[PART I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) This section provides SunPower Corporation's unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended July 3, 2022 [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents SunPower Corporation's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), equity, and cash flows, for the quarterly period ended July 3, 2022 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific points in time, detailing assets, liabilities, and equity | Metric (in thousands) | July 3, 2022 | January 2, 2022 | | :-------------------- | :----------- | :-------------- | | **Assets** | | | | Total Current Assets | $1,071,587 | $1,073,466 | | Total Assets | $1,536,472 | $1,554,806 | | **Liabilities & Equity** | | | | Total Current Liabilities | $903,091 | $509,596 | | Total Liabilities | $1,117,381 | $1,164,782 | | Total Equity | $419,091 | $390,024 | - Total current liabilities significantly increased from **$509.6 million to $903.1 million**, primarily due to the reclassification of **$424.3 million** in convertible debt to current portion as of July 3, 2022, and an increase in accrued liabilities and contract liabilities[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's revenues, expenses, and net income or loss over specific periods | Metric (in thousands) | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Total Revenues | $417,772 | $260,751 | $768,049 | $500,887 | | Gross Profit | $81,499 | $60,711 | $153,808 | $106,677 | | Operating (Loss) Income | $(17,961) | $13,181 | $(28,551) | $11,803 | | Net (Loss) Income | $(62,327) | $74,769 | $(90,787) | $25,271 | | Net (Loss) Income per Share – Basic | $(0.36) | $0.43 | $(0.53) | $0.15 | - The company reported a significant **net loss of $62.3 million** for the three months ended July 3, 2022, compared to a **net income of $74.8 million** in the prior year, and a **net loss of $90.8 million** for the six months, compared to a **net income of $25.3 million** in the prior year, largely driven by operating losses and other expenses, net, which included a loss on equity investments[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the total comprehensive income or loss, including net income and other comprehensive income items | Metric (in thousands) | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net (Loss) Income | $(62,327) | $74,769 | $(90,787) | $25,271 | | Total Other Comprehensive (Loss) Income | $(31) | $492 | $(29) | $590 | | Total Comprehensive (Loss) Income | $(62,358) | $75,261 | $(90,816) | $25,861 | - Total comprehensive loss for the three and six months ended July 3, 2022, was **$(62.4) million** and **$(90.8) million**, respectively, a significant decline from comprehensive income in the prior year, primarily reflecting the net loss[15](index=15&type=chunk) [Condensed Consolidated Statements of Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This section details changes in the company's equity, including contributions, distributions, and net income or loss | Metric (in thousands) | January 2, 2022 | July 3, 2022 | | :-------------------- | :-------------- | :----------- | | Total Stockholders' Equity | $388,389 | $413,317 | | Noncontrolling Interests | $1,635 | $5,774 | | Total Equity | $390,024 | $419,091 | - Total equity increased from **$390.0 million** at January 2, 2022, to **$419.1 million** at July 3, 2022, largely due to a **$114.4 million** gain on the sale of the C&I Solutions business recorded in additional paid-in capital, partially offset by a **net loss of $90.8 million**[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash generated and used by the company across operating, investing, and financing activities | Metric (in thousands) | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Net Cash Used in Operating Activities | $(164,577) | $(18,353) | | Net Cash Provided by Investing Activities | $252,087 | $7,363 | | Net Cash Used in Financing Activities | $(7,474) | $(84,187) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $80,036 | $(95,177) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $228,649 | $151,627 | - Net cash used in operating activities significantly increased to **$164.6 million** for the six months ended July 3, 2022, from **$18.4 million** in the prior year, offset by a substantial increase in net cash provided by investing activities to **$252.1 million**, primarily from the sale of the C&I Solutions business and equity investments[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=15&type=section&id=Note%201.%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes SunPower Corporation's business, recent strategic shifts, and key accounting principles applied - SunPower Corporation is a leading solar technology and energy services provider, primarily serving residential customers in the U.S. and Canada with integrated solar, storage, and home energy solutions[27](index=27&type=chunk) - The company completed the sale of its Commercial and Industrial Solutions (C&I Solutions) business on May 31, 2022, for a preliminary purchase price of **$190.0 million**, resulting in a strategic shift to a single operating segment focused on residential customers[28](index=28&type=chunk)[35](index=35&type=chunk) - Management believes current cash and cash equivalents, along with potential proceeds from Enphase Energy, Inc. stock sales and operational cash generation, will be sufficient to meet obligations over the next 12 months, including the **$425.0 million** 4.00% senior convertible debentures due 2023[29](index=29&type=chunk)[234](index=234&type=chunk) - The company launched SunPower Financial in Q4 2021 to offer long-term retail installment contracts (typically 20-25 years) for solar power system purchases, recognizing revenue upon system installation and final permit, with a significant financing component deferred and recognized over the contract term[38](index=38&type=chunk) [Note 2. DISCONTINUED OPERATIONS](index=17&type=section&id=Note%202.%20DISCONTINUED%20OPERATIONS) This note details the financial impact and strategic implications of the C&I Solutions business divestiture - The sale of the C&I Solutions business to TotalEnergies Renewables, a common control transaction, closed on May 31, 2022, yielding net cash consideration of **$149.2 million**, with a gain of **$118.3 million** recorded primarily in additional paid-in capital[41](index=41&type=chunk)[42](index=42&type=chunk)[45](index=45&type=chunk) - Transaction costs of **$8.3 million** and **$10.6 million** were incurred for the three and six months ended July 3, 2022, respectively, and expensed within 'loss from discontinued operations before income taxes'[44](index=44&type=chunk) Discontinued Operations Financials | Metric (in thousands) | Three Months Ended July 3, 2022 | Six Months Ended July 3, 2022 | | :-------------------- | :------------------------------ | :---------------------------- | | Total Revenues | $8,256 | $36,710 | | Gross (Loss) Profit | $(6,574) | $(23,150) | | Net (Loss) Income from Discontinued Operations, net of taxes | $(20,616) | $(46,571) | [Note 3. TRANSACTIONS WITH TOTAL AND TOTALENERGIES SE](index=20&type=section&id=Note%203.