by significant growth in our U.S. utility scale. In the first quarter of 2024, revenues were $187 million, or 18% lower than fourth-quarter 2023 levels. Utility scale revenues were nearly unchanged sequentially, but DG declined at a rate generally consistent with volume decline. DG ASPs in the first quarter benefited from the final shipments to Sankawa, and overall IBC pricing remained above $0.60 globally. But blended DG ASPs were impacted by inventory sales of our Performance Line 6 products ahead of the P7 launch this year. We also saw a higher mix of DC versus AC shutoffs.
Speaker Change: For the year 2023, total revenues were over $1 1 billion up 6% from 2022, driven by significant growth in our U S utility scale business.
Speaker Change: In the first quarter of 2024 revenues were $187 million or 18% lower than fourth quarter 2023 levels.
Speaker Change: Utility scale revenues were nearly unchanged sequentially, but DG declined at a rate generally consistent with volume decline.
Speaker Change: D G asps in the quarter benefited from the final shipments to San Carlos and overall ABC pricing remained above 60% globally, but.
Speaker Change: But blended DG asp's were impacted by inventory sales of outperformance line six products.
Speaker Change: Head of the P 70 launch this year.
Speaker Change: We also saw a higher mix of <unk> versus AC shipments.
Kai Strohbecke: Non-GAP gross loss in the fourth quarter was $10 million, in line with our original guidance of $5 to $15 million. U.S. utility scale saw minimal sequential change while Europe and Australia DG declined. Our gross margin in these markets is being impacted by several of the company's capacity transformation initiatives and efforts to sell through the remaining P6 inventory. On a gap basis, our gross loss was $34 million due to restructuring impacts related to our capacity transformation and austerity initiatives.
Speaker Change: non-GAAP gross loss in the fourth quarter were $10 million.
Speaker Change: In line with our original guidance of $5 million to $15 million.
Speaker Change: U S utility scale saw minimal sequential change, while Europe, and Australia DG declines.
Speaker Change: Our gross margin in these markets is being impacted by several of the company's capacity transformation initiatives and efforts to sell through the remaining inventory.
Speaker Change: On a GAAP basis gross loss was 34 million.
Speaker Change: Due to restructuring impacts related to our capacity transformation austerity initiatives.
Kai Strohbecke: Despite headwinds in the second half of the year, Maxeon's total non-gap gross profit for 2023 was $104 million, or 10% of sales, which amounted to a $135 million improvement over 2022 levels. Cost reductions and ASP improvements in our utility scale business were significant drivers of the year-on-year improvement.
Speaker Change: Despite headwinds in the second half of the year Maxion total non-GAAP gross profit for 2023 was $104 million.
Speaker Change: Or 10% of sales, which amounted to $835 million improvement over 2022 levels.
Speaker Change: Cost reductions in ASP improvements in our utility scale business with significant driver of the year on year improvement.
Kai Strohbecke: First quarter 2024 gross loss was $13 million on a non-gap basis and $15 million on a gap basis. These results represent sequential improvement on a gap basis from comparatively less restructuring impact, but a decline of nearly $3 million on a non-gap basis due in part to lower DG revenue levels and profitability. GAP operating expenses in the fourth quarter were $141 million and included restructuring charges of $103 million, primarily in connection with our previously announced capacity transformation, which includes ramping down our Maxeon 6 IVC cell capacity and converting our Maxeon 3 IVC cell capacity in the Philippines to our latest generation Maxeon 7 technology.
Speaker Change: First quarter 2024, gross loss was $13 million on a non-GAAP basis and $15 million on a GAAP basis.
Speaker Change: These results represent sequential improvement on a GAAP basis from comparatively less restructuring impact, but a decline of nearly $3 million on a non-GAAP basis due in part to lower revenue levels and profitability.
Speaker Change: GAAP operating expenses in the fourth quarter were $141 million and included restructuring charges of $103 million.
Speaker Change: Primarily in connection with our previously announced capacity transformation, which includes ramping down our Mexican ABC selling capacity and converting our Mexican three IDC site capacity in the Philippines to our latest generation makes some seven technology.
Kai Strohbecke: Non-GAP operating expenses were $37 million in the fourth quarter, coming in slightly better than the midpoint of our guidance. This reflects austerity measures that we put in place in the previous quarter. First quarter 2024 operating expenses were $49 million on a gap basis, due in part to restructuring charges from a reduction in force the company executed in March. Non-GAP operating expenses were $39 million in Q1, similar to our result of $38 million in the same period of 2020-21.
Speaker Change: non-GAAP operating expenses were $37 million in the fourth quarter coming in slightly better than the midpoint of our guidance. This reflects austerity measures that we've put in place in the previous quarter.
Speaker Change: First quarter 2024, operating expenses were $49 million on a GAAP basis due in part to restructuring charges from our reduction in force the company executed in March non.
Speaker Change: non-GAAP operating expenses were $39 million in Q1, similar to all reside of $38 million in the same period of 2023.
Kai Strohbecke: On a year-over-year basis, the company has become more efficient in its corporate functions while expanding USDG sales and marketing expenses to support selling increasingly through our own channels, which facilitates higher ASPs and lowers customer concentration risk compared to our previous model in the U.S., where we sold almost exclusively to Samsung.
Speaker Change: On a year over year basis, the company has become more efficient and its corporate functions, while expanding USD <unk> sales and marketing expenses to support selling increasingly through our own channels, which facilitates higher asps.
Speaker Change: And lower customer concentration risks compared to our previous model in the U S, where we sold almost exclusively to control.
Kai Strohbecke: Adjusted EBITDA in the fourth quarter was negative $38 million, slightly worse than our original guidance, partially due to a lower level of depreciation charges as a result of our restructuring-related asset write-off in Malaysia. Net loss attributable to stockholders came in at $186 million compared to $1.8 million in the previous. The sequential change was impacted by $104 million in higher restructuring charges and $27 million in lower remeasurement losses on our prepaid forward.
Speaker Change: Adjusted EBITDA in the fourth quarter was negative $38 million.
Speaker Change: Slightly worse than our original guidance range, partially due to a lower add back of depreciation charges as a result of our restructuring related asset write off in Malaysia.
Speaker Change: Net loss attributable to stockholders came in at $186 million.
Speaker Change: Compared to one 8 million in the previous quarter. This.
Speaker Change: The sequential change was impacted by $104 million in higher restructuring charges and $27 million and lower re measurement loss on all prepaid falloff.
