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spk10: The conference will begin shortly. To raise your hand during Q&A, you can dial star 1-1. Good day, and thank you for standing by. Welcome to the SunPyre second quarter 2022 results. 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'll need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Weinstein, Investor Relations for SunPower.
spk11: Please go ahead. Good afternoon.
spk05: I would like to welcome everyone to our second quarter 2022 earnings conference call. On the call today, we will begin with comments from Peter Farisi, CEO of SunPower, who will provide an update with second quarter announcements and business highlights, followed by our expectations for the remainder of 2022. Following Peter's comments, Manasial SunPower's CFO will then review our financial results and guidance for the year. As a reminder, a replay of the call will be available later today on the investor relations page of our 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, our 2021 10-K, and our quarterly reports on Form 10-Q. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. Also, we will reference certain non-GAAP metrics during today's call. Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate GAAP to non-GAAP reconciliations. Finally, to enhance this call, we've posted a set of PowerPoint slides which we'll reference during the call on the events and presentations page of our investor relations website. In the same location, we've also posted a supplemental data sheet detailing additional historical metrics. With that, I'd like to turn the call over to Peter Farrisee, CEO of SunPower. Peter?
spk07: Thanks, Mike, and good morning, everyone. First, a comment on the recent announcement of the Inflation Reduction Act before I review our Q2 business highlights. The news gave me an increased hope that the United States can lead the world in the energy transition. The bill could ensure that all Americans get access to clean energy technology and the cost savings, resiliency, and peace of mind that comes with it. It has the potential to boost our economy with well-paying jobs in communities across the nation. As we keep working every day to make renewable energy accessible to everyone, I urge our legislators to pass this bill so we can get to the future we envision quickly. People need clean, affordable, and reliable electricity now. Please turn to slide number four. I'm pleased to report that customer demand continues to be strong and that we added 19,700 new customers in the quarter, a 51% increase year over year, and a record all-time quarter high. Just as impressive has been revenue accelerating at 63% more than a year ago, a solid increase over the 41% year-over-year growth we saw in Q1. This is a clear indication of how higher pricing is working its way into our results without dampening customer appetite. We continue to see strength across all our sales channels and note the 117% year-over-year customer growth from the SubPower Direct channel. Our backlog set a new high versus recent quarters at 19,000 retrofit customers with another 34,000 new home customers in backlog as well. Within new homes, we see multifamily and rent-to-own segments that have been strengthening under the current home market conditions. Our Sunvolt energy storage solution continues to attract strong customer interest with a 19% SunPower direct bookings attach rate. Sunvolt also benefited this quarter from improved profitability as we raised pricing. SunPower financial increased loan bookings 87% year over year, driven by strong customer interest in our new loan products. Please turn to slide number five. The strength of customer demand is illustrated all the way up to sales fall, where we are experiencing more than 70% growth across lead generation, gross appointments, and bookings revenue. These numbers are also impressive sequentially versus Q1, with a 10% increase in lead generation and a 16% increase in bookings as we start to increase prices for the first time in over a year. Please turn to slide number six. Consumers are already burdened with levels of energy cost inflation that haven't occurred in a decade. They need relief, and they need it now. Fortunately, residential solar remains one of the most meaningful ways to reduce home power bills, even considering the rising cost of supply, chain, and labor. Our main competition has been traditional electric utility, and their costs are rising more rapidly than the solar industry. According to the US Energy Information Agency, electric bills have already increased 9% year-over-year as of March. More electric bill inflation could be coming as their cost of capital and conventional generation fuels continue to rise rapidly this year. Utility capital spending for an aging and increasingly less reliable grid is also forecast to grow significantly in the next few years, according to the Edison Electric Institute. All these factors add up to a strengthening customer incentive to add rooftop solar while simultaneously providing the residential solar industry with more pricing power than we've seen in years. Please turn to slide number seven. I imagine some of you are wondering about the possible impact that the current