Q2 2025 SunPower Corp Earnings Call
And, uh, you're just tell you about our quarter.
Um I dragged out an old picture uh to talk about the uh the ITC and the weather out there.
So, let me start out.
With the numbers.
That slide is buried in there.
so,
This is our new logo. SunPower is the old 1.
And the airplane uh which is called Helios. Also solar Challenger.
Uh, is really an image.
Of a power of the sun, you can see solar cells on the wing.
Of the airplane.
Um, giant propellers uh, that are required really for thin air.
um this airplane just so you know, about it and why it is is a great um,
Great icon for solar energy, truly energy. Uh, it's set a record that has never been broken of level flight at altitude, uh, in 2001.
And that was 92,800 ft. I won't go over the specs but it's a huge airplane, 247. Ft.
Um, it can carry a payload of 726 pounds.
Uh, 60,000 solar cells, putting out 35 kilowatts.
142 horsepower motors. So they only use 21 of the 35. Uh, the reason for that is, there's batteries in the airplane that will fly the airplane for 5 hours. Uh an airplane, very similar to this 1 Flew Around the World. Um
Interesting performance because the thick are at ground level is slow. But this thing can do 170 miles an hour at altitude and it was designed to fly endurance missions to 70,000 feet and artificial satellite.
Okay. That's my geek uh, presentation for this thing. But uh, this is 1 of my favorite pictures ever.
Uh this is 1 more picture. I got from 1 of the engineers on the project. This this is the output airplane at altitude. You can see the solar cells, they're so thin. They Bend like paper
And you can see that the Earth is indeed round. Um, by the way, the atmospheric pressure up here is 0.2 pounds per square inch. So you're above 99% of the atmosphere. You can clearly see that here.
Okay.
Speaker Change: To the quarter. Uh, we had 67.5 million in Revenue, that's a number less than we wanted and 2.4 million dollars in operating profit. Uh, that we're very proud of especially given the revenue. Uh, the by line is vigorous cost cutting. We have a very lean company now, uh, canceled out an ITC related Revenue drop. I'll talk about both of them.
Um,
Speaker Change: that has my stamp of approval and I've created a stamp of approval that I use in the company now to, um, talk about various things
Speaker Change: The numbers, uh we have a new uh accounting person and CFO, who helped me.
Speaker Change: And these numbers are, I spent a lot of time on them and they're perfect in terms of accuracy.
Uh, they're the first 2 quarters of 2025, we have accounting methods that were developed during our Kent 10K.
Speaker Change: And they were developed to merge 3 companies with different accounting rules together. So we've applied those economy methods and will in the future uh to present gap, which is a legal requirement non-gaap, which is a way we run the company.
Speaker Change: So,
Speaker Change: There's the story. Uh, there are only 3 points to make on this graph. I have the key. I have the key parameters here. Number 1 is last quarter. We did 82.7 million and and that was the third 800 million plus quarter in a row.
Speaker Change: This quarter, we dropped Like a Rock. Um is due to the ITC. It's also due to some
Speaker Change: last minute problem which was 5 million out of the quarter. But it is what it is and I'll talk about going forward later.
Speaker Change: Uh, if you look at the gross profit,
Speaker Change: Um, we suffered there for a hit, the profitability of 3.7 million.
Speaker Change: Uh, we made up for some of that by by focusing on the most profitable segments in having excellent gross margin.
Speaker Change: Our Opex less commission, the actual real Opex. The best we requires putting commission into Opex in the Gap. Thing is 1 of the distortions. I don't like
Speaker Change: Um we cut 4.5 million dollars. So you might say Wahoo you actually cut more than you lost in gross. Margin. Not quite because the operating expense with commission, uh, this difference here was only 3.2 million better.
Speaker Change: So, if you go down to the profit line, uh, it's the old Prophet plus 3.7 minus 3.2 minus 5, excuse me, minus 3.7 plus 3.2 520,000 short so we dropped from 2.9 Million last quarter, to 2.4 million this quarter. Those are both pretty good numbers, given our size right now. And they they they say, we're very healthy.
Speaker Change: Now, the next and only other thing you need to explain.
Speaker Change: Which I was certainly asked for if I were watching this presentation is, okay, tell me how you have 2.4 million of Gap prophet and a 2.7 million dollar loss of non-gaap profit in the 2.7 million dollars of loss of Gap.
Speaker Change: And I've added an extra line to the p&l to explain that this is stock compensation and intangible costs. In other words, non-cash required accounting that doesn't really affect cash profit.
Speaker Change: And that jump this quarter primarily because you've proved a lot of stock which we give out to our employees, uh, to 5.1 million. So,
Speaker Change: If you look at that difference, if you look at that difference uh that is what took 2.8 down to 2.7 and a few different, those numbers. Um you all of these numbers were both vertically and horizontally.
Speaker Change: So where did that come from? It's in the footnote. I won't spend a lot of time going through it. Uh basically 3.7 in stock based compensation, my feeling is not and it's always been that I reflect stock stock compensation and the dilution of the extra shares.
