Maxeon Solar Technologies, Ltd.

Q1 2023 Earnings Conference Call


spk00: 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.
spk03: 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.
spk04: 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.
spk11: I will discuss the drivers and details of last quarter's performance and then provide guidance for the current quarter, as well as updated guidance for the full year. Total shipments for the first quarter were 774 megawatts, up 6% sequentially and nearly 60% year on year. We exceeded our guidance range of 730 to 770 megawatts due largely to the accelerated ramp of our new US utility scale capacity. Revenues for the first quarter were $318 million, near the midpoint of our guidance range of 305 to 345 million. In DG, we saw AST expansion in the US which offset expected price declines in Europe. Blended global DG ASTs were slightly down sequentially due to a higher mix of specialty application solar cell sales. These carry an exceptionally strong margin percentage, but at a lower price per watt compared with module sales. Non-GAAP gross profit in the first quarter was $54 million. up from 21 million in the previous quarter. This represents a 17% non-GAAP gross profit margin and is the highest ever for Maxion as a standalone company. While we forecasted strong gross margin expansion, the result exceeded the expectations embedded in our 30 to 40 million guidance range. The largest contributor was a favorable $12 million net utilization of provisions related to our US utility scale business based on lower cost or market accounting rules. Excluding this impact, our results still would have come in above the high end of our guidance range. The European team maintained a strong price premium and the expected market price declines were offset by lower input costs, including poly and freight. And in the US, we expanded margins sequentially as a result of our new SunPower contract and additional high margin revenue from our new US residential channel. Production volumes at our facilities in Malaysia and Mexico for our performance line panels have been increasing. and a reduction in Q1 COGS combined with higher prices drove margin improvement in our US utility scale business. Non-GAAP operating expenses were $38 million in the first quarter compared to our guidance of 37 million plus or minus 2 million. Adjusted EBITDA in the first quarter was $31 million, significantly better than our guidance of 10 to 20 million based on the previously mentioned favorable developments that impacted our gross margin. Gap net income attributable to stockholders came in at $20 million compared to a loss of $76 million in the previous quarter, driven primarily by a $35 million sequential improvement in adjusted EBITDA and a $42 million quarter-on-quarter swing in the mark-to-market valuation of our prepaid forward. Moving on to the balance sheet, we closed the first quarter with cash, cash equivalent, restricted cash, and short-term investments of $304 million, compared to $344 million at the end of the fourth quarter. Capital expenditures in the first quarter were $16.5 million, which was within our guidance range. A majority of the spend was for our Malaysia and Mexico performance line capacity. We are very pleased to have started 2023 with a strong financial performance, posting gross margins ahead of our target model. While we recognize that our first quarter results benefited from roughly four percentage points of gross profit margin due to the previously mentioned one-time material effects, our teams are now highly focused on achieving gross margins of at least 15% based solely on consistent run rate contributions. We indicated previously that we expect to reach this milestone late in 2023 once our Malaysia and Mexico facilities are fully ramped and we have transitioned to higher price utility scale contracts. We also anticipate improved costs from our performance line products for DG offset in part by expected price decreases in Europe and in our rest of world markets. These catalysts are all still relevant, and we expect them to play out across the next two quarters in a fashion that allows the company to maintain gross profit margins within striking distance of our 15% target, give or take a couple of percentage points. Heading into Q4, we expect to see further modest improvement in gross margins based on incremental enhancements of our US utility scale business, as well as usual seasonality in DG. With this context in mind, I now turn to our guidance for the second quarter of 2023 and an update for the full year. We project second quarter shipments of between 860 and 900 megawatts. The midpoint of this guidance represents 14% sequential growth and nearly 70% growth year over year, reflecting the continuous ramp of our U.S. utility scale capacity. We project second quarter revenues of 360 to 400 million plus and nearly 20% sequential improvement at the midpoint, driven in part by growth in USDG mix with higher ASPs more than offsetting lower pricing associated with our growing utility scale mix. Non-GAAP gross profit is expected to be in the range of $50 to $60 million. This projection is roughly flat sequentially, but based entirely on what we consider sustainable run rate metrics and driven primarily by the higher mix of USDG volume at ASPs above our global average, and higher DG volumes overall. Non-GAAP operating expenses are expected to be $42 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 incremental top and bottom line growth. Adjusted EBITDA is expected to be between $24 and $34 million, driven largely by the improved run rate metrics impacting our gross profits. Second quarter capital expenditures are projected to be in the range of $20 to $26 million. And for the year, our expectations are unchanged at $100 to $120 million. for the completion of manufacturing capacity for performance line panels to be sold into the US market, completion of manufacturing capacity for our Maxion 6 product platform, further development of Maxion 7 technology and the pilot line, preparation for scale-up of Maxion 7 technology, as well as various corporate initiatives. As a reminder, this annual CAPEX guidance excludes spending for any U.S. manufacturing, which we plan to finance primarily with the U.S. Department of Energy loan and customer co-investment. Last quarter, we introduced 2023 annual guidance of $1.35 to $1.55 billion in revenue and $80 to $100 million in adjusted EBITDA. While our 2023 year-end exit expectations are largely unchanged, we exceeded our expectations for the first quarter, and thus our projections for the year are now also increased. We estimate 2023 revenues will be in the range of $1.4 to $1.6 billion, and adjusted EBITDA will be in the range of $95 to $120 million. Our confidence in these projections is bolstered by the fact that roughly half of the revenue on six commercial terms for both volume and price. With that, I turn the call back to Bill to summarize before we go to Q&A.