economic conditions may have on our customers. I want to take a moment here to highlight some of the specific comments we read on why they are going solar with us now. Among the most important reasons cited are, number one, to lower their monthly electric bills. Two, to have a positive impact on climate change with clean and renewable energy. And finally, number three, the peace of mind that comes from knowing that they will have power even when the grid fails. which unfortunately has been happening with increasingly frequency in the recent years. We believe these drivers of demand are important to consumers regardless of the economic forces. Please turn to slide number eight. We created SubPower Financial late last year to offer a full choice between a suite of loan and lease products, whatever suits the customer's needs best. We continue to innovate in this area with loans that keep monthly payments low. We are originating loans using purchase agreements that provide up to $2.5 billion source from depository capital with a cost that's 150 to 200 basis points lower than the ABS market. We remain ready with facilities in place to shift towards ABS if that market becomes more attractive to us. Higher interest rates could have an impact on customer savings But with flexible terms and the abundance of customer choice, we are working to mitigate that effect, especially in comparison to the rapidly rising utility bills. While we stand ready to expand our lease offering if needed, we aren't seeing a push for that from our customers. Loans have been roughly 80% of our financing originations over the past year, and as we look at bookings happening right now, we expect that same level in the second half. Please turn to slide number nine. Another topic I want to address is the new homes market and what we are expecting as the sector deals with the impact of higher mortgage rates. SunPower is a leader in this segment. In Q2, we set an all-time record high in more than 4,600 new installations. We continue to bring in new home builders in their communities that are planned and under construction. In Q2, we saw a 46% increase in contracted active construction communities where solar is a standard offer on every home. This brings our contracted backlog in new homes to 34,000 customers with another 40,000 potential customers in the pipeline, including a growing multifamily segment. When we look beyond 2022, we see the potential for a slowdown in single-family construction due to slower monthly sales rates being reported by that industry. But there's more to the story here. Number one, typically any slowing of home sales typically takes about six months to affect solar installations. Based on home builder construction progress for their previously sold backlog, we expect most of this second half solar installations to pay similar to the first half. Number two, even as single-family homes slow down, we are increasingly engaged in the multifamily and single-family build-to-rent categories, both of which are growing rapidly. Number three, over the long run, the U.S. still faces an underlying shortage of new homes. By one estimate, this deficit is 3.8 million homes that's been building ever since the 2008 mortgage crisis. And finally, number four, we continue to add new home builders and communities to the portfolio as we broaden our scope nationally beyond California, which should help mitigate some of the effect of any slowdown in new home sales and construction within each community. Please turn to slide number 10. Finally, I'll share with you the progress we've made executing against the five pillars of our strategy. For customer experience, we continue to make significant progress in Q2. Our net promoter score improved to 51, a 38% improvement year over year. Service levels improved further with customer wait times reduced 45% to 31 seconds and average query resolution time reduced 36% year over year. This is a journey, not a destination. And the constant improving of our customer experience ensures that SunPower continues to earn the title of best in the business. On new products, we're pleased to report that we have secured additional panel supplies for 2022 from a variety of sources that will help us meet soaring customer demand. We've continued to make progress toward signing a deal with First Solar with an expected completion date in Q3. to develop a domestically produced residential tandem thin-film module as well as a long-term supply plan. For growth, we launched a new home solar program in partnership with IKEA for select California markets. In the new home segment, we extended our contract with KB Homes nationwide, and we signed a new deal with DreamFinders Homes in Colorado. Under digital innovation, we're happy to announce the completion of a multi-year redesign of our remote monitoring system that saves $4 million of OpEx per year and improve the customer experience with the app. My SunPower users have more than doubled since last year to 107,000 monthly active users. And finally, SunPower Financials continues to innovate and grow with low APR loans, expanded eligibility up to 150K, and favorable cost of funds. I'll now turn it over to Manu for more details on our Q2 results. Manu? Thank you, Peter.