Kai Strohbecke: Adjusted EBITDA for 2023 came in at $4 million versus negative $109 million in 2022, mainly attributable to an expanded gross margin. In the first quarter of 2024, adjusted EBITDA was negative $39 million, or $1 million lower sequentially, mainly due to the aforementioned decline in gross income. Moving on to the balance sheet, we close the fourth quarter with cash-cash equivalents, restricted cash, and short-term investments of $197 million, compared to $277 million at the end of the third quarter.
Speaker Change: Adjusted EBITDA for 2023 came in at $4 million.
Speaker Change: Versus negative $109 million in 2022, mainly attributable to an expanded gross margin in.
Speaker Change: In the first quarter of 2024, adjusted EBITDA was negative $39 million.
Speaker Change: Or $1 million lower sequentially, mainly due to the aforementioned decline in gross income.
Speaker Change: Moving onto the balance sheet, we closed the fourth quarter with cash cash equivalents restricted cash and short term investments of $197 million.
Speaker Change: Compared to $277 million at the end of the third quarter.
Kai Strohbecke: Cash levels were negatively impacted by $83 million of previously collected cash advances from U.S. utility-scale customers that were amortized during the quarter and show up in our cash flow statement as a change in contract liability. However, a sequential reduction in inventories from $386 to $309 million favorably impacted cash. This was largely driven by our settlement with SunPower, which allowed us to resume shipments in mid-November, which came straight out of inventories that we had accumulated in the previous quarter after we paused shipments in August. As a result of this change, DIO went from 149 days in the third quarter to 120 days in the fourth quarter.
Speaker Change: Cash levels were negatively impacted by $83 million of previously collected cash advances from U S utility scale customer that were amortized during the quarter and show up in our cash flow statement as a change in contract liabilities.
Speaker Change: As sequential reduction in inventories from 386% to $309 million.
Speaker Change: Favorably impacted cash.
Speaker Change: This was largely driven by our settlement with Sunpower.
Speaker Change: Lots to resume shipments in mid November which came straight out of inventories that we had accumulated in the previous quarter. After a report shipments in August.
Speaker Change: As a result of this change <unk> went from 149 days in the third quarter to 120 days in the fourth quarter.
Kai Strohbecke: Total operating cash flows in the fourth quarter were negative $76 million. Excluding the aforementioned changes in contract liabilities and cash restructuring charges, the business generated $16 million in positive cash during the fourth quarter. Cash, cash equivalents, restricted cash, and short-term investments stood at $105 million at the end of the first quarter. However, operating cash flows were negative $73 million during the quarter.
Speaker Change: Total operating cash flows in the fourth quarter were negative $76 million.
Speaker Change: Excluding the aforementioned changes in contract liabilities and cash restructuring charges the business generated $16 million in positive cash during the fourth quarter.
Cash cash equivalents restricted cash and short term investments stood at $105 million at the end of the first quarter.
Speaker Change: Operating cash flows were negative $73 million during the quarter.
Kai Strohbecke: This was driven by the company's adjusted EBITDA result and a negative $67 million impact from amortization of contract liabilities, positively offset by improvements in net worth and capital. Inventory levels further decreased to $272 million as we shipped another 49 megawatts of product to SunPower straight from inventory. But this benefit was diluted by an increase in US utility scale inventory that occurred as a result of delays by the customer. GIO in the first quarter was 131 days.
Speaker Change: This was driven by the company's adjusted EBITDA resides and a negative $67 million impact from amortization of contract liability positively offset by improvements in networking capital.
Inventory levels further decreased to $272 million as we shipped another 49 megawatts of product tanker trade from inventory, but this benefit was diluted by an increase in U S utility scale inventory that occurred as a result.
Speaker Change: <unk> on the customer side.
<unk> in the first quarter was 131 days.
Kai Strohbecke: Excluding charges and contract liabilities and cash restructuring charges, the business generated $8 million in positive cash in the first quarter. Capital expenditures came in at $12 million in the fourth quarter, consistent with our guidance range of $10 to $20 million. 2023 capital expenditures totaled $67 million compared to $63 million in 2022. A significant portion of the 2023 capex was related to our performance line capacity rank. In the first quarter of 2024, CapEx was $19 million, a $7 million sequential increase as the company took steps toward upgrading the Maxeon 3 lines to our 7th generation IVP technology.
Speaker Change: Excluding charges in contract liabilities and cash restructuring charges.
Speaker Change: Business generated $8 million in positive cash in the first quarter.
Speaker Change: Capital expenditures came in at $12 million in the fourth quarter, consistent with our guidance range of $10 million to $20 million.
Speaker Change: 2023 capital expenditures totaled $67 million compared to $63 million in 2022, a significant portion of the 2023 Capex was related to our performance nine capacity ramp.
Speaker Change: In the first quarter of 2020 for Capex was $19 million.
Speaker Change: 7 million sequential increase at the company took steps towards upgrading the Mexico on three lines to our seventh generation IBP technology.
Kai Strohbecke: Taking a step back, we are deeply disappointed by our negative EBITDA results over the past three quarters after our successful efforts since then, which facilitated strong earnings momentum in the first half of 2023, as well as our first positive annual EBITDA result as an independent company. As Phil mentioned, the dramatic industry-wide reductions in pricing and demand since the middle of last year have had a material negative impact on our liquidity position at a time when we also encountered significant previously scheduled amortizations of our utility scale prepayments, amounting to a total of approximately $150 million in the fourth and first quarter alone.
Speaker Change: Taking a step back we are deeply disappointed by our negative EBITDA results over the past three quarters. After our successful efforts in Spain, which facilitated strong earnings momentum in the first half of 2023 as well as our first positive annual EBITDA reside as an independent.
Speaker Change: Company <unk>.
Bill: As Bill mentioned, the dramatic industrywide reduction in pricing and demand since the middle of last year has had a material negative impact on our liquidity position at a time when we also encountered significant previously scheduled amortizations of our utility scale prepayment.
Speaker Change: Mounting to a total of approximately $150 million in.
Speaker Change: In the fourth and the first quarter alone.
Kai Strohbecke: In response, we have implemented various restructuring efforts that give us a line of sight to achieving healthy profit margins again starting in 2025, as well as our financing efforts, which we expect will stabilize our balance sheet while we continue the necessary transformation initiatives. Despite some further prepayment amortization and expected negative adjusted EBITDA in the near term, we project cash levels will exceed $100 million once the new equity from our shareholder TDE has been funded.
Speaker Change: In response, we have implemented various restructuring efforts that give us line of sight to achieving healthy profit margin again, starting in 2025 as well as our financing effort, which we expect will stabilize our balance sheet, while we continue the necessary transformation initiatives.