Speaker Change: Uh, and 1419 in amortization of intangible. So this is
Speaker Change: a Goodwill charge that's put artificially on the books. When you make an acquisition, if the assets, you acquire are less than an important paid or the acquisition.
Okay.
Uh, I I talk here about the ITC Revenue Dupree uh, passes Steve and it reminded me of my hometown with in Wisconsin, when I woke up on that day, January 31st, 1967.
and if you look at, um,
Speaker Change: You looked at that? That was a Sunday. It was 18 below. Zero.
Speaker Change: And it was windy and the chill factor is almost my is 50.
Speaker Change: Uh, that was the day of a Green Bay game. A championship game, NFL Championship with Dallas Cowboys.
Speaker Change: And it was so cold that and you, you can see you can, you can see this kind of a weird crowd double Park up, uh, that your breath didn't you couldn't see your breath, your breath froze into ice and the ice clogged hung over uh, the stadium all day long.
Speaker Change: Um, this is a picture I showed in the beginning. Uh this is me. Running in 2000. Also in Oshkosh
Speaker Change: I was 52 at the time and I just showed it to prove that. Yes, your eyes can indeed free shut. And this is why my my rule is I never run if it's below zero so I didn't run that day of minus 18.
Speaker Change: Uh, just so to give you the last thing they won the game. This is the quarterback going in with less and less than 30 seconds left.
Speaker Change: Um, this was a monster defensive lineman Jethro, Pugh of the Cowboys and he's getting blocked by Jerry Kramer. The famous, allpro guard of Green Bay,
Speaker Change: Um, he's not saying touchdown, he's saying, I didn't push the quarterback because the push push then was illegal and they've lost the game. Had that been called
That's the winning play. I'm not going to that. And Jerry Kramer is the guy that did did the blocking.
Speaker Change: Uh, this is uh, a club I run and a country club. I run in Oshkosh.
Speaker Change: And I was fortunate enough to get Jerry Who's now 88. Uh, to come and talk to crowds throughout. He's an excellent speaker.
Speaker Change: I won't tell you about this 1. I'm just putting it in to tell you that in the future.
Speaker Change: If I have another bad Revenue quarter, I'll tell you the story about Max McGee but that is a picture of the ball going over the goal line on the first touchdown in the first Super Bowl.
Speaker Change: And I'm not going to tell you the story about how Max didn't take the game, seriously.
Speaker Change: 6:30 in the morning before the game was 2. Stewart is just hanging on
Speaker Change: End of that story. Okay, the good story is uh profit.
Speaker Change: Um,
Speaker Change: Our, this is a graph of prophet.
Speaker Change: The merger is here. We've now been a company for 3 quarters.
Speaker Change: Um, if you took the sum of losses of the 3 companies before merger, we managed to cut that down a lot. The first quarter, we broke profitable, the second quarter. We've never
Speaker Change: Gotten credit for that. And I'll explain in, in stock price and I'll explain why.
Speaker Change: Uh this this quarter we had decent profit on a lot less Revenue that that was positive news. Then the question is how are you going to make the revenue bigger?
And I'll talk about that.
Speaker Change: When we merged uh I created a theory for the 3 companies, uh the The Arc theory of merger.
And I calculated the ark would be the thing when the rain came, um, that would save the people on it and I calculated that there could be 1225 seats. It turned out to be an excellent way to cut 2/3. In a merger. Couldn't have happened. If I didn't lay off not by trying to lay off people, which would have been possible. Even if you're talking and push on it.
Speaker Change: Um, I laid off by not hiring and that that difference. The the is what made it work.
Speaker Change: This is a graph of some bar. Head count.
Speaker Change: Um, by the way, once SunPower, learned how to do this, they liked it, we like it. The companies lean it, it's better now than it was when we had a lot more people.
Speaker Change: So we had a pool of 3,499 people.
Uh, when I said, 1225 was our Target, that's that line right there.
Speaker Change: And we started out with on the first day of the first quarter of 1341 people, and made our Target by the end of the quarter, beat him.
And then um, the first quarter was 80 million instead of 100, which is what I had hoped for. So I told everybody that their know, we're no longer 1,225 seats on the ark, there were 980 and we reset the target to 980.
Speaker Change: And we made that in the second quarter.
Speaker Change: um,
Speaker Change: then we weren't profitable.
Speaker Change: And I said, well then then we wanted to get props a lot profitable and I said we've got to go to 8:20.
At this point, people started griping, you know, we're keeping losing, um, cease on the ark and my my comment was well, we didn't need giraffes anyway. And we, uh, we now are down to 861. So we're almost done at that Target.
Speaker Change: So, if you think of everybody is spending money, this is like Doug wrap of cost and Doug graph of cost reduction. And the good thing is, you can drive it, you can drive it early. You don't have to wait for accountants to tell you that you lost money because you had too many people.
Uh, we actually keep more careful track of head count in that I, I review this graph 3 days a week.
Speaker Change: This is the total head count in the company.