spk06: Please turn to slide 12. As Peter mentioned earlier, strong demand remains the key story for SunPower in the second quarter. And this combined with continued healthy gross margin and declining platform investment for customer should set us up well for a strong second half. For second quarter, we are reporting $15 million of adjusted EBITDA and $414 million of non-GAAP revenue, an increase of 63% year-over-year, which you will note is an acceleration over the 41% year-over-year growth we saw in the first quarter. We added 19,700 new customers in the second quarter, a 51% increase year-over-year, and that was also nearly 20% higher than the first quarter, putting us on track to achieve our 2022 guidance by year-end. Adjusted non-GAAP gross margin remained above 20% as we passed along to customers higher panel freight and labor costs that continue to be felt across the industry broadly. As sales and marketing OPEX for new customer declined from the first quarter to second quarter, we saw a sequential increase of adjusted EBITDA for customer before platform investment to $1,900 for the second quarter. As we highlighted at the analyst's day, platform investment of $23 million is primarily product, digital, and corporate OPEX, and on a per-customer basis, platform expenses peaked and we expect this to decline in the second half as customer growth continues. We believe that this will help us achieve our full-year EBITDA guidance. Our balance sheet remains strong with a higher cash balance and lower net recourse debt, which continues to provide us with the flexibility to invest in the business. We also have 1.5 million unsold MPS shares at the end of the second quarter. Please turn to slide 30. We are affirming our guidance for 2022 and our target model for 2025 that we most recently discussed at the analyst day. Continued strong customer growth, operating leverage, and discretionary platform investment all contribute to our confidence in meeting full-year EBITDA guidance. We have said that our results this year are weighted towards second half. And next, I'll walk you through an update of the bridge between first half results and full year guidance for EBITDA for customer. Please turn to slide 14. On this slide, we highlight updated factors that lead to our 2022 full year guidance for $2,000 to $2,400 EBITDA for customer before platform investment starting from a base of $1,850 in the first half. These figures are rounded for presentation. First, we expect to see continued improvement to gross margin from higher customer pricing to offset cost inflation that will result in an incremental improvement of between $125 to $325 EBITDA per customer for the full year metric. We remain in a strong position for this, especially as utility bills rise this summer and fall. Recall that a target model from the analyst state also assumes SunPass financial attach rates grow from 35% to 45% by the end of 2022. The target model also assumes a storage attach rate for installed system that grows modestly through 2022, assuming up to $1,000 to $3,000 of incremental margin for each attached customer we ultimately expect a broad incremental improvement of between $25 to $225 EBITDA per customer for the full year. Third, we've largely achieved enough improvement from reducing sales and marketing effects per customer to put us on a path to achieve full year guidance. Altogether, that nets out to an expected improvement of roughly between $150 to $550 EBITDA per customer for the full year metric, bridging the gap between the $1,850 we are reporting for the first half and our annual guidance for 2022 of $2,000 to $2,400. As customer acquisitions build into Q4, you should think about our total EBITDA as seasonally weighted towards the fourth quarter. We exited the first half of 2022 with strong residential demand, completion of a strategic transformation to a residential-only company, and a cash and balance sheet position that is in the best shape there have been in years. This sets us up very well for a strong second half of the year and continued expansion of our market share in the years to come. With that, I would like to turn the call over for questions.
spk11: Thank you.
spk10: And as a reminder, to ask a question, please press star 11 on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Sean Morgan with Evercore ISI. Your line is open.
spk12: Hey, guys. Good morning. And I had a question on the first solar partnership. The First Solar has their Ohio manufacturing, and this recent IRA bill, it's kind of increased the likelihood of them being able to capture some production tax credits. And I think they're probably not going to do it on the CapEx for the facilities, rather on the actual flow of modules being produced. Is it too much of a stretch to think that with the JV, you guys might be eligible for some of those PTCs? And then just as a follow-up on that, how big do you think the addressable market is for these tandem crystalline thin film products in the residential market?
spk07: Good morning, Sean. Thanks. Yeah, we're... continue to be excited and optimistic about our opportunity to develop a commercial partnership with First Solar. Just to clarify, it is a commercial partnership. It's not a JV per se. And as you pointed out, they've got a terrific set of manufacturing facilities in Perrysburg, Ohio. I've had a chance to visit there and tour their factories, and they're quite impressive. The amount of automation and the amount of domestic content they're able to combine together are terrific. In this bill being considered by the federal government, I think we are quite excited about this adder for domestic content. I think it's a little early to speculate as to whether or not these products would qualify. I think it would be wonderful if they did, obviously, because I think it would open up new market segments across the U.S., and it would potentially give us a unique advantage in having a potential 10% adder for leases and PPAs. I think on the thin film products, we're thinking about addressing the market in two ways. We've had success at the premium segment of the market, and we would imagine that the highest efficiency panels that we might produce together would be targeted toward that segment and set a new innovation standard. But we're also thinking quite broadly about how do we also produce a module that maybe would be at the very top end of the mass market segment. or mainstream segment and allow us to have that same kind of innovation lead and affordability for that segment as well. So as we work together and we think about what we wanna go do in the future, we're really thinking about developing products that would address both of those market segments.
spk12: Okay, thanks. And then I think I saw in the, it was either the release or the presentation, 150,000 is the upper limit for the financing packages. And I think that's, you know, pretty well in excess of the average cost of an install. So I was kind of wondering, like, what exactly would be sort of included in that upper limit of, you know, a customer CapEx bill that ran at $150,000? Like, would that include storage, like some sort of super extra generation? Or how would you get to that level of kind of the upper end of customer cost?