%20TRANSACTIONS%20WITH%20TOTAL%20AND%20TOTALENERGIES%20SE) This note describes the company's relationship and financial transactions with its majority shareholder, TotalEnergies SE - TotalEnergies SE and its affiliates hold approximately **51% ownership** of SunPower's outstanding common stock as of July 3, 2022[52](index=52&type=chunk) - TotalEnergies SE announced an agreement to acquire **50%** of Clearway Energy Group from Global Infrastructure Partners, with consideration including a **50% minus one share interest** in the TotalEnergies subsidiary holding SunPower's common stock, expected to close in late fiscal 2022[53](index=53&type=chunk) - The Affiliation Agreement with Total imposes restrictions on Total's ownership thresholds and certain corporate actions, while also granting Total the right to maintain its percentage ownership in new securities issuances[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - SunPower's obligations under the Strategic Cooperation Framework Agreement with Total were transferred to TotalEnergies Renewables following the sale of the C&I Solutions business[59](index=59&type=chunk) - Total holds **$100.0 million** of SunPower's **$425.0 million** 4.00% debentures due 2023, which are convertible into common stock at a rate of **40.1552 shares per $1,000 principal amount** and mature on January 15, 2023[61](index=61&type=chunk) [Note 4. REVENUE FROM CONTRACTS WITH CUSTOMERS](index=23&type=section&id=Note%204.%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) This note details the breakdown of revenue by category and the aggregate transaction price from customer contracts Revenue by Category | Revenue Category (in thousands) | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Solar power systems sales | $320,294 | $172,837 | $591,938 | $339,164 | | Component sales | $74,542 | $56,656 | $134,419 | $107,388 | | Light commercial sales | $24,569 | $19,107 | $38,765 | $34,825 | | Services and other | $(1,633) | $12,151 | $2,927 | $19,510 | | Total revenues | $417,772 | $260,751 | $768,049 | $500,887 | - Total revenues increased by **60%** (QoQ) and **53%** (YoY) driven by higher volume in organic residential business and the Blue Raven acquisition, partially offset by a reduction in 'services and other' revenue due to the reversal of variable consideration on legacy power plant projects[67](index=67&type=chunk)[196](index=196&type=chunk) - As of July 3, 2022, the company has **$817.9 million** in aggregate transaction price from contracts with customers, with the majority expected to be recognized within the next 12 months[69](index=69&type=chunk) [Note 5. BALANCE SHEET COMPONENTS](index=24&type=section&id=Note%205.%20BALANCE%20SHEET%20COMPONENTS) This note provides a detailed breakdown of specific asset and liability accounts on the balance sheet Selected Balance Sheet Accounts | Metric (in thousands) | July 3, 2022 | January 2, 2022 | | :-------------------- | :----------- | :-------------- | | Accounts Receivable, net | $149,166 | $121,268 | | Inventories | $222,524 | $214,432 | | Prepaid Expenses and Other Current Assets | $166,364 | $100,212 | | Property, Plant and Equipment, net | $50,675 | $33,560 | | Other Long-term Assets | $169,882 | $156,994 | | Accrued Liabilities | $155,273 | $101,980 | | Other Long-term Liabilities | $117,942 | $141,197 | - Accounts receivable, net, increased by **$27.9 million**, and prepaid expenses and other current assets increased by **$66.2 million**, reflecting growth in operations and deferred project costs, while property, plant, and equipment, net, also increased by **$17.1 million**[71](index=71&type=chunk)[74](index=74&type=chunk)[76](index=76&type=chunk) - Accrued liabilities rose by **$53.3 million**, primarily due to increases in employee compensation, short-term warranty reserves, and a **$6.3 million** payable to Total related to the C&I Solutions sale, while other long-term liabilities decreased by **$23.3 million**[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 6. GOODWILL AND INTANGIBLE ASSETS](index=26&type=section&id=Note%206.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details the company's goodwill and intangible assets, including their sources and amortization - Goodwill of **$126.3 million** as of July 3, 2022, resulted from the acquisition of Blue Raven Solar Holdings, LLC in Q4 2021[82](index=82&type=chunk) Intangible Assets | Intangible Asset (in thousands) | Gross Carrying Amount (July 3, 2022) | Net Book Value (July 3, 2022) | | :------------------------------ | :----------------------------------- | :---------------------------- | | Developed technology | $3,700 | $2,775 | | Brand | $15,800 | $12,837 | | Non-compete agreements | $3,400 | $2,550 | | Software development costs | $6,286 | $6,239 | | Total | $29,186 | $24,401 | - Aggregate amortization expense for intangible assets was **$1.6 million** and **$3.2 million** for the three and six months ended July 3, 2022, respectively, with no impairment loss recorded[86](index=86&type=chunk) [Note 7. FAIR VALUE MEASUREMENTS](index=27&type=section&id=Note%207.%20FAIR%20VALUE%20MEASUREMENTS) This note provides information on assets and liabilities measured at fair value, including valuation methodologies and inputs Fair Value of Assets | Asset (in thousands) | Total Fair Value (July 3, 2022) | Level 3 (July 3, 2022) | Level 1 (July 3, 2022) | | :------------------- | :------------------------------ | :--------------------- | :--------------------- | | Equity investments with FVO | $11,692 | $11,692 | — | | Equity investments with readily determinable fair value | $293,580 | — | $293,580 | | Total assets | $305,272 | $11,692 | $293,580 | - Equity investments with fair value option (FVO), primarily in joint ventures like SunStrong Capital Holdings, LLC and Dorado Development Partners, LLC, are classified as Level 3 due to significant unobservable inputs (discount rate, residual value) in their valuation[92](index=92&type=chunk)[96](index=96&type=chunk) - The company recorded a **loss of $15.2 million** and **$13.9 million** for the three and six months ended July 3, 2022, respectively, on equity investments with readily determinable fair value (Enphase common stock), compared to gains in the prior year, with **1 million shares** of Enphase stock sold for **$149.8 million** cash proceeds[97](index=97&type=chunk) - Retail installment contract receivables, net, had a carrying value of **$100.5 million** and a fair value of **$80.2 million** as of July 3, 2022, with fair value determined using Level 2 inputs based on market-indexed pricing[98](index=98&type=chunk) [Note 8. RESTRUCTURING](index=29&type=section&id=Note%208.%20RESTRUCTURING) This note outlines the company's restructuring plans, associated costs, and their current status - The January 2021 restructuring plan, related to the closure of the Hillsboro, Oregon manufacturing facility, is substantially completed, with cumulative costs of approximately **$3.3 million** incurred as of July 3, 2022[99](index=99&type=chunk)[102](index=102&type=chunk) - The December 2019 restructuring plan, initiated to optimize workforce requirements following the Spin-Off, was completed during Q2 2022, with cumulative costs of approximately **$6.1 million**[103](index=103&type=chunk) Restructuring Charges (Credits) | Restructuring Plan (in thousands) | Three Months Ended July 3, 2022 | Six Months Ended July 3, 2022 | | :-------------------------------- | :------------------------------ | :---------------------------- | | January 2021 Restructuring Plan | $(303) | $(265) | | December 2019 Restructuring Plan | $(236) | $(53) | | Other restructuring | $45 | $451 | | Total Restructuring Charges (Credits) | $(494) | $133 | - Restructuring credits in Q2 2022 primarily resulted from employee transfers to Maxeon Solar due to an amendment to the cross license agreement, while six-month charges included severance for exiting the Light Commercial business[107](index=107&type=chunk)[205](index=205&type=chunk) [Note 9. COMMITMENTS AND CONTINGENCIES](index=31&type=section&id=Note%209.