SunPower Inc.(SPWRW)Q2 2025 法說會逐字稿

Hi, this is T.J. Rodgers, CEO of SunPower, here to discuss our quarterly performance. I'll start with our numbers. We generated $67.5 million in revenue, which was less than anticipated, but we are proud of our $2.4 million operating profit, particularly given the revenue situation. We have implemented strong cost-cutting measures, leading to a leaner operation that offset a decline in ITC-related revenue. We have made sure the accuracy of these numbers is high following a recent change in our accounting leadership. In the previous quarter, we achieved $82.7 million, marking a third consecutive quarter above $80 million. This quarter, however, we faced a downturn in revenue due to the ITC impact and some last-minute issues that affected $5 million. As a result, our gross profit took a hit of $3.7 million, but we mitigated some of that loss through a focus on our most profitable segments and maintaining excellent gross margins.

Our operational expenses were successfully reduced by $4.5 million, although after adjusting for commissions, the net benefit was $3.2 million. Consequently, our profit dropped from $2.9 million last quarter to $2.4 million this quarter, which, despite being lower, remains commendable for our current scale. Regarding our financial performance, I was asked how we reported a GAAP profit of $2.4 million alongside a non-GAAP loss of $2.7 million. The discrepancy is primarily due to increased stock compensation and intangible costs, mainly stemming from stock issued to employees amounting to $5.1 million this quarter. We have also been dealing with the effects of a temporary revenue freeze related to ITC issues. Reflecting back on a frigid day in my hometown of Wisconsin in 1967, that memory resonates with the challenges we've recently faced. Positive developments include finally being able to collect old SunPower accounts receivable, which will help alleviate some revenue challenges we faced previously.

We recently joined two Russell indices, enhancing our stock's visibility, which is beneficial for us moving forward. Additionally, we have established a low-cost finance center in Chennai, India, collaborating with two capable firms for our accounting needs. Our new interim CFO is Jeanne Nguyen, and we are also welcoming Nicolas Wenker as our Chief Legal Officer. In summary, while we've faced challenges, we remain optimistic about our future revenue growth and ongoing improvements in our profit projections. Now I'd like to introduce Dan McCranie, a new board member, to share his insights from his first month with us.

Thanks, T.J. Hello, everybody. Well, first off, T.J., thank you very much for using a 15-year-old picture. I appreciate that very much. Let's get to the slides. So first off, I've been on this job now almost three weeks, but that doesn't mean I've only had three weeks of looking at this particular operation at SunPower. I joined the Board in the December time frame. And from that time on, I spent about 20 hours a week monitoring all of the major meetings from December to July. So what I'm about to show you is not my observations in the last three weeks of this position, but really six months. So I only point that out because I think it adds more credibility if you've got more time watching the stuff. First and foremost, I've come to truly, truly like the young men and women in the sales organization. We have a broad organization of direct virtual and dealer as well as new home sales personnel.

And I find them smart, find them focused, very loyal to SunPower, very aggressive. I really have come to love that energy, but also pretty loosely managed. The result of that is all that energy and all that positive collaboration is not maximized in terms of bookings. We need to get bookings in order to pop up the revenue. And there's — as far as I can see right now, the total available market in solar is, for all intents and purposes, infinite for us. And the issue is, is to get this team of good people, good men and women to function better and more aggressively. But here's how I see it right now. First off, the sales organization hasn't been responsible for forecasting quarterly bookings. And the problem with that, I see this back in my day, I used to see this on start-up companies where the sales force was doing best efforts as opposed to having skin in the game in terms of actually forecasting the bookings along with the sales, along with the operations guys.

But I'm not used to seeing that with a company this size. You must have input from sales. Once you have that input, sales no longer provides best effort. They actually are accountable, truly accountable to the numbers that they're forecasting. Second, the sales management has been slow to react to changes in the industry and customer environment. This is bad all the time, but it's particularly bad in solar. As all of you are aware, the kits keep on coming in solar. We've had huge changes in the last six months. It is really the responsibility of executive sales management to move fast and quickly as these changes occur. And frankly, that's been unacceptable. Individual sales personnel are not giving performance targets. So it's not just bookings. You've got to manage the entire funnel. That funnel is all the way from generating leads to driving appointments to doing pitches with the customers to bookings to the final design complete and then all the way through to revenue, which is at installs.