spk07: Yeah, Sean, you hit it exactly right. We do have homeowners that have large homes, big roofs, want to have the maximum number of panels their roof will support. If you think of places like Hawaii and California where it really does make sense to sort of maximize the amount of cube space you can get in solar panels, but also increasingly attaching batteries and EV chargers is becoming more and more common for our customers. On the battery side, you know, as we introduced later this summer, our two-inverter whole-home backup product, you know, some of those products you could spend $20,000, $30,000, $40,000, you know, depending on what size battery you want to have with your home. So it really does increase the... the budget, I guess, if you would, for solar plus battery plus EV charging. We're also imagining that it will be helpful for consumers to qualify for a large amount so that they have the ability to easily buy stuff from us in the future. So we've talked about we really have a view of our customer base, a long-term view, a lifetime view. So we really think of ourselves as we want to be their partner for the lifetime. If they qualify for a large amount and only use part of that, you might imagine us being able to make it very easy for them to add on a couple more panels or add on a new battery or whatever it might be. So we're quite excited about the innovations that we're developing on the SunPower financial side and a lot more to come as we go forward there.
spk12: All right. Thanks, Peter.
spk07: Thanks, Sean. Thanks, Ron.
spk10: We have a question from Ben Callow with Baird. Your line is open.
spk00: Hey, good morning, guys. Thanks for all the information. Congratulations. Could you talk about maybe just the geographic kind of mix in the corner and then I'll follow up?
spk07: Yeah, I think the thing that we're looking for, Ben, is are we continuing to see signs of growth spread across the United States? As you know, we've been a company that had a very strong presence in California that we're very proud of, and California's a terrific business. But we're also looking to see if we continue to grow the business in the Northeast and the Southeast. And I'm pleased to say that in Q2, we had another good quarter of growth outside of California. So in particular, if you take a look at Texas, Florida, North Carolina, Illinois, and then the New York, New Jersey, Massachusetts, Connecticut corridor, all of those states continue to grow quite well as well. And then, interestingly enough, Blue Raven is in these, I would call them, I guess, more off-the-radar states. They go through the middle of the country. And when you take a look at their customer growth rate in Q2, we don't break that out separately. But to give you color, I would say their growth rate was even faster across those states than our overall growth rate was, just to give you a feel for how strong the solar business is all across the country. I really feel like we're getting closer to reaching an inflection point where it's becoming more common knowledge that you can really save a great deal of money, none of your solar costs every month. You saw the customer feedback that we stuck in our presentation, and that was purposeful because we want to kind of share with everybody how our customers describe to us why they're choosing to buy solar, and I think you're seeing that more and more across the country.
spk00: Thank you. And then just, you know, you talked a lot about increasing utility prices. Could you just talk maybe, you know, the leverage to that? I think, you know, and maybe, you know, it seems like you're more levered than some others in the near term. And I'm just wondering how that squares with, you know, reiterating guidance versus, you know, maybe raising a bit and how you guys think about that. Thanks, guys.
spk07: Yeah. Well, I think we feel like if I just take a break after the first half of the year, we're in line maybe slightly ahead of where we said we would be when we were on analyst day. So from a customer perspective, if you took a look at the midpoint of our guidance, we're about 47% of the way there. That's what we expected to be about this time. We've got a strong second half ahead of us. And then from an EBITDA perspective, We had kind of described it as one-third, two-thirds, one-third the first half, two-thirds the second half. And I think we're in a solid position to deliver that for the year. That's why we reaffirmed our guidance. I think what we're seeing, Ben, is the ability to pass along where we are getting price increases, whether it be cost of capital on the financing side or where it would be product or or labor costs increasing we've been able to successfully pass those along without slowing down demand one of the reasons that we put the page in there comparing this is page five of our deck q2 to q1 is to sort of directly address this this topic of whether or not the business is losing as any momentum and from our perspective we began to raise prices at the end of q1 and You saw those prices begin to have an impact in Q2, and yet the business continues to accelerate. And so far in Q3, I think we're seeing this continued pretty strong growth as we go. So we're excited for the second half of the year. We reaffirm our guidance, and we feel like we've got the plans in place to deliver those results. Thank you.
