SunPower Inc.

Good morning. My name is Siobhan Hickey. I'm VP of IR and I would like to welcome everyone to SunPower's fourth quarter earnings call. I will take a few. I would, I will review a few housekeeping items before turning the call over to our CEO, Dr. TJ Rogers. This call is being recorded and a replay will be available within the events section of SunPower's Investor Relations website. Please note that today's presentation may contain projections and other forward-looking statements. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in our statements. Also on today's call, we may discuss certain non-GAAP financial measures. A reconciliation of any differences between those non-GAAP financial measures and the most directly comparable GAAP financial measures are available within our press release. Lastly, we will hold a question and answer session after the end of formal remarks today. For those watching via the webcast, you may submit a written question at any time via the submission box located on the right hand side of your screen. I will now turn the call over to Dr. T.J. Rogers, SunPower's chairman and CEO.

Morning. We have some guests here today. First, we have John Berger, who I'm going to introduce later. And we have two directors of SunPower, Dan McCraney and Will Anderson, both of whom I have slides to introduce. So let me get right into it. Our logo is the Helios airplane. It had 35,000 watts of sun power solar cells on it back when it flew under its own power, takeoff, 92,000 feet, an unbroken record. I'll relate to one more aspect of this airplane today. You notice this reflection here. that reflection means that the bottom side of this wing is clear plastic. So this wing, if you looked at it, you can look right through it, and you see the struts and clear plastic on one side and the solar panels on the other side, meaning all the light coming from down here can come in the bottom of the wing and add power. And that's what's called bifacial. That is, the cells accept energy from either side. I'll talk about that later. Dan McCraney, I introduced to you, very short introduction. He's been on 10 NASDAQ boards. That's what he did after he left Cypress Semiconductor. He ran VP of Marketing and Sales. And he was the chairman of both halves of Motorola when they split up into Freescale and on. And he was on the Cypress board as well. He's also run Seek Technology, which was a spin-out of Intel in non-volatile memories. Will Anderson is on the far side. He's a MIT, Stanford MBA credential guy. He's been on the SunPower board since 2010. And he was actually the founder and CEO of Complete Solar, the company which acquired SunPower in the SunPower name. Now he's on our board. And he's a... Glutton for punishment. He's got another startup called Same Day Solar, and he's learning how to do financing. So if that works out, that may be a way for us to get into that business, which we're not in right now. Okay, I showed you this slide before, and I'm showing it again because I think it's cool. This is a picture of the helios flying at 80,000 feet, curve of the earth, clearly above the atmosphere, unbridled sun coming right in. Of course, that means more energy. And I did a little engineering work since the last time you saw this. At 80,000 feet, atmospheric pressure is down to 0.4 pounds per square inch from 14.7 psi at sea level. And, okay, what does that mean? Well, here obviously you can't breathe, but there's more than that. The boiling point of water at sea level is 212 F, and the boiling point of water at that pressure is 59 F. Said another way, if your body's at 86, 98.6 degrees Fahrenheit, your body temperature is enough to boil your blood. Hence, if you fly in one of these airplanes, you have to wear a spacesuit. And this is my favorite of all the pictures. You can see completely sealed up oxygen. They'll run in 4.7 pounds of oxygen, which is partial pressure that you get on Earth. And I really like this one. And this airplane can stay up forever. Because it has batteries in it. This is a report we put out this morning early. Record financials, I'll talk about that. We have two acquisitions I'll mention. And we just signed a $55 million equity line of credit. I'll go through this in detail on the next page. The main points are our revenue set a record of $88.5 million, up from $70 million last quarter. The main thing is that we have two new acquisitions, Sunder, which contributed a full quarter of revenue, and Ambia, a partial quarter. Our operating income is a, for the new Sunflower, record of $3.5 million. That's only 4% of revenue. Our target is to get to operating income. to 10%. And our ending cash balance was $9.3 million up from $5.1 in the prior quarter. And I already mentioned this, but we increased our equity line of credit with White Line Capital, that's our vendor in Southern California, to $55 million on January 11th. It's now signed, and the shareholders have to approve it because it's an equity transaction. We've got a shareholder meeting coming up. Little bit of details. These are abbreviated preliminary financials. I don't expect them to change a lot, but I've limited to the key numbers that investors