If you don't drive all elements of that funnel, you're going to find yourself waking up with a subpar performance in bookings, which we did in Q2. And I'll get on to that a little bit later. Finally, the sales executives, the 1,099 do not effectively engage with other corporate departments. An example of that would be when you're doing your forecast or when you're trying to figure out what's going on, for instance, in the latest ITC ruling, the sales executives previously were not collaborating with finance, HR, operations, or engineering. When you get these seminal changes in the industry, you've got to be engaged. And frankly, I found in the six months I've been watching this, there was ineffective engagement, therefore, ineffective sales strategies as a result. Cost of selling is another issue. This is a very high cost of selling. I've been in semiconductors most of my life. I'm used to cost of selling being in low single digits percentage of revenue, 4%, 5%.

I'm not used to this double-digit cost of selling, but it gives us an opportunity and you take a look at where your problems are, your cost of lead generation is extraordinary compared to the industry. Center management is probably double industry standard. Funnel velocity is slow. The problem with slow funnel velocity is that you end up losing orders that you've worked for months to secure. The funnel yield, which refers to how much you get out for what you brought in is, from my investigation, not at industry standard. So they're all poor when compared to what I would call best-in-class in the solar industry. So here's our corrective action and progress. It's been three weeks. So we reorganized SunPower to a truly functional organization. The advantage of that is that now the VP of Sales is on par with the top finance people, with the top operations people, with the top legal people. And so we can have a seat at the table, if you will, for strategies going forward.

It's also under one department. So we can have cross-pollinization between New Homes, between dealer, between direct, between all the channels going into sales, and they all report directly to the CEO. We're going to recruit eventually a sales executive to drive the organization. In the meantime, you're looking at your sales executive. I want to make those senior executive changes necessary to improve group performance drive. Now I told you I was proud of the team and I am. There were some issues, and we made some changes at the executive level on a couple of those areas, and those changes have been made, and we're now in the process of replacing those executives with very good, strong, young men and women who are currently inside the SunPower organization. Now we created a more detailed forecast. I told you the sales force didn't participate in the forecast. We now have forecasts on a weekly basis, measured daily on all the important parameters that lead to strong bookings, and that's leads, appointments, pitches, bookings, FDCs, and another one, installs.

We track that multiple times per week. The min are given a weekly bonus and a weekly forecast in addition to a quarterly forecast. And just as a brief point on that, we've been banging on that for about four weeks now, and I am very encouraged in the first four weeks of this operation. I like the FDCs, final design complete. That's our version of bookings to the factory. That's up almost 30% from this time last quarter, and I am very proud of the minute for doing that. We need to set global cost, funnel yield, and funnel velocity goals for sales. I haven't exactly got that yet. We've created a plan to get what would be entitlement for each of those areas. We've already started monitoring some of the basic yield issues. I won't bore you with which ones that are. But throughout the quarter, we're going to add all the rest of the issues in the funnel and drive cost. We think we're spending almost twice the price per watt effective for certain — compared to the industry for certain effective. That's it, T.J.

We're pleased with what we've achieved so far, but a common question is why our stock price isn't higher if everything is going well. I’d like to address that now. There are several areas for improvement that can enhance our situation. For instance, I refer to the price-to-sales (PS) ratio. When I looked at this metric, it was at $1.81, with a revenue run rate of $270 million, down from $300 million, leading to a ratio of 0.54x. In comparison, a group of small tech companies maintains a stable price-to-sales ratio around 2.5x going into 2024. At Cypress, where I worked for 34 years, our average over three decades was 2.4x. Meanwhile, Enphase, a company I hold in high regard, still sits at 5x despite some declines. The solar industry, particularly the leader Sunrun, has faced challenges but is beginning to recover, currently at 1x. Our share price is low today, which is the bad news. On the brighter side, there's potential for growth in our value, which could lead to an improved price-to-earnings ratio over time.