spk06: Yeah, Ben, the only thing I'd add is if you go to page 14 of our deck, we laid out our EBITDA per customer growth from the first half to total year. So we are expecting to see operating leverage in the back half of the year, both price in excess of inflation, as well as increasing attach rates for SunPower Financial and modest increase in attach rates for SunVault.
spk11: Thanks, Ben.
spk10: Our next question comes from Pavel Molchanov with Raymond James. Your line is open.
spk08: Thanks for taking the question. You touched on kind of geographic footprints a bit earlier. Maybe I'll ask it this way. Before all the inflation of the past year, the rule of thumb was Rooftop solar makes sense where utility rates are at or above 15 cents per kilowatt hour, you know, which was about maybe a little over a dozen states. How has that changed in the past year?
spk07: So I think that if you take a look at the – I think that using that metric I think is a fair way to take a look at it. I think part of the reason we gave the customer feedback we did in the deck is that there are multiple reasons that people consider buying solar. One of them is the one that you pointed out, which is the pure economic reason. And we think of it as the spread between solar and traditional utility costs. Those have gotten bigger over this past year, and therefore we see that addressable market as having gotten larger on the lower electric bills. But I would also say I'm surprised and delighted to see the number of people who identify with wanting cleaner energy and wanting to contribute to that. That's that middle bucket of feedback. And then maybe not a surprise if you live in California or one of these states where there's regular outages, But we're seeing more and more people who really want to have more control over their energy resiliency. And so people talking about both solar and battery storage as being essential to avoid these outages is increasing in our customer footprint. So I do think the economics look more and more favorable. If we can get this bill passed, you know, we think the addressable market will grow dramatically over the next four years. But I think in addition to the economics, you know, you probably ought to consider there are other reasons that people are buying right now. That's one of the reasons I think demand is so strong. Mani, what would you add?
spk06: Yeah, I think the two points I'd add is, one, you know, we put some data in our deck as well. You're seeing about 9% increase in utility bills year on year. That was as of March. And with, you know, natural gas prices increasing, I think that probably accelerates as we head into the back half of the year. So that's point number one. If you link that to what we are seeing in terms of growth, we are seeing growth in all our channels, whether it's our dealer channel or our direct channel, including Blue Raven. So we are seeing growth not just in the Northeast or in California, but also in the areas that Blue Raven operates. I think The trend in terms of rising interest on solar, given what's happening in the backdrop of the utility prices and the natural gas prices, is probably more secular throughout the year. And you're seeing that in our bookings growth, despite us increasing prices.
spk08: Just a small housekeeping question to follow up. Why did depreciation expense triple from Q1 to Q2? Yeah.
spk06: You know, as you've talked about, that we are investing in our platform, and the platform investment happens both in terms of investment in OPEX that shows up in our EBITDA, but also in some of the digital tools, including our ERP system that we upgraded and went live in the second quarter or late first quarter of and that's what's causing the increase in depreciation quarter on quarter. We also have a little bit of work associated with our sun vault in that capitalized number that impacts depreciation. So overall, as a company, we are investing heavily in technology, whether it's product or software, and that is consistent with our approach from a capital allocation perspective.
spk08: Thank you.
spk10: Our next question comes from Julian Dumoulin Smith with Bank of America. Your line is open.
spk09: Hi, this is Morgan. I'm for Julian here. Just wanted to ask, you've given some comments about some of the cost reduction dynamics through the rest of the year and as well as these price increases. Can you maybe just talk about the latitude of those things through Next year, your expectations for the pricing primarily, and then also cost reduction plans sort of cadence through the rest of the year. Like, what specifically is driving these moving pieces?
spk07: Yeah, let me start off with – I'll talk a little bit about the pricing piece first. I think in this environment where supply chain costs are increasing – We have been able to increase our prices by that amount and actually a little bit more throughout the year. But if you said what's healthy for the long term, I don't think that dynamic is healthy for the long term. Our goal would be that we manage our supply chain prices in a way that keeps them flat or actually improves them over time, because I do think we don't want to put ourselves in a position where solar becomes such a big ticket item that it appears to be unaffordable for people. And I think it's more about the appearance than the reality, because between leases and loans, there's lots of good financing opportunities, but we have to be careful we don't become... the appearance of the reality, because between leases and loans, there's lots of good financing opportunities, but we have to be careful we don't become perceived as a premium product. On the cost front, we're constantly looking for things, and I think the best example I can give you is the one we highlighted under our innovation. This project where we redesigned our monitoring system, we basically in-sourced the software and built it ourselves. Not only is the software higher performing and a better customer experience, but saving $4 million annually is obviously a great annuity for us to take advantage of as we move forward. So we're constantly looking for opportunities where we are outsourcing or using a third party or where there's manual work that could be automated. And we'll continue to look for those opportunities this year, next year, and many years and beyond. Manu, anything else you want to add to that?