Despite some further prepayment amortization of expected negative adjusted EBITDA in the near term, we project cash levels will exceed $100 million.
Speaker Change: Once the new equity from our shareholders <unk> has funded.
Kai Strohbecke: Subsequently, we target to maintain a cash balance above $100 million for the foreseeable future, thanks to those funding transactions, continued focus on working capital management, and additional sales from inventory. We expect to exit this year with the peak of our prepayment amortization schedule behind us and with a rebuilt USB-G channel contributing healthy gross margin. We have revised the RAM schedule of Maxeon 7 slightly to preserve cash and allow the business to build a U.S. channel with cash-generating sales from existing inventory.
Speaker Change: Subsequently, we target to maintain a cash balance above $100 million for the foreseeable future. Thanks to those funding transaction continued focus on working capital management and additional sales from inventories.
Speaker Change: We expect to exit this year with the peak of all prepayment amortization schedule behind us and with our rebuilt <unk> EG channel contributing healthy gross margins.
We have revised the ramp schedule of <unk> seven lightly to preserve cash and allow the business to build the U S channel with cash generating sales from existing inventory.
Kai Strohbecke: With this context in mind, I'll now discuss our expectations for Q2 and the full year. We project second quarter shipments of between 520 and 600 megawatts. US utility scale is projected to increase sequentially, as we've been able to pull in the demand from one customer to offset the previously mentioned push out by two other customers. Our US CG channel is projected to grow nicely on a percentage basis this quarter, albeit from a low base and with more significant volumes projected later in the summer as key new dealers complete the onboarding process.
Speaker Change: With this context in mind I'll now discuss our expectation for Q2 and the full year.
Speaker Change: We project second quarter shipments of between 520 and 600 megawatts.
Speaker Change: U S utility scale is projected to increase sequentially as we've been able to pull in the demand from one customer to offset the previously mentioned push out.
Speaker Change: By two other customers.
Speaker Change: Our U S. DG channel is projected to grow nicely on a percentage basis this quarter, albeit from a low base and with more significant volumes projected later in the summer as key new dealers compete onboarding processes.
Kai Strohbecke: Our European DG business is projected to post sequential growth, yet will be down year over year due to market conditions. Second quarter revenues are expected to be in the range of $160 to $200 million. The midpoints of revenue and volume guidance imply a blended ASP decline from $0.38 to $0.32 per watt sequentially that reflects a drop in USDG volumes due to the transition from SunPower to our own dealer channel and the preparation of the European DG channel for the transition from P6 to P7, which includes strategically selling older P6 inventory into Tier 2 markets at discounted prices.
Speaker Change: Our European DG business is projected to both sequential growth yet will be down year over year due to market conditions.
Speaker Change: Second quarter revenues are expected to be in the range of $160 million to $200 million.
Speaker Change: The midpoint of revenue and volume guidance imply a blended ASP declined from 38% to 32 cents per watt sequentially that reflect a drop in U S. DG volumes due to the transition from Sunpower to our own dealer channel and the preparation of the European DG channel for the transition from <unk> six to <unk> seven.
Speaker Change: Which includes strategically setting older <unk> inventory into tier two market a discounted price.
Kai Strohbecke: Licensing our Shingling IP as part of the HSPV sale transaction is contributing $10 million in revenue to the second quarter. Non-gap gross loss is expected to be in the range of $0 to $20 million. Due to high inventory levels and low demand from our traditional channels, we have recently decided to sell certain IBC products below our usual ASP targets into carefully selected channels in order to elevate cash conversion.
Speaker Change: Licensing our shingling IP as part of the <unk> transaction is a $10 million in revenue to the second quarter.
Speaker Change: non-GAAP gross loss is expected to be in the range of zero to $20 million.
Speaker Change: Due to high inventory levels and low demand from our traditional channels. We have recently decided to sell certain IDC products below our usual ASP target into carefully selected channels in particular to elevate cash conversion.
Kai Strohbecke: We expect that this will require us to recognize a non-cash charge of approximately $20 million in the second quarter for writing these inventories down to their future net realizable value, which is included in our guidance. We expect gross margins to improve for the remainder of 2024 and into 2025. GAP operating expenses are expected to be $45 million plus or minus $2 million; non-GAP operating expenses are expected to be $37 million plus or minus $2 million.
Speaker Change: We expect that this will require us to recognize a noncash charge of approximately $20 million in the second quarter for writing these inventories down to their future net realizable value, which is included in our guidance.
Speaker Change: We expect gross margins to improve for the remainder of 2024 and into 2025.
Speaker Change: GAAP operating expenses are expected to be $45 million, plus or minus $2 million.
Speaker Change: non-GAAP operating expenses are expected to be $37 million, plus or minus $2 million, having executed a reduction in force. This March which has some impact on the current quarter. We believe the company's current opex levels are generally sufficient on an absolute basis to ramp both DG and utility scale businesses to what.
Kai Strohbecke: Having executed a reduction in ports this March, which has some impact on the current quarter, we believe the company's current OPEX levels are generally sufficient on an absolute basis to ramp both CG and utility scale businesses to a considerably higher volume to achieve our EBITDA targets in 2025. Adjusted EBITDA in the second quarter is expected to be between negative $31 and $51 million. Excluding non-cash charges for inventory adjustment, this represents an implied sequential improvement at the midpoint, consistent with our gross margin guidance.
Speaker Change: Literally higher volume to achieve our EBITDA targets in 2025.
Adjusted EBITDA in the second quarter is expected to be between negative, 31% and $51 million.
Speaker Change: Excluding noncash charges for inventory adjustment. This represents an implied sequential improvement at the midpoint consistent with our gross margin guidance.
Kai Strohbecke: Second quarter capital expenditures are projected to be in the range of $15 to $25 million and distributed across a small number of projects, including Maxeon 7. For 2024, we project annual revenues of $640 to $800 million, which assumes growth in our USDG channel that is more than offset by a lower utility scale volume in the back half of the year that reflects our current delivery schedule revised for the project delays we discussed.
Speaker Change: Second quarter capital expenditures are projected to be in the range of $15 million to $25 million.
Speaker Change: And distributed across a small number of projects, including Mexico seven for.
Speaker Change: For 2024, we project annual revenues of $640 million to $800 million.
Speaker Change: Which assumes growth in our U S. DG channel that is more than offset by a lower utility scale volume in the back half of the year that reflect our current delivery schedule revised or the project delays we discussed.
