Maxeon Solar Technologies(MAXN) - 2024 Q4 - Annual Report

markdown PART I [Key Information](index=9&type=section&id=Item%203.%20Key%20Information) The company faces severe liquidity issues, U.S. customs product detentions, and challenges in its strategic pivot to the U.S. market Risk Factors - The company has incurred recurring losses, faces significant liquidity risks, and has received an unqualified opinion from its auditor that includes a paragraph indicating substantial doubt about its ability to continue as a going concern[40](index=40&type=chunk)[49](index=49&type=chunk)[53](index=53&type=chunk) - Business operations are severely impacted by the continued detention and denial of entry for its solar panels by U.S. Customs and Border Protection (CBP), which significantly affects revenues, margins, and cash flows[40](index=40&type=chunk)[67](index=67&type=chunk) - The company is undergoing a major restructuring to focus exclusively on the U.S. market, which involves divesting non-U.S. businesses and developing a U.S. manufacturing facility, but the success of this plan is uncertain and contingent on securing financing[40](index=40&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - As a controlled company with a majority shareholder (TZE) based in the PRC, Maxeon faces risks related to conflicts of interest, U.S. geopolitical tensions with China, and potential scrutiny under U.S. regulations concerning foreign entities[49](index=49&type=chunk)[195](index=195&type=chunk)[203](index=203&type=chunk) - Shareholders face risks of significant dilution from recent debt restructuring transactions and future capital raises, high stock price volatility, and reduced governance protections due to the company's status as a foreign private issuer and a controlled company[47](index=47&type=chunk)[154](index=154&type=chunk)[177](index=177&type=chunk) [Information On The Company](index=48&type=section&id=Item%204.%20Information%20On%20The%20Company) Maxeon is strategically shifting to focus on the U.S. market, divesting non-U.S. operations, and transitioning its manufacturing footprint History And Development Of The Company - In fiscal year **2024**, TZE became the company's controlling shareholder on August **30**, **2024**, following a series of financing transactions[212](index=212&type=chunk) - The company announced a strategic restructuring in November **2024** to focus exclusively on the U.S. market. This includes divesting its 'rest-of-the-world' distributed generation business and its Philippines manufacturing operations (SPML) to affiliates of TZE, with transactions completed in Q1 **2025**[214](index=214&type=chunk) - In late March **2025**, U.S. Customs & Border Protection (CBP) denied the company's protests regarding detained shipments of Maxeon **3**, **6**, and Performance **6** solar panels, leading to their continued exclusion from the U.S. market[214](index=214&type=chunk) Capital Expenditures (Fiscal Years 2022-2024) | Fiscal Year | Capital Expenditures (in millions) | | :--- | :--- | | 2024 | $52.1 | | 2023 | $67.5 | | 2022 | $63.3 | Business Overview - Maxeon is strategically restructuring to concentrate exclusively on the U.S. market, leveraging its premium solar technology[228](index=228&type=chunk)[242](index=242&type=chunk) - The company's primary products are the high-efficiency Maxeon line of Interdigitated Back Contact (IBC) solar panels and the cost-effective Performance line of shingled solar panels[233](index=233&type=chunk) FY 2024 Revenue Breakdown | Category | Percentage of Revenue | | :--- | :--- | | **By Product Line** | | | Maxeon Line | 72.8% | | Performance Line | 27.2% | | **By Geography** | | | United States | 63.0% | | EMEA | 26.5% | | Asia Pacific | 9.2% | | Other | 1.3% | - In response to tariffs and trade barriers, the company is establishing alternative manufacturing and supply chains, including a new facility in Albuquerque, New Mexico, and identifying domestic U.S. component vendors[239](index=239&type=chunk)[248](index=248&type=chunk) Organizational Structure - Maxeon became a standalone public company after its spin-off from SunPower. In fiscal year **2024**, TZE became the company's controlling shareholder on August **30**, **2024**[285](index=285&type=chunk)[286](index=286&type=chunk) - As part of its strategic restructuring to focus on the U.S. market, the company completed the divestiture of its Philippines operations and its 'rest-of-the-world' distributed generation business in the first quarter of **2025**[286](index=286&type=chunk) Property, Plants And Equipment - The company is evaluating options for its manufacturing facilities in Malaysia and Mexico, which may include repurposing, sale, or permanent