Speaker Change: Um, you can see 5 weeks worth of data here. We look at rolling 5 weeks and this shows going from the 9008 61 over the last 5 weeks, our Target of 820 and a little hint that the next Target is below that.
This is the curve for blue raven. This is a curve for new homes. These are our 2 divisions
Speaker Change: uh, these guys will make my my target for revenue for employee is,
400,000. These guys are already there. They're already lean.
Speaker Change: Uh, these guys have gone backwards. Um and they're they're not lean, and that's not a good number and you can see they've actually um gone up.
Speaker Change: Uh, this is because not because we had a people, but because the laws in Nevada and Utah changed, we had to turn 1099 contractors that we don't pay and don't count as employees into W2 employees.
Um, so this is my, this is my pork problem right here, and we're working on it. Meanwhile, I keep track of every little group inside the company. These are places where they like to hide, uh, overhead. And I have a, a consultant group of Goodwin in XX. McKenzie Consulting Group, giving me indices, for the median of 200 tech companies and the top quartile best of the companies for a lot of parameters. For example,
Speaker Change: Information Technology. It full-time equivalent for billion of Revenue.
That drive right there. I'll talk about twice more today.
Um, required us to move some Finance from Salt Lake to India. I wanted the group together in Salt Lake. Um can't afford it, so I couldn't do it.
Speaker Change: Okay. Uh, Outlook
Speaker Change: Uh, this quarter, we're in now.
Um, we're going to increase Revenue. We're going to bounce part way back.
Speaker Change: I have about 70 million there and I put the word about in 70 because um after missing a quarter I on Revenue, I don't want to do it again.
Uh, better news is that when we look at profit, a lot of those cuts happened after the great quarter, we just had or happened halfway through. That is there'll be effective for the whole quarter. Uh, this quarter and and then profit, then be 3 million. And all of a sudden, um, you've got real profit and, and the concerns about our viability are going to start to evaporate more on that later, okay? A few bullets.
Speaker Change: Um, SunPower State. This is the bankruptcy of State uh, run by lawyers, uh, and the Bank of America and the Coalition of lenders
Speaker Change: I signed an agreement with us on the last day of the quarter that authorizes us to collect all sampara accounts receivable. Well, gee isn't that wonderful? Um, we bought them, we paid 4645 million bucks for them and now they're now they're
Signing that we will agree. And what they did was, they hired
Speaker Change: bill collection firm, and wrote letters to all the people that owed money for the SunPower systems, we bought systems on, roofs working that we own
And they were arguing about accounts receivable.
Speaker Change: I won't use the word unethical, but I would, if I weren't in a public forum.
Speaker Change: Okay, um, so that is behind us.
Um but it delayed our that was owed to us, and we're going to now, starting to collect that are and that, that was part of the revenue problem, that was 5 million of the revenue problem right there.
Speaker Change: We joined 2 Russell, uh, Industries. Uh, not going to brag about it. But always any company that any index that that people follow, they own a mix, they'll buy your stock. They trade your stock, your stock becomes better known. That's goodness.
Speaker Change: Um and then when I said it would come back to you, we created a low-cost Finance Center in India.
Speaker Change: The city is Chennai.
Speaker Change: Uh, we even gave 2 companies and they together become our low-cost Center for finance and we're even doing socks here. They're pretty good. 1 companies called excellencia
Speaker Change: Uh, in the British.
Speaker Change: Way of doing business. Um, the company uses Chartered Accountants.
Speaker Change: We call them CPA. So they've got really good accounting and they're going to be do most of our accounting work and and we move we move jobs out. That's part of the headcount reduction. I talked about
Speaker Change: We also have a startup.
meal AI is an AI startup high-tech and they have proprietary AI software that studies um things like expense uh
Speaker Change: Mapping expense into accounts. Um, other HR stuff for example.
Speaker Change: And they take your processes and look at the manual inputs and outputs of the process and create code for an automated process.
Speaker Change: Um, so that's our AI effort rather than trying to hire uh an American 1 or 2 Guys and hoping it's going to work. Uh this is a company and it's in our low cost center. So I think this is a
Certainly.
Speaker Change: It's a good move for managing the company, the way we want.
Therefore um CFO Dan Foley is leaving SunPower. You can imagine he wasn't happy, he relocated to Salt Lake.
Speaker Change: Thank you.
Speaker Change: Um then because cost cutting, he lost some of his guys so he and I agreed last year.
That he could leave some power but not before the 10K was filed me, it created low cost Finance Center in India. So he agreed
Speaker Change: To.
Speaker Change: Walk out the door. Shut the door, turn off the license. Shut the door. A really high integrity move in this part, and we thank him for that.
Speaker Change: um, our new
Speaker Change: um,
Speaker Change: our new interim CFO.
Is Jeannie new new. I'll show you a picture in a minute, and then, again, I want to thank Stan Paul, and he's he's done everything. We've asked him to do.
um,
Speaker Change: Dan.
Speaker Change: That's Genie.
