SunPower Inc.

Good day and thank you for standing by. Welcome to the SunPower first quarter 2023 results conference call. 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 TAR 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press TAR 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, Mike Weinstein. Please go ahead.

Good morning. I would like to welcome everyone to our first quarter 2023 earnings conference call. On today's call, we will begin with comments from Peter Farisi, CEO of SunPower, who will provide an update on the first quarter announcements and highlights, followed by an update on progress toward 2023 guidance, including California sales, backlog, and financing. Following Peter's comments, Guthrie Dundas, SunPower's interim CFO, will then review our financial results. 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 2023 Form 10-K, and our quarterly reports on Form 10-Q. Please see these 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 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 will reference during the 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 Ferrissey, CEO of SunPower. Peter?

Thanks, Mike, and good morning, everyone. I'm pleased to be with all of you to discuss both our Q1 2023 results and the progress we are making on our five-pillar strategy to build SunPower into the world's best residential solar company. In the first quarter, we continued to show strong customer installation growth that tracked towards the high end of our full year 2023 guidance of approximately 10% to 30% customer growth. We reported $1 million of adjusted EBITDA this quarter with $10 million of business unit cash generation. As we highlighted on our last call, adjusted EBITDA was expected to be low this quarter, impacted by higher sales and marketing expense to generate strong bookings volumes in California before the expiration of NEM 2.0 rules on April 15th. We were also affected by unfavorable California weather conditions throughout Q1 that kept crews idle, increased costs, and delayed certain installations in the state. We expect to catch up in California over the next few quarters. Importantly, we remain confident in our plans to achieve our full year 2023 guidance of between $125 and $155 million of adjusted EBITDA based on 90 to 110,000 new customers and adjusted EBITDA per customer before platform investment of between $2,450 and $2,900. Please turn to slide number four. We added 21,000 new customers in Q1. This is a 27% increase year-over-year. Revenue also grew at 32% year-over-year as price increases continued to offset the impact of higher product and installation costs. New order bookings grew fastest in our direct channel at 97% year-over-year. With strong bookings growth under NEM 2.0 in California, our backlog increased to 23,000 retrofit customers with another 39,000 in the new homes channel. We expect the backlog to increase further in the coming weeks as many of our dealers continue to enter orders into our system after concentrating efforts solely on customer NEM 2.0 applications in March and April. Adjusted EBITDA per customer came in at $1,200 before platform investment, which reflects the special seasonal effect of California sales and marketing expense and the weather we discussed earlier. Sunvolt energy storage system sales are showing early signs of strength in California under NEM 3.0 rules. In recent weeks, we are seeing this trending towards a tax rate over 20% in our direct channel in the state. lease demand continues to grow with a 268% increase in contract volumes in Q1. As we've noted previously, further growth for leasing is expected in 2023 and beyond due to bonus tax incentives under the Inflation Reduction Act. SunPower remains customer-centric and agnostic towards lease or loan financing, and we believe that our current access to capital markets as a top-tier installer is a major competitive advantage. Please turn to slide number five. Our Q1 customer growth of 27% year over year positions us well to achieve our full year customer guidance of between 90 and 110,000 customers, a 20% growth rate at the midpoint. Revenue grew to $443 million, a 32% increase that reflects higher pricing and we believe is indicative of the continued strong value proposition of solar in this inflationary environment. Please turn to slide number six. We know that demand and sales trends are top of mind for investors lately. I want to provide you with an update on California NEM 2.0 results and a preliminary look at early NEM 3.0 trends as well as our refocused sales efforts back to the rest of the country now that our successful push for NEM 2.0 customers is completed. In California, Q1 retrofit bookings to existing homes were up 135% year-over-year in our direct channels, which outpaced our peers and boosted our market share, resulting in a state backlog that exceeds six months. The pivot to NEM 3.0 began in April with a transition period that included a late NEM 2.0 surge in the first half of the month, followed by weaker initial bookings because of the earlier pull forward of demand. However, with many of the dealers fully engaged on completing NEM 2.0 interconnection applications for customers in March and April, we expect to continue registering purchase orders and bookings into our systems for several more weeks. This means we don't have the full picture of either NEM 2.0 or NEM 3.0 impacts until the incoming data is finalized over the next month or two. One area that's not been affected by demand pull forward is battery storage sales. Here we are seeing some early indications of higher attach rates in California through our direct channel. At this time, we are expecting to see the April data coalesce above a 20% attach rate, with stronger battery sales expected because of higher customer return on investment under NEM 3.0. We believe these attach rates have the potential to climb higher and that SunPower is well-positioned to deliver SunVolt storage systems to customers, with inventory levels entering 2023 that we believe are sufficient to meet stronger demand for the year. In the rest of the country, we continue to see booking strength in the Northeast and the Mid-Atlantic, with Q1 gross bookings up over 100% in certain states, including Connecticut, Virginia, and North Carolina. In one of our largest markets, Texas, gross bookings have come on strong, up 38% year-over-year for the quarter. To take advantage of the California market in Q1, we focused our sales resources on that state, particularly in our direct channels. While this was a factor affecting softer results in Florida and Arizona, this was contemplated within our annual guidance. The new home segment has been outperforming our original expectations so far this year. An April surge in California has brought year-to-date new homes bookings tracking at 26% growth year-over-year, including multifamily, with