spk06: Yeah. A couple of things. If you go to slide 14 of our deck, we lay out some of the dynamics that go towards how we go from our first half EBITDA per customer to our total year EBITDA per customer. And there are two things I'll call out in terms of operating leverage. One is price in excess of inflation. And second is increasing from a tax rate perspective, both on SunPass financial and storage. But the other point is, I think, to get to our guidance, we do not need to reduce our sales and marketing expense and our per customer expense. So that kind of gets you from our first half to our total year. I think as you think about modeling for 2023, probably take the back half run rate in terms of EBITDA per customer and use that as a good approximation for next year.
spk02: Excellent. Thanks. It's Julian here. Just a quick follow-up here, if I can, just on the loan product and just what you're positioning here. Can you talk a little bit more on what's reflected in the 45% attached rates and given some of the gyrations on that front? I mean, can you talk about your sort of competitive positioning here, especially on pricing?
spk07: Yeah, I think, Julian, on SubPower Financial, one of the most exciting things is we really have an opportunity to invest in technology and to make that product easier for our dealers to sell with our customers and someday easier for our customers to be able to buy directly from us. Along with making the technology easier, we're on this, I guess, path of innovation where we're continuing to launch more and more new products each and every quarter. We highlighted a couple of those in our release and our comments. From a pricing perspective, I think we were one of the early ones to begin to pass along our cost of capital increases into the cost of our loans, and I think we're still pleased with how strong the business is overall and how strong our loan business is. So right now, I think we feel comfortable that we're providing customers with good value, we're getting a good return on the business, and we're looking forward to more and more innovation as we go. The key thing in my perspective on increasing the attach rate is Because historically we didn't have as competitive a product as we needed, you know, most of our dealers have chosen to seek other financial alternatives. We're really seeing that change pretty dramatically. And one of the best tests we've done is we're in the process now of converting Blue Raven to become 100% SunPower Financial. And I've held the bar high for Blue Raven. I didn't want them to convert over. I wanted them to sort of treat SunPower Financial as if it was a third-party company. and not convert their loan business until we had products that were at least as good or better than they had been using previously at rates that were at least as good as better. So using our own test case, I think we feel increasingly good about the SunPower Financial business and our ability to be competitive both with our dealers and someday I hope beyond that as well.
spk06: Manu, anything else you want to add? Yeah, a couple of things as you think about SunPower Financial relative to some of the pure play financiers. One is we have access to depository capital that, as you know, that's lower than what's currently being financed through the ABS markets. And second is because we have access to the customer, since we sell them the systems, we can leverage our fixed costs across a wider suite of products that now includes financial products. And then the third thing I'd point out is Peter touched on Blue Raven. The other opportunity from a SunPower perspective is getting more of our dealers to use SunPower financial finance products. You can see that trend over the last few quarters where our installing dealer cash as a percentage of total systems is going down and will continue to go down through the years.
spk02: All right. Great, guys. Thank you. Good to hear you guys are on track.
spk10: We have a question from Kashi Harrison with Piper Sandler. Your line is open.
spk01: Good morning, everyone. Congrats on the quarter. Most of my questions have been asked. Just one more for Manu. You know, I know y'all are still early in the Newsome Power story, but I was wondering if you could maybe just give us some thoughts on how to think about EBITDA conversion to cash flow from ops, not necessarily for 22, but as you think about 2023. Um, you know, you, you indicated, I think in the, in the prior question that, you know, we should be thinking about the second half run rate on a EBITDA per customer basis. And so I'm just trying to think through how to, how to model that, uh, from, from a cashflow perspective. Thank you.
spk06: Yeah. So just from a model perspective, you are right. We have transformed the model of the company to, uh, a high, uh, uh, cash generation and cash conversion model. You'll see that in the back half of the year as we expect to generate operating cash in our business. We call that out in the cash table we put in the appendix. I think as you model us long-term, EBITDA to cash conversion, probably think 60% or in the 60s from a long-term perspective.
spk02: Thank you.
spk10: We have a question from Colin Rush with Oppenheimer. Your line is open.
