speaker
Operator

Good day, ladies and gentlemen, and welcome to the Maxion Solar Technologies' fourth quarter 2022 earnings call. Currently, all participants are in a 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 your host, Mr. Robert Leahy of Maxion Solar Technologies. Sir, you may begin.

speaker
Robert Leahy

Thank you, Operator.

speaker
spk11

Good day, everyone, and welcome to Maxion's fourth quarter 2022 earnings conference call. With us today, our Chief Executive Officer, Bill Mulligan, Chief Financial Officer, Kai Strobeck, and Chief Strategy Officer, Peter Aschenbrenner. Let me cover a few housekeeping items before I turn the call over to Bill. 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 20F, 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. 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. With that, let me turn the call over to Maxion's CEO, Bill Mulligan.

speaker
Bill Mulligan

Thank you, Rob, and hello, everyone. This is my first earnings call as Maxion's CEO, and it is great to be back following over 20 years of experience leading SunPower's R&D and operations teams. During my first month and a half as CEO, I spent time at our California R&D headquarters, both of our self-abs in Asia, with our sales and marketing team in Europe, and with employees and customers at our modcos in Mexico. I was reminded by these visits that Maxion has two strong competitive advantages, one in the global distributed generation market and the other in U.S. utility scale. These markets offer exciting, profitable growth opportunities with strong customer demand for high-performance panels, and we have a well-established presence in both of them. I give great credit to our executive leadership team and to our board for putting Maxion in a position to take advantage of these opportunities by executing bold transformation initiatives over the last two years. And I'd also like to give credit to my predecessor, Jeff Waters, for leaving behind a high-performing, cohesive management team. Thanks to their efforts, today we have an updated and expanded manufacturing fleet, strong sales channels in the highest margin markets, expanding beyond the panel revenue streams, and the latest generation of the world's highest efficiency panel technology ready to ramp. Technology innovation has been a legacy strength of ours for decades. Going forward, one of my highest priorities will be to accelerate development and deployment of more efficient and cost-effective solar panel technologies that can be scaled quickly. We will continue to invest in beyond-the-panel offerings that will improve end customer experience and provide additional differentiation and strength in our DG channels. We will also aggressively pursue manufacturing cost reduction and operational excellence in our existing manufacturing facilities. I believe that this combination can make Maxion one of the most profitable companies in the solar industry. And now I'll provide an update on our fourth quarter key initiatives and accomplishments through the lens of our distributed generation and utility scale businesses. Kai will then review our financial performance and outlook, and we'll conclude with Q&A. Let me start by reporting that Maxion delivered financial results in Q4 that were well above planned. driven by strong shipment growth, solid ASPs, and outstanding work by our operations group to significantly beat our COGS targets. As a result, we generated over $20 million of gross profit in Q4 and are well positioned for positive adjusted EBITDA in the current quarter. Our DG business was led once again in volume and revenue by our European team and their strong direct-to-installer channel. Shipments in Europe grew more than 25% year-on-year. We are now approaching an annualized deployment run rate of roughly 1 gigawatt in our European DG business. Our European sales network comprises over 1,000 partners and incorporates services such as direct shipping, credit, in-person sales training, and strategic business planning that make this channel fundamentally different from our competition. We gained market share in several key countries, including the Netherlands, France, Germany, and Belgium. driven largely by increased shipments from our HSPV joint venture. Belgium was a particular bright spot with shipments up roughly 40% year over year and market share in the double digits, joining other long-term Maxion strongholds such as Italy and France. Blended DG ASPs in Europe increased more than 5% sequentially on stable module pricing and a higher mix of power electronic shipments and were up more than 30% year on year. In the fourth quarter, our AC module attach rate was above 20% of total DG shipments outside the United States, led by France and the Netherlands, where AC continues to account for a majority of sales. We expect our AC mix to continue to increase this year, driven by growth in markets where AC modules are relatively new. We also expect increasing revenue and profit contribution in 2023 from our SunPower Reserve storage solution, and SunPower Drive EV chargers. The first storage orders were received last quarter in Australia, and our products team is launching storage in Europe soon, starting in Belgium, Italy, and Spain. Turning