home builders indicating that they are selling homes more briskly than previously anticipated. We are also seeing rapid growth in the still small but important multifamily segment with Q1 2023 bookings exceeding all of that of 2022. The bottom line is that we're off to a solid start for the year coming out of Q1, and we're currently tracking to achieve our full year customer guidance. Please turn to slide number seven. Conventional electric utility rates are the primary competition for our industry, and they have continued to accelerate upward of 15.4% year-over-year in February, despite the moderating bulk of wholesale power, cost of wholesale power, and key fuels such as natural gas. As you can see on the right, 10 states continue to see increases greater than 20% year-over-year And states such as Texas and Florida are experiencing rises of 19.5% and 16.3% respectively. As we've noted, we believe these steep rises continue to elevate the value proposition of residential solar as one of the most powerful ways to stabilize and reduce home energy bills. Although fuel prices have declined in recent months, The Edison Electric Institute is projecting a 20% increase in electric utility capital investment from 2022 to 2024 over the previous three years. As these investments are recovered through electric bills, we believe the value of customer-financed rooftop solar is likely to continue rising. Please turn to slide number eight. Next, I'll share some of the most important progress we've made in Q1 as we move forward with the five pillars of our long-term strategic plan. For customer experience, SunPower remained the number one ranked home solar installer last year, as indicated by our rankings and reviews on various platforms, including EnergySage and Google. For products, we continue to diversify our panel supply agreements, securing enough volume to fully address our anticipated 2023 demand. For growth in April, we finalized an investment in Minnesota-based Wolf River Electric through our dealer accelerator program. Wolf River, the company's newest and now third largest dealer, will sell some power panels, storage, EV charging equipment, and financial products. With this relationship, SunPower plans to significantly expand its geographical footprint across Minnesota, Wisconsin, and Iowa. In the new home segment, we expanded beyond California to eight new states and leaned into our multifamily home business with three new deals in California. For digital, we've developed a new scheduling software in the first quarter which we believe will enable more reliable appointment times and provide customers with real-time tracking of technicians traveling to their site. We also updated our digital tools for dealers to make managing inventory faster, easier, and more accurate. And finally, SubPower Financial's lease business grew 268% year-over-year in the first quarter. to comprise 68% of our Q1 bookings. We expect the lease business to continue growing rapidly in 2023 and beyond because of the favorable tax treatment under the Inflation Reduction Act. We have also announced that we've secured financing commitments to fund more than a billion dollars of residential solar and storage loans in recent weeks. through the non-recourse vehicle SunPower Financial will continue to provide customers with attractive loan options for their transition to clean energy. Please turn to slide number nine. We are very excited to share with you the California launch of our virtual power plant offering to customers in partnership with OMConnect. The program allows participating customers to earn financial rewards for allowing their Sunvolt storage system batteries to periodically utilize by local utilities to help stabilize the grid during peak energy usage. Please turn to slide number 10. I want to emphasize the strength of our corporate and customer financing model during the recent period of banking turbulence. As previously noted, our low-risk financing model is based on the off-balance sheet origination of loans and leases for customers. With similar origination fees for either loan or lease, we are agnostic and strive to act in the customer's best interest. We recently announced we secured non-recourse financing commitments to fund more than a billion dollars of residential solar and storage loans from Hannon Armstrong, Credit Agricole, and as of this week, KKR. Through these transactions, SunPower Financial will continue to provide customers with attractive loan options and tenors up to 25 years for their transition to a cleaner and lower cost future. We've also applied for conditional loan guarantees through the U.S. Department of Energy's Loan Programs Office that are designed to make distributed energy resources, including rooftop solar, battery storage, and virtual power plant-ready software available to more American homeowners. If granted, we expect these financial benefits to be available for our customers in 2024. Our lease net bookings continue to grow robustly with our dealer network leading the way as the value of leasing solar under higher utility rates becomes an increasingly attractive option. Our all-in cost of capital for leasing remains below 6.5%, including tax equity, with the added advantage of lower interest rate sensitivity across the full capital stack. We believe this to be equal or better than our competitors. We believe that we will have ample facilities in place to finance a growing lease pool through 2023, and we are in late-stage discussions that aim to close additional funding arrangements for further growth. Before I turn it over to Guthrie for the financials, I want to share some exciting news. This week, SunPower is bringing on important senior leadership talent as we welcome Pat Bigatel as our Senior Vice President of Sales. With over 20 years of experience, Pat is a highly accomplished leader with a proven track record spanning operations, sales and business development, marketing and brand management for both emerging and large-scale organizations. We are also proud to announce that Jennifer Johnston will join the company as Executive Vice President and Chief Operating Officer effective May 8th. Jennifer is an accomplished executive with over two decades of experience leading teams in operations, manufacturing, logistics, and finance. She joins the company from a leading-edge robotic technology company that specializes in automating e-commerce order fulfillment, where she served as its chief operating officer and chief financial officer. Prior to this, Ms. Johnston spent 10 years at Amazon in North America and Europe, where she held finance and business leadership positions across Amazon Fulfillment, Amazon Logistics, Amazon Go, and AWS, driving operational and financial scalability across each of the businesses. And on that note, I'll turn it over to Guthrie for more details on our Q1 results. Guthrie.