want to see based on my experience. So on the non-GAAP side over here, we jumped 26 quarter on quarter revenue at 88.5. On the gross margin, We had exceptional gross margin because we cleaned up some old backlog that we bought from SunPower. And the reason I put base 38% is to say that's our normal fall through gross margin. I urge you not to change models and put in some giant numbers which are unmakeable in the long haul. And then I'll point that our OPEX went up only 8.5% quarter-on-quarter, and by the way, we're working on that. That can get better, yeah. That left us with a record profit of $3.545 million, up from $2 million last quarter. We also added $4.3 million in cash. This did not include any money from the ELOC I mentioned. This was the, quote, natural quarter that we had. This is a graph of our operating income. So it shows time before acquisition, time after acquisition, $0 here, massive loss for the three components of what turned out called SunPower, one quarter of loss, and then now four quarters of profit, including a record profit this quarter. We came out of the – this is a revenue sort of a footnote. We came out of some power acquisition with about $80 million a quarter in revenue, $320 million in run rate. The record was set in the second quarter. We got the bad news of the ITC cut in the second quarter, and our revenue dropped precipitously, but we were ahead of it with cost cutting, and we actually made almost the same profit on a lot less revenue. We recovered in the third quarter a little bit to $70 million of revenue. This number, when I first showed it to you 91 days ago, was $3.123 million, and it was a record. We chose because we had a lot of aged backlog that we inherited from SunPower, now completely collected, I might add. But at that time, we had age backlog. We took a million one out of this number and stuffed it into reserves. So we have reserves in the $8 million range. We've been getting our reserves so we can have some sort of hiccup in the future and not trash our earnings. The quarter we're in now, 88.5, primarily a large growth due to the startups just starting to the acquisitions just starting to kick in. And that led record revenue to record profit. For the next quarter, I've got a conservative estimate here where, by the way, this shows the acquisitions, Sunder, Ambia, and Cobalt. I'll talk about each of them later. I went down 4.4% in the estimate, and the profit is commensurate with that. That's conservative. We believe we can make that number. But, you know, this quarter is typically the bad quarter for solar, the winter quarter, and we're deployed in the north. And then you've got the ITC, you know, uncertainty. So... This will still be our second best quarter ever, even in the uncertain, perfect storm quarter of Q126. Okay, it was our fourth consecutive profitable quarter. So our whole year was profitable. That comes off of four consecutive years that the prior SunPower, a different company, did not make money. Our Q425 revenue and operating income were both records. Our 2025 revenue totaled 308.8. So we managed to hold the revenue and not lose it. There are factors that can cause you to lose revenue in our business. I'll talk about that later with a profit. And that included a loss of this profit of $1.1 million in bad debt reserve we took last quarter. Our Q126 revenue is expected to be 84, and I say it's highly uncertain. I'm pretty sure of the 84, but I put some slack in the writing. Our Q126 operating income is expected to be positive. That's the main event. And if we make it through Q1 with a positive income, we're going to make it through 2026. I'm going to say one thing about marketing. This is the Energy Information Agency, sort of one of the official places to get data. This is United States residential solar penetration. So it says that in the United States, we currently, as of 2024, this report, we're 5.6% penetrated, up from 3.7% in 2020. And then here you can see in the west, the sunny west in California, where green is in big time, the penetrations are higher. But even then, the highest penetration on the list is 15.5%. The point is, I don't think about the market as being competitive like I used to with chips. Don't worry about my competitor that's got a RAM cheaper than mine or a processor with more megaflops per milliwatt. Don't think about any of that. The market here... is an ocean, infinite. And when you throw your cork in the ocean, it doesn't cause somebody else's cork to go up or down. It's just there to be taken. And that's why I am not going to talk at all about ITC and speculate on rates going up and down because this is an exponential growth curve. And the reason it is, is there. Today, 94.6%, 100% minus that of qualifying homes do not yet have solar. And the price of solar, your competitor is incompetent. The price of electricity goes up every year, and it goes up faster than the index, than any inflation index. So your competitor is giving you business. So stop thinking about, do you have a hiccup? What happens with the dislocation in the market? Stop thinking about that and go take some market share. That's where my head is. This is a graph of acquisition-related