spk04: Thanks, Kai. As I mentioned last quarter, 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 extending our panel technology leadership and leveraging our unique global channels to market. I'm pleased with our results this quarter and look forward to continuing to demonstrate the strength of Maxion's business model over the coming quarters.
spk05: Now let's go to Q&A. Operator, please proceed.
spk00: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Julian Dumoulin-Smith of BofA. Go forward with your question.
spk02: Julian Dumoulin- Thank you, Alfred, and thank you, Tim. Appreciate the opportunity here, and nicely done, I got to say. Maybe just to kick things off, you know, there's been some broader commentary through the earnings cycle here on channel inventory levels across various products and equipment in the residential space. Can you comment a little bit about what you're seeing vis-a-vis those concerns? perhaps through the course of the 23? Obviously, we see your guidance here today, but more specifically, how are those inventory dynamics impacting you and impacting your ability to price, and what are you assuming through the course of the year here, specifically across the U.S. and Europe?
spk04: Yeah, hi, Julian. Bill here. Yeah, you know, we monitor that pretty closely, but, you know, so far, again, you know, we really compete in a somewhat different market with our highly differentiated products. So we're just not competing against all the material that's building up in inventory. And so, so far, it looks good. Our own inventory, I think, is solid. Kai, do you want to add anything to that?
spk11: Yeah, I think on our inventory side, Kai, Julia, and You can see that inventories are slightly up quarter on quarter here, but I would say that probably more of a seasonal effect that we have seen, but we feel pretty comfortable with the inventory levels that we have.
spk12: Excellent.
spk02: All right, perfect. And then if I can pivot a little bit here, how do you think about margin cadence from here? I mean, how do you think about where you exit the year? versus where obviously you've started the year on a pretty high note. How do you think about that evolving, considering your commentary just now on channel, but also as you think about the mix shift over time here too? What does that say, and what does that mean for exiting the year as well?
spk11: Yeah, this is Kai. It's, of course, a pretty multifaceted question here, I would say, so let me try to unpack that a little bit. So if we look at the first quarter here from a gross margin standpoint, we had about 17% gross margin in the first quarter. And we commented that four percentage points of that is because of that one-time effect. We utilized some prior inventory provisions for a lower cost of market inventory accounting. So on a normalized basis, it's about 13% if we take that one time out. For the second quarter, if you look at our guidance, we are guiding at the midpoint for about a 14.5% gross profit margin here. And of course, there's a range around that, as you have heard. And then, as I said in my prepared remarks here, over the next couple of quarters, we think we are going to get a slide of about a... gross margin in line with the long-term financial model of 15% give or take a couple of percentage points here and of course as you know our long-term financial model 15% is at least 15% so we expect that in the fourth quarter we're probably towards the end of the year can see a uptake that may be related to seasonal patterns in the DG space, but also us shifting to higher price contracts on the U.S. utility scale. So that's, in a nutshell, how we see, at the moment, the year unfolding here, and that's what our guidance is based on.
spk02: Right. And the nuance there being the higher price products that you're shifting to that you alluded to in the fourth quarter, that should, in theory, carry over – at least into 24, as you're alluding to?
spk11: We would expect some of those contracts to carry over into 24. And as we have said, we are booked out through 2025 for our U.S. performance line supply chain here. And some of those contracts are fixed price, but also some of those contracts are underlying a variable pricing structure.
spk12: Wonderful. Thank you guys so much. Again, truly congrats.