Speaker Change: She's an accountant.
Speaker Change: She's a look at her. She took her own selfie pictures, she's a happy account and we will not find out if she likes to eat raw meat for breakfast or not.
Speaker Change: Okay, then we have, uh,
Chief legal officer, we've we've uh, switched Chief legal officers. His name is Nicholas Banker Swiss origin.
Speaker Change: Um, he writes, he writes well he's energetic. He's got a lot of degrees.
Speaker Change: And we'll find out that he wants, he wants to get out of the private company world into the public company, and he's worked for Kirkland and Ellis so we wish him luck.
Speaker Change: And finally uh We've tapped the Sunfire board member Dan McRaney. Who's here with me today.
Speaker Change: um, he's got a
Speaker Change: background who's been on the board of 10? Uh, that's spelled on NASDAQ companies. I, I listed the 7 most important here. He's been the chief executive that was the eeprom company that spun out of Intel.
Speaker Change: And he's been VP of Marketing sales. Uh, so it's Cyprus, he was our VP of marketing and sales for decade.
Speaker Change: so,
Speaker Change: I told Dan that this retirement time was over and he needed to and I paid him for it and uh and he needed to um help us out. So right now um I'm going to introduce Dan and he's going to tell you he's been on the job a month. He's going to tell you what he found and what he's going to do about it. So let me have the months.
Thanks TJ. Hello everybody.
Speaker Change: Well, first off TJ, thank you very much for using the 15 year old pitcher. Appreciate that very much.
Let's get to the slides.
Speaker Change: so, first off
Speaker Change: um,
Speaker Change: I've been on this job now, almost 3 weeks, but that doesn't mean I've only had 3 weeks of looking at this particular operation at SunPower. I joined the board in, uh, in December time frame or and it from that time on uh, I spend about 20 hours a week monitoring all of the major meetings from December to to July. So I've what I'm about to show you is not my observations from the last 3 weeks of this position but rarely 6 months so I won't be putting that out because I think it adds more credibility. If you've got more time uh watching this stuff. First and foremost, I've come to truly truly like the young men and women. In the sales organization, we have a broad organization of direct virtual.
Speaker Change: Tool and dealer uh, as well as new homes, sales personnel and I find them smart, find them focused, uh very loyal to SunPower uh very aggressive. Uh I I really have come to love that energy.
But also pretty Loosely managed. Uh the result of that is all that energy and all that positive collaboration is not maximized in terms of bookings, we need to get bookings in order to pop up the revenue and there's as far as I can see. Right now, the total available Market in solar is for all intents and purposes infinite for us. And the issue is is to get this team of good people. Good men and women to function, better and more aggressively, but here's how I see it right now.
Speaker Change: You got to help their?
First off the sales organization hasn't been responsible for forecasted quarterly. Bookings. Uh and and the problem with that, I see this back in my day, I used to see this on Startup companies where where the sales force was was doing best efforts as opposed to having skin in the game. In terms of actually forecasting, the bookings along with the sails along with the operations guys, but I'm not used to seeing that with a company this size. Uh, you must have input from sales. Once you have that input sales, no longer provides best effort. They actually are accountable truly accountable for the numbers that they're forecasting.
Speaker Change: Second, the Sales Management has been slow to react to changes in the industry and customer environment. This is bad all the time, but it's particularly bad in solar is, is up all of you are aware. Uh, the the kits keep on coming and solar. We've had huge changes in the last 6 months. It is really the responsibility of executive Sales Management to move fast and quickly as these changes occur. And frankly that's been that's been unacceptable.
Speaker Change: To revenue, which is at installs. If you don't drive all elements of that funnel, you're going to find yourself waking up with a subpar performance in bookings, which we did in Q2. Uh, and I'll get on to that a little bit later.
Speaker Change: Finally, the sales Executives at 1099, do not effectively engage with other equipment, other court, departments, and an example of that would be when you're doing your forecast, when you're trying to figure out what's going on. For instance, this latest ITC ruling, uh, the sales Executives. Previously were not collaborating with Finance, HR operations, or engineering. Uh, when you get these, these seminal changes in the industry, you've got to be engaged. And uh, frankly, I found in the 6 months, I've been watching this. There was ineffective engagement therefore ineffective, sales strategies as a result.
Speaker Change: Uh but it gives us an opportunity and you take a look at where your problems are your cost of lead. Generation is extraordinary compared to the industry Center managements is is probably double industry standard. Uh, funnel velocity is slow the problem with slow funnel velocity. Is that you end up losing orders, that you've worked for months to secure the funnel and yield, which refers to how much you get out for what you brought in is from my investigation, not at at industry standard, so they're all, they're all poor when compared to what I would call best-in-class in solar industry. So here's our corrective action in progress.