increases in our sales rep headcount. So in the solar business, we talk about 1099s, meaning in the IRS, they're 1099s, meaning they're independent contractors. They don't work for us. We can't give them orders. We can't force them to domicile somewhere, and they can quit at will. And the fact is, in the 1099 world, oftentimes people will go to a different company, and you'll find out about it later. So these are our reps. And the name of the game here is since you don't pay for them, you pay them only commission. They're only incremental costs, big incremental costs, but only incremental costs. You get as many as you can. Okay, so now we go back to the beginning of this year. We had 1,126 reps. They all came from Old Sun Power. And Old Sun Power was in the process of a strong decline because the Old Sun Power went bankrupt. And a lot of the guys decided to head for the road and find a new home at that time. In Q3, we announced Sunder. Sunder was, in my mind, the most important sales company in Salt Lake. And that's Solar Valley, Salt Lake, Utah. And we brought on more than double our sales force. Now, you notice here, while this sales force was declining, in Q3, the Sunder sales force actually grew. So when Eric Nielsen took over and started running sales right, better than me for sure, then the 1099s decided it was in their interest to come to work for us. So this number has actually been growing. Then in Q4, we announced Ambia. And Ambia added 203 salespeople, and they're still with us. This is a snapshot on today, so I could give you where we are now. And then we've never announced this, but another company in Salt Lake went bankrupt. It's called Pure Light. It had 350 sales reps that were generally considered to be really top-notch. So we created a program to bring them in. Talk about it later. And we hired them. So I didn't put this on any of the financials because they're 1099s. We have now more 1099s working for us. And these guys are pretty good. And the fact is the results they're producing so far are pretty impressive. So bottom line, we've gone from 1,100 to 2,000, rounded off, almost double in our sales rep headcount. Having said that, there's another headcount that matters and matters in a different way. It's our direct employee headcount. These we call W-2s, those that work for us, and we pay them to standard employees. That needs to stay stable because when this goes up to a first order, directly proportional to your costs going up and your gross profit going down. So this thing goes all the way back to Q3-24, back in that massive loss quarter I showed you earlier. You can see why there was massive losses. The combined company said 3,499 employees. We used the ARC strategy and put, we said we can handle 1,225 on the ARC. And we achieved that by the fourth quarter of year before last. Then we tightened our target to 980 and we achieved that. And now we're in the game of acquiring and acquiring acquiring and acquiring. So we pushed up a little bit. We actually were down here, but then we pushed up. Ambia had a bunch of direct employees because they were a real company with EPC and real meat in that company. And now we've started using Synergy, where we have two of this and two of that to cut down, and we're back down to 847. The goal is still to get to 820 after having absorbed the best people from three companies, all of the sales reps that want to work for us, plus the best of the other W2 people using Synergy to use the best of decision, who stays and who doesn't. Okay, if you then hold your headcount constant and grow to record revenue, then our overarching metric is revenue per employee per year. And this is a relatively crude metric, but it's not that bad. Just think somewhere between $70,000 and $78,000 a year for the average employee in solar. Multiply that, and you've got a cost. And take your headcount, and you've got a major part of your cost. Furthermore, everybody adds other expenses. Okay, so we came out in the first quarter at $285,000. We lost money that quarter. We cut our expenses that quarter. So I'm going to tell you that this number right here, $285,000 per employee per year, is our break-even level. It wasn't in this quarter, but it is now. Then we jumped up to 360. Times were flying high. Then we got clobbered with our revenue going down, and we stayed at 304. That's a make a little bit of money level. Then we climbed to 337 last quarter, and this quarter we're setting a record. First time we've been over $400,000 per employee per year. So there's Sunder coming in, and there's Zambia coming in. And those companies brought in more salespeople and sales than they brought in people. Therefore, revenue per employee went up in each case. I'm comparing to Sunrun because I admire them. If you take their revenue of $240 billion and 11058 employees, these are published numbers, you get $217,000. Not a completely fair comparison because they also run a utility, right? They keep their jobs. They don't sell them like we do to some other financial company or to the owner of a house. They keep them, and they're building a utility, and they have infrastructure to build and collect it. But nonetheless, I'm