Reflecting on our stock price history, we've faced challenges since we reported our first profitable quarter when our price was above $2. After publishing some risk factors that might have seemed overly cautious, our price dropped. For instance, we indicated we may not achieve continued profitability, even though other companies like SunPower are experiencing gains. While we do have vulnerabilities and acknowledged risk factors, we plan to be more realistic moving forward. Moving on to profitability and cash flow, we expect to see our third consecutive profitable quarter in Q3 '25, likely with significant profits. Regarding growth, we're also focusing on acquisitions. I've been in discussions with three different companies over the past four months, and while we haven't finalized any deals yet, I'm confident we will. Once we do, I'll approach you for funding to support the acquisition. Lastly, I want to address some misinformation in stock reporting.

For example, MarketWatch displays outdated headlines about past bankruptcies of SunPower, which is misleading for potential investors. I've raised these concerns before, and I'm hopeful they'll work with us to rectify this issue. We are not on the verge of bankruptcy, and it's important to clarify that. Thank you, and I'm open to any questions you may have.

Thank you, T.J. Our first question today comes from Derek Soderberg from Cantor Fitzgerald.

So T.J., on your call recently, you were talking about the ITC being eliminated. You sort of spoke to the fact that the industry has been bloated with cheap capital, sort of propped up mismanaged companies. For the past two quarters here, you've already proven that you can achieve positive operating income despite some of these challenges. And while you guys are generating income, your peers are going bankrupt, some of them. How can SunPower benefit from surviving this cycle? And when might we see some of that organic growth coming from, in a sense, a less crowded industry?

Okay. Think about my pitch. We made $2.5 million last quarter. This quarter, we're going to make $3 million, and we're a public company. You're private, your cash flow is 0 or negative and you're not public, so you have no liquidity on your stock. What if we work together? And by the way, we have a good organization. We are starting to have structure that means you can join the organization and join something that is going to be run well, and you can run your own division. You have to conform to our accounting rules, et cetera, et cetera. But — and you will get some help. We have a good legal group, et cetera. And we do accounting in India, so you can save money there. Let's work together. And oh, by the way, I'm 77 years old. Although right now, I'm in the full war mode, and I'm actually enjoying myself. I'm 77 years old, and I ain't going to be around a year from today, I won't be there, and you might be the guy to replace me.

What do you think? It's a compelling pitch, and it gets more and more compelling as the economy gets crappier. That's why I used the famous Martin Luther King quote, "Free at last, Lord God mighty, free at last." When we got the government, I thought the hell out of solar, so we can just run companies and compete in the free market. Right now, that's happening for part of the market. It's not happening for the other part. I'm most worried about — actually, everybody would say it's important to the safe harbor. If you want to induce a company to poor practices, give them a safe harbor, let them buy equipment for the next year, put it in the warehouse so it can start aging. It's like buying a year's worth of lettuce, okay, it's not going to be good by the time you need it. So we're not out of the woods yet, but I believe the solar industry surely will be better off. We have this always help from government in our industry, and it costs you $3 a watt or $2.75 a watt to put solar on your house.

Well, in Australia, it's $1 a watt. In Europe, it's $1.5. So if we have free markets in a free economy and we're America, how come the consumers getting screwed? And the answer is all of these games, the Monday morning pronouncement about what's going to be tariff and what's not. All of that is the friction in the economy that needs to go away with the ITC, and that's more important than Joe Blow's P&L. And if you want to be around, just make your P&L nice when it's gone, then you will win.

Can I add Derek, a couple of things on the SunPower sales organization. As large as it is and as much as it's been around and punching, there are certain areas where it is below critical mass. And those areas happen to be the biggest positive potential future growth even with the ITC ruling. As an example, the states of California, Texas and Florida are going to continue to be robust even during this ITC operation. SunPower does not have a very large direct presence in Florida, and it has a very poor presence in California and in Texas. My point is that we can take some of our energy and some of our personnel currently at SunPower, redirect them into those critical states and have an opportunity to attack areas with a large total available market for which we are currently doing very poor. So I think one of the ways we can pop up revenue is, if you will, reallocation of our precious sales resources into areas that have a high TAM even in this ITC environment.

