Maxeon Solar Technologies, Ltd.

To raise your hand during Q&A, you can dial star 1 1. Good day, ladies and gentlemen. Welcome to the Maxion Solar Technologies third quarter 2022 earnings call. Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host, Mr. Robert Leahy of Maxion Solar Technologies. Sir, you may begin.

Thank you, operator. Good day, everyone, and welcome to Maxion's third quarter 2022 earnings conference call. With us today, our interim chief executive officer, Mark Babcock, chief financial officer, Kai Strobeck, and chief strategy officer, Peter Raschenbrenner. Let me cover a few housekeeping items before I turn the call over to Mark. 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 investor relations website. Also, we will reference certain non-GAAP measures during today's call. Please refer to the appendix of our supplemental slide deck, as well as today's earnings press release, both of which are available on Maxion's investor relations website, for a presentation of the most directly comparable GAAP measure, as well as the relevant GAAP to non-GAAP reconciliations. Let me turn the call over to Maxion CEO, Mark Babcock.

Thank you, Rob, and good day, everyone. I was appointed interim CEO of Maxion in September when our board and Jeff Waters made the mutual decision to transition to new leadership. We are very thankful for Jeff's nearly four years of service to the company, during which we successfully spun out of SunPower, refreshed the majority of our manufacturing fleet, launched our Beyond the Panel initiative, and commence shipping our first Performance Line product into the United States. As we look forward to the next four years, we expect our focus to be primarily on panel manufacturing capacity growth, expansion of our footprint in the U.S. market, and increasingly material contributions from our Beyond the Panel initiatives. The Board's search for a new CEO is well underway, and in the meantime, it's a privilege for me to serve the company during the transition. With that said, I'll now provide a detailed update on Maxion's key transformation initiatives and progress toward achievement of our long-term financial model. Then Kai will review our financial performance and outlook, and we'll conclude with Q&A. Now let's talk about progress of our business, starting with distributed generation. We were thrilled to formally launch our U.S. channel expansion initiative at the RE Plus Conference in September. Our largest DG customer, SunPower, had a significant presence there and expressed strong interest in our products for 2023 and beyond. While this partnership has evolved since the spinout, their relationship remains mutually beneficial, and we look forward to continuing to be a key supplier to SunPower well into the future. We also began booking our first sales of Maxion branded products destined for the DG market through a new partnership with Greentech Renewables, previously known as CED Greentech. This new channel is busy selling systems for delivery starting in January. Feedback from new installer customers was excellent, with many noting the value and differentiation of our 40-year warranty. As demand for premium solar products increases and the number of alternative suppliers decreases, we believe this new partnership should deliver material market share expansion in 2023 and beyond. Maxam will also cultivate touchpoints with installers and end customers via our new channel program. By moving closer to end customers in the US, we expect to drive ASP expansion beyond our current global average. ASPs are also increasing materially in core EU markets like France and the Netherlands, where modules integrated with power electronics accounted for more than 60% of sales in the third quarter. Beyond the panel revenue also grew sequentially in Belgium, Germany, Italy, the UK, and Australia. Our channel partners are preparing to integrate storage, which starts shipping next quarter, as well as our new EV charging products. We're making our installers' lives easier by shipping pre-integrated systems from a single source and providing a point of differentiation for their sales professionals to increase close rates at the kitchen table. We believe Maxion is uniquely positioned for success in this portion of the downstream value chain by virtue of our channel structure, respected brand, and unique and differentiated solar panels. The initial results are very encouraging, and we believe we're just starting to scratch the surface at this opportunity. Overall, DG sales in Q3 were up 25% year-over-year as we benefited from additional price increases and a higher mix of our Maxion 6 product, which has now replaced all of our previous Maxion 5 capacity. Europe set new volume and revenue records for the sixth consecutive quarter. We were particularly pleased with our business results in France, where we crossed the 60% threshold for AC module mix and increased our residential market share to north of 20% in the third quarter, up from mid-teens in 2021. Beyond the panel, contributions were also strong in Australia, where AC module mix increased to approximately 40%, and where we began booking orders for storage product sales with delivery scheduled for Q1. We continue to maximize global DG profits by leveraging supply of our performance line products in certain markets, and redirecting IBC volume to our highest ASP segments, such as the residential markets in the U.S. and European Union. We plan to continue this margin optimization strategy in 2023 and expect to liberate a significant amount of Maxion III supply to support sales into our new U.S. residential channel. The strength of demand in both the U.S. and EU has led us to reassess the deployment plan for Maxion VII. Our seventh-generation IBC technology is based on a novel cell architecture that we expect will yield roughly 100 basis points higher efficiency compared with our current IBC technology, as well as other unique and important performance attributes. This translates to a 25% energy yield advantage compared to standard efficiency modules in the first year and is amplified over time due to slower degradation and longer warranted lifetimes. We believe this product is ideal for the US and EU residential markets. We are increasing electricity demand from EV and heat pump adoption is constrained by limited roof spaces. Given the unique value proposition of Maxion 7 and the exceptional demand environment, we are evaluating strategies to expand Maxion 7 capacity instead of retrofitting existing lines. This approach will maintain full output from our Maxion 3 production to meet the high levels of anticipated demand in 2023. Detailed engineering studies are ongoing, and we will provide capex and ramp timing information at a later date. In our utility scale business, we ramped our performance line capacity to just over 1 gigawatt and are on track to achieve the full 1.8 gigawatts of capacity in 2023. The ramp of our U.S.-focused capacity is timely, with extremely high appetite for solar panels from U.S. utility scale customers. Our discussions at the RE Plus conference validated what we have heard from several third-party sources around an approximate doubling of U.S. utility-scale demand over the next few years due to the impact of the recent extension and enhancement of the investment tax credits. With a multi-gigawatt pipeline fully allocated through 2025, our sales team is now in active discussions for supply agreements with delivery dates into 2028. As we assess our opportunities in U.S. utility-scale business, we are highly focused on maximizing the advantage of our unique market position. With that in mind, I'd like to share an update on our plans for domestic manufacturing. Developments in the macro geopolitical landscape and recent passage of the Inflation Reduction Act have put in place conditions that support exciting growth prospects for Maxxion. We plan to capitalize on this opportunity with a new 3-gigawatt solar cell and module factory located in the southeastern United States. Our unique technology and tailored supply chain is in high demand with customers, and we're moving rapidly to secure long-term supply arrangements that ensure healthy margins for Maxion while providing certainty of supply for our customers. We anticipate ramping in 2025, subject to the completion of financing through the Department of Energy Loan Guarantee Program. The next step in this process is an invitation to due diligence and a negotiation of a term sheet, which, if successful, would lead to a conditional commitment. We continue working closely with the DOE team to move the process forward and expect an invitation soon. With a total projected investment of over $1 billion, this factory is currently planned to generate over 2,000 manufacturing jobs and enable long-term, predictable supply of locally produced solar panels to our customers. It's an exciting time at Maxion. We've done some heavy lifting during the past two years, ramping Maxion 6, developing Maxion 7, launching beyond the panels, and expanding into U.S. utility scale. These efforts are finally starting to show the expected results as we improve from our second quarter 2022 margin trough toward achievement of our long-term financial model next year. While we are now accelerating our 2024 to 2026 growth initiatives we're still laser-focused on executing the final steps in our transformation to profitability in 2023. With that, I'll turn the call over to Kai.