very proud of our productivity per employee. And I don't know because there's not a lot of data, but I think it's probably the best in the industry, certainly as good as the chip industry was when I was in that. And final point, we have a clear line of sight to get to half a million dollars per employee per year. I can see that because we're just now starting to incremental revenue doesn't add anything. I don't add an incremental lawyer to add incremental revenue. I don't add an incremental controller to get incremental revenue, et cetera. So we're amortizing overhead. This is a graph of market cap, your ratio of market cap to revenue. If you looked at it on a stock basis, it's a price-per-share to sales-per-share ratio or PS ratio. So it's the analog of the PE ratio but market cap on sales. And here you see an interesting trend. You see sun power. I mean, that's almost Planck's constant. I actually had written it in here, and I got rid of it because it was too cute. It's 0.55 plus or minus 0.15. So then I said, is that good or bad? And a while back when we were down here, I said, well, you know, the whole solar industry is getting clobbered and we're doing about as well as them. Well, if you look at the leader, Sunrun, they've recovered and we haven't. And I'm going to address that today. That is a problem for me and an opportunity for investors because, um, Yeah, you guys managed to move that thing right across my arrow. Okay, because that's a 3x change. If we can figure out the formula to get to that multiple, which is achievable. And I'll also point out that we have a high-tech index where that PS ratio for five, six companies is 2.2. And if you look at a company like Enphase, a solar company, they're up at 3.3. So... This is still depressed as an industry. The leader should be higher, and we just want to catch up. That's my job. Okay, so why did Sunrun recover from the ITC cut? Well, Sunpower didn't, and I've listed three reasons here. One is cash. Last quarter in this meeting, last quarter we reported $5.1 million in cash. And I did that honestly so you'd all know where we were. And I won't say freak out, but people are going, whoa, that's not enough. So we have raised our equity line of credit. This is an equity line of credit. You sign a contract. A broker agrees to have stock put on them. and sell it and give you back proceeds. So it's like an ATM where you do it yourself. And the proper ELOC has got professionals selling it, is kinder on the market, and doesn't cost any more than an ATM. So that got raised from $20 to $55 million. No, $30 to $55 million. Point here is we chose an ELOC because that's an option to raise money, not a raise. But you can raise now. You can raise on demand. And that means we weren't forced to raise expensive money immediately. So right now, debt's expensive. And our share price, I think equity is expensive. So what I want to do is have $10 million at the end of every quarter come hell or high water. But I don't want to pay for that right now, other than a promise to work with these guys over time, which we certainly will. These guys are a pretty good white lion. We also have three other funding deals in progress. I talked about these last year. I've worked on every one for the last six weeks. We've got meetings and discussions in three other areas, and I will be announcing things over time. Second point, we had a late SEC report. Our Q3 was late. And it turned out everybody's going, oh, my God, what's going on? The old sun power had problems with their auditor, blah, blah, blah. It turns out we were just slow and not okay, but we were slow. And the actual change that happened after all of that was de minimis. That was that $1.1 million I talked about, which actually is insane. It sure is future performance if you look at it that way. Our financial system is currently a mix of acquired systems, and now we have two brand-new acquired systems, and that slows us down. We're not nimble on finances the way I'm used to it. And if you want to ask about King, talk about Intel. They report early in the quarter with their reports filed. They're always ready to go. That's my goal, and that's what I'm demanding from our finance people today. but we go back and forth with the auditor, and those cycles are long, and that's what pumped us over on the late SEC report. There was no smoke indicating fire or anything like that, but I'm tired of it, and therefore I've hired a guy named Cal Hogan. He's a well-known Silicon Valley financial consultant. He's worked for 20 companies, He comes in, he's an auditor himself, and he helps you straighten up your finances by bringing in his knowledge of state-of-the-art systems. In the last three years, he's worked for 20 companies. And his longest tenure at any one of the companies has been seven months. So he comes in, helps you fix it, and then goes on to his next company. And he's been with us for a few weeks right now. And he's going to help us speed up, upgrade our financial systems. Finally, I've been talking CFO now for six months. I've used my own network, which I could find a CFO. I'm right here in Silicon Valley right now. But I could use my network and talk to three CFOs