Maxeon Solar Technologies, Ltd. Q1 FY2024 earnings call

• Maxeon has faced significant pressure since mid-last year due to worldwide Chinese module oversupply, high interest rates, policy changes, SunPower supply agreement termination, and delivery push outs by primary utility scale customers.
• Initiated capacity restructuring initiatives in October 2023, including shutting down Maxeon cell capacity in Malaysia and pivoting Maxeon 7 commercialization plan.
• Negotiated liquidity support from largest shareholder TZE, with TZE to invest $97.5 million via debt and commit $100 million equity investment (subject to reg approval), and restructuring of 2025 convertible bonds with majority expected to convert to equity.
• In utility scale, had momentum heading into 2024 but faced project delays from large customers, had to curtail production, and seeing improving price and demand environment due to US trade policy changes. Making progress on domestic manufacturing in Albuquerque, NM.
• In DG, market demand sluggish in US and Europe, but signed up over 100 US Dealers since last earnings call, and first storage product gaining traction in Italy.
• Focus on returning to profitability early in 2025, reducing customer concentration, and patent actions on TopCon and IBC technologies.

Fourth quarter total shipments were 653 megawatts. First quarter total shipments were 488 megawatts, a 25% sequential decline and 37% year-over-year decline. Revenues in Q4 were $229 million, roughly flat compared to previous quarter. First quarter revenues were $187 million, 18% lower than Q4 2023 levels. For 2023, total revenues were over $1.1 billion, up 6% from 2022. DG shipments in Europe accounted for over 20% of fourth quarter volume, increasing ~8% quarter-on-quarter but down over 20% year-over-year. Utility scale shipments were impacted by customer project delays in Q1.

• Second quarter shipments projected to be between 520 and 600 megawatts.
• Second quarter revenues expected to be in the range of $160 million to $200 million.
• Non-GAAP gross loss expected to be in the range of zero to $20 million, with a non-cash charge of ~$20 million for inventory write-downs.
• Adjusted EBITDA in second quarter expected to be between negative $31 million and negative $51 million.
• 2024 annual revenues projected to be $640 million to $800 million, adjusted EBITDA expected to be between negative $110 million and negative $160 million with sequential improvement from Q2.
• Expect to exit 2024 with peak of prepayment amortization behind us and rebuilt US DG channel contributing healthy gross margins, and return to adjusted EBITDA profitability early in 2025.

• Market dislocation due to worldwide Chinese module oversupply, high interest rates, and policy changes.
• Termination of SunPower supply agreement and delivery push outs by primary utility scale customers.
• Slow progress in working down inventories.
• Uncertainty around patent litigation outcomes.
• Complications in securing DOE loan guarantee due to majority ownership by Chinese entity.

Q: On the DOE loan guarantee, update on situation and impact of TZE ownership?

A: Still committed to Albuquerque project, DOE application advanced, but transaction complicates process, exploring other funding mechanisms.

Q: On project cancellations/pushouts, details on Origis contract cancellation, notice period, reason for cancellation, risk of backlog cancellation?

A: Had 1.2 gigawatt contract with Origis, informed early 2024 of delays, terminated contract and pursuing damages, won't speak on motivations but understanding was related to project ways.

Q: With majority ownership by Chinese entity, complicates DOE loan guarantee process?

A: Yes, complicates but believe scenarios exist and working closely with DOE.

Q: Share count once structured financings concluded?

A: Complex with many moving parts, detailed disclosures in 6-K, broad strokes include new investments and conversions.

Q: Thoughts on patent infringement suit outcome and IP defense going forward?

A: Outcome not surprising, merits of case strong, expanding action on other markets, appealing Netherlands decision and pursuing actions in Germany.

Q: Exposure to incremental import tariffs and impact of TZE ownership on regulator discussions?

A: 201 bifacial exemption working with Mexican govt and US admin, AD/CVD country specific, working with participants, TZE ownership aims to support US reshoring.

Q: TZE ownership and IP access, motivation to prioritize Maxeon?

A: TZE values Maxeon as independent company with unique access to Western markets and technology leadership, partnership expected to be synergistic, keeping Maxeon independent with unique US market access.

Q: Evaluated IT backed loan as capital raising option?

A: Looked at multiple alternatives, new liquidity from TZE was only credible option providing long term capital and delevering balance sheet.

Q: Cadence of EBITDA turnaround and drivers, US Utility project pricing?

A: Turnaround driven by full capacity utilization, better US Power plant pricing, rebuilding DG channel, and transitioning utility scale technology, forward pricing in US utility scale confidential but contracts at healthy ASPs.