Maxeon Solar Technologies(MAXN) - 2022 Q1 - Quarterly Report

Q1 2022 Financial Results Overview Management Commentary The CEO highlighted record performance in European Distributed Generation (DG), with module sales up over 75% year-over-year, and the successful first delivery of US Utility-Scale shipments, focusing on ramping Maxeon 6 and Performance line production to achieve profitability in 2023 despite ongoing supply chain challenges - Record DG performance in Europe with module sales up over 75% year-over-year and the launch of the SunPower One ecosystem[2] - First US Utility-Scale module shipments were successfully delivered from Mexico facilities, with negotiations underway for 2024 deliveries[2] - The company's key strategic focus is on ramping up Maxeon 6 (to 500MW in H2 2022) and Performance line capacity for the US market (fully ramped in H1 2023) to drive a return to profitability in 2023[3] Q1 2022 Financial Highlights In Q1 2022, Maxeon reported revenue of $223.1 million, a slight increase from Q4 2021 and a significant increase from Q1 2021, recording a GAAP Net Loss of $59.1 million and an Adjusted EBITDA of -$33.6 million, while shipments decreased quarter-over-quarter but increased year-over-year Selected Q1 2022 Unaudited Financial Summary | (In thousands, except shipments) | Fiscal Q1 2022 | Fiscal Q4 2021 | Fiscal Q1 2021 | | :--- | :--- | :--- | :--- | | Shipments, in MW | 488 | 577 | 379 | | Revenue | $223,081 | $221,479 | $165,417 | | GAAP Gross (loss) profit | $(12,964) | $(10,545) | $1,051 | | GAAP Net loss attributable to the stockholders | $(59,112) | $(73,332) | $(38,814) | | Capital expenditures | $21,682 | $37,393 | $10,958 | Other Financial Data (Non-GAAP & Adjusted EBITDA) | (In thousands) | Fiscal Q1 2022 | Fiscal Q4 2021 | Fiscal Q1 2021 | | :--- | :--- | :--- | :--- | | Non-GAAP Gross (loss) profit | $(12,542) | $(10,056) | $1,274 | | Adjusted EBITDA | $(33,590) | $(32,777) | $(23,520) | Financial Outlook Second Quarter 2022 Guidance For Q2 2022, the company projects revenue between $215 million and $230 million, with shipments expected to be in the range of 460 to 490 MW, anticipating an Adjusted EBITDA loss of $37 million to $47 million and capital expenditures projected at $20 million to $24 million Q2 2022 Outlook | (In millions, except shipments) | Outlook | | :--- | :--- | | Shipments, in MW | 460 - 490 MW | | Revenue | $215 - $230 | | Gross loss | $15 - $25 | | Non-GAAP gross loss | $15 - $25 | | Adjusted EBITDA | $(37) - $(47) | | Capital expenditures | $20 - $24 | - Capital expenditures are primarily directed towards upgrading production to Maxeon 6 in Malaysia, purchasing equipment for the Performance line in the U.S., and developing Maxeon 7 technology[8] Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets As of April 3, 2022, Maxeon's total assets were approximately $1.1 billion, up from $1.06 billion at the start of the quarter, while total liabilities increased significantly to $845.6 million from $701.7 million, primarily due to increases in convertible and short-term debt, consequently decreasing total equity from $354.9 million to $254.2 million Key Balance Sheet Items (As of April 3, 2022 vs. January 2, 2022) | (In thousands) | April 3, 2022 | January 2, 2022 | | :--- | :--- | :--- | | Total current assets | $604,005 | $533,120 | | Total assets | $1,099,807 | $1,056,543 | | Total current liabilities | $452,976 | $421,036 | | Total liabilities | $845,599 | $701,668 | | Total equity | $254,208 | $354,875 | Condensed Consolidated Statements of Operations For the first quarter ended April 3, 2022, the company generated revenue of $223.1 million, an increase from $165.4 million in the same period last year, though the gross loss widened to $13.0 million from a gross profit of $1.1 million year-over-year, and the net loss attributable to stockholders increased to $59.1 million, or ($1.45) per share, compared to a net loss of $38.8 million, or ($1.14) per share, in Q1 2021 Q1 2022 vs Q1 2021 Statement of Operations Highlights | (In thousands, except per share data) | Three Months Ended April 3, 2022 | Three Months Ended April 4, 2021 | | :--- | :--- | :--- | | Revenue | $223,081 | $165,417 | | Gross (loss) profit | $(12,964) | $1,051 | | Operating loss | $(50,374) | $(36,156) | | Net loss attributable to the stockholders | $(59,112) | $(38,814) | | Net loss per share (Basic & Diluted) | $(1.45) | $(1.14) | Condensed Consolidated Statements of Equity Total equity decreased from $354.9 million at the beginning of the