Kai Strohbecke: Adjusted EBITDA is expected to be in the range of negative $110 to $160 million, with sequential improvement every quarter from a drop in Q2. 2024 capital expenditures are expected to be in the range of 70 to 100 million dollars. With that, I turn the call back to Bill to summarize before we go to Q&A.
Speaker Change: Adjusted EBITDA is expected to be in the range of negative $110 million to $160 million with sequential improvement every quarter from a trough in Q2.
Speaker Change: 2024 capital expenditures are expected to be in the range of $70 million to $100 million.
With that I'll turn the call back to Bill to summarize before we go to Q&A.
William P. Mulligan: Thank you, Kai. We appreciate the investment and support from TZE Announce today. We believe that the difficult steps we are taking to reinforce our balance sheet are necessary to protect the interests of all Maxeon stakeholders and position the company for future success. In light of this refreshed capitalization, we are optimistic about our ability to complete our transformation and return to profitable growth. Now, let's go to Q&A. Operator, please proceed. Thank you.
Speaker Change: We appreciate the investment and support from TCE announced today.
Operator: Thank you. If you'd like to ask a question, please press star 1 1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1 again. One moment for questions. And our first question comes from Philip Shen on behalf of Roth MKM. Your line is open.
Bill: We believe that the difficult steps, we are taking to reinforce our balance sheet are necessary to protect the interests of all maxion stakeholders and position the company for future success.
Bill: In light of this refresh capitalization, we are optimistic about our ability to complete our transformation and returned to profitable growth.
Speaker Change: Now, let's go to Q&A operator. Please proceed.
Speaker Change: Thank you.
To ask a question. Please press star one one.
Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Speaker Change: For questions.
Speaker Change: And our first question comes from Philip Shen with Roth <unk>. Your line is open.
Philip Shen: Hi everyone, thanks for taking my questions. The first one is on the DOE loan guarantee.
Philip Shen: Everyone. Thanks for taking my questions.
Philip Shen: First one is on.
Philip Shen: I was wondering if you could update us on what the situation is there. We haven't heard about that in a while, at least not that I've seen, so sorry if I've missed something. But, you know, with the transactions and now... The ownership of TZE being greater than 50%. Does that impact the potential for you to secure the DOE loan?
Philip Shen: The Doe loan guarantee I was wondering if you could update us on.
Philip Shen: What the situations there.
Speaker Change: We haven't heard about that in a while or at least not that I have seen so sorry, if I Miss something.
Speaker Change: But with the transactions.
Speaker Change: And now.
Speaker Change: The ownership of <unk>.
Speaker Change: <unk> being greater than 50%.
Speaker Change: Does that impact the potential for you to secure.
Speaker Change: The loan guarantee.
William P. Mulligan: Yeah, thanks, Phil. Yeah, we're still very committed to our Albuquerque, New Mexico project, and we're better capitalized now to execute on that. Our DOE application is still advanced and live, and we're continuing discussions with DOE. We are mindful this transaction might present some new challenges, but we believe there are scenarios that will allow this project to proceed with the DOE. Absent that, we're exploring other mechanisms to finance the project.
Phil: Yes, thanks, Phil.
Phil: Yes.
Speaker Change: We're still very committed to our Albuquerque, New Mexico project, and we are better capitalized now to execute on that.
Speaker Change: <unk> application is still advanced in lives and we're continuing discussions with Doe.
Speaker Change: We are mindful of this transaction might presents new challenges, but we believe there are scenarios that will allow us allow this project to proceed with the GLA.
Speaker Change: Absent that are exploring.
Speaker Change: Their mechanisms to finance the project.
Philip Shen: Okay, so on that latter point, Bill, can you give us some more color on those potential alternative funding sources or transactions?
Speaker Change: Okay. So.
Speaker Change: On that latter point Bill can you give us some more color on what those potential alternatives.
Speaker Change: Funding sources are transactions could be.
William P. Mulligan: Yeah, I think it's too early to really say much about that, Phil, except that we are definitely better capitalized now with this new round of investments.
Bill: Yes, I think it's too early to really say much about that so except that we are definitely better capitalized now with this new round of investments.
Philip Shen: Okay, thanks. Shifting to the project... cancellations and push-outs. I was wondering if you could give us a little more color.
Speaker Change: Okay shifting to the project.
Philip Shen: I know there's a 6k out on the Orgis contract cancellation, and so was it possible that you guys could have known about these delays earlier since modules are one of the last Elements to be added to the project? So I guess I have a series of questions here. I might just read them.
Speaker Change: Cancellations or push outs.
Speaker Change: If you could give us a little more color I know there was a 6K out on the <unk>.
Speaker Change: Contract cancellation.
Speaker Change: So.
Speaker Change: Was it possible that you guys could have known about these delays earlier since modules are one of the last.
Speaker Change: Elements to be added.
Speaker Change: To the project.
Speaker Change: So I guess I have a series of questions here I might just read them.
Philip Shen: When was the installation of the modules supposed to take place? Does Maxeon have a maximum notice period after which customers can't delay deliveries? And why did one customer cancel? Did they find it much easier or cheaper to go with an alternative? Is there a risk that the rest of the backlog could also do that? Thanks.
Speaker Change: One was the installation of module is supposed to take place.
Speaker Change: Does maxion have a max notice period, after which customers can't delay deliveries.
Speaker Change: And why the one customer cancel because they find it much easier or cheaper to go with an alternative.
Speaker Change: Is there a risk that the rest of the backlog could also do that.
Peter C. Aschenbrenner: Phil, this is Peter. I'll take this one. So the, we had a 1.2 gigawatt contract with Origis, as we disclosed on 6k, that was scheduled to start delivery in Q1 of this year, ramp up in Q2 and then proceed through the end of 2025. [inaudible] were informed early this year that the company would not be in a position to accept those deliveries under that contracted schedule. I certainly won't speak for Origious in terms of the motivations. Our understanding was that it had to do with delays in their contracts, on their projects. And as we said, we've terminated the contract and are pursuing damages.
Peter C. Aschenbrenner: Phil This is Peter ill take this one.
Speaker Change: So.
We had a one two gigawatt contract with or just as we disclosed on.
Speaker Change: That was scheduled to start delivery.
Speaker Change: In Q1 of this year ramp up in Q2, and then proceed through the end of 2025.
We.
Speaker Change: We were informed earlier this year that.
Speaker Change: The company would not be in a position to accept those deliveries under that contracted schedule.
Speaker Change: I certainly won't speak.