spk03: Thank you, Julian.
spk00: Thank you. Please stand by while we prepare the Q&A. Our next question comes from Brian Lee of Goldman Sachs. Please move forward with your questions.
spk06: Hey, guys. Good afternoon. Kudos on the strong execution to start the year. I guess my question first would be on the guidance. You know, if I look at Q1, even if I just out the $12 million provision and then the Q2 guide, you're kind of already annualizing to the high end of the updated EBITDA guidance range. And I think, Kai, in response to Julian's question, you said gross margins are probably going up through the year. And then with seasonality, I would assume volumes are also higher in the second half than they are in the first half. So maybe I'm missing something or there's just a high degree of conservatism baked into this new updated EBITDA guidance. But why wouldn't... you have passed in an even higher EBITDA viewpoint as you move through the year if those are the moving pieces, higher gross margins, higher volumes, and already having kind of covered half of the top end of the range through the first half of the year if you execute to the guidance here for QQ.
spk11: Yeah, thank you, Brian, for the question. I mean, obviously, we want to put guidance out here that we have a high degree of confidence in. And secondly, I think, as I've said, in the next couple of quarters, there's going to be a few gives and takes that we expect, which may give us margins that hover around the 15% by a couple of percentage points. So that's how we see it laying out here. And again, we have confidence in our margin projection here and our guidance. And we'll be very, very focused to execute according to that. And where we see opportunities to outperform, we will try to seize those opportunities.
spk06: Okay, fair enough. And then, you know, second question on pricing. You know, it looks like IBC ASPs were kind of at the highest level. We've seen them in quite a long time. And then you mentioned Europe pricing was down a little bit. do you anticipate IBC pricing to continue to move up through the rest of the year, or is this sort of a stable level we should be forecasting going forward? And then similarly on Europe, is there more pricing degradation as you move through the next few quarters, or are we going to stabilize at these levels you saw to start the year?
spk04: Yeah, hi, Brian. Well, there are two different markets, right, Europe and the U.S. In Europe, We do expect continued pricing declines, and we've built that into our outlook. In the United States, as you probably know, we have a lot of our volume contracted at fixed prices. So we're feeling pretty good about that. And then in addition to that, we just recently launched the Greentech channel. And so far, as we noted in our prepared remarks, it's adding a significant amount of ASP uplift. Kai, I don't know if you want to say anything else.
spk11: Yeah, maybe just two more comments. One is the new green tech channel in the US has started this past quarter and it's not fully ramped yet. It's still ramping. So we need to take that into account and have taken that into account in our guidance. And secondly, in markets like Europe, as we said, we are anticipating and have baked in some price declines, but also reduce the reduction, anticipate reductions in input costs.
spk10: And if you look at the data that we put out in our donor chart, you can also see that in IBC we have had 17 percent increase in average AFC quarter over quarter compared to the fourth quarter.
spk11: So that's just to underline your statement that we are seeing very, very high and encouraging
spk06: Okay, that's great, very helpful. Last one for me and I'll pass it on. Recently, one of the solar peers in the space got final approval on a DOE loan guarantee, obviously a different scope from what they are doing. But our understanding is that you guys may have started the application process somewhere in the same time frame as they did so wondering if you had any updates as to kind of how close you are to reaching final stages and then ultimately being able to put together a financing package for the us capacity expansion okay yeah sure um you know we're this is obviously for our u.s uh manufacturing facility and we're still very excited about this project um
spk04: As we reported last quarter, we are in due diligence with the DOE Loan Program Office, and, you know, we're working through that. You know, the schedule is not entirely under our control, but I think we're moving forward expeditiously at this point. So, hopefully, we'll have some news on that soon.
spk05: Okay. Fair enough. Thanks, guys.
spk00: Thank you.
spk05: Please wait while we prepare the Q&A roster.
spk00: Our next question comes from Philip Shen of Roth MKM. You may proceed with your question.
spk09: Hi, everyone. Thanks for taking my questions. First one is on margins. It sounds like you have 23 margins well on hand. I would think a lot of the strength is coming from your fixed-price contracts, especially with SunPower, given the environment that we're in, and I'm sure that's helping How much risk is there to your 24 margins as the SunPower fixed price contract, I believe, converts to variable pricing? Can you talk about, you know, how you would expect that to be dealt with in 24? Thanks.
spk04: Yeah, I'll say a couple words, Phil, and then turn it over to Kai. Okay. You know, we are sticking for 2024 with our long-term financial model that leaves, you know, 20% year-on-year revenue growth and 15% gross margin. So we feel like we're on track with that. You know, there are obviously puts and takes, and maybe, Kai, you can say a few more words.