period to $254.2 million as of April 3, 2022, primarily driven by the net loss of $59.1 million and a $42.1 million reduction from the adoption of accounting standard ASU 2020-06 - Total equity decreased from $354.9 million on January 2, 2022, to $254.2 million on April 3, 2022[31] - The primary drivers for the equity decrease were a net loss of $59.1 million and a $42.1 million reduction from the adoption of accounting standard ASU 2020-06[31] Condensed Consolidated Statements of Cash Flows In Q1 2022, net cash provided by operating activities was $14.7 million, a significant improvement from the $50.8 million used in Q1 2021, with net cash used in investing activities at $21.7 million mainly for property and equipment purchases, and net cash provided by financing activities at $22.5 million, ending the quarter with $176.7 million in cash and cash equivalents Summary of Cash Flows (Three Months Ended) | (In thousands) | April 3, 2022 | April 4, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $14,685 | $(50,823) | | Net cash used in investing activities | $(21,693) | $(10,958) | | Net cash provided by (used in) financing activities | $22,476 | $(15,463) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $15,532 | $(77,139) | | Cash, cash equivalents and restricted cash, end of period | $207,764 | $132,433 | Supplementary Information and Non-GAAP Measures Supplementary Information Affecting GAAP and Non-GAAP Results The company's cost of revenue was significantly impacted by polysilicon-related costs, including a $7.4 million incremental cost for above-market polysilicon contracts and an $8.3 million loss on ancillary sales of excess polysilicon in Q1 2022 Polysilicon Impact on Cost of Revenue (In thousands) | Item | April 3, 2022 | January 2, 2022 | April 4, 2021 | | :--- | :--- | :--- | :--- | | Incremental cost of above market polysilicon | $7,388 | $11,542 | $11,618 | | Loss on ancillary sales of excess polysilicon | $8,328 | $2,621 | $1,720 | Use of Non-GAAP Financial Measures Maxeon uses non-GAAP measures such as non-GAAP gross profit, non-GAAP operating expenses, and Adjusted EBITDA to enhance transparency into its ongoing operating performance by excluding non-core operational items - The company uses non-GAAP measures to enhance comparability across reporting periods and with competitors by removing items not associated with core operations[19] - Key adjustments to arrive at non-GAAP figures include stock-based compensation, restructuring charges, remeasurement loss/gain on prepaid forward, impairment, and equity in losses of unconsolidated investees[20][22] Reconciliation of Non-GAAP Financial Measures The company provides a detailed reconciliation from GAAP to non-GAAP figures, where the Q1 2022 GAAP Net Loss of $59.1 million was reconciled to an Adjusted EBITDA of -$33.6 million through adjustments for depreciation, interest, taxes, and other non-cash or non-core operational items Reconciliation of GAAP Net Loss to Adjusted EBITDA (Q1 2022, in thousands) | Line Item | Amount | | :--- | :--- | | GAAP Net loss attributable to the stockholders | $(59,112) | | Interest expense, net | $4,786 | | Provision for income taxes | $825 | | Depreciation | $12,898 | | Amortization | $90 | | EBITDA | $(40,513) | | Stock-based compensation | $2,697 | | Restructuring charges (credits) and fees | $768 | | Remeasurement loss (gain) on prepaid forward | $397 | | Equity in losses of unconsolidated investees | $3,061 | | Adjusted EBITDA | $(33,590) | Other Information Forward-Looking Statements The press release contains forward-looking statements regarding pricing, demand, product launches, strategic plans, and financial guidance, which are subject to substantial risks and uncertainties including supply chain disruptions, competition, and regulatory changes - The report includes forward-looking statements concerning future performance, strategy, product ramps (Maxeon 6, 7, Performance line), and Q2 2022 guidance[13][14] - These statements are subject to significant risks and uncertainties, and readers are cautioned not to place undue reliance on them; a detailed discussion of risk factors is available in the company's SEC filings[16] Conference Call Information The company scheduled a conference call for May 26, 2022, to discuss the first quarter 2022 financial results and provide a business update, with dial-in details and webcast information provided for interested parties - A conference call to discuss Q1 2022 results was scheduled for May 26, 2022, at 5:30 PM U.S. ET[11]