%20COMMITMENTS%20AND%20CONTINGENCIES) This note details the company's lease obligations, purchase commitments, warranty liabilities, and legal matters Lease Expenses | Lease Metric (in thousands) | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :-------------------------- | :---------------------------- | :---------------------------- | | Operating and finance lease expense | $6,888 | $6,817 | | Sublease income | $(191) | $(211) | | Rent expense | $6,697 | $6,606 | | Cash paid for operating and finance leases | $4,652 | $8,001 | - Future minimum lease payments under non-cancellable operating leases total **$45.4 million** as of July 3, 2022, with **$7.5 million** due in the remaining six months of 2022[116](index=116&type=chunk) - Future purchase obligations under non-cancellable agreements amount to **$338.7 million** as of July 3, 2022, primarily for photovoltaic modules from Maxeon Solar and MLPEs from another vendor, with a new Master Supply Agreement with Maxeon Solar effective in Q1 2022[117](index=117&type=chunk) Warranty Activity | Warranty Metric (in thousands) | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :----------------------------- | :---------------------------- | :---------------------------- | | Balance at beginning of period | $80,282 | $62,801 | | Accruals for warranties issued | $3,866 | $9,675 | | Settlements and adjustments | $(5,564) | $(13,058) | | Balance at end of period | $78,584 | $59,418 | - The company recorded a one-time quality charge of **$26.5 million** in fiscal 2021 for a cracking issue, with repairs expected to be completed through fiscal 2023, and no significant changes to this estimate occurred in Q1/Q2 2022[122](index=122&type=chunk) - Liabilities for uncertain tax positions totaled **$15.4 million** as of July 3, 2022, an increase of **$0.7 million** from January 2, 2022, primarily due to interest, penalties, and foreign exchange rate changes[123](index=123&type=chunk)[172](index=172&type=chunk) - SunPower is contractually liable for certain obligations under Hemlock Agreements, but is fully indemnified by Maxeon Solar under a Back-to-Back Agreement, with ongoing discussions regarding alleged inflationary price escalation clauses[127](index=127&type=chunk)[128](index=128&type=chunk) - A liability of **$6.3 million** was recorded for litigation indemnity provided to Maxeon Solar, including a **$2.0 million** change in fair value for a settled matter[129](index=129&type=chunk) [Note 10. EQUITY INVESTMENTS](index=35&type=section&id=Note%2010.%20EQUITY%20INVESTMENTS) This note provides details on the company's equity investments, including their fair value and contributions to joint ventures Equity Investments | Equity Investment Category (in thousands) | July 3, 2022 | January 2, 2022 | | :---------------------------------------- | :----------- | :-------------- | | Equity investments with readily determinable fair value (Enphase) | $293,580 | $457,352 | | Equity investments without readily determinable fair value | $17,392 | $807 | | Equity investments with fair value option | $11,692 | $8,374 | | Total equity investments | $322,664 | $466,533 | - New equity investments in Q1/Q2 2022 include **$5.0 million** in OhmConnect, Inc. (**1.8% interest**), **$2.0 million** in Sea Bright Solar, Inc. (**20% interest**, equity method), and **$9.4 million** in Freedom Solar Holdings, LLC (**4.5% interest**, equity method)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - SunPower entered a joint venture with Hannon Armstrong and SunStrong to form Dorado DevCo in March 2022 for residential lease solar power projects, with SunPower contributing **$3.3 million** in capital for the six months ended July 3, 2022[139](index=139&type=chunk)[141](index=141&type=chunk) - SunStrong, a significant unconsolidated VIE, reported revenues of **$72.2 million** and a **net income of $8.8 million** for the six months ended July 3, 2022[143](index=143&type=chunk) - Revenues and fees received from investees for products/services decreased to **$86.6 million** for the six months ended July 3, 2022, from **$100.1 million** in the prior year[148](index=148&type=chunk) [Note 11. DEBT AND CREDIT SOURCES](index=38&type=section&id=Note%2011.%20DEBT%20AND%20CREDIT%20SOURCES) This note provides a comprehensive overview of the company's debt obligations and available credit facilities Debt and Credit Sources | Debt Type (in thousands) | Face Value (July 3, 2022) | Short-term (July 3, 2022) | Long-term (July 3, 2022) | | :----------------------- | :------------------------ | :------------------------ | :----------------------- | | 4.00% convertible debentures due 2023 | $424,991 | $424,298 | — | | Asset-Backed Loan | $61,687 | $61,649 | — | | Safe Harbor Loan | $0 | $0 | — | | Credit Suisse Warehouse Loan | $55,656 | — | $53,798 | | Vendor Financing and Other Debt | $772 | $441 | $331 | | Total | $543,106 | $486,388 | $54,129 | - The **$425.0 million** 4.00% convertible debentures due 2023 are now classified as current portion, with a carrying value of **$424.3 million** and a fair value of **$454.7 million** as of July 3, 2022[152](index=152&type=chunk)[156](index=156&type=chunk) - SunPower repaid the remaining **$47.6 million** Safe Harbor loan with Hannon Armstrong in June 2022[153](index=153&type=chunk) - A new **$100.0 million** delayed draw term loan facility was entered into with Credit Suisse AG on June 30, 2022, to finance retail installment contract receivables, with **$55.7 million** outstanding as of July 3, 2022[160](index=160&type=chunk)[161](index=161&type=chunk) - The company has letter of credit facilities with Deutsche Bank Trust (up to **$200.0 million**, fully cash-collateralized) and Bank of the West (up to **$25.0 million**, **50%** cash-secured), with **$22.0 million** outstanding under the Bank of the West facility and none under Deutsche Bank as of July 3, 2022[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Note 12. RELATED-PARTY TRANSACTIONS](index=40&type=section&id=Note%2012.%20RELATED-PARTY%20TRANSACTIONS) This note outlines significant transactions and agreements with related parties, including Maxeon Solar - SunPower entered into a First Amendment to the Cross License Agreement with Maxeon Solar in Q2 2022, adjusting the scope of Maxeon Solar's non-exclusive license and settling certain payments[164](index=164&type=chunk) - A **net loss of $4.3 million** was recorded in Q2 2022 related to these agreements, impacting research and development and sales, general, and administrative expenses[165](index=165&type=chunk) Related-Party Transactions | Transaction (in thousands) | Three Months Ended July 3, 2022 | Six Months Ended July 3, 2022 | | :------------------------- | :------------------------------ | :---------------------------- | | Purchases of photo-voltaic modules | $62,602 | $135,061 | | Research and development expenses reimbursement received | $8,061 | $17,535 | | Income (expense) from transition services agreement, net | $(24) | $(290) | [Note 13. INCOME TAXES](index=40&type=section&id=Note%2013.