and have one in two weeks. But I want somebody in Salt Lake, and that's been harder for me. And we're working on it, and we have a list of Salt Lake CEOs right now, and we're doing methodical interviews. So we have a formal service going on. And finally, I've talked about this before, disinformation from financial services. This quarter I read in one place that we were being investigated by the SEC. Not true. The old Sun Power was being investigated by the SEC, et cetera. And I've asked them to stop and be careful, and they're not listening. And the next time they hear from me, it'll be a formal demand. Why don't you guys claim to show the light for finances? Work with me. Because I tell you how to invest. Well, if you can't get the name of a company right, what credibility do you have? So that's going to be subject to my purse strings, my next initiative. Monolith. We announced this a while back. This is the name of a solar panel. I picked the name and I actually, we have a thing called Sun Power at the movies in Salt Lake. And I showed 2001 Space Odyssey done in 1968, an amazing movie. And there's this mysterious monolith that follows him around. Black monolith. You never know what it is. And the movie never tells you. Roger Ebert, when he reviewed the movie back when it came out, said it asks more questions than it answers. So we called our all-black, high-wattage panel of monoliths. This is our sales conference. And me pulling the thing off to also spark their through-strut, the music from, you know, bomb, bomb, bomb, da-da, the music from the movie. What's good about it is I call it a record 470 watts. Now, if you ask for, go on your phone and say, list 500 watt panels for me, you'll get a big list. So why is 470 a record? Because the real name of the game here is that OSHA enforces a weight limit And they say a panel can't weigh more than 50 pounds. And if it does, then the work limits change. For example, you need two guys to lift the panel and install it. Disaster for efficiency. So there is in the residential area. Now you go and that's two square meters for the panel area. If you go into utilities, the typical panel is three square meters, so it's one and a half times more power, and many of them are over 500 watts. But they're lifted into place by robots in a construction site. It's not apples to apples. I want to give credit to our partner, REC, which is the largest non-Chinese company. panel company in the world, Solar Panel. And actually, they're the largest in the United States for residential solar panels. And this is, now you see why I used the monolith for a word. Otherwise, I'd have to talk about our Alpha Pure RX 470 watt panel, which I don't want to do. But I want to give credit to these guys. They're good. And we're the only one that got that panel, by the way. They offered us an exclusive. And we're working to make the site, I mentioned this earlier, bifacial. That is, instead of having black plastic on the back of the panel, glass on the front, if you put glass on the front and glass on the back, then light can come in from either side. And if you can get some reflected light, like the light reflected from the earth I showed you earlier, coming in the back, you can get more power. Now, it's not going to blow you away, but it's perfectly reasonable, depending upon the installation and the place, to get the panel over 500 watts just by putting glass on the back. And that's our plan. Cobalt. We announced on January 16th, we signed a letter intent to acquire Cobalt Power Systems. And I wrote these words carefully, Silicon Valley's premier solar company. I was around when SunPower went public in 2002. I was chairman of SunPower. And everybody knew about, everybody knew about Cobalt. And they made a big deal about the monolith panels. My guys back in Salt Lake said, yeah, we got some more panels. That's great. We got a lot of different kinds of panels. John Berg called me up and said, when can I get some? I said, when you need them. He said, now. So they got put in his parking lot just last week. And one of our first projects is going to be 111 kilowatts. So they do bigger stuff. There's a building called the Fortnette building in Sunnyvale. Sunnyvale is two cities south of Palo Alto, dead center of Silicon Valley. And it's an iconic building. We're going to do that's going to be one of our first ones. When the ITC news came out, I wrote a press release called Free at Last. We're free of government meddling at last. There will actually be a free market and solar at last, and that's going to play for us because we think free market. We don't think safe harbor, buy stuff and put it and let it rot in somewhere else. We don't work like that. We do what's best for a business. And I said we would take advantage of the free market because we know how to behave in free markets. And we have two goals, and I've already shown them to you, to rapidly grow our rep sales force as big as we can and to upgrade but not grow our 847-person workforce. And by the way, every one of them is an option holder, so that's a little piece of Silicon Valley that we brought to Salt Lake. Now I can introduce John Burke. This is a picture. He has a