SunPower(SPWR) - 2022 Q4 - Annual Report

Part I Business 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] - 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][39] - 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] - 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] - 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][58] - As of January 2, 2022, SunPower had approximately 3,660 full-time employees worldwide, with about 2,510 located in the United States[96] Risk Factors 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][109] - 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][187] - 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][143] - 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][158] - 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] - 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][196] - 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][268] Unresolved Staff Comments The company has no unresolved staff comments - None[313] Properties 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 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 $14.8 million[619] - Subsequent to the fiscal year end, on February 16, 2022, a securities class action lawsuit was filed against the company related to the disclosure of a cracking issue in certain factory-installed connectors[736] Mine Safety Disclosures This item is not applicable to the company - Not applicable[317] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities SunPower's common stock trades on Nasdaq under "SPWR"; the company has never paid cash dividends and repurchased shares in Q4 2021 for tax withholding - The company's common stock is listed on the Nasdaq Global Select Market under the trading symbol "SPWR"[318] - SunPower has never declared or paid a cash dividend on its common stock and does not intend to in the foreseeable future[319] Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | 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 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 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] - 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] - 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] Liquidity and Capital Resources 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] - 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] 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 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] - 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] - 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] Financial Statements and Supplementary Data 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 The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[737] Controls and Procedures 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] - 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][742] Other Information The company reports no other information - None[743] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[743] Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees 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][745][748][749] Part IV Exhibits and Financial Statement Schedules 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][752] Form 10-K Summary The company provides no Form 10-K summary - None[761]