%20INCOME%20TAXES) This note provides details on the company's income tax provision or benefit and uncertain tax positions - For the three months ended July 3, 2022, an income tax provision of **$3.2 million** was recorded on a pre-tax loss of **$38.5 million**, primarily due to changes in the forecasted annual effective tax rate and mark-to-market unrealized losses on equity investments[168](index=168&type=chunk)[214](index=214&type=chunk) - For the six months ended July 3, 2022, an income tax benefit of **$8.4 million** was recorded on a pre-tax loss of **$52.6 million**, mainly due to the reversal of deferred taxes for California following the enactment of Senate Bill 113, which restored the ability to utilize net operating losses[169](index=169&type=chunk)[215](index=215&type=chunk) - The sale of the C&I Solutions business resulted in a taxable gain, with a **$1.4 million** tax impact recorded in 'additional paid-in capital'[171](index=171&type=chunk) [Note 14. NET INCOME (LOSS) PER SHARE](index=41&type=section&id=Note%2014.%20NET%20INCOME%20(LOSS)%20PER%20SHARE) This note presents the basic and diluted net income or loss per share calculations and related factors Earnings Per Share | EPS Metric | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :--------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Basic Net (Loss) Income per Share | $(0.36) | $0.43 | $(0.53) | $0.15 | | Diluted Net (Loss) Income per Share | $(0.36) | $0.39 | $(0.53) | $0.15 | - Basic and diluted net loss per share were **$(0.36)** for the three months and **$(0.53)** for the six months ended July 3, 2022, a significant decrease from positive EPS in the prior year periods[177](index=177&type=chunk) - Anti-dilutive potential common stock excluded from diluted EPS calculations for the three and six months ended July 3, 2022, included **17.1 million shares** from 4.00% debentures due 2023 and **3.4 million** restricted stock units[180](index=180&type=chunk) [Note 15. STOCK-BASED COMPENSATION](index=43&type=section&id=Note%2015.%20STOCK-BASED%20COMPENSATION) This note details the company's stock-based compensation expense across various categories Stock-Based Compensation Expense | Expense Category (in thousands) | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Cost of revenues | $1,395 | $698 | $2,350 | $1,282 | | Research and development | $270 | $1,441 | $839 | $1,799 | | Sales, general, and administrative | $5,386 | $7,115 | $9,263 | $10,524 | | Total stock-based compensation expense | $7,051 | $9,254 | $12,452 | $13,605 | - Total stock-based compensation expense decreased by **$2.2 million** for the three months and **$1.2 million** for the six months ended July 3, 2022, compared to the prior year periods[182](index=182&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on SunPower's financial condition and results of operations for the period ended July 3, 2022 [Cautionary Statement Regarding Forward-Looking Statements](index=43&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section advises readers that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements regarding future financial results, business strategies, liquidity, costs, product development, supply chain, inflation, regulatory compliance, and other factors, which are subject to risks and uncertainties that could cause actual results to differ materially[186](index=186&type=chunk) [Overview](index=44&type=section&id=Overview) This section provides a high-level summary of SunPower's business model and strategic focus - SunPower is a leading solar technology and energy services provider, offering integrated solar, storage, and home energy solutions primarily to residential customers in the U.S. and Canada, with its 'Smart Energy' initiative aiming to add intelligent control to homes and grids[188](index=188&type=chunk) - Following the classification of the C&I Solutions business as discontinued operations, SunPower now operates in a single segment focused on residential customers[188](index=188&type=chunk) [Key Developments](index=45&type=section&id=Key%20Developments) This section highlights significant events and strategic actions undertaken by the company during the reporting period - The sale of the Commercial and Industrial Solutions (C&I Solutions) business to TotalEnergies Renewables USA, LLC closed on May 31, 2022, for a preliminary purchase price of **$190.0 million**, with net cash consideration of **$149.2 million** received[190](index=190&type=chunk) - SunPower published its fiscal 2021 Environmental, Social, and Governance (ESG) Report in Q2 2022, detailing its commitment to energy sustainability, waste minimization, and diversity, equity, and inclusion initiatives[191](index=191&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, gross profit, and operating expenses Financial Performance Summary | Metric (in thousands) | Three Months Ended July 3, 2022 | % of Revenues (2022) | Three Months Ended July 4, 2021 | % of Revenues (2021) | | :-------------------- | :------------------------------ | :------------------- | :------------------------------ | :------------------- | | Total Revenues | $417,772 | 100% | $260,751 | 100% | | Gross Profit | $81,499 | 20% | $60,711 | 23% | | Operating (Loss) Income | $(17,961) | (4)% | $13,181 | 5% | | Other (Expense) Income, net | $(20,524) | (5)% | $77,518 | 30% | | Net (Loss) Income from continuing operations attributable to stockholders | $(42,496) | (10)% | $87,094 | 33% | - Total revenues increased by **60%** (QoQ) and **53%** (YoY) due to higher residential business volume and the Blue Raven acquisition, partially offset by a reduction in 'services and other' revenue from legacy power plant projects[196](index=196&type=chunk) - Gross margin decreased by **3 percentage points** (QoQ) and **1 percentage point** (YoY) primarily due to inflationary cost increases exceeding pricing increases, and the revenue reduction from legacy projects[201](index=201&type=chunk) - R&D expenses increased by **74%** (QoQ) and **40%** (YoY) due to higher labor costs, increased headcount, and hiring costs[202](index=202&type=chunk) - SG&A expenses increased by **88%** (QoQ) and **85%** (YoY), driven by the Blue Raven acquisition, strategic hiring, and increased acquisition/divestiture-related transaction costs[203](index=203&type=chunk) - Other (expense) income, net, decreased significantly by **$98.7 million** (QoQ) and **$52.8 million** (YoY), primarily due to a loss on equity investments with readily determinable fair value in 2022, compared to a gain in 2021[212](index=212&type=chunk) [Critical Accounting Estimates](index=51&type=section&id=Critical%20Accounting%20Estimates) This section discusses the accounting policies that require significant judgment and estimation by management - No significant changes were made to critical accounting estimates during Q2 2022, except for the detailed