to our United States DG business, we are seeing an excellent 2023 demand environment in terms of volume, growth, and price. Unlike some segments of the US DG market that are experiencing cooling demand, Maxion's products are positioned in segments of the market where demand for our premium products is healthy, led by high cost of power locations including California and the Northeast. Our product's value proposition is particularly strong in these markets because of the relatively small roof sizes and common tree shading conditions, both factors leading to constrained roof areas and playing to the ability of our products to deliver more power on our customers' roofs. We are seeing a strong cash business in these states based on long-term savings. with utility rate inflation observing part of the cost increases on loans and competitive leases and PPAs as alternatives to loans. Also in these more mature markets, installers often have sales processes engineered around the long-term value of solar rather than a simple focus on year one savings. Even in states experiencing some cooling demand for solar due to higher interest rates, we are seeing cases of counter cyclical growth from installers who sell long-term value. We are pleased to have recently announced the expansion of our SunPower relationship with new commercial terms for 2023 and mutual exclusivity for Maxeon 6 in the U.S. through 2024. And as we discussed last year, we see opportunity in large segments of the U.S. residential market where SunPower isn't present and where demand for our premium modules has increased due to the abrupt exit of LG. We're excited to take advantage of this opportunity with our new U.S. channel, partnering with Green Tech Renewables. In this relationship, we expect to leverage Green Tech's unparalleled distribution capabilities and focus our energy on training installers on the benefits of our technology and how to translate those benefits into improved financial outcomes for both installers and homeowners. During 2023, we plan to roll out elements of a multi-tiered channel program in the United States similar to our European structure. We are planning to exit 2023 with over 100 new Maxion channel partners in the US, all incremental to SunPower's channel. We're selling our Maxion 3 technology in this channel, which boasts industry-leading efficiency and our new 40-year warranty, which offers installers another unique selling proposition and provides homeowners with enhanced peace of mind. In summary, Our confidence in the strength of our global DG business is high. We expect strong ongoing demand in Europe, increased availability of performance line panels from HSPV, and meaningful contribution from our reserve and drive products will support continued growth in Europe and Australia. In the U.S., we believe that the addition of our new U.S. channel through green tech on top of our contracted minimum volumes with SunPower set us up for strong DG volume growth in 2023. Let's now transition to our utility scale business. We remain primarily focused on the United States market where our uniquely positioned North American manufacturing footprint allows us to provide our customers with reliable supply of leading edge technology. We also have a unique corporate profile anchored in strong ESG values, which is becoming increasingly important to various stakeholders. Earlier this year, We are honored to be the sole silicon module manufacturer named on the Corporate Knights list of the world's 100 most sustainable corporations, a welcome recognition of our focus on becoming an industry leader in sustainability. Our value proposition has been validated by a number of key customers who have contracted for 4.2 gigawatts of supply backlog extending deep into 2025, plus options with advanced deposits for an additional 1.5 gigawatts through 2027. Since our last earnings call, all new bookings have been secured with repeat customers, and in some cases, include adjustments to 2023 commercial terms, which Kai will discuss in his guidance commentary. With a solid and growing multi-year backlog in place, our attention in this business is primarily focused on completing the ramp of our mono per excel and module production and driving cost reduction. Our performance line is expected to ramp to the full 1.8 gigawatt of capacity by this summer. On the supply chain front, we are finally seeing cost decreases on key input materials, which contributed to our better than expected fourth quarter results, and which support the trajectory toward achievement of our long-term financial model targets within 2023. We continue to progress with the planning of our U.S. manufacturing facility, and are in due diligence with the Department of Energy's Loan Program Office, which is the final stage of the LPO process. Subject to successful completion of this process, we expect to significantly benefit from the IRA incentives in future years as we ramp our planned U.S. manufacturing capacity. There is a lot of excitement at Maxion currently, as we expect to deliver our first adjusted EBITDA positive quarter at the end of this month, and are on plan to achieve our long-term financial model within the next 10 months. And with that, I'll turn it over to Kai.

