Maxeon Solar Technologies, Ltd.

Good day and thank you for standing by. Welcome to Maxion Solar Technologies first quarter 2023 earnings conference. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Please go ahead.

Thank you, Operator. Good day, everyone, and welcome to Maxion's first quarter 2023 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 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 gap measure, as well as the relevant gap and non-gap reconciliations. With that, let me turn the call over to Maxion CEO, Bill Mulligan.

Thanks, Rob. I'm pleased to report that Maxion had a very strong first quarter, executing well across the whole company and delivering financial performance ahead of expectations. On our last earnings call, we noted several internal and external factors that had the potential to accelerate our margin expansion. These factors helped Maxion exceed our Q1 financial projections and reach our corporate gross margin target of at least 15%. Our first quarter 2023 non-GAAP gross profit was $54 million, or 17% of revenue. We also delivered adjusted EBITDA of $31 million, or 9% of revenue. While the team is pleased with these quarterly results, we are still very much in execution mode, focused on hitting our full-year targets and executing key projects that we believe will make Maxion one of the most profitable companies in the solar industry. With this context, I'll now provide an update on our first quarter key initiatives and accomplishments through the lens of our distributed generation and utility scale businesses. Kai will then review our Q1 financial performance, refresh our 2023 outlook, and we'll conclude with Q&A. Our DG business was led once again in volume, revenue, and gross margin dollars by our European team and our unique direct-to-installer channel in that region. Our strong European footprint allowed us to maintain margins at similar levels to the previous quarter in both percentage and absolute terms, despite typical Q1 seasonality trends and increased overall industry supply volumes that created a more competitive pricing environment. This is another example of how Maxion has been able to consistently maintain significant ASP premiums through our differentiated product portfolio and unique channel strategies. Belgium and France were bright spots, both posting year-on-year volume growth of more than 40%. Our Italy team also exceeded their volume target, in part due to growth in the commercial segment. Serving commercial rooftop demand through our existing dealers allows us to increase our mix of performance line modules, and in turn frees up IBC volume for sale in higher ASP segments. Overall European ASPs were down sequentially in line with our expectations but benefited from an AC module mix north of 20%. We expect beyond the panel sales to increase over the course of 2023 with a higher attach rate of microinverters as well as sales from storage and EV charger products. Our United States DG business also delivered strong results with higher than planned shipments to SunPower, as well as material gross margin contribution from our new Maxion residential channel. While demand in some segments of the U.S. residential market has cooled, customer appetite for our premium products remains healthy, particularly in markets where the effect of rising interest rates has been offset by increased power costs and where constrained roof space plays to our product efficiency advantage. We were particularly excited to begin the ramp of our new Maxion US residential channel in Q1. By moving closer to USN customers, we were able to capture the highest ASPs in the company's history, increasing our global blended DG ASP by almost 3% in the first quarter. It will take time and considerable effort to build a leading independent presence in the USDG market. But we feel good about our prospects due to the long-standing reputation that our products enjoy in this market and considering our deep channel experience in other regions. Last year, we began assembling a core sales and marketing team of industry veterans familiar with our product. This team is targeting premium installers incremental to the SunPower dealer network. We formally launched our multi-tiered channel program in April. leveraging many parts of the structure already built for Europe. Our first preferred partner signed up almost immediately, switching a majority of their module business to Maxion. The partner is in Massachusetts, a state where we have always loved doing business, due in part to tree-shading conditions favoring high-efficiency systems and also due to performance-based incentives, which elevate the importance of degradation rates and energy production over time. This partner is just one of 48 residential installers nationwide who purchased our product through Green Tech last quarter. Look for more updates regarding our US channel development in future quarters. Overall, we are pleased with how our DG channel is positioned in terms of margins, growth, and diversification. We have over 17 years of presence in both the European and the US markets, a portfolio of highly differentiated solar panel offers and increasing traction beyond the panel products. And outside these core markets, we are pursuing growth opportunities in Latin America, Japan, Australia, and in specialty applications. On a combined basis, these growth segments accounted for around 13% of DG revenue last quarter. Maintaining technology leadership is a key focus area for our management team, particularly in our DG business with Maxion 7 close to commercialization. In order to ensure the current and future projects meet our high expectations, we've added the position of Chief Technology Officer to our executive team and hired Matt Dawson, one of the world's leading experts in IBC architecture. Matt and I worked together at two previous companies, including SunPower, where he led the R&D team for several years. I am thrilled to welcome Matt and look forward to working closely with him and his R&D team to continue driving technology innovation and maintaining industry leadership. Now let's turn to our utility scale business. We booked several new projects in the first quarter, all with repeat customers. Our North America supply chain is sold out through the end of 2025 with over 1 gigawatt of capacity allocated for 2026 and 2027 based on options supported by deposits. The U.S. utility scale market is dynamic, continues to be influenced by various regulatory and policy factors. We believe that Maxion is very well positioned in terms of our ability to supply this market with our 1.8 gigawatt North American manufacturing facility nearing full ramp. Given the opportunity in the U.S. utility scale market and the strong demand signals from our customers, we are also evaluating a variety of expansion opportunities, including, but not limited to, a U.S. solar cell and module manufacturing facility. Since our application with the Department of Energy Loan Program Office progressed to the due diligence phase last quarter, We have expanded our negotiations with potential customers for product delivery through 2030. We regularly hear from utility scale customers that they appreciate our industry-leading ESG profile. This is something that has been a core part of our culture dating back to our legacy SunPower days, and it is one of the reasons why our technology has a remarkably prominent presence among high-profile, corporate campuses, and government buildings where sustainability requirements are paramount. We recently received two new important ESG recognitions. First, we saw our MFCI ESG rating increase from single A to double A, the second highest rating achievable for a company and at the top of our industry. Second, our IBC manufacturing facilities increased their cradle to cradle certification from bronze to silver, the highest status achieved in the solar industry and a meaningful competitive advantage for any project attempting to optimize a lead rating. The energy level among Maxion employees today is high. Our people are energized by the company's recent progress, but still laser focused on the execution work ahead, achieving the remaining elements of our annual targets and realizing our future expansion opportunities. With that, I'll turn it over to Kai. Thank you, Bill.