spk03: Thanks so much, guys. Can you talk a little bit about trends in battery size, you know, that you're seeing right now? Are you seeing any real significant changes or increases that you see some of the issues around the grid?
spk07: Yeah, I think the biggest trend that we're seeing is we launched our SunVolt product last year and And we describe it as a partial home backup. And what that means is that you can identify key appliances that you would like to keep up and running during the course of an outage, or you can identify your entire house for a shorter outage. What we're seeing is that there's more and more demand, actually, for the much larger batteries as we go forward. So think of the product that we launched and I have in my garage as the entry-level product, and the two-inverter, you know, multi-battery product is where consumers really want to go. And I think if you look forward, it's quite exciting, actually. The idea that between the solar battery backup and possibly your EV car or truck backup, homes are going to be able to support themselves throughout an outage and maybe even multi-day outages of keeping their key appliances going. I think that's the big trend that people are excited about. I happen to live in an area where the power is relatively stable, but for those who live in areas where the outages are regular, they're extremely disruptive to people's lives. And the feedback we get from customers, some of which we put on our deck this week, reflects the fact that for some people, it's really the resiliency that's driving them to the table. They're delighted to find out they get to save money. They probably have it in their heart to do something good for the planet, but I think the resiliency is becoming a bigger, bigger story, and I expect our battery sizes to increase over time. One of the things that's exciting about the Inflation Reduction Act is that it does include battery. It includes battery for 10 years at that 30%. So I think that's really terrific because I think we're going to get a chance to really expand that market size as we go forward.
spk03: Great. And then the follow-up is just I'm curious about the difference between some of the more mature markets like California and and some of the emerging markets within the U.S. in terms of cycle time for customer acquisition, conversion rates, things like that, as you look at some of the middle of the country versus some of the coastal work that you guys do?
spk07: Yeah. We break out, you know, to keep it simple, the one metric we take a look at is California, non-California, for things like cycle times and conversion rates. And what's so pleasing is that we're really beginning to see conversion rates get to the same level as California all across the nation. So I'm just taking a look at a sheet here. I mean, even states, some of these we talked about before, Colorado, North Carolina, Florida, Texas, you know, those are just very, very strong states for solar. And I think we're beginning to see building momentum in those states. Really, our biggest challenges this past quarter was the high-class challenge of keeping up with demand. It's really been how do we get the number of panels we need and the right SKUs of panels and the right labor in the right cities at the right time. That's been our challenge. But we've made some progress on that, and we're quite excited about our plans for the back half of the year.
spk03: Thanks so much.
spk11: Thank you.
spk10: We have a question from Mark Strauss with JP Morgan. Your line is open.
spk04: Yeah, good morning. Thanks for taking our questions. Most of them have been addressed. I wanted to come back to slide nine, though. And when we're thinking about the mix of single family versus multifamily, is that something that you can provide or just kind of give us a general guideline of how we should be thinking about kind of how big the multifamily business is for you?
spk07: Yeah, Mark, I think multifamily is beginning to be material. Single-family builder rent is just kicking off, I would say. I think our comments were, interestingly enough, as we work with the new home builders, most of them overlap across these segments, across the U.S., so they're not just in one particular channel. And although there may be a slowdown, it'll still grow, but maybe a little bit of a slowdown in single-family new homes, we're really seeing them accelerate their investments in multifamily and single-family builder rent. What's interesting is California is kind of leading the way again. I don't know if you're aware of this, but the incentives are strongly aligned for all multifamily homes are now required to have solar, and at some point they'll be required to have both solar and and battery storage. And what we've seen is what starts in California begins to spread across the US, and many of these same builders find it economically feasible and desirable to do what they're doing in California across the other states they operate in. So I think as we look forward, these three segments, single-family new home, multi-family new, and single-family build-a-rent are three segments that we expect to grow grow healthy I guess over the next five to ten years as more and more people are looking for different types of dwellings that meet their economic needs. Big thanks to all of you for the questions today and thanks for your support of SunPower. We're really looking forward to the back half of the year. We're cautiously optimistic that the Inflation Reduction Act will get passed. We encourage it to get passed quickly so that customers can take advantage of Consumers across the U.S. can take advantage of solar and storage and the money savings and the job generation that comes with it. We look forward to talking to all of you next quarter. Thanks.
spk10: This concludes today's conference call. Thank you for participating. You may now disconnect. The conference will begin shortly. To raise your hand during Q&A, you can dial star 11.
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