speaker
Rob

Thank you, Bill. And hello, everyone. I will discuss the drivers and details of last quarter's performance and then provide guidance for the current quarter and the full year. Total shipments for the fourth quarter were 734 megawatts, up 21% sequentially, and slightly above our guidance range of 680 to 720 megawatts. The growth is attributable to strong DG demand as well as operational progress from our internal performance line capacity for the U.S. utility scale market. Revenues for the fourth quarter were $324 million. near the high end of our guidance range of 290 to 330 million. The primary drivers were strong output from our Mexico Performance Line ModCo, as well as healthy ASPs in DG. ASPs for our top-of-the-line IDC panels were up by 17% quarter-on-quarter, supported by incremental volume shipments into the U.S. for sun power as well as the new USDG channel. Non-GAAP gross profit in the fourth quarter was $21 million, up $36 million from the previous quarter and $45 million higher than our margin drop in the second quarter of last year. It represents a 6.4% gross profit margin and is the highest ever since Maxion became a standalone company. as well as the first positive gross margin since Q1 of 2021. While we forecasted being gross margin profitable in the quarter, the results exceeded the expectations embedded in our zero to 10 million guidance range. The primary reasons for this outperformance were operational improvement at our performance line factories in Malaysia and Mexico, as well as supply chain costs. especially freight falling faster than expected earlier in 2022 there were opportunities to slightly reduce freight costs in the near term by entering into long-term contracts while these opportunities were tempting at the time we believed spot prices would ultimately pull back and Maxion could realize greater cost savings over time with a more flexible strategy last quarter shipping rates declined sooner and faster than anticipated, and hence contributed to a better-than-expected result for our P&L. Polysilicon spot price declines in China have also been positive for our transfer prices with HSPV, which track market indices. On a year-over-year basis, the impact of total supply chain cost inflation on our cost of goods sold was favorable $2 million, This is materially improved from the prior seven quarters when we saw an average unfavorable impact of more than $30 million per quarter. At the same time, increasing ASPs resulted in an uplift of $43 million, providing a significantly favorable contribution to our bottom line. Because our performance line products for the U.S. utility scale market were introduced less than a year ago, they are excluded as no year-on-year comparison exists. Underutilization charges totaled $9 million in the quarter, demonstrating sequential improvement as we approach completion of the capacity ramp for our performance line products. Our fourth quarter cost of goods sold included a small amount of out-of-market polysilicon costs, which were below our guidance of $1 million. These costs were related to a long-term contract executed 13 years ago that ran until December 31st of 2022. With this contract now expired and any remaining impact expected to be immaterial, we are happy to announce that we will now cease reporting on this metric going forward. Non-GAAP operating expenses were $34 million in the fourth quarter compared to our guidance of $36 million plus or minus $2 million. Adjusted EBITDA in the fourth quarter was negative $4 million and significantly better than our guidance of negative $17 to $27 million based on the previously mentioned favorable development that impacted our gross margin. Gap net loss attributable to stockholders came in at $76 million, compared to $45 million in the previous quarter, mainly driven by a $42 million quarter-on-quarter swing in the mark-to-market valuation of our prepaid forward, as well as $26 million higher income tax provision quarter-on-quarter. Moving on to the balance sheet, we closed the fourth quarter with cash, cash equivalent, restricted cash, and short-term investments of $344 million, compared to $314 million at the end of the third quarter. DIO was flat sequentially at 91 days. Capital expenditures in the fourth quarter were $7 million. which was below our guidance range as we maintained payment discipline while continuing to spend on our performance line capacity and other ongoing initiatives. We are very pleased to have exited 2022 with a positive gross margin trajectory, particularly in DGE, which now enjoys a much improved cost structure thanks to the successful ramp of maximum fixed capacity and improved ASPs based on our geographic optimization strategy and execution by the sales team. Our next financial milestones are to post an adjusted EBITDA positive quarter and to achieve our long-term financial model, including a gross margin of at least 15% and adjusted EBITDA margin of at least 12% of sales by the end of 2023. Previously, we indicated that getting from gross margin break-even to 15% assumed the following key levers. Transitioning to higher ASP utility scale contracts, fully ramping our 1.8 gigawatt performance line facilities, increasing U.S. residential sales, and growing beyond the panel in Europe, all while benefiting to some degree from supply chain cost improvements. Many of these levers are already now showing substantial progress and ongoing momentum. First, a portion of our previously below-market utility-scale ASPs has been adjusted as part of a broad package of supply renegotiations. Second, as Bill mentioned, some of the expected supply chain cost reductions have been realized sooner than expected. And our DG business is benefiting from a combination of factors on both the cost and ASP sides. As a result, we now expect significant margin improvement to occur in the first quarter with further progress expected in the second half of the year as we progress towards our long-term financial model. With this context in mind, I'll now turn to our guidance for the first quarter of 2023 and then lay out our view for the full year. We project first quarter revenues of $305 to $345 million. The midpoint of these numbers and of our shipment guidance are products of continued ASP increases for our IBC products offset by a higher mix of utility-scale shipments due to ongoing ramp of performance line shipments to our U.S. utility-scale customers. Non-GAAP gross profit is expected to be in the range of $30 to $40 million. At the relevant guidance midpoints, this represents an 11% gross profit margin. The largest contributor with respect to sequential improvement is unit cost reduction on our performance line due to ramp effect. We also expect to see ASP improvements due to adjustments in some of our utility scale supply agreements, as well as the impact of our first quarter of shipments through Maxion's new residential channel, together with improved pricing with SunPower. Non-GAAP operating expenses are expected to be $37 million plus or minus $2 million. This includes a slight increase in our spend for beyond the panel and the US residential channel, both of which are expected to enable significant incremental gross margin. Adjusted EBITDA is expected to be between $10 and $20 million, driven largely by improvements in our gross profit. At the relevant guidance midpoint, this represents a 5% adjusted EBITDA margin and would be Maxion's first adjusted EBITDA positive result. First quarter capital expenditures are projected to be in the range of 13 to 17 million dollars. We expect total capex for the year to be in the range of 100 to 120 million for the completion of manufacturing capacity for performance line panels to be sold into the U.S. market completion of manufacturing capacity for our Maxion 6 product platform, further developing Maxion 7 technology and operating a pilot line, preparation of the capacity expansion for our Maxion 7 technology, as well as various corporate initiatives. This annual CAPEX guidance excludes spending for any U.S. manufacturing, which we plan to finance primarily with a U.S. Department of Energy loan and customer co-investment. Previously, we have not provided annual P&L guidance. With the majority of our transformation behind us, we are pleased that we are now in a position to do so. We project 2023 revenues to be in the range of $1.35 to $1.55 billion. About half of these revenues are based on volumes and prices that are contractually fixed for the entire year. For those parts of our business that are not contracted at fixed terms, we feel well positioned due to diversified and growing demand in Europe and the US. 2023 full year adjusted EBITDA is expected to be between 80 and 100 million dollars, achieving margin levels consistent with our long-term financial model before we exit the year. As these targets and our first quarter guidance imply, we expect margins to increase further from current levels, with the fourth quarter expected to be our best quarter on both margin dollars and percentages. The ramp of our performance line facilities and related operational improvements are primary levers, followed by AST expansion and utility scales as we commence shipping on our 2022 bookings as well as incremental margin contributions from our new residential channels plus beyond the panel products. With that, I turn the call back to Bill to summarize before we go to Q&A.