Speaker Change: Just in terms of the motivations, our understanding was that it had to do with <unk>.
Speaker Change: <unk> on their contracts on their projects.
Speaker Change: And as we said we've terminated the.
The contract in our.
Speaker Change: Pursuing damages.
Speaker Change: Got it and so.
Philip Shen: said you can't share motivations, but the delays on their projects, can you give a little bit of color? Was it due to interconnection, queuing, or? you know, long lead time, high voltage equipment, or... Was it like some kind of surprise at the last minute? I mean, at this, you know, if you were ramping up in Q1. Supposedly. It's pretty, you know.
Speaker Change: You said you can't share motivations, but the delays on their projects can you just give us a little bit of color was that due to the interconnection queuing or.
Speaker Change: Long lead time high voltage equipment or.
Speaker Change: Was it.
Speaker Change: So I'm kind of surprised at the last minute I mean, if you were ramping up in Q1.
Speaker Change: Supposedly.
Speaker Change: It's pretty.
Philip Shen: Did something happen last minute, or did they possibly shift to another module source given the price decline?
Speaker Change: Something happened last minute or two.
Speaker Change: Possibly shift to.
Speaker Change: Another module source given the price declines.
Peter C. Aschenbrenner: Phil, I'm not gonna, I don't think it's our position to go into much detail about our customers' projects, so I'd urge you to speak with them.
Speaker Change: I'm not going to I think it's our position to go into much detail about.
Speaker Change: And our customers projects.
Philip Shen: Okay, all right. In terms of normalized revenue and EBITDA, can you speak a little bit more about that? What should we expect? You know, price declines have effectively stopped, and so maybe the rest of the world outside of the U.S. It seems like we're not going to get any more. Deceleration in Pricing, and then in the U.S., pricing has flipped around and is likely going higher. So I was wondering if you could speak to a little bit of, without giving guidance, but what normalized quarterly revenue and EBITDA could look like in the medium term.
Speaker Change: George you to speak with them.
Speaker Change: Okay Alright.
Speaker Change: In terms of normalized revenue in EBITDA can you speak a little bit more about that.
Speaker Change: What should we expect.
Speaker Change: Price declines have effectively stopped.
Speaker Change: And so maybe rest of world outside of the U S.
Speaker Change: It seems like we're not going to get anymore.
Speaker Change: Deceleration on pricing and then in the U S pricing has flipped around and.
Speaker Change: He is likely going higher so was wondering if you could speak to.
Speaker Change: A little bit of without giving guidance, but what normalized quarterly revenue and EBITDA could look like.
Speaker Change: Medium term thanks.
Kai Strohbecke: Hi Phil, it's Kai here. So, beyond the guidance that we have just given for the second quarter, I think, and we've also given yearly guidance, as you have seen, and from that, you can see that we foresee for the rest of the year, there are some challenges on the revenue and adjusted EBITDA sides. I think revenue generally is going to be driven by some of the cancellations and push-outs that we have experienced in the power plant business.
Speaker Change: Yes.
Kai: It's Kai.
Speaker Change: So beyond the guidance that we've given for the.
Speaker Change: The second quarter, I think any pause the given year.
Speaker Change: Guidance.
Speaker Change: And from that you can see that.
Speaker Change: For CE.
Speaker Change: For the rest of the year.
Speaker Change: There are some challenges on the.
Speaker Change: Revenue and adjusted EBITDA.
Revenue generally is going to be driven by.
Speaker Change: Some of the.
Speaker Change: The cancellations and push outs that we have experienced in the power plant business. We were successful plugging in some of the holes in the near term.
Speaker Change: In the second quarter by putting in some other deliveries.
Kai Strohbecke: We were successful in plugging some of the holes in the near term here in the second quarter by pulling in some other deliveries. We are looking for further customers in the second half of the year to fill the volumes. In the meantime, we have slowed down production until we can see the demand and we can lock in further demand, if available, at good cash margins for us. So, that's going to affect, I think, our revenue for the rest of the year.
Speaker Change: We're looking for further.
Speaker Change: Customer.
Speaker Change: The second half of the year too.
The volumes in the meantime, we have slowed down the production until we can see the demand that we can lock in.
Speaker Change: <unk> is available.
Speaker Change: It puts cash margins, so thats going to affect I think the revenue for the rest of the year.
Kai Strohbecke: As we said, in 2025, we are looking at turning positive on an EBITDA basis early in the year, so we expect 2025, in return, to adjust the EBITDA base profitability here and also further growth on the revenue side quarter-on-quarter in 2025.
Speaker Change: As we said.
Speaker Change: In 2025.
Speaker Change: We are looking at.
Speaker Change: On a positive.
Speaker Change: On an EBITDA basis early in the year. So we expect 2020 by a return to adjusted EBITDA base.
Speaker Change: <unk>.
Speaker Change: And also occur the growth on the revenue side.
Speaker Change: Quarter on quarter.
Fine.
Philip Shen: Okay, thank you all for the details. I'll pass them on.
Speaker Change: Okay. Thank you all for the details I'll pass it on.
Operator: Thank you. Our next question comes from Pavel Molchanov with Raymond James. Your line is open. Yeah, thanks.
Speaker Change: Thanks, Joe.
Speaker Change: Thank you. Our next question comes from Pavel <unk> with Raymond James Your line is open.
Pavel S. Molchanov: Yeah, thanks for taking the question. So following up on what Phil asked a minute ago about the DOE loan talks, given that the company will be majority owned by a Chinese entity, does that complicate the process of getting a loan guarantee from the U.S. government?
Speaker Change: Yes, thanks for taking.
William P. Mulligan: Yeah, it does complicate the process, you know, but as I said, we believe there are still scenarios. And again, we're working very closely with the DOE on this where they will allow this. [inaudible] So, this is obviously a fairly big change for the company today, so we just have to work through that with the DOE. Wright.
Pavel: Taking the question so following up on.
Speaker Change: When Phil asked a minute ago about the DAU.
Speaker Change: Loan talks given that the company will be majority owned by a Chinese NTT.
Speaker Change: Since that complicate the process of getting.
Loan guarantee from the U S government.
Speaker Change: Yes, it does complicate the process.
Speaker Change: But as I said, we believe there is theres still scenarios and again, we're working very closely with them on this where they will allow this.
Speaker Change: This loan application to proceed and again the loan application itself is very advanced at this stage.
Speaker Change: So this is obviously a fairly big change for the company today. So we just have to work through that with the Joey.
Pavel S. Molchanov: Right, it's kind of a housekeeping question, but given the complications in the capital structure, what is the share count?