Speaker Change: It's been 3 weeks. So we've reorganized SunPower to a truly functional organization. The advantage of that. Is that now, the VP of sales is on par with the top Finance people with the top operations, people with the top legal people and so we can have a seat at the table. If you will, for strategies going forward. It's also under 1 department. So we that we can have cross-pollination between new homes between dealer between direct between all the channels going into sales and they all report directly to the CEO. Uh, we we're going to recruit eventually a sales executive to drive an organization. In the meantime, uh, you're looking at your sales executive
I want to make those senior executive changes necessary to improve group performance drive. Now I told you I was proud of the team and I am, there were some issues and we made some changes at the executive level, on a couple of those areas. Uh, and those changes have been made and we're now in the process of replacing, those Executives with very good, strong young men and women, uh, who are currently inside the SunPower organization.
Speaker Change: Now, we created more detailed forecasts. I told you the sales force didn't participate in the forecast. We now have, uh, forecast on a weekly basis measured daily on all the important parameters that lead to strong, bookings, and that's leads appointments pitches bookings. Uh, it's fdc's is another 1 installs. Uh, we track that multiple times per week. Uh, the men are given a, uh, a weekly bonus and a weekly forecast in addition to a curly forecast, uh, and just as a, a brief point on that we've been banging on that for about 4 weeks now, and I am very encouraged the first 4 weeks of this operation. I like the uh, fdc's final design complete. That's our version of bookings to the factory. Uh, that's up almost 30% from this time last quarter. And I am very proud of them in for doing that.
Speaker Change: We need to set Global costs, funnel yield and funnel, velocity goals for sales. Uh, haven't exactly got that yet. We've created a plan to get. What would be entitlement for each of those areas. We've already started monitoring some of the basic yield issues uh on boarding with which ones that are but throughout the quarter, we're going to, we're going to add all the rest of the issues in the funnel and drive cost.
Speaker Change: We think we're spending almost twice, the price per watt effective for certain the compared to the industry uh for certain effective ills.
Speaker Change: Oops.
That's it, TJ.
Speaker Change: Okay.
Speaker Change: so,
What you've heard so far?
Um,
Speaker Change: we're um, we're happy with the product.
But the obvious question that I saved for the last section is so why isn't the stock price higher if everything's so great? How come
Speaker Change: And I want to address that now, and what we're doing about it. There, there are things that that can get improved, that will work on multiple
Speaker Change: uh, so if I talk about, uh,
Speaker Change: P. I call it the PS ratio price to sales market cap on Revenue.
Speaker Change: Um,
Speaker Change: when I did the slide it was a buck 81, the revenue was down to a run rate at 270 down from 300.
Speaker Change: And it's 0.54.
Speaker Change: So here we have a group.
Speaker Change: Of companies uh, small tech companies.
And they have a very stable going back through 2024, uh, 2.5 price to sales ratio.
Speaker Change: My company Cyprus that I ran for 34 years, I kept the state of religiously and our average at Cyprus over 30 years was 2.4.
Um, and phase company, which who on his board. I am a very good company is now has come down, but they're still at 5, okay?
Speaker Change: Now, the solar industry is taking a hit and this is the uh, leader in the Solar industry sunrise.
Speaker Change: To think, uh, they're going to do, okay?
So they're, they're at 1 and here we are banging along at the bottom.
That's good news and bad news. Bad news is slow, share price today. The good news is in addition to growth
Speaker Change: uh,
Speaker Change: raising share price. We we can also have multiple. There can be 2 factors multiplying each other.
Okay, so why is that?
Speaker Change: uh, this is a
Speaker Change: uh,
screenshot.
Uh, of our stock price.
Back here, we were up at 2 bucks and and sometimes over 2 bucks. When we reported our first profitable quarter and I thought I would finally broken out of the morass.
Speaker Change: Then that happened. And I got I, I thank Cheryl was, by the way for sending the information, I really appreciate it.
um, I got this and
The day our risk factors were published.
Speaker Change: The day I risk factors were published. We published some aftermarket clothes, but that very day. We had this problem and I read the risk factors and they weren't
Speaker Change: They were too aggressive. The lawyers were quote, protecting unquote us too much.
Speaker Change: For example, I read in my own risk factors.
That um, we may not achieve profitability. Okay. So go back to page 1 and it says some parameters, first prophet in 4 years, okay?
Speaker Change: Uh, we do have vulnerability, We There are risk factors. Uh, we we do have a going concern. I'm not arguing with that, but that's Overkill.
and from now on,
TJ's going to be involved, TJ's going to read it, TJ's going to read line it. And by the way, the benefits for you is when you see the risk factors they're real. I I left them there for a reason.
Speaker Change: Okay. Now underlying this, this is a, a then, of course, the house, ITC Bill hit. This is the first announcement and there are several hits, uh, for the house ITC bill. But this took us down uh, to a little over a buck and a quarter.
Speaker Change: And there's nothing you can do about that. But underneath this statement of risk factors,
Speaker Change: um, are the risk factors themselves and that's profitability and cash flow.
Speaker Change: And like I said, in Q3 255, we intend to have a third consecutive quarter of profit and it's likely to be the highest profit in the current run dollars. 10%
Speaker Change: Next point and we are working hard on Acquisitions to grow inorganically. Now you, you just heard the story about how we plan to get more sales by selling more effectively with a thousand person sales force. We had to be able to do that.