disclosure on retail installment contract receivables, net[220](index=220&type=chunk) - Retail installment contracts involve long-term loans for solar system purchases, with revenue recognized upon system completion and a significant financing component deferred and amortized over the contract term[221](index=221&type=chunk)[222](index=222&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to generate and manage cash, including cash flow activities and contractual obligations Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Net cash (used in) provided by operating activities | $(164,577) | $(18,353) | | Net cash provided by (used in) investing activities | $252,087 | $7,363 | | Net cash (used in) provided by financing activities | $(7,474) | $(84,187) | - Net cash used in operating activities increased by **$146.2 million**, primarily due to a higher net loss (excluding non-cash items) and increases in accounts receivable, prepaid expenses, and inventories[226](index=226&type=chunk) - Net cash provided by investing activities increased by **$244.7 million**, mainly from the C&I Solutions sale proceeds (**$146.3 million**) and sale of equity investments (**$149.8 million**), partially offset by increased capital expenditures and new equity investments[227](index=227&type=chunk)[228](index=228&type=chunk) - Net cash used in financing activities decreased by **$76.7 million**, primarily due to higher net proceeds from bank loans and other debt, and the absence of convertible debt repayment that occurred in fiscal 2021[229](index=229&type=chunk) - Unrestricted cash and cash equivalents increased to **$206.4 million** as of July 3, 2022, from **$123.7 million** at January 2, 2022, with the company planning to use available cash, short-term equity investments, and debt for operations, capital expenditures, and M&A[230](index=230&type=chunk)[231](index=231&type=chunk) - Management believes current liquidity sources are sufficient to meet obligations for the next 12 months, including the **$425.0 million** 4.00% debentures due 2023, potentially using proceeds from Enphase stock sales and operational cash[234](index=234&type=chunk) Contractual Obligations | Contractual Obligation (in thousands) | Total | 2022 (remaining 6 months) | 2023-2024 | 2025-2026 | Beyond 2026 | | :------------------------------------ | :-------- | :------------------------ | :---------- | :-------- | :---------- | | Convertible debt, including interest | $434,199 | $8,500 | $425,699 | — | — | | Other debt, including interest | $122,968 | $63,543 | $59,168 | $158 | $99 | | Operating lease commitments | $45,370 | $7,523 | $24,862 | $10,966 | $2,019 | | Supply agreement commitments | $338,731 | $129,517 | $202,978 | $1,707 | $4,529 | | Total | $941,268 | $209,083 | $712,707 | $12,831 | $6,647 | - Liabilities associated with uncertain tax positions (**$15.4 million** as of July 3, 2022) are excluded from contractual obligations due to the inability to reliably estimate cash settlement periods[238](index=238&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses SunPower's exposure to market risks, specifically focusing on interest rate risk - SunPower is exposed to interest rate risk due to fixed-rate financing receivables from retail installment contracts, where increases in market interest rates could adversely affect the company as it has locked in lower fixed rates for these contracts, which will need to be refinanced[241](index=241&type=chunk) - The fair value of retail installment contract receivables was **$80.2 million** as of July 3, 2022, and a hypothetical **50 basis points** change in market interest rates did not have a material effect on their fair value[241](index=241&type=chunk) - Rising interest rates could also make it difficult for customers to obtain financing for solar power systems on favorable terms, impacting sales[242](index=242&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of SunPower's disclosure controls and procedures and any changes in internal control over financial reporting - The CEO and CFO concluded that SunPower's disclosure controls and procedures were effective at a reasonable assurance level as of July 3, 2022[244](index=244&type=chunk) - A new enterprise resource planning (ERP) system was implemented in Q1 2022, leading to modifications in internal control processes and procedures related to the new system, with no other material changes to internal control over financial reporting occurring[245](index=245&type=chunk) [PART II. OTHER INFORMATION](index=55&type=section&id=Part%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and exhibits filed with the report [ITEM 1. LEGAL PROCEEDINGS](index=55&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the disclosures on legal matters within the Notes to Condensed Consolidated Financial Statements - Information on legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies—Legal Matters,' in the financial statements[248](index=248&type=chunk) [ITEM 1A. RISK FACTORS](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in prior reports - No material changes to previously disclosed risk factors were identified since the Annual Report on Form 10-K for January 2, 2022, and the Quarterly Report on Form 10-Q for April 3, 2022[249](index=249&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's purchases of its own equity securities, specifically shares surrendered by employees for tax obligations Shares Purchased | Period | Total Number of Shares Purchased | Average Price Per Share | | :-------------------------- | :------------------------------- | :---------------------- | | April 4, 2022 – May 1, 2022 | 9,769 | $23.48 | | May 2, 2022 – May 29, 2022 | 29,368 | $18.08 | | May 30, 2022 – July 3, 2022 | 84,428 | $17.71 | | Total | 123,565 | | - The shares purchased represent shares surrendered by employees to satisfy tax withholding obligations on vested restricted stock[251](index=251&type=chunk) [ITEM 6. EXHIBITS](index=56&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q - The exhibits include a Letter Agreement related to the C&I Solutions sale, an Amendment to the Cross License Agreement with Maxeon Solar, an Amendment to Securities Purchase Agreement, and an Amendment to Master Supply Agreement with Enphase Energy, Inc[253](index=253&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer, as well as XBRL taxonomy documents, are also filed[253](index=253&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) This section contains the signature of the authorized officer, Manavendra S. Sial, Executive Vice President and Chief Financial Officer, certifying the filing of the report - The report was signed by Manavendra S. Sial, Executive Vice President and Chief Financial Officer, on August 2, 2022[256](index=256&type=chunk)

SunPower Corporation. (NASDAQ:SPWR) Q2 2022 Earnings Conference Call August 2, 2022 8:30 AM ET Company Participants Mike Weinstein - Vice President-Investor Relations Peter Faricy - Chief Executive Officer Manu Sial - Chief Financial Officer Conference Call Participants Sean Morgan - Evercore ISI Ben Kallo - Baird Pavel Molchanov - Raymond James Morgan Kaplan - Bank of America Kashy Harrison - Piper Sandler Colin Rusch - Oppenheimer Mark Strauss - JPMorgan Operator Good day and thank you for standing by. We ...