Speaker Change: Right.
Speaker Change: And then just kind of housekeeping question, but given the.
Speaker Change: Complications on the capital structure.
Speaker Change: What is the share count.
Speaker Change: One.
Speaker Change: All of these structured financings are.
Speaker Change: Concluded so let's say July one.
Speaker Change: What kind of share count or are we looking at.
Kai Strohbecke: So Pavel, it's Kai, so there are obviously a few things and also some moving parts which are going to make it difficult to predict the exact share count here, but I can, there are some pretty detailed disclosures out there in a 6K with all the related documents attached, but just from an overview standpoint, of course, you know, a big, big variable here is the share price and also the sequencing of some of the conversions which are at the option But just in broad strokes here, so we'll have the new CD by GDE 97.5 that's going to be set on a 10-day VWAP from a conversion, but that only becomes due in 2029.
Speaker Change: Hi, Bob.
Speaker Change: So there are obviously, a few things and also some moving parts, which are going to make it difficult to predict the exact share column here, but I can.
Speaker Change: There are some pretty detailed disclosures out there in our 6K with all the related documents attached but just from a from an overview.
Speaker Change: Final court.
Speaker Change: A big variable.
Speaker Change: The share price.
Speaker Change: Also the sequencing of some of the conversions which are.
Speaker Change: At the option of some of the Securityholders, but just in broad strokes.
That's the <unk>.
Speaker Change: New CBE by <unk> 97, five it's going to be set on a 10 day.
Speaker Change: From a conversion, but that only becomes.
Kai Strohbecke: The conversion price of the existing 2027 nodes that are held by GDE will be reset based on the same VWAP, and also here this maturity is going to be pushed out from 2027 to 2029. Then the exchange of our existing 2025 nodes into 196 million dollars nominal of those 200 million at 2025 nodes. They have two tranches, and one of them, tranche A, is $137.2 million, and that's going to be convertible into $347 million of the company's shares.
Speaker Change: <unk> 29.
Speaker Change: The conversion price of the existing 2027 notes that are held by <unk> will be reset based on the same day.
Speaker Change: This maturity is going to be pushed out from 2027% to 2029.
Speaker Change: Then the exchange of our existing 2025 nodes.
Speaker Change: Into.
Speaker Change: $196 million nominal those $200 million in 2025 notes.
Speaker Change: Two tranches.
Speaker Change: And one of them the tranche, a is $137 2 million and thats going to be convertible into $347 million.
Speaker Change: The company's share and then the tranche b, which is $64 million is going to be based on.
Kai Strohbecke: And then the tranche B, which is $64 million, is going to be set based on a VWAP year. And TZE will also be issued a warrant, which during the time when the node holders have the ability to convert their nodes into shares to keep TZE's shareholding level stable at the current level of 23.5%. And then, you know, last but not least, once we get the relevant regulatory approvals for TZE's equity investment of $400 million.
Speaker Change: Yes.
Speaker Change: And these and TCE will also be issued a water and which during the time at the node.
Speaker Change: T to convert their notes into shares.
Speaker Change: Keep TCE.
Speaker Change: Shell holding level.
Speaker Change: The stable.
Speaker Change: Stable at the current level of 23.5% and then last but not least once we get the relevant regulatory approvals.
Speaker Change: Equity investments or unwritten well again.
Speaker Change: Target state funding.
Kai Strohbecke: 1% for TCE. So, as I said,
Speaker Change: One 1%.
So as I said quite a lot of moving parts and pieces. So we need to ask you to do the math and make your own assumptions around these things.
Pavel S. Molchanov: Okay, last question. To get to positive EBITDA in early 2025, as you indicated, what specifically needs to happen? Is it, you know, kind of macro module pricing dynamics, or is it improving capacity utilization at your existing production plants? What are the variables?
Speaker Change: Edward.
Speaker Change: Okay.
Speaker Change: Last question to get to positive EBITDA in early 2025, as you indicated what specifically needs to happen.
Speaker Change: Is that.
Speaker Change: Macro module pricing dynamics or is it improving.
Speaker Change: Capacity utilization at your existing.
Speaker Change: Production plants.
Speaker Change: What are the variables.
Kai Strohbecke: Yeah, there's a lot of factors going on. I would say first of all we're not planning any dramatic recovery in pricing. We've taken it, especially in Europe, a pretty sober view of how long that will take. I think we are.
Speaker Change: Yes, there is.
Speaker Change: A lot of factors going on I would say first of all we're not planning any dramatic recovery in pricing.
Speaker Change: We've taken that especially in Europe, a pretty sober view of how long that will take.
I think we are starting to see some some tailwind here in the U S driven by policy that in particular should lift our utility scale pricing.
Speaker Change: But the big factors for US is we're introducing some some refresh technologies.
Speaker Change: The outperformance signed seven technology in the maxillary seven technology have just recently been leased and are starting to gain traction.
Speaker Change: A big factor for Us is rebuilding our U S D G channel.
Speaker Change: We are of course lots of Sunpower contract late last year, we completed deliveries of all but that product to sunpower at this point.
Speaker Change: Alright.
Speaker Change: Just getting going with rebuilding that channel historically maxion product has had a 10% market share.
Speaker Change: And in the U S and we're quite optimistic we're going to get back to that and probably exceed that.
Speaker Change: Over the next several quarters.
Speaker Change: But it will take some time and once we get there towards that going out at the end of this year, we think we're going to be.
Speaker Change: Much more advanced than we are today.
Speaker Change: It's going to help us a lot.
Speaker Change: On the bottom line.
Speaker Change: That's still the best market in the World is the U S. Again, we have a relatively strong position here.
Speaker Change: Got a team that really knows how to do this is very experienced in the selling proposition through our dealer channel.
Speaker Change: We're confident that that's going to help.
Speaker Change: To help drive things in a more positive direction.
Speaker Change: Utility scale side it is.
Speaker Change: More about getting.
Speaker Change: Fully enter these higher price contracts that were starting to execute on were close to finishing.
Speaker Change: All of the restructuring that is add to occur with the with the <unk>.
Speaker Change: Origin cancellation.
Speaker Change: And so we're still very confident in our remaining contracts and.
Speaker Change: Expect those to more fully load the factory.
Speaker Change: Particularly into next year.
Speaker Change: And we are also transitioning that technology as well to the latest generation.
Speaker Change: Top on based product, which we believe will be very competitive.
Speaker Change: Got it thanks very much.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from William <unk> with UBS. Your line is open.