spk11: Yeah, I think we... I feel pretty good about our SunPower contract also for 2023 and for 2024. It's true that there are some variable changes, some variable components in the pricing, but we do feel that it's a balanced contract and it enables us to stay on the long-term financial model and within that margin range. You know, there's other things as we move into 2024 that are going to take a more significant part of the business than what we have right in 2023. And right now we're starting the beyond the panel business in this quarter or, you know, in this first half. And that's going to grow over the next quarter to something more significant. We have more dry powder also on the side of our HSBC joint venture where we can take more offtake from that side. And also in 2024, we are going to have a fully ramped U.S. utility scale capacity throughout the year, which is still in a ramp stage here in 2023. So there are some things that we think are going to enable us in 2024 also to stay on that long-term financial model with regards to the margins and the growth.
spk09: Great. Thanks for the color. Shifting to the green tech relationship, you touched on it earlier. I was wondering if you could share how much volume you think you pulled through green tech in Q1, and then how much do you expect that to be in 2023 overall? And how is that comparing to your original plan before, especially the inventory build and the module price declines that we've seen for a lot of other players? Thanks.
spk04: Yeah, we actually haven't publicly commented on our volume plans for 2023 with Green Tech. You know, it's a significant undertaking for both companies. And, you know, we're putting a really strong effort into this. But, you know, we think it's going to be a really – we're really optimistic about this channel. We saw sort of the early benefit of the high ASPs. Feedback from customers has been decidedly positive. But, yeah, we're not publicly disclosing volume plans yet for 2023. Okay.
spk09: I can appreciate that. That said, I was wondering if you could talk about whether or not you're meeting the goals that you had set, you know, with this – relationship last year. You had some, I'm guessing, some volume targets. Without sharing the targets, are you meeting those goals? Or do you feel like you're maybe falling short of that? And if so, are you finding other outlets for that Maxion panel, Maxion branded panel? For example, are you able to sell back into the SunPower channel some of those Maxion panels? Or are you definitely keeping all the green tech modules through that distribution channel. Thanks.
spk04: Yeah, well, we're happy with the margin contribution that we've gotten so far. So I would say we're largely on track.
spk11: I just want to underline maybe one thing that Bill has said in his prepared remarks. So that US residential channel has actually increased our global blended DG ASPs by almost 3% in the first quarter. So that's pretty substantial and has made a substantial positive dent in the ASPs that we discussed earlier. So just as a data point to show where we are with that and the positive contribution that we're getting from it.
spk09: Great. Okay. Thanks, and great job on the execution, and I will pass it on. Thanks. Thank you, Phil.
spk00: Please stand by while we prepare the Q&A roster. Our next question comes from Graham Price of Raymond James. You may move forward with your question.
spk13: Hi. Thanks for taking the question. First one I had, just following up on the DOE LPO application question, now that you're in the due diligence phase, wondering, does this change the nature of your discussions with potential customers? Do you have a little more certainty in those talks?
spk04: Yeah. Well, as we mentioned in our prepared remarks, we're now negotiating offtake agreements with customers extending all the way through 2020. It's very clear that customer interest is very high in this project. I think Bill just said 2020. I'm sure he meant 2030. Sorry, 2030. Sorry.
spk13: Got it. Got it. Perfect. And then just looking at 2Q, I was wondering how we should think about the ratio between IBC and performance shipments and then maybe any color on the breakout by region as well.
spk11: Well, I would say, Graham, you know, on the IBC side, we would still expect for the year to sell about one gigawatt of IBC. So, you know, we started with about, you know, 0.2 gigawatts, about 200 megawatts, that seasonality. We don't give a quarterly breakout, but you would expect that it's going to go up in order to reach that one gigawatt, which is our total capacity. On the performance line, that also continues ramping for the U.S. utility scale. We would also expect further growth as we go through the year with the performance line products that come from our HSPV joint venture and go mostly into Europe and Australia, among some other places. So, I would also expect some growth on the performance line, probably mostly coming from the U.S. and the utility-scale space, and then also some growth in Europe and Australia.
spk13: Okay. Great, great. Thank you for that color. I'll jump back in the queue. Thank you.
spk00: Please stand by while we prepare the Q&A roster. Our next question comes from Andrew Percoco of Morgan Stanley. You may proceed with your question.