house in Santa Cruz, and this is a picture of him Self-made man. His dad had a water well business and died, and he got yanked out of college in his junior year to take the family business. He started working on solar thermal collectors. This is solar energy focused to heat water. Worked his way into understanding PV. I knew about him at SunPower. He started as a salesman and walked right through up to the Silicon Valley regional sales manager, arguably the most important sales position in sales, other than maybe one of the biggest companies in Salt Lake. He went to work for QSales. It's a Korean manufacturer that sells a lot of panels in the U.S., And he was business development, selling at a high level using technology, BizDev, $336 million business. He used his own funds to buy Cobalt Systems. Cobalt was well-known. He bought it how long ago? 18 months ago. 18 months ago. And it's been exploding right now. It was always a $25 million business. This year they did 33. And he invented a cobalt concept, and that I call sales system designers. One of our companies, Ambia, had a concept that made us more efficient. And their concept was the salesman who sells at a house needs to do the site visit. The site visit is the next thing. Normally, some salesman or seller sells the home. Then you go in and do a site visit. And that's when you take pictures of all the wiring and everything so you can create a plan for the house. And Ambia asked their sales force to do site visits. They eliminated a whole step in the process, shortened down the process, and also obviously made it more efficient. These guys have gone one step farther. They're salespeople that are called system designers, and they can design things. So they can go into some mogul's house in Silicon Valley and put together a big system, which requires more elaborate and detailed plans than a simple retrofit on a suburban house. He's also an athlete and a coach of youth sports. And he's going to run Cobalt, which we are going to run due to fact he runs it. I've been there. I was there for their company picnic. It's got great esprit de corps, and they're far away. except not for me, so I can meddle as frequently as I want. John, you got some words for us.

I do. Excited to be here. You know, been involved with SunPower since late 2006, where our customers had to wait six months to get panels. Well, now they don't have to wait six months, and they don't want anything that's safe harbored and waiting in a warehouse for two years. They want the newest technology, and they want it deployed, and they want it deployed on their house now. Cost of electricity is going up. But what Cobalt Power Systems really represents here, and it's a different type of acquisition for Mr. Rogers and Mr. McCraney and his team, is we represent a differentiated scalable revenue vector for SunPower. So we're uniquely positioned to integrate sales origination, operational execution, and next generation renewable energy technology deployment all within this single platform. So together, our combined capabilities, as TJ has mentioned earlier with the sales capability, I mean, right now we've got a dozen system designers and they're top notch, they're top tier. But having access to 1,800 or over 1,800 sales reps That plays right into our position. So together, we can address the full spectrum of demand of the market, spanning residential, new home construction, multifamily, light commercial, large-scale commercial, industrial applications, including up to large-scale data center power infrastructure. By operating Cobalt as a focused subsidiary within a publicly traded enterprise, SunPower unlocks a multiplier effect, unknown or unseen in the market. It's got efficient access to capital for a company like Cobalt. Its workforce scale and its institutional resources as a publicly traded company will allow us to scale, grow, and meet the market demand for renewable energy power. It takes five to seven years for a gas turbine to be installed in one of these units. They need power now. They need solar. They need wind. They need infrastructure and execution, which we can provide. Cobalt brings a proven track record of building, operating, a profitable business unit, which is unique in solar. It's positioned to deliver meaningful, sustainable profitability while accelerating the deployment of industry-leading energy solutions to end users at scale. That's why when we first got our first shipment of Monolith last Friday, we have customers that have already oversold. We're already oversold our first container, so we're getting our second container. They want the most power-dense module. They want to use the best parts of the roof. Why? Because they have EVs. They have complex energy demands that are requiring more electricity. We're here to serve that function. But quality, quality is at the foundational standard. It always has been with SunPower. Quality, technology, that's the core of our platform. And now with TJ and his team, we have the discipline execution at scale that will reestablish SunPower and establish the new SunPower in a league of its own over the coming months and years. So I couldn't be more excited. Thank you.