Speaker Change: Thanks, very much good morning.
Speaker Change: First question was on some of the recent developments with respect to your patent infringement suit against that go solar.
Speaker Change: It looks like that didn't go your way.
Speaker Change: How are you thinking about your approach to defending your IP going forward and maybe how does this decision impact your thoughts on which markets you would like to focus on going forward.
Speaker Change: Yes, yes.
Speaker Change: That outcome was not a particular surprise to us.
Speaker Change: We of course, we are trying to get an injunction.
Speaker Change: Have you know that the bar for <unk>.
Speaker Change: Getting a preliminary injunction is usually a very high bar.
Speaker Change: I think.
Speaker Change: We of course didn't quite clear that bar, but we believe the merits of our case are so fundamentally very very strong and we expect to ultimately prevail.
Speaker Change: And and we are expanding action and other markets as you have seen on our top con and our RBC.
Speaker Change: Patent portfolio.
Speaker Change: Maxion history dating back to the Sunpower days.
Speaker Change: As invested tremendously in R&D hundreds of millions of dollars over the year.
Speaker Change: We have probably the largest IP war chest of any solar company out there.
Speaker Change: And now as other companies start to move into our space.
Speaker Change: High performance solar cells.
Speaker Change: We arent going to.
Speaker Change: Take action on that portfolio that we have invested so much over the years and.
Again, we're really confident is going to help us in markets all over the world.
Speaker Change: We even have.
Speaker Change: Patent portfolios in China, So Europe U S. China rest of World, we're going to we're going to stand our ground and defendants portfolio and monetize it.
Peter C. Aschenbrenner: Well this is Peter I'll, just add a little bit there so.
Speaker Change: Our news that you were referring to as Bill said related to a request that we had made for a preliminary injunction in the Netherlands.
Speaker Change: There were some questions about raised about the.
Speaker Change #100: The testing done.
Speaker Change #101: We're appealing that decision we think.
Speaker Change #101: Underlying.
Speaker Change #101: Structure is very clear on the infringing.
Speaker Change #101: We're also pursuing.
Speaker Change #101: Ending actions in Germany.
Speaker Change #101: So.
Speaker Change #101: Although initial with the initial.
Speaker Change #101: Decision about a preliminary injunction was not did not go our way.
Speaker Change #102: As Bill said.
Speaker Change #103: <unk> does not relate to the eventual outcome of this infringement case.
Speaker Change #103: And any of the jurisdictions we're pursuing.
Speaker Change #103: Yeah.
Speaker Change #104: Okay. Thanks for thanks for that clarity. My next question was just on.
Speaker Change #104: And your comfort around potential exposure to any incremental import tariffs and maybe how the.
Speaker Change #105: The increased ownership by TCE might impact your.
Speaker Change #105: I guess your efforts.
In your discussions with regulators there.
Speaker Change #106: Ladies and gentlemen, please standby.
Speaker Change #107: Operator can you hear us now.
Speaker Change #108: Yes. Please proceed.
Speaker Change #109: Sorry about that.
Speaker Change #110: Youre asking about.
Speaker Change #110: Yes.
Speaker Change #111: Import tariffs correct.
Speaker Change #111: Yes, Jamie to repeat the question I'm not sure if I got cut off there.
Speaker Change #111: Yes.
Speaker Change #112: Yes, please repeat it.
Speaker Change #113: Yeah. So just I was just asking about your how you're thinking about.
Speaker Change #114: Your potential exposure to incremental import tariffs right as we obviously have this new <unk> CBD.
Speaker Change #115: Case out there and maybe how does the increased ownership by by TCE potentially impact your discussions with regulators or maybe their perception of.
Speaker Change #115: Whether or not maxion should be subject to any of these tariffs.
Speaker Change #115: Tariffs.
Peter C. Aschenbrenner: Okay. This is Peter I'll take that so there's a couple.
Peter C. Aschenbrenner: Fronts here with respect to tariffs that I think you are referring to one is the tier one bifacial exemption and others. There are the new ADC Vg.
Speaker Change #116: Our filings.
Peter C. Aschenbrenner: Ill.
Peter C. Aschenbrenner: Both of those really are are country specific.
Peter C. Aschenbrenner: We're working with.
Speaker Change #117: So, let's just let's talk about <unk> hundred one bifacial exemption first.
Peter C. Aschenbrenner: When.
Peter C. Aschenbrenner: President Biden issue.
Peter C. Aschenbrenner: 2022 proclamation he directed.
Peter C. Aschenbrenner: USTR too.
Peter C. Aschenbrenner: Fine.
Peter C. Aschenbrenner: The accommodations or a country exclusions for Mexico and Canada.
Peter C. Aschenbrenner: That's already happened for Canada, and we're working closely with the Mexican government.
Peter C. Aschenbrenner: The U S administration to <unk>.
Peter C. Aschenbrenner: Implement that for Mexico as quickly as possible.
Peter C. Aschenbrenner: So that really has to do more with <unk>.
Peter C. Aschenbrenner: Country specific issue.
Peter C. Aschenbrenner: Dating back to I'd say original NAFTA.
Speaker Change #118: Our relationships.
Speaker Change #119: Got anything company specific.
Speaker Change #119: With respect to 80 CVD.
Speaker Change #120: Those are also country specific targeting as you know the four countries in southeast Asia.
Speaker Change #119: We.
Speaker Change #119: I think it's too early to say exactly how that's going to play out.
Speaker Change #119: We're clearly in discussion with all of the participants there.
Speaker Change #119: But don't have any comments yet in terms of what the likely outcome will be.
And then from a timing perspective, I think we expect to see.
Speaker Change #119: Some preliminary decisions.
Speaker Change #121: Yes, perhaps in late Q3.
Speaker Change #121: And with respect to our status I think that.
Speaker Change #121: The most important thing.
Speaker Change #121: For the administration the U S administration.
Speaker Change #121: <unk>.
Speaker Change #121: Jobs in the U S.
Speaker Change #121: In and re shoring the sort.
Speaker Change #121: Our supply chain, we're still committed to do that as Bill said, So I think we'll have to see going forward.
Speaker Change #122: How that plays out with respect to our new cap stack.
Speaker Change #123: Alright, I appreciate the time I'll pass it on thank you.
Speaker Change #124: Thank you. Our next question comes from Donovan Schafer with Northern capital markets. Your line is open.
Donovan Due Schafer: Hey, guys. Thanks for taking the questions.
Speaker Change #124: No.
Donovan Due Schafer: I want to first ask about with the with.
