SunPower(SPWR) - 2022 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents SunPower Corporation's unaudited condensed consolidated financial statements for the quarter ended July 4, 2021, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, with detailed notes on accounting policies and financial data Condensed Consolidated Balance Sheets The balance sheet as of July 4, 2021, shows total assets decreased to $1.55 billion from $1.65 billion, primarily due to reduced other long-term assets, while total liabilities decreased to $1.10 billion from $1.24 billion, and total equity increased to $444.0 million from $406.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 4, 2021 | January 3, 2021 | | :--- | :--- | :--- | | Total Assets | $1,546,632 | $1,646,482 | | Total Current Assets | $1,061,347 | $790,315 | | Total Liabilities | $1,102,619 | $1,239,996 | | Total Current Liabilities | $408,230 | $529,731 | | Convertible debt, net | $423,059 | $484,974 | | Total Equity | $444,013 | $406,486 | Condensed Consolidated Statements of Operations For the three months ended July 4, 2021, total revenues increased to $308.9 million, driving gross profit to $61.0 million, with net income attributable to stockholders at $75.2 million or $0.44 per basic share, significantly influenced by an $83.0 million gain on equity investments Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2021 (3 months ended Jul 4) | Q2 2020 (3 months ended Jun 28) | H1 2021 (6 months ended Jul 4) | H1 2020 (6 months ended Jun 28) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $308,927 | $217,667 | $615,325 | $508,213 | | Gross Profit | $61,031 | $25,652 | $110,905 | $54,836 | | Operating Income (Loss) | $730 | $(7,298) | $(2,608) | $(27,901) | | Net Income Attributable to Stockholders | $75,207 | $19,378 | $26,822 | $17,947 | | Diluted EPS (Continuing Operations) | $0.40 | $0.31 | $0.15 | $0.44 | Condensed Consolidated Statements of Cash Flows For the six months ended July 4, 2021, net cash used in operating activities improved to $18.4 million, net cash provided by investing activities decreased to $7.4 million, and net cash used in financing activities was $84.2 million, primarily for debt repayments Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended July 4, 2021 | Six Months Ended June 28, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,353) | $(158,842) | | Net cash provided by investing activities | $7,363 | $55,838 | | Net cash used in financing activities | $(84,187) | $(81,409) | | Net decrease in cash | $(95,177) | $(184,299) | Notes to Condensed Consolidated Financial Statements This section details accounting policies and financial statement figures, covering company organization, transactions with TotalEnergies SE, revenue recognition, balance sheet components, business divestitures, fair value measurements, restructuring, debt, and segment information - The company completed the spin-off of Maxeon Solar on August 26, 2020, with prior periods presented as discontinued operations[38] - As of July 4, 2021, TotalEnergies SE and its affiliates owned approximately 51% of the company's outstanding common stock[48] - In June 2021, the company repaid the remaining $62.5 million principal of its 0.875% debentures due 2021[60] - During the quarter, the company sold certain commercial projects and residential lease assets to its joint venture, SunStrong, resulting in a net gain on business divestitures of $0.2 million[91][98][197] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2021 financial performance, highlighting a 42% year-over-year revenue increase driven by the Residential, Light Commercial segment, covering results by segment, income statement analysis, liquidity, capital resources, and recent developments Results of Operations Q2 2021 total revenue increased 42% YoY to $308.9 million, driven by a 59% increase in the RLC segment, improving gross margin to 20%, while SG&A expenses rose 58%, and $76.5 million in other income, largely from equity investment gains, led to $75.2 million net income Revenue by Segment - Q2 YoY Change (in thousands) | Segment | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Residential, Light Commercial | $254,119 | $160,290 | 59% | | Commercial and Industrial Solutions | $48,176 | $50,320 | (4)% | | Others | $6,628 | $12,700 | (48)% | | Total Revenue | $308,927 | $217,667 | 42% | Gross Margin by Segment - Q2 YoY | Segment | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Residential, Light Commercial | 23% | 16% | | Commercial and Industrial Solutions | 1% | 21% | | Total Gross Margin | 20% | 12% | - SG&A expenses increased by 58% YoY in Q2 2021, primarily due to higher litigation costs, increased labor costs from new hires, and accelerated stock vesting for former executives[242] - Other income for Q2 2021 included an $83.0 million gain on an equity investment (Enphase Energy stock), compared to a $71.1 million gain in Q2 2020[113][252] Liquidity and Capital Resources As of July 4, 2021, the company held $140.5 million in unrestricted cash, with net cash used in operating activities improving to $18.4 million for the first six months, and $84.2 million used in financing activities for debt repayment, with management confident in meeting obligations for the next 12 months Cash and Cash Equivalents (in thousands) | Date | Unrestricted Cash & Cash Equivalents | | :--- | :--- | | July 4, 2021 | $140,462 | | January 3, 2021 | $232,765 | - The $140.5 million decrease in cash used in operations for the first half of 2021 compared to 2020 was primarily due to lower payments for accounts payable and accrued liabilities, and lower contract assets from a milestone settlement[265] - Management believes total cash and cash equivalents are sufficient to meet obligations for the next 12 months, citing historical success in divesting assets and securing financing[272] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the company's market risk exposures since January 3, 2021, with detailed information available in the Annual Report on Form 10-K - There have been no material changes in the company's market risk exposures since January 3, 2021[277] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of July 4, 2021, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of July 4, 2021[280] - No material changes to the internal control over financial reporting were identified during the most recent fiscal quarter[281] Part II. OTHER INFORMATION Legal Proceedings This section incorporates legal matters from Note 8, stating the company is involved in various litigation matters in the ordinary course of business but does not expect a material adverse effect - The company is involved in various litigation matters from the ordinary course of business but does not expect them to have a material adverse effect[142][282] Risk Factors Updated risk factors include dependency on key personnel following executive transitions, reliance on Maxeon Solar as an exclusive supplier for critical components, and potential supply chain disruptions due to human rights concerns in sourcing materials - The company highlights risks associated with recent executive transitions, including a new CEO and Chief Legal Officer, and the potential for loss of continuity or inefficiency[286] - A significant risk is the dependency on Maxeon Solar as the exclusive supplier for certain products under a two-year Supply Agreement, making the company vulnerable to supply interruptions or delays[287][288] - The company notes potential supply chain disruptions related to human rights concerns, such as forced labor allegations in China's Xinjiang region, which could impact the sourcing of polysilicon and other materials[291] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchase of 186,999 shares during the quarter to satisfy tax withholding obligations related to employee restricted stock vesting Issuer Purchases of Equity Securities (Q2 2021) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Apr 5 - May 2, 2021 | — | $— | | May 3 - May 30, 2021 | 76,171 | $23.26 | | May 31 - Jul 4, 2021 | 110,828 | $22.84 | | Total | 186,999 | N/A | - All shares purchased during the quarter were surrendered by employees to satisfy tax withholding obligations upon the vesting of restricted stock[293] Exhibits This section lists exhibits filed with the Form 10-Q, including management certifications (Sarbanes-Oxley Act Sections 302 and 906) and Interactive Data Files (Inline XBRL) - Exhibits filed include CEO and CFO certifications and Inline XBRL financial data[296]