Financial Data and Key Metrics Changes - For Q1 2022, the company reported $11 million of adjusted EBITDA and $336 million of non-GAAP residential revenue, with a 40% year-over-year increase in new customers [15][16] - Residential gross margin remained at 23%, consistent with Q1 results from the previous year, despite higher panel, freight, and labor costs impacting results [16] - The adjusted EBITDA per customer before platform investment decreased to $1,700 for the quarter, influenced by increased spending on sales and marketing [16][20] Business Line Data and Key Metrics Changes - The company added 16,500 new customers in Q1 2022, a 40% increase year-over-year, supported by a 72% increase in gross lead appointments [15][16] - The SunPower direct channel experienced a 118% year-over-year growth, while the company set a new backlog record with 13,800 customers [7][15] - SunPower Financial achieved a 41% bookings attach rate in Q1, progressing towards a goal of 45% by year-end [8][19] Market Data and Key Metrics Changes - The company reported strong demand across all sales channels, with significant growth in Texas, Florida, and the Northeast, indicating a shift from a California-centric business model [32][76] - The company is expanding its dealer network, adding 83 new dealers, and has partnerships with five of the top 20 U.S. homebuilders [8][10] Company Strategy and Development Direction - The company is focused on executing a five-pillar strategy to become a leading renewable energy company, emphasizing customer experience, product innovation, and market expansion [7][11] - A new dealer accelerator program was launched to support dealer growth and territorial expansion, which is seen as a critical component of the company's market share growth strategy [9][36] - The company is in discussions with First Solar to develop high-efficiency tandem thin film and polysilicon modules, aiming to enhance its product offerings [8][9] Management's Comments on Operating Environment and Future Outlook - Management noted that rising supply chain costs have not led to price increases for dealers and customers in 2021, allowing the company to pass along cost increases in 2022 without hurting demand [13][29] - The company expects to achieve its guidance of 73,000 to 80,000 customers by year-end, driven by strong customer demand and backlog [15][17] - Management expressed confidence in meeting guidance despite challenges in panel supply due to the Department of Commerce investigation, stating that the main panel supplier is not involved [14][62] Other Important Information - The company closed a new residential lease and PPA fund, which will support demand and improve customer affordability [21] - The company is actively working to improve customer experience, with a Net Promoter Score increase from 35% to 49% year-over-year [11] Q&A Session Summary Question: Challenges of using thin film technology - Management expressed excitement about the potential partnership with First Solar, highlighting the unique efficiency of tandem products combining silicon and thin film technologies [24][25] Question: Impact of rising interest rates on customer preferences - Management noted no significant changes in customer preferences, with strong growth in all financing options, particularly loans [26][27] Question: Price increase strategy - Management indicated that they can pass along cost increases to customers without negatively impacting demand, which has actually accelerated [29][30] Question: Update on EV charging partnership - Management highlighted the strong overlap between EV owners and solar customers, indicating a positive outlook for the EV charging opportunity [54] Question: Module availability and supply chain issues - Management reassured that they have sufficient panel supply to meet customer demand and guidance, despite some tightness in the market [60][62] Question: Future of the First Solar deal - Management expects discussions with First Solar to conclude in the next couple of quarters, with no significant gating factors anticipated [68][69]

Part I [Business](index=7&type=section&id=Item%201.%20Business) SunPower provides integrated solar, storage, and home energy solutions in the U.S. and Canada, focusing on residential markets after strategic acquisitions and divestitures - SunPower is a leading solar technology and energy services provider in the U.S. and Canada, offering integrated solar, storage, and home energy solutions through a network of dealers and in-house sales teams[33](index=33&type=chunk) - On October 4, 2021, the company acquired Blue Raven Solar to expand its geographic footprint in the U.S. residential market for up to **$165 million**, including a **$20 million** contingent payment[37](index=37&type=chunk)[39](index=39&type=chunk) - In Q4 2021, SunPower launched SunPower Financial™, an in-house finance company, to provide a broader range of financing options and increase access to solar for more homeowners[40](index=40&type=chunk) - On February 6, 2022, SunPower signed an agreement to sell its Commercial and Industrial (C&I) Solutions business to a subsidiary of TotalEnergies SE for approximately **$190 million**, plus up to **$60 million** in contingent consideration, to sharpen its focus on the residential market[41](index=41&type=chunk) - The company operates through two main segments: Residential, Light Commercial (RLC) and Commercial & Industrial (C&I) Solutions, sourcing solar panels from Maxeon Solar under a master supply agreement[42](index=42&type=chunk)[58](index=58&type=chunk) - As of January 2, 2022, SunPower had approximately **3,660** full-time employees worldwide, with about **2,510** located in the United States[96](index=96&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant operational and financial risks, including COVID-19 impacts, supply chain dependencies, product quality issues, reliance on government incentives, substantial debt, and control by its majority shareholder - The COVID-19 pandemic has adversely affected business operations, supply chains, and customer demand, and its future impact remains unpredictable[108](index=108&type=chunk)[109](index=109&type=chunk) - The business is dependent on a limited number of suppliers, including an exclusive supply agreement with the 2020 spin-off Maxeon Solar for certain critical solar cells and panels, exposing the company to supply chain risks[186](index=186&type=chunk)[187](index=187&type=chunk) - Growth is dependent on the availability of third-party financing for customers and projects, with the launch of SunPower Financial introducing new risks related to consumer underwriting and potential default rates[136](index=136&type=chunk)[143](index=143&type=chunk) - The reduction, modification, or elimination of government incentives like the solar investment tax credit (ITC), or changes to regulations like net energy metering, could significantly reduce demand and harm financial results[156](index=156&type=chunk)[158](index=158&type=chunk) - The company has a significant amount of debt outstanding (**$536.7 million** as of Jan 2, 2022), which could make it difficult to meet payment obligations and fund operations[180](index=180&type=chunk) - Product quality issues, such as a recently identified third-party connector defect, can lead to significant warranty costs, reputational harm, and decreased sales, with the company recording a **$26.5 million** charge for this issue[195](index=195&type=chunk)[196](index=196&type=chunk) - TotalEnergies SE's majority ownership (approx. **51%**) gives it significant control over the company's affairs, which may adversely affect the stock's liquidity and limit the influence of other stockholders[266](index=266&type=chunk)[268](index=268&type=chunk) [Unresolved Staff Comments](index=53&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments - None[313](index=313&type=chunk) [Properties](index=53&type=section&id=Item%202.