shutdown, as part of its shift to U.S. domestic manufacturing[289](index=289&type=chunk) - Maxeon has executed a five-year lease for a manufacturing facility in Albuquerque, New Mexico, with a capacity of up to **2 GW**. Production is planned to begin in **2026**, contingent on securing necessary funding[291](index=291&type=chunk) - The company's ESG strategy is built on three pillars: environmental, social, and governance. In **2025**, it was ranked among the top sustainable corporations by Corporate Knights, and its Maxeon solar panels have achieved Cradle to Cradle Certified™ designation[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Operating And Financial Review And Prospects](index=66&type=section&id=Item%205.%20Operating%20And%20Financial%20Review%20And%20Prospects) The company experienced a dramatic decline in FY2024 revenue and profitability, facing severe liquidity issues and substantial doubt about its going concern status Operating Results Selected Consolidated Statements of Operations Data (FY 2024 vs. FY 2023) | (In thousands) | Fiscal Year Ended Dec 31, 2024 | Fiscal Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | **Revenue** | $509,048 | $1,123,110 | | **Gross (loss) profit** | ($249,413) | $78,115 | | **Operating loss** | ($576,640) | ($219,205) | | **Net loss attributable to the stockholders** | ($614,300) | ($275,829) | - Revenue decreased by **$614.1 million** (**54.7%**) in fiscal year **2024** compared to **2023**. This was primarily due to the detention of solar modules by U.S. Customs, the termination of supply agreements with former major customer SunPower, and an industry-wide demand slowdown, particularly in Europe[353](index=353&type=chunk) - The company incurred significant restructuring charges of **$116.2 million** in fiscal year **2024** and **$125.5 million** in fiscal year **2023**, mainly related to rebalancing global operations and manufacturing capacity[342](index=342&type=chunk)[362](index=362&type=chunk) - The independent auditor's report includes an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern, citing recurring net losses, a significant accumulated deficit, and a working capital deficiency[336](index=336&type=chunk) Adjusted EBITDA Reconciliation (FY 2024 vs. FY 2023) | (In thousands) | Fiscal Year Ended Dec 31, 2024 | Fiscal Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | **GAAP Net loss attributable to the stockholders** | ($614,300) | ($275,829) | | **Adjusted EBITDA** | ($376,149) | $3,670 | Liquidity And Capital Resources Cash and Liquidity Position | (In thousands) | As of Dec 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | Unrestricted cash and cash equivalents | $28,895 | $190,169 | Summary of Cash Flows (FY 2024 vs. FY 2023) | (In thousands) | Fiscal Year Ended Dec 31, 2024 | Fiscal Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($270,156) | ($254,295) | | Net cash (used in) provided by investing activities | ($25,243) | $13,926 | | Net cash provided by financing activities | $141,233 | $167,951 | - The company's financial condition raises substantial doubt about its ability to continue as a going concern due to recurring losses, negative cash flows, and the impact of U.S. product detentions[397](index=397&type=chunk) - To address the liquidity crisis, management is liquidating non-core assets, such as the 'rest-of-the-world' business, and has renegotiated payment terms with its controlling shareholder, TZE, to defer outstanding trade payables[398](index=398&type=chunk)[399](index=399&type=chunk) [Directors, Senior Management And Employees](index=86&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20And%20Employees) This section outlines the company's corporate governance, executive compensation, and significant employee headcount reduction due to restructuring Directors And Senior Management - The Board of Directors consists of **ten** members, including **five** designees from the controlling shareholder TZE, **four** independent directors, and the Chief Executive Officer[419](index=419&type=chunk)[447](index=447&type=chunk) Compensation - Eligible non-employee directors (Outside Directors) receive annual cash fees for board and committee service, plus an annual equity award of **$0.2 million** in RSUs[441](index=441&type=chunk) - Executive officer compensation for fiscal year **2024** included a corporate bonus plan (cash) and time-based Restricted Stock Units (RSUs) that generally vest over **three** years[443](index=443&type=chunk)[449](index=449&type=chunk) Board Practices - As a foreign private issuer and a "controlled company" under NASDAQ rules, Maxeon follows certain home country (Singapore) corporate governance practices in lieu of NASDAQ requirements. This includes not having a majority of independent directors on the board[464](index=464&type=chunk)[465](index=465&type=chunk) - The Board has **four** primary committees: Audit, Compensation, Strategy and Transformation, and Nominating and Corporate Governance. The Audit Committee is composed entirely of independent directors[452](index=452&type=chunk)[453](index=453&type=chunk) Employees Full-Time Equivalent Employees (Year-End) | As of | Total Employees | | :--- | :--- | | Dec 31, 2024 | 1,591 | | Dec 31, 2023 | 3,888 | | Jan 1, 2023 | 5,344 | - As a result of restructuring and divestitures, the total number of full-time equivalent employees further decreased to **405** as of April **21**, **2025**[469](index=469&type=chunk) [Major Shareholders And Related Party Transactions](index=99&type=section&id=Item%207.%20Major%20Shareholders%20And%20Related%20Party%20Transactions) TZE is the controlling shareholder, and the section details numerous related-party transactions, including asset sales and financing arrangements Major Shareholders - As of April **21**, **2025**, Zhonghuan Singapore Investment and Development Pte. Ltd. (TZE SG), a subsidiary of TZE, is the controlling shareholder, beneficially owning **9,959,362** shares, which represents **59.0%** of the company's ownership[483](index=483&type=chunk) - TotalEnergies, previously a major shareholder, ceased to own **5%** or more of the company's ordinary shares as of July **25**, **2024**[485](index=485&type=chunk) Related Party Transactions - In Q1 **2025**, the company completed the sale of its non-U.S. assets and subsidiaries, including its Philippines operations and 'rest-of-the-world' distributed generation business, to its controlling shareholder, TZE[487](index=487&type=chunk) - In fiscal year **2024**, the company engaged in a series of debt restructuring and financing transactions with TZE, including the issuance of convertible notes and the sale of ordinary shares, which resulted in TZE becoming the controlling shareholder[493](index=493&type=chunk)[495](index=495&type=chunk)[500](index=500&type=chunk) - The company has a silicon wafer master supply agreement with a subsidiary of TZE for the purchase of P-Type G12 wafers for its Performance line modules[504](index=504&type=chunk) [Financial Information](index=103&type=section&id=Item%208.%20Financial%20Information) This section highlights the impact of SunPower's bankruptcy on indemnification and a shareholder class action lawsuit filed in June 2024 Consolidated Statements And Other Financial Information - Following SunPower's Chapter **11** bankruptcy filing on August **5**, **2024**, the Separation and Distribution Agreement was rejected. As a result, Maxeon made a provision for an expected credit loss of **$12.1 million** in fiscal year **2024** for previously indemnified arrangements[509](index=509&type=chunk) - A shareholder class action complaint was filed against the company and certain officers on June **27**, **2024**, alleging violations of the Securities Exchange Act of **1934**[510](index=510&type=chunk) [Additional Information](index=104&type=section&id=Item%2010.%20Additional%20Information) This section details the company's corporate constitution under Singapore law and discusses U.S. and Singapore tax considerations for shareholders Constitution - The company's corporate affairs are governed by its Constitution and the laws of Singapore. New shares can only be issued with prior shareholder approval at a general meeting[519](index=519&type=chunk) - The company is subject to the Singapore Code on Take-overs and Mergers, which requires a mandatory offer under certain acquisition thresholds. However, the company received a conditional waiver from the Singapore Securities Industry Council as long as it is not listed on a Singapore exchange[540](index=540&type=chunk)[545](index=545&type=chunk) Taxation - For U.S. Holders, the company does not believe it was a Passive Foreign Investment Company (PFIC) for the **2024** taxable year but notes that PFIC status is determined annually and cannot be guaranteed for future years[568](index=568&type=chunk) - Under Singapore's one-tier corporate tax system, dividends paid by the company are tax-exempt for shareholders. Gains from the sale of shares are considered capital in nature and are generally not taxable in Singapore, subject to certain conditions[583](index=583&type=chunk)[585](index=585&type=chunk) [Quantitative And Qualitative Disclosures About Market Risk](index=121&type=section&id=Item%2011.