SunPower Inc.

Good morning. Welcome to the SunPower Corporation third quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentations, there will be a question and answer session. To ask a question at that time, please put star 11 on your touchtone telephone. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Mr. Mike Weinstein, Vice President of Investor Relations at SunPower Corporation. Thank you, sir. You may begin.

Good afternoon. I would like to welcome everyone to our third quarter 2022 earnings conference call. On the call today, we'll begin with comments from Peter Farisi, CEO of SunPower, who will provide an update with third quarter announcements and business highlights, followed by our expectations for the remainder of 2022. Following Peter's comments, Guthrie Dundas, SunPower's interim 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 the call, we have posted a set of PowerPoint slides, which we will reference during this call, on the events and presentations page of our investor relations website. In the same location, we have posted a supplemental data sheet detailing additional historical metrics. With that, I'd like to turn the call over to Peter Farisi, CEO of SunPower. Peter?

Thanks, Mike, and good morning, everybody. In the third quarter, we continue to break records for customer growth and revenue. putting us on track towards the high end of our 2022 guidance for those metrics. The value of our solar and storage systems continues to grow as utility rates rise and costs are offset by tax incentives from the Inflation Reduction Act. With a balanced approach to pricing, growth, and profitability, we continue to build a growing market share against peers. We reported $33 million of adjusted EBITDA this quarter, more than the entire first half, and 24% higher year-over-year. We also turned positive on business unit cash generation this quarter, and now hold $397 million cash and equivalents on an under-levered balance sheet. SunPower's momentum is building, and we feel like we have the wind at our backs. We are very excited to share with you our accomplishments this past quarter as we look forward to building the world's best residential solar company for both our customers and our investors. Please turn to slide number four. I'm pleased to report that customer demand continues to be strong, and we added 23,100 new customers in the quarter, a 63% increase year-over-year that shows a persistent level of strong customer demand for residential solar and for SunPower specifically. Revenue also grew at 67% year-over-year as price increases are offsetting the higher impact of product and installation costs. We continue to see strength across all of our sales channels and note the 113% year-over-year customer growth from the SunPower direct channel. Our backlog set a new high versus recent quarters at 20,300 retrofit customers. Importantly, adjusted EBITDA per customer has grown to $2,100 before platform investment, and we believe we'll be able to achieve our analyst day guidance for 2,000 to 2,400 for the full year. Sunvolt energy storage system sales continue to benefit from higher pricing in the third quarter, partially offset by a slightly lower 17% bookings attach rate in the SunPower Direct channel. SunPower Financial also benefited this quarter as we raised pricing. SunPower Financial reached a 49% bookings attach rate in September, and we know that lease offerings have begun to attract renewed customer interest in recent weeks since the passage of the Inflation Reduction Act. Many of you have expressed concern about the impact that higher mortgage rates are having on new home builder partners and the new home segment. In the third quarter, new home installations were up 22% year over year, and backlog stretches out to 33,600 homes. We continue to see important long-term strategic value here, and we are working to extend our presence beyond California and into multifamilies. which is showing strength under the current economic conditions. We are also pleased to have reached a finalized agreement with DreamFinders Homes to build nearly 400 solar standard homes across five communities in Colorado. Please turn to slide number five. I want to highlight the steady acceleration of growth that we've seen both in new customers and revenues year over year. Even considering the higher cost of borrowing and other price increases, the value of residential solar continues to increase versus steeply rising conventional utility bills. The Inflation Reduction Act also helps propel this widening value proposition well through the next decade. Please turn to slide number six. Progress has not been limited to top-line growth. as we illustrate here with improving both EBITDA and EBITDA per customer throughout this year. With $59 million of EBITDA booked this year, we are reiterating our guidance for 90 to 110 million of adjusted EBITDA for the full year. Please turn to slide seven. As the cost of conventional electric fuels remains elevated, utility bill inflation continued to accelerate in recent months to 14.3% year-over-year. And 11 states saw increases greater than 20% year-over-year in August. As I noted earlier, these steep raises continue to elevate the value proposition of residential solar, which remains one of the most powerful ways to stabilize and reduce home power bills, despite the rising costs of solar industry supply chain and labor. Please turn to slide number eight. We were very proud to announce a new collaborative agreement with General Motors this quarter. Under the agreement, Sumpower will be the preferred installation partner for level two and bi-directional EV charging equipment. Most importantly, Sumpower will be the exclusive solar provider to all GM customers, and we view this as an important new sales channel that capitalizes on the growing interest in rooftop solar that naturally arises from EV ownership. Nearly 80% of electric vehicle charging occurs at home, typically adding 40% or more home electric usage per vehicle. So it's not surprising that some reports have cited nearly 30% to 60% of global EV owners going on to purchase a rooftop solar system. Residential solar is the best way to help reduce this extra demand with clean energy at a preset cost that can reduce and stabilize an electric bill for decades. GM is targeting to reach more than 1 million units of annual EV capacity in North America in 2025, and SunPower expects to be there to help this new audience obtain affordable clean energy. Please turn to slide nine. In order to serve EV customers, SunPower will build a new, more efficient customer experience. This includes conducting home assessments remotely, allowing everything from pricing, scheduling, and payment, as well as self-service tracking to occur quickly with minimal customer effort. 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, SunPower continues to receive public recognition and media accolades. You may have seen that we were recently ranked the number one home solar installer by CNET, and SunPower continues to be the highest rated solar company in the United States. For products, we launched new versions of our Sunvolt storage system and win a good housekeeping award this quarter as well. We also began installing the first U-Series panels targeting the mass market in Q3. U-Series panels are an important part of being able to serve this growing consumer demand. We continue to work closely with First Solar on a panel production agreement. As you know, the Inflation Reduction Act includes benefits to encourage domestic panel sourcing and production. Accordingly, our discussions with First Solar have been evolving to best align the supply chain side of the agreement with those incentives.