Got it. Super helpful. I do want to touch on the business here. I think there was a mention on the call here about the backlog, up 30% from last quarter. I was wondering if that's the case. And if so, what's sort of driving backlog today, which area of the business? Can you just talk a little bit more about that backlog growth?

Go ahead.

Yes. So the biggest thing that's happened now, we have three fundamental divisions inside SunPower. We have what we call the direct business, then we have New Homes, and then we have the virtual business. The thing that popped us up last quarter big time was a direct business. We had — a matter of fact, if I just look at the numbers, we had a terrible book-to-bill in Q1 2025 of 0.8 book-to-bill. That's actually because there's about a 9-week lag there between when we book it and when the factory ships it. So 9 weeks, you can kind of see your future in front of you. So at a 0.81 book-to-bill, that explains — that is the reason for the pathetic — not pathetic — for the poor revenue we posted in Q2. Fast forward to today, our Q2 book-to-bill was 1.2, so a strong growth in that. And that has — it has nothing to do with me, since I only came in four weeks ago. It has everything to do, I think, to the spirit and the aggressiveness of this young sales organization who popped back up strong in what we call the direct business, which is selling directly to the homeowner.

We also had, for the first time, some regrowth in New Homes. New Homes was more abound — going back to Q4 2024 from a bookings perspective, and they had a very strong first quarter out of the block. So that's what was contributing to it. And as I said, if you take a look at the first three weeks, actually the first three weeks of one day since I just saw yesterday's numbers this morning, we are continuing on that strong booking path for both New Homes as well as direct.

More comments. So when I'm looking for companies, I'm looking for New Homes companies. That's our most profitable division. That's the one $600,000 of revenue per employee. So that would be an acquisition, the specific acquisition I'm after. Also, you got to talk about batteries. In Europe, in the Netherlands, we talk about NEM in California, the net electricity metering. And when solar started, the way it worked was if you imported power into your house, you paid for it, and there is a tariff for it as a function of daytime. And then if you had excess power, then power would run your meter backwards literally, and you'd get paid for it at the going rate. NEM cut that going rate to $0.05. So now exporting power in the middle of the day doesn't cut it. And the reason I mentioned the Netherlands is their midday export rate is negative. They charge you for taking your junk power away. So for obvious reasons at noon time, we have extra power.

We're now up to 4 terawatts of solar. And within a couple of years, it will be the largest source of power on the face of the earth, okay? So store the stuff. Now the short-term thing is if you want to sell some solar, you go to a guy and say, "Look, I'll give you a battery." We'll sell you a battery, you hook it up. During noon time, when you can't get anything from your power, you charge your battery and starting at 4:00 in the afternoon when they start screwing you for $0.50 a kilowatt hour, then run off your battery. And that's called a grid-type battery. It's the cheapest of all batteries, and you don't need a big one. It's the smallest and cheapest. So that is taking off because you only need enough battery power to run one house from 4:00 in the afternoon to midnight. Think about 5-kilowatt hours is plenty. And even if you need a little bit bigger battery, it doesn't matter. You get 5 kilowatt hours at $0.50 a kilowatt hour, $2.50 every day, times 7, times 52, and that number adds up.

So batteries are becoming important. And from an electrical engineering point of view, store it during the day and use it at night. So the growth of the battery market exceeds the growth of the solar market. So we're pushing on that. Now if Dan said, well, our sales force is slow to change. My first talk to the sales force was in Scottsdale, Arizona last January. And I gave a one-hour long lecture on batteries, why they're good, why they need them. And we're not selling enough. So the second point is our deployment tends to be Midwest, stripe across the country, loan finance, no battery. Well, we need to change that, and that means we need a presence in particular in California. So number two, I need a company that is strong in California and SunPower is not strong and has never been really strong in California. So that's my shopping list. I'm in continuous communication. My next phone call to a guy who runs the company is — what time is it now?