speaker
Bill Mulligan

Thank you, Kai. As I mentioned in my opening remarks, my goal is to help make Maxion one of the most profitable companies in the solar industry by driving aggressive manufacturing cost reduction and operational excellence, while capitalizing on our leadership in panel technology and global channels. The company has a strong start in 2023 with positive adjusted EBITDA guidance for the first quarter and expected increasing profits throughout the year. As we look beyond the current year, we are pursuing several significant growth opportunities that we expect to drive future top and bottom line expansion. Now, let's go to Q&A. Operator, please proceed.

speaker
Operator

Thank you. And as a reminder, to ask a question, simply press star 1-1 on your telephone and wait for your name to be announced. To withdraw the question, simply press star 1-1 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Alexander Bravo with Bank of America. Please proceed.

speaker
spk11

Julian, do you want to take it?

speaker
Robert Leahy

Yep. Hey, good afternoon. It's Julian Will Smith here.

speaker
Julian Will Smith

Hey, thank you guys very much. Truly well done. Impressive, I've got to say. So to that end, I just want to talk a little bit about the margin inflection we're seeing here in the fourth quarter and obviously talking about here in the first quarter. I mean, what's the cadence as we think through the course of the year here? I mean, you're already achieving... a good chunk of what you want to do in 23 from a gross margin perspective in the first quarter as far as you're suggesting here in the guidance. Can you talk a little bit about how you get to that 15% in the course of the year here into the exit run rate? And then also similarly, can you talk about what the outline looks like even for the year ahead considering the utility scale comments that you made and what that might imply for your domestic manufacturing effort?