spk01: Great. Thanks so much for taking my question. On the prepared remarks, you mentioned some cooling in the USDG market. I'm just curious if you're seeing any differences in demand trends between the SunPower channel and the channel you have set up with GreenTech.
spk04: Yeah. You know, well, we don't manage the SunPower channel, so I don't know that we could comment on how they're doing there. The Green Check channel is a different channel. It's a new channel. And, you know, SunPower, of course, has many years of experience selling through their channel. We're still ramping up our channel and, you know, rolling out our model from other regions where we've been successful. That requires, you know, bringing on... new sales force, training them, training the dealers. So we're early on in the process, and I don't think it's like we're in a situation where we can kind of compare the sales success of those two channels.
spk01: Got it understood. And maybe just one follow-up on that. How would you expect the mix of your USDG business to evolve between Green Tech and SunPower over time?
spk04: Well, as we said in the prepared remarks, we're trying to do this as very much incremental to the sun power demand. So, sun power should grow, and I think green tech will grow incremental to that.
spk01: Got it. Thank you.
spk00: Please stand by as we compare the Q&A roster. Our next question comes from Donovan Schaefer of Northland Capital Markets. You may proceed with your question.
spk08: Hey, guys. Thanks for taking the questions. I wanted to see if we could get an update on the residential battery. I might be misremembering some of this, but I believe you initially rolled it out in Australia maybe a quarter ago, and it sounds like the launch is kind of underway in Europe. So just if there have been any incremental data points kind of from that process, whether it's you've actually been able to push it out to customers so you can start to talk about things like attachment rates or if it's been more distributor feedback or whatnot. But just any kind of updates there for the residential battery would be great.
spk04: Yeah, thanks. I think you're referring to our SunPower Reserve product, which in fact we did roll out in Australia. um and uh it you know so far so good we've gotten some initial feedback from installations and it's been very strong um and we're in the late stages preparing to uh to roll this out in europe and several several of our key countries in europe in europe when would you expect like the what quarter would there be i know it'd be the minimus in terms of you know amount but just kind of to keep track of things when would that kind of
spk08: hit the shelves and start to translate into revenue just, you know, as a framework, like a reference point.
spk04: Yeah, well, I think we said that we expect our beyond the panel revenues to be meaningful by the end of this year. Okay, okay.
spk08: And then one other question, you know, is probably, I like to ask some oddball questions just because sometimes it's stuff that people might miss and who knows someday, you know, it could be, maybe it becomes material. So, you know, one thing I've seen just from like a news alert is your cells, the IBC cells kind of get picked up in random products, you know, because you've got, I think some unique properties with IBC around durability, some around kind of flexibility. So, you know, I've seen someone, you know, a smaller company using your, your cells for the roofs of golf carts and, Then most recently, there was some company making their magnet tiles, these Picasso tiles almost. It looked like it, and they were using, I believe it was Maxion IBC cells. And then people talk more about putting solar on automobiles, and maybe it does or doesn't make sense. You can kind of argue either way, but if somebody is going to pay $100,000 for solar, You know an EV Jaguar or something they kind of like to trick it out with all that stuff So so for these uses it's kind of niche uses as IBC panels Is that something that you know could be interesting if you were able to integrate it? you know become a big supplier for cars or something or And then can you get a just a really great ASP because it becomes more of this, you know consumer product Yeah, good question
spk04: So, yeah, in fact, we are in this market today. We're making a significant number of cell sales, as we reported in the prepared remarks. I'll let Peter Aschenbender say a little more about the long-term market prospects.
spk10: Hey, Donovan. Yeah, so as you mentioned, our cells are kind of uniquely appropriate to some of these what we call specialty applications because of the of very high efficiency, the fact that they look really good close on a consumer product, say, on the roof of a car. They're quite susceptible. They can bend quite easily and are forgiving if you crack that a little bit. For some reason, it's kind of compound curves. So all these applications are ones that we're engaged with. As Phil mentioned, we had a strong quarter in Q1 with the sales of those cells. we're typically constrained in terms of the amount we have available. But over time, we plan to grow that business in a more meaningful way because there are a lot of these specialty applications knocking at the door now. And as we said in fair remarks, the gross margins on those sales are really good.
spk07: Okay, very interesting. All right, well, thanks, guys. I'll take the rest of my questions offline. Thanks, Norman.
spk00: Thank you. Please stand by while we compile the Q&A roster. As a reminder, to ask a question, you'll need to press star 11 on your telephone.
spk05: Thank you for standing by.
spk00: There appears to be no further questions. Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.

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