%20Properties) The company's principal properties are leased facilities, including its California headquarters, global support offices, and a former Oregon manufacturing site Principal Leased Properties | Facility | Location | Approx. Square Footage | | :--- | :--- | :--- | | Corporate headquarters | California, U.S. | 61,000 | | Global support offices | California, U.S. | 163,000 | | Global support offices | Texas, U.S. | 69,000 | | Global support offices | Philippines | 129,000 | | Global support offices | Utah, U.S. | 43,000 | | Former manufacturing facility | Oregon, U.S. | 212,000 | [Legal Proceedings](index=53&type=section&id=Item%203.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 9 of the consolidated financial statements - The company is party to various litigation matters, settling an ongoing litigation matter in Q4 2021 and receiving proceeds of **$14.8 million**[619](index=619&type=chunk) - Subsequent to the fiscal year end, on February 16, 2022, a securities class action lawsuit was filed against the company related to the disclosure of a cracking issue in certain factory-installed connectors[736](index=736&type=chunk) [Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[317](index=317&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=54&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) SunPower's common stock trades on Nasdaq under "SPWR"; the company has never paid cash dividends and repurchased shares in Q4 2021 for tax withholding - The company's common stock is listed on the Nasdaq Global Select Market under the trading symbol "SPWR"[318](index=318&type=chunk) - SunPower has never declared or paid a cash dividend on its common stock and does not intend to in the foreseeable future[319](index=319&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | Oct 4 - Oct 31, 2021 | 59,834 | $26.69 | | Nov 1 - Nov 28, 2021 | 20,957 | $32.59 | | Nov 29 - Jan 2, 2022 | 8,994 | $24.44 | | **Total** | **89,785** | | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal 2021, total revenues grew 18% to **$1.32 billion**, driven by RLC segment growth, while the company reported a **net loss of $38.0 million** and faces a **$425.0 million** convertible debenture maturity in January 2023 [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Fiscal 2021 saw **18% revenue growth** to **$1.32 billion**, driven by the RLC segment, but increased SG&A and the absence of a prior-year gain resulted in a **$38.0 million net loss** from continuing operations Fiscal Year 2021 vs. 2020 Financial Performance | Metric | FY 2021 (ended Jan 2, 2022) (Millions) | FY 2020 (ended Jan 3, 2021) (Millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1,323.5 | $1,124.8 | 18% | | Gross Profit | $221.6 | $167.1 | 33% | | Gross Margin | 17% | 15% | +2 p.p. | | Operating Loss | ($27.5) | ($6.0) | N/A | | Net (Loss) Income from Continuing Operations | ($38.0) | $597.0 | N/A | Revenue by Segment (FY 2021 vs. FY 2020) | Segment | FY 2021 Revenue (Millions) | FY 2020 Revenue (Millions) | % Change | | :--- | :--- | :--- | :--- | | Residential, Light Commercial | $1,121.2 | $848.1 | 32% | | Commercial and Industrial Solutions | $191.5 | $254.8 | (25)% | | Other | $10.2 | $65.6 | (84)% | - The **32%** revenue growth in the RLC segment was driven by higher volumes in residential cash, loan, and new home channels, and the consolidation of the newly acquired Blue Raven business[334](index=334&type=chunk) - SG&A expenses increased by **$67.6 million** (**41%**) in fiscal 2021, primarily due to the consolidation of Blue Raven, transaction costs, increased labor costs, and accelerated vesting of stock units for the former CEO[347](index=347&type=chunk) - Other income decreased by **$669.6 million**, mainly because fiscal 2020 included a **$692.1 million** gain on an equity investment, compared to a much smaller **$21.7 million** gain in fiscal 2021[354](index=354&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) As of January 2, 2022, the company held **$127.1 million** in cash, with **$44.5 million** net cash used in operations, and plans to address its **$425.0 million** convertible debenture maturity in January 2023 through asset sales and operations Cash Flow Summary (Fiscal Year Ended) | Cash Flow Activity | Jan 2, 2022 (Millions) | Jan 3, 2021 (Millions) | | :--- | :--- | :--- | | Net cash used in operating activities | ($44.5) | ($187.4) | | Net cash provided by investing activities | $54.3 | $129.2 | | Net cash used in financing activities | ($108.0) | ($153.9) | - The company ended fiscal 2021 with **$127.1 million** in unrestricted cash and cash equivalents, down from **$232.8 million** at the end of fiscal 2020[389](index=389&type=chunk) - SunPower must address the maturity of its **$425.0 million** **4.00%** senior convertible debentures due January 15, 2023, planning to use proceeds from the sale of Enphase stock, cash from operations, and the pending sale of the C&I Solutions business to satisfy this obligation[391](index=391&type=chunk) Material Contractual Obligations as of Jan 2, 2022 | Obligation Type | Total (Millions) | Due in 2022 (Millions) | Due in 2023-2024 (Millions) | | :--- | :--- | :--- | :--- | | Convertible debt, including interest | $442.7 | $17.0 | $425.7 | | Other debt, including interest | $116.3 | $115.8 | $0.2 | | Operating lease commitments | $64.4 | $15.8 | $24.2 | | Supply agreement commitments | $169.0 | $128.1 | $34.9 | | **Total** | **$865.9** | **$350.2** | **$484.9** | [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks including credit, interest rate, and equity price fluctuations, particularly concerning its Enphase investment and convertible debentures - The company is exposed to interest rate risk, as higher rates could make it more difficult for customers to finance solar systems, potentially reducing demand[398](index=398&type=chunk) - SunPower holds an equity investment in Enphase Energy, Inc. (ENPH), recognizing a gain of **$21.0 million** from this investment in fiscal 2021 and selling **one million shares** for **$177.8 million** in proceeds, retaining **2.5 million shares** as of January 2, 2022[399](index=399&type=chunk) - The fair market value of the company's **$425.0 million** in outstanding convertible debentures is subject to interest rate and market price risk, particularly changes in SunPower's common stock price[400](index=400&type=chunk) [Financial Statements and Supplementary Data](index=68&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year 2021, including balance sheets, statements of operations, comprehensive