Maxeon Solar Technologies, Ltd.

Good day, ladies and gentlemen, and welcome to the Max Beyond Solar Technologies Third Quarter 2020 Earnings Conference Call. Currently, all participants are on the remote. Later, we'll conduct a question and answer session and instructions will be given at that time. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Mr. Gary Dvorak of the Blue Shirt Group. Start your meeting again.

Thank you, operator. Good day, everyone, and welcome to Maxion's third quarter 2020 earnings conference call. With us today is Chief Executive Officer Jeff Waters and Chief Financial Officer Joanne Solomon. Also available for questions during the Q&A is Chief Strategy Officer Peter Aschenbrenner. Let me cover a few housekeeping items before I turn the call over to Jeff. As a reminder, a replay of this call will be available later today on the investor relations page of Maxion's website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the safe harbor slide of today's presentation, today's press release, the 6K, and other SEC filings. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. To enhance this call, we have also posted a supplemental slide deck on the events and presentations page of Maxion's Infest Relations website. Finally, we want to point out that results reflect the full three-month period. Through August 26th, we were part of SunPower. Since then, we have operated as an independent company. With that, let me turn the call over to Maxion's CEO, Jeff Waters. Jeff?

Thank you, Gary, and good day, everyone. I'm delighted to be addressing you today as the CEO of Maxion Solar Technologies in our first earnings call as an independent company. I'd like to start by thanking the teams at Maxion and SunPower for as well as our strategic shareholders, TZS and Total. It was the collective hard work and collaboration of these teams that made possible our spinoff on August 26th. We're energized and optimistic as we start this new chapter as a recapitalized independent company with leading technology, brand, and global downstream channel. This first quarter as an independent Maxion was a good one. The recovery in our business continued with solid sequential growth in shipments and revenue and improved margins. Growth was balanced across all geographies, driven primarily by the strong channels we have built in the distributed generation, or DG, segment. Joanne will cover those financial details shortly. Now I'll review developments in our two businesses, DG and large-scale power plant. First, DG, which we expect to continue as the near-term driver of our business. DG was strong around the world, with sequential revenue growth of 35%. Nearly all regions grew sequentially as markets continued to recover from the COVID-induced disruption. We believe that the DG opportunity outside the U.S. is promising. For example, let's look more closely at Europe, which was especially strong this quarter. In Q3, we shipped 106 megawatt into the European DG market, almost equal to the 110 megawatt that went in to the U.S. to our partner SunPower. We expect continued DG growth in Europe due to three primary factors – First, demand in our core markets such as Italy, Benelux, France, and Germany continues to grow, driven by the increasingly attractive economics of self-consumption and strong government support measures. Second, we continue to build market share, having nearly doubled our share of the European DG market in the past two years. Finally, we're expanding our footprint into incremental markets such as Greece, Hungary, Cyprus, Bulgaria, and Lithuania. To further accelerate growth in October, we initiated an incentive program for installers that buy through our official distributors. This program is intended to strengthen our distribution network by giving installers the tools to both create and rapidly fulfill demand. We introduced the program in five European countries and expect to roll it out across Europe in 2021. In parallel to expanding our geographic footprint, we are driving product innovation. In July, we made the first concrete step toward implementing our beyond-the-panel strategy when we announced our AC module product line. We are already taking orders in certain European markets and expect to make our first AC module shipments within the next few weeks. Our inverter-integrated AC panels offer several compelling benefits. Installers benefit with access to highly differentiated, best-in-class products and a simplified sales, design, and installation process. The factory integrated and tested panel enables fewer parts and installation steps, and a single SKU simplifies inventory management. As well, installers can capture more revenue because the system is easily expanded with incremental panels. In the end, installers and customers get more peace of mind from a high performance, reliable product that will produce more energy over the life of the system. On top of the increased reliability and performance, and customers also benefit from an industry-leading 25-year product warranty. And with a monitoring app that displays real-time and historical performance data, customers can confidently monitor system performance and health anytime, anywhere. We expect sales of AC modules to ramp throughout 2021 as we expand into other geographies and as we incorporate microinverters into our performance product line. Now I'll turn to our large-scale business. This business is driven by our performance series panels, which deliver differentiated value through our patented shingling technology selling it to power plant and other large-scale opportunities. We expect this end market to drive growth for us over time, with the business showing solid growth in the third quarter and with revenue up 7% sequentially. As we look out over the coming year, there are two factors that we expect to moderate near-term revenue growth in our large-scale business. The first factor is strong projected demand within China at higher ASPs than are available in most other global markets. Second, the China upstream supply chain is experiencing a series of disruptions in terms of limited availability and price increases for key materials such as polysilicon and glass. Global logistics costs have also increased, mainly due to COVID-related factors. All this is pressuring the near-term price competitiveness of our P series products outside of China. For these reasons, we've agreed with our HSPV joint venture to significantly shift volume allocation to the Chinese market through mid 2021. As a reminder, performance series sales to China are made by HSPV, not Maxion. That said, we're confident that shifting volume to China is clearly the right call for HSPV and for Maxion as a joint venture partner. Since the profit from sales in China will allow HSPV to improve its financial performance, and to drive scale and cost down more rapidly. This ability to flex our volume allocation enables Maxion to have a capital efficient approach to the large scale market. Partnering with QZS to create the HSPV joint venture enabled Maxion to avoid a high fixed cost base while serving the large scale market. The ramp of HSPV's first new three gigawatt smart fab continues with full operation expected by the end of the quarter. Demand is high in China for the new bifacial P5 panels, and we're working hard with HSPV on further shingled cell technology innovations to drive continued performance increases and cost reductions. From Axion, we therefore expect recovery in our large-scale shipment volume to happen later in 2021. We believe that the upstream supply chain should return to a more balanced situation over the next few quarters. We also expect logistics costs, which have been impacted by COVID, to decrease over that period as additional shipping capacity is released. As supply chain costs normalize and as HSPV drives scale through sales in China and implements further technology improvements, we expect Maxion's large-scale business to return to growth mode and be an important contributor to overall company profitability. Let me now touch on progress with our IBC Technology Root for Action Fab 3. We plan to install the first MAX 6 line by Q4 2021 and plan to have converted the existing MAX 5 line to MAX 6 by early 2022. Our IBC technology continues to lead the industry in terms of performance and, as you will hear shortly from Joanne, commands premium ASPs. Replacement of our 10-year-old MAX 2 technology with new leading edge MAX 6 capacity is expected to further increase our differentiation versus the competition and to support gross margin expansion. To summarize, MaxxHand is now positioned to grow as an independent, recapitalized company. We're focused on building our DG business around the world, further enhancing the value of our panels by incorporating AC functionality and expanding our industry-leading DG channel footprint into new markets. We are proceeding with our Fab 3 technology refresh that will upgrade our entire IBC manufacturing fleet to the highest levels of industry performance leadership, and premium value. Meanwhile, we're being patient and disciplined in pursuing the large-scale opportunity, which we expect to be sizable over time. Now, I will turn the call over to Joanne to review our financial performance. Joanne?