Speaker Change: but,
Speaker Change: We're working on inorganic growth.
I can tell you that, uh, I've
Speaker Change: been to the negotiating table 3 times in the last 4 months.
Speaker Change: And I'm still talking to all 3 of those companies.
But um, I am bag 1 yet.
I'm going to bag 1, we're going to make this happen and at that time, I'll come back to you. Um, and ask you to fund that acquisition, whatever it is, and I'll tell you the story.
Speaker Change: Okay. Um, here, I'm bitching about bad reporting, my stock Services if you go to market watch. Um,
Speaker Change: And by the way, I picked them because they're the biggest and most famous. They're all, they all have the same problem and you go right underneath the stock graph.
Speaker Change: You see another green Energy Bus?
Speaker Change: August 9th 2004. This is the old sunflower SunPower files for bankruptcy, SunPower stock balls after company files for back. Sunglass SunPower files. This is the first 4 things you see.
Speaker Change: So my my complaint was gentlemen, why do you have your Bots? Keep digging up, dinosaur bones and beating us over the head with them.
Speaker Change: Uh, now, to be completely fair. I complained about that 1 other time in the imitation of this meeting, I griped about it.
Speaker Change: And market watch printed it. So I'm hopeful they're going to work with us and clean up the same because I actually have investors
Call me and say, gee. I I wanted to invest in SunPower but you know, you guys are right on the edge of bankruptcy. I I I I'm not going to invest
Speaker Change: No, we aren't in the edge. We want bankrupt. Now, look at the date and now look forward.
Okay, that's all we got uh, questions.
Speaker Change: Screen within the black bar. When it is your turn, you will receive a message on your screen. Allowing you to speak.
Speaker Change: When your name is called please accept, unmute your audio and ask your question.
Um, our first
Speaker Change: Question. Today comes from Derek Soderbergh, from Cantor Fitzgerald, you may go ahead.
Derek Soderbergh: Yeah. Hey, thanks for taking the questions. Um, so, so TJ on your call, uh, recently you were talking about the ITC being eliminated, you know, you sort of spoke to the fact that the industry has been bloated with Chief Capital, sort of propped up mismanaged companies, uh, for the past 2 quarters, here, you've proven that
Derek Soderbergh: You know, you can achieve Pro, uh, positive operating income, despite some of these challenges. Um, you know, and while you guys are generating income, your peers are going bankrupt. Some of them, um, you know, how can some Power benefit from surviving this cycle? And, you know, when might we see some of that organic growth coming from, you know, in a sense of less crowded industry
Derek Soderbergh: Okay. Um,
thing about my pitch.
Derek Soderbergh: We made.
2, 2, 2 2, and a half 2.
Derek Soderbergh: Out 2 and a half million dollars last quarter. This quarter we're going to make 3 and we're a public company. Your private your cash flow is zero or negative and you're not public so you have no liquidity on this stock. What if we work together?
Derek Soderbergh: And by the way, we have a good organization, we, we are starting to have structure, uh, that that means you can join the organization and join something that is going to be, uh, run, well, and you can run your own division. You have to conform to our counting rules etc, etc, but and you will get some help. We have a good Legal Group, uh, Etc, we do Accounting in India, um, so you can save money there.
Derek Soderbergh: Let's work together. And oh, by the way, I'm 77 years old. Um, although right now, I'm in the full War mode and I'm actually enjoying myself uh, I'm 77 years old and I ain't going to be around.
Derek Soderbergh: A year from today. I won't be there.
Derek Soderbergh: And you might be the guy who replaced me. What do you think?
Speaker Change: It's a compelling pitch and it gets more and more compelling as um as the economy gets crappier. That's that's why I use the famous smart and Luther King quote free at last Lord. God Almighty free at last when we got the government, I thought the hell out of solar so we can just run companies and compete in the free market.
Derek Soderbergh: Um,
Derek Soderbergh: Right now that's happening for part of the market. It's not happening for the other part. Um, I'm most worried about. Actually, everybody would say it's important that the Safe Harbor. If you want to induce the company to poor practices, give them the Safe Harbor. Let them buy equipment for the next year, put it in the
Warehouse, so it can start aging. It's like, buying a Year's worth of lettuce. Okay. It's not going to be good by the time you need it.
Derek Soderbergh: so we're not out of the woods yet, but I believe
Derek Soderbergh: the solar industry. Surely will be better off.
Derek Soderbergh: You know, we have we have this all this help from government.
In in our industry and it costs you uh 3 dollars of water 2.75 cents a watt.
To put solar on your house. Well, in Australia, it's a buckle watt in Europe. It's a buck and a half. So, if we have free Marcus, any free economy, and we're America, how come?
The consumers getting screwed. And the answer is all of these games, the Monday morning, pronouncement about, what's going to be tear up and what's not? And, um, all of that is the friction in the economy that that needs to go away with the ITC and that's more important than Joe blow's pnl. And if you want to be around, just make your pnl nice when it's when it's gone, then then you will win.
