Maxeon Solar Technologies, Ltd. Q3 FY2023 earnings call

• US Utility Scale Focus: Key growth driver, with US utility scale revenue up 10% QoQ. Working intensively with DOE for financing of Albuquerque factory, installing TOPCon pilot line in Malaysia, advancing offtake agreements.
• DG Strategy: Settled with SunPower to resume shipments, leveraging Solaria acquisition to expand channel, phasing out Maxeon 6, focusing on Maxeon 7. Europe shipments impacted by inventory, but commercial and industrial segment showing growth.
• IP: Filed patent infringement actions, has over 1,600 granted patents and 360 pending applications across 30 countries, maintaining strong IP moat.

US Utility Scale: Third quarter US utility scale revenue was up 10% vs previous quarter. On track to exit 2023 with fully ramped manufacturing facilities, sold-out backlog at higher prices expected to contribute materially to margins in 2024. Planned New Mexico factory is in engineering and design stage. Working on 3.5 GW solar cell and panel factory in Albuquerque (500 MW increase from original design), hired general manager, secured adjacent parcels. Plan to install TOPCon pilot line in Malaysia's Fab 3. Contracted backlog stands at 3.3 GW through 2025 plus 500 MW each in 2025-2027.

DG: Faced demand challenges from SunPower suspension and Europe market dislocation. Reached settlement with SunPower to resume shipments of 85 MW IBC panels through Feb 2024. Leveraging Solaria acquisition to expand dealer channel to over 170. Europe shipments down 37% sequentially due to elevated industry-wide module inventories. SunPower reserve battery available in multiple markets. Commercial and industrial segment wins in Europe. Phasing out Maxeon 6 to focus on Maxeon 7, bringing Maxeon 7 to market earlier than planned. IBC technology advancements with Maxeon 7 delivering increased efficiency and performance attributes.

• 4Q Guidance: Shipments projected 610-650 MW, revenues $220M-$260M, non-GAAP gross loss $5M-$15M, GAAP operating expenses $113M ±4M, adjusted EBITDA -$27M to -$37M.
• 2023 Full Year: Revenue guidance updated to $1.114B-$1.154B, adjusted EBITDA $4M-$14M, CapEx $66M-$76M.

• DG Market Challenges: Demand challenges from SunPower suspension, Europe market oversupply, high interest rates, policy disruptions.
• Inventory Issues: Build-up due to SunPower dispute and Europe oversupply leading to inventory write-downs.
• IP Risks: Competition and potential patent challenges as competitors try to close performance gap.

Q: Alex Vrabel asked about the cadence of MAX 7 into mid-2024, phase down of Maxeon 6, and when adjusted EBITDA would return to profitability.

A: Bill Mulligan said the downturn provided an opportunity to pivot to Maxeon 7 cost-effectively, Kai Strohbecke added about inventory turning around and Maxeon 6 running at half capacity.

Q: Brian Lee asked about SunPower dispute resolution, margins, and New Mexico facility customer co-investments.

A: Bill Mulligan said settlement included warrants, Kai Strohbecke elaborated on customer co-investments discussions.

Q: Pavel Molchanov asked about Europe vs US utility scale sales and JV in China.

A: Bill Mulligan said US utility scale is a key growth driver, JV used for international offtake.

Q: Philip Shen asked about margins, pricing, SunPower warranty, and payment bond.

A: Kai Strohbecke discussed margin recovery, Bill Mulligan talked about pricing and SunPower warranty resolution.

Q: Donovan Schafer asked about Albuquerque Journal report, DOE loan timeline, and Maxeon 7 warranty.

A: Peter Aschenbrenner clarified on the $2.4B reference, Peter Aschenbrenner talked about DOE loan timing, Bill Mulligan discussed Maxeon 7 warranty.

Q: William Grippin asked about DG customer base ramp, production changes, and cadence.

A: Bill Mulligan and Kai Strohbecke discussed DG customer base ramp, production transition, and inventory modulation.

Q: Andrew Percoco asked about free cash flow and liquidity thresholds.

A: Kai Strohbecke discussed free cash flow cadence and liquidity management.