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include foreign currency exchange rates and interest rate fluctuations, mitigated by hedging strategies - The company's primary market risk exposure is to foreign currency exchange rates, mainly related to sales to European customers denominated in Euros. In fiscal year **2024**, these sales represented **22%** of total revenue[406](index=406&type=chunk) - Maxeon uses hedging strategies, including foreign currency forward contracts, to mitigate balance sheet exposure to foreign currency fluctuations. As of December **31**, **2024**, the company held contracts with an aggregate notional value of **$12.0 million**[405](index=405&type=chunk)[409](index=409&type=chunk) - The company is exposed to interest rate risk, as higher rates can make it more difficult for customers to obtain financing for solar power systems, potentially lowering demand[412](index=412&type=chunk) PART II [Controls And Procedures](index=122&type=section&id=Item%2015.%20Controls%20And%20Procedures) The company's disclosure controls and internal control over financial reporting were concluded effective as of December 31, 2024 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of December **31**, **2024**[619](index=619&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December **31**, **2024**, based on the COSO framework[620](index=620&type=chunk)[621](index=621&type=chunk) - The effectiveness of the company's internal control over financial reporting has been audited by Ernst & Young LLP, which issued an unqualified opinion[622](index=622&type=chunk)[670](index=670&type=chunk) [Other Information](index=123&type=section&id=Item%2016.%20%5BReserved%5D) This section covers corporate governance, accountant fees, cybersecurity risk management, and NASDAQ listing standard exemptions Principal Accountant Fees And Services Principal Accountant Fees (Ernst & Young LLP) | (In thousands) | Fiscal Year Ended Dec 31, 2024 | Fiscal Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Audit fees | $2,291 | $2,944 | | Audit-related fees | $0 | $329 | | Tax fees | $458 | $116 | | Others | $187 | $227 | | **Total** | **$2,936** | **$3,616** | Corporate Governance - As a foreign private issuer and a controlled company, Maxeon follows its home country (Singapore) corporate governance practices in lieu of certain NASDAQ standards, such as the requirement for a majority-independent board of directors[633](index=633&type=chunk) Cybersecurity - The company has a cybersecurity risk management framework aligned with industry standards like NIST and ISO **27001**. The Board of Directors, through its Audit Committee, oversees this framework[639](index=639&type=chunk)[640](index=640&type=chunk)[648](index=648&type=chunk) - Management's cybersecurity governance is led by the Chief Information Officer (CIO), who oversees the Global Information Security (GIS) team. A Cyber Committee, chaired by the CFO, convenes to manage cybersecurity incidents[649](index=649&type=chunk)[650](index=650&type=chunk) - The company has not experienced any material cybersecurity incidents in the last **three** fiscal years[646](index=646&type=chunk) PART III [Financial Statements](index=127&type=section&id=Item%2018.%20Financial%20Statements) This section presents audited financial statements, with the auditor's unqualified opinion noting substantial doubt about going concern and identifying critical audit matters - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the financial statements but included an explanatory paragraph stating that substantial doubt exists about the Company's ability to continue as a going concern, citing recurring losses and negative cash flows[669](index=669&type=chunk)[671](index=671&type=chunk) - The audit identified three Critical Audit Matters: Warranty Valuation, due to the high degree of subjectivity and long warranty periods; Inventory Reserve Valuation, due to subjective judgments on demand and market conditions; and Convertible Debt and Warrants Valuation, due to the complexity and significant estimation uncertainty[674](index=674&type=chunk)[675](index=675&type=chunk)[677](index=677&type=chunk)[679](index=679&type=chunk) Consolidated Balance Sheet Summary | (In thousands) | As of Dec 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | **Total Current Assets** | $266,016 | $619,019 | | **Total Assets** | $376,272 | $1,002,009 | | **Total Current Liabilities** | $338,508 | $431,936 | | **Total Liabilities** | $664,637 | $997,367 | | **Total Equity (Deficit)** | ($288,365) | $4,642 | Consolidated Statement of Operations Summary | (In thousands) | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | | **Revenue** | $509,048 | $1,123,110 | $1,060,113 | | **Gross (loss) profit** | ($249,413) | $78,115 | ($47,948) | | **Net loss attributable to stockholders** | ($614,300) | ($275,829) | ($267,424) |