Speaker Change: Can I add hey Derek. Uh a couple things on the SunPower seals organization as large as it is, and as much as it's been around and punching, there are certain areas where it is, it is, uh, below critical mass and those areas have to be happen to be the biggest positive potential future growth. Even with the ITC ruling, this is an example of the states of California. Texas and Florida are going to continue to be robust.
Have a high 10 even in this ITC environment.
Speaker Change: Got it. Super helpful. Um, I do want to touch on the business here. Um, I think there was a mention on the call here about the backlog, um, up 30% from last quarter. I was wondering if that's the case. Um, and if so, what sort of driving backlog, uh, today, which area of the business, um, can you just talk a little bit more about that? Backlog growth.
Speaker Change: Go ahead. Yeah, so the, the biggest thing that's happened. Now, we have 3. We have 3, fundamental divisions inside SunPower. We have what we call the Direct business. Uh, then we have new homes and then we have, uh, the virtual business. The thing that popped this up last quarter. Big time was a direct business, uh, We've, uh, we had a matter of fact, I was just looking at the numbers. We had a terrible book to bill in q1, 2025 of 0.8 book to Bill. That's actually because there's about a there's about a 9-week lag there between when we booked it, and when the factory ships it, so 9 weeks you can kind of see your your future in front of you. Uh, so at a 0.81 book to Bill that explains
That is the reason for the pathetic pathetic for the poor, uh, Revenue we posted in Q2 fast forward to today. Our Q2 booked a bill was 1.2, uh, so a strong growth in that and that has a un
Speaker Change: It has nothing to do with me. Uh, since I only came in 4 weeks ago, it has everything to do. I think, to the spirit and the aggressiveness of this young sales organization, who popped back up, strong in what we call the Direct business, which is selling directly to, uh, the homeowner. Uh, we also had for the first time some regrowth in new homes. New homes was more abundant going back to Q4 2024 from a bookings perspective and they had a very strong first quarter out of the block, so that's what was contributing to it. As I said, if you take a look at the first 3 weeks, actually the first 3 weeks and 1 day, since I just saw yesterday's numbers this morning, uh, we are continuing on that strong booking path for both new homes, as well as Direct.
Speaker Change: More more comments. Um,
Speaker Change: so when I'm looking for companies, I'm looking for new homes companies, that's our most profitable division.
Speaker Change: That's the 1, 600 K of Revenue per employee. Um so that would be an acquisition, the specific acquisition. I'm after also got to talk about batteries these
Speaker Change: in Europe.
Speaker Change: In the Netherlands.
Um, we talked about them in California, the net electricity metering,
Speaker Change: and when solar started, the way it worked was if
You imported imported power into your house. You paid for it and there was a tariff for it as a function of daytime.
Speaker Change: and then if you had Excess power, then power would run your meter backwards literally and you would get you'd get paid for it at the going rate, ma'am, cut that going rate to a nickel
Speaker Change: So now exporting power in the middle of the day doesn't cut it.
Speaker Change: Um and by the reason I mentioned in the Netherlands, is there midday export rate is negative, they charge you for taking your junk power away. So, for obvious reasons that noon time, we have extra power,
Speaker Change: We're now up to 4 terawatts of solar.
Speaker Change: Within a within a couple of years, it will be the largest source of power on the base of the earth, okay? So store the stuff.
Speaker Change: now the short-term thing is, if you want to sell some solar you go to a guy and say look
Speaker Change: I'll give you a battery. Yeah, we'll sell you a battery. You hook it up during noon time when you can't get anything from your power, you charge your battery, the starting at 4:00 in the afternoon and they start screwing you for 50 cents, a kilowatt hour then run off your battery.
And that's called The Grid tied battery. It's the cheapest of all batteries and you don't need a big 1, it's the smallest and cheapest.
Speaker Change: So that that is taking off now because you only need enough battery power to run, 1 house from 4 in the afternoon. So midnight, think about 5 kilowatt hours is plenty and even if you need a little bit bigger battery, it doesn't matter. You get 5 kilowatt hours at 50 cents, a kilowatt hour, 250 every day times 7 times 52 and that that number adds up. So batteries are becoming important and and and from an electrical engineering point of view stored during the day and use it at night. So the the growth of the battery Market exceeds, the growth of the solar Market.
Speaker Change: so, we're we're pushing on that now Dan said well, our sales force
Speaker Change: Change.
Speaker Change: Uh, my first talk to the sales force was in Scottsdale Arizona last January, and I gave a 1-hour long lecture on batteries, why they're good, why they need them.
And we're not, we're not selling enough.
Speaker Change: so, second point is
Our deployment tends to be Midwest. Stripe across the country loan. Finance, no battery.
Speaker Change: Well, we need to change that and that means we need a presence in particular in California. So number 2, I need a company that is strong in California and some are not strong and has never been really strong in California.