speaker
Bill Mulligan

Yeah. Hi, Julian. Bill Mulligan. Yeah, thanks for the question. Yeah, you know, we're obviously starting off 2023 strong, and we expect the business to continue to improve throughout the year. As you probably know, Q4 is typically seasonally our strongest quarter, but we also expect some Maxion-specific parameters to come into play here. You know, perhaps Kai could say a few words about that.

speaker
Rob

Yeah, absolutely. Hi, Julian, and thanks for your encouraging words here. So we put a little slide together also on page six of our slide deck that you may want to reference in terms of the gross margin trajectory. And you're right to point out that we had quite a steep improvement here in gross profit margin on a non-GAAP basis in the fourth quarter. A few things came together we already guided for. break-even levels, above break-even levels. But, you know, we outperformed that guidance, as I mentioned before, partially because of outperformance in our operations for the U.S. performance line and also because of especially great costs dropping sooner and faster than we had anticipated. Then as we look into the first quarter, you see some further improvement here. And those improvements are going to come from continued improvement in our U.S. performance series. We continue to ramp. Costs are going to come further down. We are expecting to further reverse some of the lower-of-cost market inventory write-downs that we've had that always gives a bit of a boost there when we do these reversals. And also, you know, we have had some economic benefits from some of the renegotiations that we have done with our customers for some of those delivery contracts that are going to kick in in the first quarter. Furthermore, I would point out the strong U.S. business. renegotiated our supply and extended our supply agreement with SunPower. We got our new U.S. residential channel ramping. Europe is a very, very strong area. We have seen strong IBC ASP increases in the fourth quarter, and we expect to continue to do so in the first quarter. So there's quite a lot of things coming together here to get us to the levels that we are guiding. And then we expect further improvements through the year as we then kind of have the highest expected performance for the year in the fourth quarter and also expect to achieve our long-term financial model within 2023.

speaker
Robert Leahy

Got it, guys. And just if you want to talk a little bit on the sustainability of the ASPs here.

speaker
Julian Will Smith

I mean, obviously, you know, given the backdrop, given the trends here, it's a nice benefit here. How do you think about cost input and the ability to hold on to some of that improvement yourself or passing along that to your customers here, to the course this year, if you will? So we have...

speaker
Rob

Yeah, we have really, really good confidence in our projections here that we put out. And as we said in our prepared remarks, about half of our ASPs are locked in for the year based on those projections. So that definitely gives us some comfort, but also we have some you know, very, very strong positions, product positioning, really, with our product in some markets. So we think the projections that we have put out here are really high confidence.

speaker
Robert Leahy

Got it. Excellent.

speaker
Julian Will Smith

Just on the build-out on the utility scale side, just any comment on status with DOE, et cetera, just considering how much demand there seems to be. I mean, it's Quite a statement on the prepayments.

speaker
Bill Mulligan

Yeah, sure. Julian, Bill again. Yeah, I'm really excited about this U.S. project. As you may know, I've been working in the battery industry for the last few years, and we've been following what became the IRA legislation very closely. For a while there, we didn't think it was going to happen, but we applaud the administration for getting it done and DOE for their mandate to enable the funding. So the IRA is a real game changer for renewable energy in the U.S., you know, bringing back good manufacturing jobs, increasing national security by controlling our energy economy. You know, given Maxion's Silicon Valley heritage, our strong North American footprint, our long experience in the U.S. market, we believe Maxion's really well positioned to benefit from this. And we believe the project we've got out there is really consistent with the administration's objective. And the project economics, I think, will look really quite favorable given the IRA incentives. So as I mentioned in my prepared remarks, you know, we're now into the due diligence phase with DOE. And, you know, this is the last step in the loan program office process. And, you know, we're working to bring this capacity online as soon as possible.

speaker
Robert Leahy

Got it. Excellent. Well, congrats again. Speak to you guys soon. Welcome, Bill.

speaker
Operator

Thank you. Thank you. And one moment for our next question, please. And it comes from the line of Philip Shen with Roth MKM. Please proceed.

speaker
Philip Shen

Hey, guys. Thanks for the questions. I'll echo the congratulations as well on the margin improvement and outlook there. Wanted to dig into the updated relationship with SunPower. You guys had that announcement earlier this year. It seems like it's a strong and healthy one. I think on the last quarter, you guys talked about how SunPower might be maybe 50% of your DG mix in 2023, down from maybe 75% in 2022. With the expansion of that relationship, I got to imagine SunPower is going to take a larger chunk of your IBC volume. So I was wondering if you could share what that might be. and I'll have a few follow-ups here as well. Thanks.