1050. So 1 hour and 10 minutes. So eventually, I'll score because my arguments are becoming more compelling, and I'll ask you for some money to make us big.

No, that's helpful, T.J. And you brought up batteries. I'm curious how much that changes if you have batteries in the platform and the offering, how much does that change the economics of your average agreement? Is it 20% higher in terms of revenue potential? Any change in gross margin? Having batteries, how does that change the economics for you guys?

The first order, we'll get the same gross margin. So then how much more gross profit dollars is the — what's called in the industry, the attach rate. Right now, the attach rate in California is literally 95% because of that time-shifting argument I gave you earlier. In the United States, it's approaching 50%. We are at 14%. All right. You can say bad performance, and I'll say yes, but you can say major upside. But think about it, you don't go to more sites. You simply effectively sell a battery when you sell a solar system. So we're floating on solar systems right now and get a 1.14 multiplier, and we need to quadruple that number. And to do that, I hired the Head of the Battery division from Enphase. Enphase is the two most important manufacturers of batteries in the United States, the other being Tesla. And I hired their top guy. He ran a 300-person division making batteries. And it was all about batteries, all about sublease and he's a good businessman. I had him sitting here last time, Mehran Sedigh. So yes, batteries will make a difference. The answer to your question is 1.3x on its way to 1.6x over time.

Wow, that's pretty meaningful for you guys. And then just a quick one on gross margin here. I think in the press release, you noted the company is focusing on high-margin business. And T.J., you mentioned New Homes as one of the most profitable parts of the business. I was curious if that was the case, the reason for the higher gross margins? And then just, again, wondering how sustainable gross margins are here. Can you talk about that a bit?

I come from the chip business and what you look at is your gross margin every day to see if you're going to make it to the next day. So I'm paranoid about gross margins as a way of doing business. We have fortuitously high gross margins and how do gross margins get high? Well, you're big enough, you can buy equipment cheaply, and we're going to get better. We're going to amortize that overhead more as we grow above $300 million. But the other way to have good gross margins don't have so many people in the arc. It's real simple because a lot of people are in the gross margin. So we've done — that's a byproduct of what we've managed in the company, and we're exemplary at that, and we're going to get better. We're going to be killer to compete against in the market with our gross margin. Now having said that, I want to be completely transparent. A lot of the SunPower business we inherited was delayed because of their bankruptcy, and we've got some juicy contracts. If they were rewritten, they wouldn't be quite as good. So part of the incremental gross margin when we said we focused on areas for better gross margin were to fulfill old SunPower orders, and that was worth several points of gross margin. Eventually, and that means in 2026, we've got a lot of money out like that in front of us. But eventually, in 2026, we'll go to "normal gross margins." And for me, that's 36%.

Thank you, Derek. We have a few coming in from the web. First one follows on to some of what you were saying. Based on comments regarding New Homes, are you able to quantify how much AR revenue you're seeking to collect that has been pushed into 3Q and the second half of the year? Or are you able to provide any amount of guidance on that impact?

Well, yes, I'm able to provide guidance given that I got a daily report, and I read my morning report this morning. And the answer is they got $16 million that either we're going to collect in Q3 or there are going to be some people in trouble. That's simple, and then there's more for Q4.

Thank you. The other one we have here is, can you please provide an update on the impact of the ITC macro environment on SunPower's business? And is it too soon to really know what a rational base run rate for the revenue would look like?

Well, I picked the frozen eyebrow picture to tell you the effect on the business right now. If you want one digital, remember that. It is cold enough, your eyes really can't freeze shut. Going forward, we have been an $80 million company. We're going to bounce back to that number. Okay. That means I got to get $13 million to get back status quo. I was planning on getting $13 million to go from $80 million to $93 million. So now starting back at $80 million again, which, by the way, will be really profitable. And when we get back there, we're going to acquire. That's what we got to do, and I went through my pitch.

Thank you. The other two questions appear to be redundant things you've already addressed. So that looks like that's all we have in the queue today.

Thank you for watching our presentation today. We appreciate your support, and we appreciate your investment.