Maxeon Solar Technologies Ltd. Q2 FY2022 earnings call

• Acknowledged the Inflation Reduction Act as a long-term tailwind, with investment tax credit extensions and support for domestic manufacturing. - Second quarter exceeded volume and revenue guidance, hit adjusted EBITDA guidance range. - Achieved strategic milestones like starting production on second Maxeon 6 production line, volume shipments of bifacial Performance Line panels into US, and details on Beyond the Panel road map. - Strengthened balance sheet with $207 million convertible bond. - DG business in 2022 has strong demand, Europe shipments record, Australia sales target exceeded. Utility Scale sales team executing well with increasing bookings volume and improving ASP.

Second quarter shipments were 521 megawatts, exceeding guidance and growing 7% sequentially. Total revenues also exceeded guidance, up 7% sequentially to $238 million. In DG business, Europe posted a fifth consecutive record quarter for shipments, Australia exceeded sales targets. In Utility Scale, signed two additional contracts for over 1-gigawatt of deliveries in 2024 with total backlog at 3.4-gigawatts. IBC volumes are transitioning to Maxeon 6 with fixed capacity of approx 500 megawatts. Revenue contribution: DG and Utility Scale are key segments, with DG benefiting from price increases and Utility Scale from growing bookings.

Third quarter shipments expected in range of 580 to 620 megawatts, revenue $270 million to $290 million. Non-GAAP gross loss projected $10 million to $20 million. Non-GAAP operating expenses expected $35 million plus or minus $1 million. Adjusted EBITDA expected negative $27 million to negative $37 million. Project to reach long-term financial model in 2023 with DG business contributing over 20% gross margin and US utility scale capacity fully utilized.

• Supply chain cost headwinds, estimated $40 million year-over-year adverse impact. - Out-of-market polysilicon price charges risk. - Market volatility impact on contract pricing and margin exposure for initial utility scale contracts.

Q: Clarity on timing and credits for US expansion.

A: DOE application expected to take 6 months for loan guarantee, then 2 years to first production, early 2025 for production. Expect to meet fab and Modco credits, working on domestic content ITC adder.

Q: Margin guide for 3Q and repricing efforts.

A: Supply chain headwinds of $40 million, good progress on utility scale contract repricing, DG side expected higher prices and Maxeon 6 ramp.

Q: Impact of non-renegotiated power plant contracts.

A: Lower ASP contracts done within 2023, 2024 and beyond will have less margin exposure.

Q: ASP uplift and Maxeon 7 efficiency.

A: Maxeon 6 is minor bump from 5, Maxeon 7 will have record cell and panel efficiencies, more insight at Analyst Day.

Q: Capacity expansion and liquidity.

A: 3-gigawatt US facility expected early 2025, $207 million convertible bond helps with Max 7 conversion, coupon has cash and other payment possibilities.

Q: DG business partnership and volume.

A: Shipments to CD start in early 2023, reallocating supply to US.

Q: Margin bridge and capacity expansion.

A: Details on margin drivers to be shared at Analyst Day, Max 7 conversion timing around 2023-2024.

Q: Asia-Pacific market allocation.

A: Reallocating IBC demand to higher margin markets, Asia-Pacific power plant business lumpy.

Q: Chinese joint venture profitability.

A: Business in scale up, expect to hit profitability as it stabilizes.

Q: Maxeon 7 timing and capacity.

A: Timing around 2023-2024, existing Maxeon 3 capacity 550 megawatts, potential larger wafer impact timing.

Q: US Performance Line margin profile.

A: Targeting 15% gross margin or better once fully ramped and on variable pricing contracts.