Speaker Change #126: So you've got <unk> now is.
Speaker Change #127: Majority are.
Speaker Change #127: Assuming everything kind of goes as <unk>.
Speaker Change #128: Anticipated would be more than 50%.
Speaker Change #128: Shareholder.
Speaker Change #128: And then there is the divestiture of HSBC.
Speaker Change #128: With certain licensing agreements and stuff in place.
They kind of ramped and have that few serious production I believe and <unk>.
Speaker Change #128: Inside China.
Speaker Change #128: And then the IP for you guys. That's the IP is owned.
Speaker Change #128: Domiciled.
Speaker Change #128: The ownership of a domicile.
Speaker Change #128: Singapore and when <unk> initially got involved back with the spinoff from Sunpower.
Speaker Change #129: Pennant raises the question of if there is an angle here of access to IP.
Speaker Change #129: And kind of gaining control maybe in some ways of P series, and <unk> and <unk>.
Speaker Change #129: Actual property.
Speaker Change #130: So the question is does this.
Speaker Change #130: If maxion is effectively almost like a subsidiary of Tees year at this point.
Speaker Change #130: How do we know or what would motivate them or how do we know that they will sort of prioritize maxion is the beneficiary of that IP as opposed to like.
Speaker Change #130: Finding some other way of funneling that through other.
Speaker Change #130: So the areas or channels or.
Speaker Change #130: Otherwise it was just sort of monetizing Ivy.
Speaker Change #131: <unk> or P series in a single technology.
Speaker Change #132: Yes, Hi, Donovan thanks for the question.
Speaker Change #133: Yes, well I think as you know TCE has been a very large.
Speaker Change #133: Supporter of Maxion since the spin.
Speaker Change #133: And I think they've always valued us as an independent company with sort of unique access to the to the western markets through our channels and really our technology leadership position.
Speaker Change #133: So I don't think they want to change that fundamental way that we operate.
Speaker Change #133: They would like us to continue.
Speaker Change #133: Continue to operate under the Maxion brand and Sunpower brand internationally.
Speaker Change #133: They believe in our team and our technology.
Speaker Change #133: I think what they view is that this increase in <unk> well will provide synergistic.
Speaker Change #133: Opportunities.
They have for example, with Hsp V that you mentioned, they've scaled that within China too.
Speaker Change #133: Sorry.
Speaker Change #133: Large scale.
Speaker Change #133: Gigawatts many gigawatts.
Speaker Change #133: We're the beneficiary of that due to our offtake agreement.
Speaker Change #133: Commercial offtake agreement with Hsp V, where we got our performance line panels that we sell into Europe and rest of world is very competitive.
Speaker Change #133: Prices and cost structure.
Speaker Change #133: So we hope that.
Speaker Change #133: This partnership will be synergistic, though they will help us bring the ability to scale and get to the cost structures we need.
Speaker Change #133: But their full intention is to keep us and independent.
Speaker Change #133: Operating company that has unique access to markets like the United States.
Speaker Change #134: Okay and then.
Speaker Change #134: The way the languages written with respect to the choices that are made are around raising capital.
Speaker Change #134: It would seem to be suggesting that this was seen as kind of the only option after evaluating others, but.
Speaker Change #134: The.
Speaker Change #135: Of possibilities that you evaluated.
Did you guys evaluate or consider look at doing.
Speaker Change #136: Some kind of an Iot backed loan.
Speaker Change #137: And if so can you share what.
The decision to not go down that path.
Speaker Change #138: So we don't have imminent tie so as we said we looked at.
Speaker Change #138: <unk>.
Speaker Change #138: Different.
Speaker Change #138: Possibilities.
John: John just to knock on a go into the details here.
John: But really what we have announced today was the only credible alternative.
John: That.
John: Was identified and provided the amount of long term capital required at the same time delever the balance sheet and safeguard the company's ability to continue as a going concern.
John: That's.
John: That's the announcement, we made today and we strongly believe that this has been the only credible.
John: Option that.
John: We have seen.
Speaker Change #140: Okay, Alright. Thank you guys I'll take the rest of my questions offline.
Speaker Change #140: Thanks.
Speaker Change #141: Thank you our next question comes from.
Speaker Change #142: Maggie Madden Loy with Mizuho Your line is open.
Speaker Change #143: Hey, Thanks for squeezing me in here.
Speaker Change #144: Just on the.
Speaker Change #145: The cadence here I just wanted to understand the.
Speaker Change #145: The guidance kind of implies a similar revenue EBITDA run rate for the second half, but when do you see it can affect that.
Speaker Change #145: That rate of positive EBITDA.
Speaker Change #145: Coming in and what drives that.
Speaker Change #145: And then maybe part of that question just trying to you talked about favorable pricing and.
Speaker Change #146: New bookings could you just talk to like.
Speaker Change #147: Is it like mid thirties, or what youre seeing out there for the U S.
Speaker Change #147: Thanks.
Speaker Change #148: Well in general I can say.
Speaker Change #149: As has been explained before in terms of the turnaround of our EBITDA.
Speaker Change #149: Getting back to full capacity and also taking advantage of.
Speaker Change #149: Better pricing generally in U S power plant is going to be a big.
Speaker Change #150: A big part of that of that turnaround, maybe all dependent over tool Peter here to talk a little bit about the pricing environment.
Speaker Change #149: Hey.
Peter C. Aschenbrenner: As you indicated we've seen some significant upward pressure.
Speaker Change #151: Pricing for pricing in the utility scale business, we tend not to.
Speaker Change #152: <unk> disclosed those numbers because we have relatively few customers.
Speaker Change #152: Consider that a confidential information on their side.
Speaker Change #152: Keep in mind that we have still have significance.
Speaker Change #152: Backlog into 2025 and options.
Speaker Change #152: Extending out into 2027.
Speaker Change #153: And so some of our pricing is already baked now Fortunately those contracts were cut.
Speaker Change #153: At a time.
Speaker Change #153: Where our pricing was also quite high before the recent slide over the last year or so.
So both with our.
Speaker Change #153: Current contracted backlog and with respect to.
Speaker Change #154: Okay incremental future volume, which we're pursuing as bill said.
Speaker Change #155: We are both of those.
Speaker Change #155: Pieces of our business are booked at quite healthy asps.
Speaker Change #155: Okay.
Speaker Change #156: Got it I will take the rest offline. Thanks.
Speaker Change #157: Thank you.
Speaker Change #158: No further questions. We will now conclude the call. Thank you. All again you may now disconnect have a great day.
Speaker Change #158: [music].