Speaker Change: So that's my shopping list. I'm I'm in continuous. Um,
Speaker Change: communication, my next phone call to a guy who runs the company is
Speaker Change: What time is it now?
10:50 10:50 so 1 hour, 10 minutes. So eventually I'll score because my arguments are becoming more compelling and I'll ask you for some money to make us big.
Speaker Change: No, no, that's helpful TJ and and you brought up batteries. Um, I'm curious how much that changes, you know, if you have batteries in the platform in the offering, um, how much does that change the economics of your average agreement? Um, is it 20% higher in terms of Revenue potential? Um, any change in gross margin?
Speaker Change: You know what? Having batteries, how does that change the economics for you guys?
um,
Speaker Change: So, first order, uh, we'll get the same gross margin so then how much more gross profit dollars.
Speaker Change: Is the the, what, what what's called in the industry, the attach rate, right now, the attach rate in California is literally 95% because of that time shifting argument, I gave you earlier.
uh, in the United States be its
Speaker Change: Approaching 50%.
Speaker Change: We are at 14%.
Speaker Change: All right, you can say bad performance and I'll say, yep. But you can say major upside but think about it. You don't go to more sites. You simply effectively sell a battery when you sell a solar system. So we're we're floating on solar systems right now and get a 1.4 multiplier and we need to quadruple that number and to do that, um, I hired the head of the battery division from nface, nface is the
Speaker Change: 1 of the 2, most important manufacturers of batteries in the United States. The other being Tesla
Speaker Change: and I hired their top guy, he ran at 300 person division making batteries and it was all about batteries, all about subtleties, and he's a good businessman.
Uh, my atom sitting here uh, last time around setting. So
Speaker Change: Yes, batteries will make a difference. The answer to your question is 1.3x, honest way to 1.6 over time.
Speaker Change: Uh, that's that's uh, pretty meaningful for you guys. Um, and then just just a, a quick 1 on gross margin here. I think in the press release, you noted, the companies focusing on high margin business and TJ, you mentioned, you know, new homes. Um as you know, 1 of the most profitable parts of the business was curious. If that was the case. Um you know the reason for the higher gross margins. Um and then just you know again wondering how sustainable gross margins are here. Um Can can you talk about that a bit?
Speaker Change: um,
Speaker Change: I come from the chip business.
Speaker Change: And what you look at is your gross margin every day to see if you're going to make it to the next day. So I'm paranoid about gross margins as a way of doing business.
Speaker Change: Uh, we have fortuitously high gross margins and how to gross margins.
Speaker Change: Get high. Well, you're big enough. You can buy equipment cheaply and
We're going to get better. We're going to amortize that overhead more as we grow above 300 million dollars.
But the other way to have good gross margins, don't have so many people on the ark. It's real simple. And because a lot of people are in, in the gross margin. Uh, so we've done, that's a byproduct of what we've managed in the company, and we're exemplary at that we're going to get better. We're going to be killer to compete against. Um,
Speaker Change: In the market, with our gross margin.
Now, having said that, I I want to be completely transparent.
um,
To feel old SunPower orders and that that was worth several points of gross margin eventually and that that means in 2026. We got a lot of money out like that in front of us, but eventually in 2026, we'll go to quote, unquote, normal gross margins. And for me, that's that's 36%
Speaker Change: Got it that that's super helpful. Um, I'll hop back in the queue.
Thank you, Derek. We have a few coming in from the, um, web
Speaker Change: First 1 falls on just some of what you were saying.
Speaker Change: Based on comments regarding new homes. Um, are you able to quantify how much are uh, Revenue your seeking to collect that has been pushed into 3 q and the second half of the year? Or are you able to provide any amount of guidance, um, on that impact?
Speaker Change: Well.
Speaker Change: Okay, yeah, I'm able to provide guidance given that I got a daily report and I read my morning report this morning and the answer is, I got 16 million bucks that either. We're going to collect in Q3 or they're going to be some people in trouble, that simple. And then there's more for Q4.
Speaker Change: Thank you. Um,
Speaker Change: the other 1 we have here is, can you please provide an update on the impact of the ITC macro environment on some Powers business and is it too soon? To really know what a rational Bass Run rate for the revenue would look like.
Tell you the effect on the business right now. If you want 1 bit you'll remember that it's cold enough. Your eyes, really can't reset. Uh going forward. Um we have been an eighty million dollar company, we're going to bounce back to that number
Speaker Change: um,
Speaker Change: Okay, that means I got to get 13 million dollars to get back status quo.
I was planning on getting 13 million dollars to go from 80 to 93. So now,
Starting back at 80 again, which by the way, will be really profitable. And when we get back to it, um,
Speaker Change: We got, we're going to acquire that's, that's what we got to do. And I went through my my pitch
Speaker Change: Thank you. Um, the other 2 questions, uh, appear to be redundant things you've already addressed. Um, so that looks like that's all we have in the queue today.
Speaker Change: Thank you, uh, for watching our presentation today, we appreciate your support and we appreciate your investment.