speaker
Bill Mulligan

Yeah, hi, Phil. Yeah, you know, SunPower, of course, is an extremely important customer for us. We're really excited about this relationship, and, you know, I think it's mutually beneficial, and, you know, we hope to keep it going for, you know, a long, long time. You know, I think in terms of the specific contribution to our overall volume, that's something we We generally don't disclose, but Kai, I don't know if there's any more color you could add there.

speaker
Rob

No, not really much. We don't break down our business by customers. I can refer you to our prepared deck where you can see the DG business overall on a revenue basis that's been growing in the fourth quarter. to $244 million revenue from $228 million in the third quarter. And you also see some of the regional breakdown there, but of course, as far as the USA and Canada are concerned, this is a combination now of our U.S. utility scale plus SunPower plus the new USDT channel.

speaker
Philip Shen

Got it, guys. And I totally get it, but as a quick follow-up there, you know, you did share a little bit last quarter, and just on a forward-looking basis, given the announcement earlier this year, I got to imagine incrementally there's more volume to SunPower than you guys had expected perhaps from the end of 2022. Is that a fair statement?

speaker
Brian

Phil, this is Peter. Maybe I can take that one. So, again, as Bill said, we don't – I think typically break out volume by customer or price for that matter. I think it's fair to say that there's more volume, there's more demand for our product, particularly our IBC product, than we can serve. And we've been in the process of shifting some of that allocation around to optimize overall ASP. In general, I think that means more of the product going to the U.S., where ASPs are the highest. And there, though, we have the two options of bringing up our own new channel, which is very healthy ASPs and also strategically important in the long term. So there's a balance there between supply to some power and supply to the new green tech channel.

speaker
Philip Shen

Great. Got it. Thank you, Peter. And then I think you guys started your dealer network recently as well, maybe a month ago or so. What's the risk or potential there that dealers may jump from SunPower to your network? Is that something that you do not expect at all, or is that something that might happen? And then as it relates to Greentech, you just talked about it, how is that volume looking? With – we were writing – in identifying module price decreases in resistive solar from the end of last year until now. I think that's dropped out recently. Has the price reduction there impacted you guys in any way? I'm guessing at the premium segment, maybe not much at all, but perhaps a little bit. So just curious if you can talk through some of those dynamics. Thanks.

speaker
Bill Mulligan

Yeah, you know, the overall strategy with Green Tech Renewables is really to address portions of the market where sun power is not there. And if you look at some of the supplemental material there, you can see there's a large sort of unaddressed portion of the market that we hope to go there. There are just our dealers out there that can't get the Maxion product. So that's our goal. And, you know, that opened up when LG left the market fairly recently. So we're trying to fill that hole and stay away from the SunPower dealers.

speaker
Philip Shen

Great. One last one, if I may. Can you talk through what the margin structure looks like for Resi or DG in Europe versus the U.S.? I know the pricing is better here in the U.S., but does that directly correspond to higher margins here? And if not, maybe talk us through how Europe is able to kind of maintain its own margins for U.S.?

speaker
Rob

So I would say on the IVC side, pricing, we oftentimes talk about it as a proxy, and that's why we are optimizing the thing for prices. But in fact, what we're optimizing for is for margins, right? And here, the reason why we have been moving more volume to the U.S. is because not only it's better price, but also it's better margin. So directionally, the margin is better in the U.S., and that's why we are doing it. In addition to that, another, you know, extra point to make is our beyond the panel. business, which includes the established microinverter business. And we just talked about that we are now at a point where we are enjoying more than 20% in tax rates, and we're not going to stop there in Europe. And we are starting with Beyond the Panel in Australia and soon going to Europe with storage and then afterwards EV charging, so these are other initiatives that we have. that are going to boost margin percent, but also margin dollar.

speaker
Brian

So maybe I can just add one note to that, and that is that our product portfolio currently is a little different in Europe and the U.S. In the European VG market, we have not only our IBC products for sale, but also a healthy dose of our performance line, which we source from the HSPB joint venture. We've got a different sort of portfolio of weapons there, and we're able to increase overall volume through our channel there in two ways. And so the optimization that we're talking about really is an optimization across not only the relatively constrained IBC capacity, but also a little bit more of capacity on tap in Europe with performance line.