income, equity, cash flows, and accompanying notes Consolidated Balance Sheet Highlights | (In thousands) | Jan 2, 2022 | Jan 3, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $127,130 | $232,765 | | Total current assets | $1,073,466 | $790,315 | | Total assets | $1,554,806 | $1,646,482 | | **Liabilities & Equity** | | | | Total current liabilities | $509,596 | $529,731 | | Total liabilities | $1,164,782 | $1,239,996 | | Total stockholders' equity | $388,389 | $404,167 | | Total liabilities and equity | $1,554,806 | $1,646,482 | Consolidated Statement of Operations Highlights | (In thousands, except per share data) | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Total revenues | $1,323,493 | $1,124,829 | | Gross profit | $221,607 | $167,127 | | Operating (loss) | ($27,462) | ($6,012) | | Net (loss) income from continuing operations | ($38,042) | $597,020 | | Net (loss) income attributable to stockholders | ($37,358) | $475,048 | | Diluted EPS | ($0.22) | $2.48 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=134&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[737](index=737&type=chunk) [Controls and Procedures](index=134&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of January 2, 2022, excluding the recently acquired Blue Raven from the latter's evaluation - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of January 2, 2022[739](index=739&type=chunk) - Management concluded that internal control over financial reporting was effective as of January 2, 2022, though the evaluation excluded Blue Raven, which was acquired on October 4, 2021[741](index=741&type=chunk)[742](index=742&type=chunk) [Other Information](index=135&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[743](index=743&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=135&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[743](index=743&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees](index=135&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information for Items 10 through 14, covering governance, compensation, and ownership, is incorporated by reference from the company's 2021 definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's definitive proxy statement[744](index=744&type=chunk)[745](index=745&type=chunk)[748](index=748&type=chunk)[749](index=749&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=136&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of exhibits and notes the omission of financial statement schedules from the Annual Report on Form 10-K - This section contains the index to the Consolidated Financial Statements and a list of exhibits filed with the report, with all financial statement schedules having been omitted[751](index=751&type=chunk)[752](index=752&type=chunk) [Form 10-K Summary](index=139&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no Form 10-K summary - None[761](index=761&type=chunk)

Financial Data and Key Metrics Changes - The company reported $385 million in revenue for Q4 2021, a 12% increase year-over-year and a 19% increase sequentially from Q3 2021, driven by the strength of the residential business [22][23] - Adjusted EBITDA was negative $8 million, impacted by a $27 million charge for crack connectors in commercial equipment and other costs related to sales and marketing, weather, and COVID-related delays [22][23] - Residential gross margins reached 25.6%, up 100 basis points year-over-year, marking the highest margins in nearly six years [24] Business Line Data and Key Metrics Changes - The residential business saw nearly 22,500 new customer bookings in Q4 2021, a 42% increase over the previous year, leading to a record addition of 17,000 customers, representing 31% year-over-year growth [8][9] - The New Home segment reported a record pipeline of 66,000 customers, more than 40% higher than a year ago [9] - Sunbelt bookings exited 2021 with a run-rate of over $130 million [9] Market Data and Key Metrics Changes - The company is experiencing strong growth in both California and other regions, particularly in the Northeast and Southeast [30] - The attach rate for the SunVault battery product has increased to the mid-30s percentage in the direct channel, indicating strong demand for battery storage [31] Company Strategy and Development Direction - The company is transforming into a residential solar company focused on customer experience, aiming to create a lifetime relationship with customers through an ecosystem of integrated products and services [10] - Five strategic pillars have been established: customer care, growth, best and affordable products, digital innovation, and world-class financial solutions [11][12][13][14][15] - The company plans to invest in upgrading customer services, expanding sales outside California, and introducing new high-value products [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth despite short-term challenges from the pandemic and supply chain issues [9][21] - The company anticipates a strong demand for residential solar and plans to increase the origination of residential financing from 35% in 2021 to 45% in 2022 [20][25] - Guidance for 2022 includes an adjusted EBITDA range of $90 million to $110 million, with expectations of over 35% volume growth and 73,000 to 80,000 new customers [25][26] Other Important Information - The company has successfully transitioned to focus solely on the residential solar business, exiting the light commercial business [66] - A new module supply agreement allows the company to continue offering existing residential products while exploring additional panel providers [21] Q&A Session Summary Question: Steps to boost growth outside California - Management highlighted strong growth in the Northeast and Southeast, with plans to discuss Blue Raven's expansion at the Analyst Day [30] Question: Trends in SunVault attach rates with EVs - Management noted that the combination of solar, battery, and EV products is expected to grow rapidly, particularly in new homes [33] Question: Role of SunPower Financial in revenue mix - Management indicated plans to increase financing from 35% to 45% and build a scalable financial products business [36][37] Question: Impact of connectors charge on guidance - Management confirmed that the connectors charge is included in the guidance for both customer and EBITDA metrics [64] Question: Sensitivities regarding NEM and ITC changes - Management expressed cautious optimism about favorable outcomes for NEM and ITC, with potential benefits for the company [57][58] Question: Changes to cost structure after exiting light commercial business - Management stated that there would be minimal impact on OpEx, as most employees would be reallocated to the residential business [65]

SunPower Corporation (NASDAQ:SPWR) Q3 2021 Earnings Conference Call November 3, 2021 4:30 PM ET Company Participants Michael Weinstein – Head-Investor Relations Peter Faricy – Chief Executive Officer Manu Sial – Chief Financial Officer Conference Call Participants Ben Kallo – Baird Sean Morgan – Evercore Kashy Harrison – Piper Sandler Brian Lee – Goldman Sachs Philip Shen – ROTH Capital Maheep Mandloi – Credit Suisse Joe Beninati – Oppenheimer Operator Good day and thank you for standing by. Welcome to the ...