Maxeon Solar Technologies, Ltd. Q2 FY2023 earnings call

• Utility-scale: Shipped over 1.4 GW annualized volume in Q2, 90% to U.S. customers; completed Primergy's Gemini site, a 968-MW project; Mexicali Modco achieved full capacity in late June with ramp-up expected in H2 2023.
• DG business: Experienced rapid demand slowdown in U.S. residential due to NEM 3.0, inventory, and interest rate effects; less impact in Southeast and Texas; Maxeon-branded dealer channel showing growth but behind targets; in Europe, faced inventory bubble in commodity segment but held gross margins above 20% with price cuts.
• Manufacturing: Selected Albuquerque, NM as U.S. manufacturing site; evaluating upsizing factory to 4.5 GW based on strong market demand and site readiness; ongoing site-specific plans submission to DOE for environmental studies.
• Technology: Over past 4 quarters, expanded factory output by over 3x and increased average panel power by ~5%; focused on extending competitive advantage with Maxeon 7 and ramping Maxeon-branded channel in U.S.

Maxeon's revenue grew 9% sequentially and 46% year-on-year in Q2 2023. The utility-scale segment was the primary growth driver, shipping over 1.4 gigawatts of annualized volume in Q2, 90% of which was to U.S. customers, including the 968-megawatt Primergy Gemini site. The distributed generation (DG) segment faced demand softness, particularly in the U.S. due to factors like NEM 3.0 implementation and high inventory levels. In Q2, DG shipments were impacted, but the Maxeon-branded dealer channel showed promising growth, roughly doubling sales from distribution to installers though behind original volume targets. In Europe, the DG market had inventory issues, but Maxeon held Q2 DG gross margins above 20% despite price cuts.

• Q3 2023: Projected shipments 700-740 MW, revenues $280-320M, non-GAAP gross profit $30-40M, non-GAAP operating expenses $43M ±$2M, adjusted EBITDA $2-12M, CapEx $29-35M.
• Full year 2023: Updated revenue guidance $1.25B-1.35B, adjusted EBITDA guidance $80M-100M; total CapEx expected $150M-170M, excluding U.S. manufacturing spending.

• Demand slowdown in DG, particularly in U.S. residential due to market dynamics like NEM 3.0 and inventory issues.
• Dispute with SunPower over non-circumvention clause in master supply agreement and unpaid invoices of ~$29M.
• Market volatility and inventory challenges in Europe's DG market affecting sales and margins.

Q: Julien Dumoulin-Smith asked about Europe's market conditions, IBC vs P-Series, and C&I as a pivot.

A: William Mulligan said Europe's conditions deteriorated due to high inventory in commodity sector, Maxeon is immune but not isolated; focusing on growing market share in Europe, C&I is an opportunity with past experience, e.g., agrivoltaics in U.S.

Q: Philip Shen asked about SunPower dispute resolution path and timing.

A: William Mulligan said the dispute is new, relationship is symbiotic and mutually beneficial, both parties incentivized to resolve quickly; Kai Strohbecke mentioned contract stands and volumes expected to continue.

Q: Brian Lee asked about SunPower shipments and dynamics.

A: Kai Strohbecke said they are willing to work with SunPower, monitor exposure, and expect contract to be honored; guidance is based on contracted minimum volumes.

Q: Andrew Percoco asked about Albuquerque factory's incremental capacity and pricing around domestic content.

A: William Mulligan said utility-scale customers buy in big chunks, upscaling based on strong market and site readiness; Peter Aschenbrenner mentioned DOE loan expected to scale with facility size.

Q: Graham Price asked about guidance breakout of IBC vs shingled and Albuquerque factory's loan scaling.

A: Kai Strohbecke said they don't provide breakdown on shipment/revenue basis; Peter Aschenbrenner said DOE loan expected to scale with facility size, constraints around financial metrics.

Q: Kevin Pollard asked about C&I margin profile and Q4 guidance.

A: Kai Strohbecke said C&I margin profile is slightly lower but comes in bigger sales chunks; Q4 expected to have improvement due to seasonality and DG business recovery.

Q: Donovan Schafer asked about C&I channels and topCON technology.

A: Peter Aschenbrenner said CVAR exists in Europe, Maxeon caters to premium C&I market; William Mulligan said future technology will be topCON, considering retrofit of existing facilities based on economics.

Q: Philip Shen asked about DOE loan timing, wafer sources, and facility announcement without loan.

A: William Mulligan said site selection completed, enabling rapid project progress; Peter Aschenbrenner said midterm aim is to source wafers in U.S., facility announced now as site event planned tomorrow to keep investors informed