Maxeon Solar Technologies(MAXN) - 2022 Q2 - Quarterly Report

Executive Summary Maxeon Solar Technologies reported Q2 2022 financial results, highlighting record EU distributed generation revenue, US utility-scale business expansion, and successful funding for Maxeon 7 technology and capacity transformation Announcement Highlights Maxeon Solar Technologies announced Q2 2022 financial results, highlighting record EU distributed generation (DG) revenue, initial high-volume shipments for US utility-scale business, and funding for Maxeon 7 technology for mass production - Maxeon Solar Technologies announced Q2 2022 financial results[1] - Record revenue from EU distributed generation (DG) business[1] - US utility-scale business commenced high-volume shipments[1] - Maxeon 7 technology secured funding for mass production readiness[1] CEO Commentary and Q2 2022 Snapshot CEO Jeff Waters highlighted strong technology demand, record EU DG revenue, US market expansion, and a successful $207 million convertible bond issuance to fund Maxeon 7 and capacity transformation, with plans for 3 GW additional US capacity - Technology demand continued to strengthen, with record EU DG revenue and 1.2 GW of new orders for US utility-scale business[2] - Secured $207 million in private convertible bonds from major shareholder TZE to fund the Maxeon 7 transition project[2] - Capacity transformation progressed: Maxeon 5 modules discontinued, Maxeon 6 capacity expected to be fully utilized later this year, Maxeon 7 pilot line met performance targets with scale-up planned, Performance Line projected to reach 1.8 GW early next year, and accelerated plans for 3 GW additional US capacity due to the Inflation Reduction Act[2] Key Unaudited Financial Data for Q2 2022 | (In thousands, except shipments in MW) | Fiscal Q2 2022 | Fiscal Q1 2022 | Fiscal Q2 2021 | | :------------------------------ | :------------- | :------------- | :------------- | | Shipments, in MW | 521 | 488 | 434 | | Revenue | $238,080 thousand | $223,081 thousand | $175,895 thousand | | Gross loss | $(39,324) thousand | $(12,964) thousand | $(2,812) thousand | | GAAP Operating expenses | $35,701 thousand | $37,410 thousand | $38,069 thousand | | GAAP Net loss attributable to the stockholders | $(87,920) thousand | $(59,112) thousand | $(77,011) thousand | | Capital expenditures | $18,231 thousand | $21,682 thousand | $51,703 thousand | Financial Performance - Q2 2022 This section details Maxeon's Q2 2022 GAAP and non-GAAP financial results, including revenue, gross loss, operating expenses, and Adjusted EBITDA, alongside the impact of polysilicon costs Selected Unaudited Financial Summary (GAAP & Non-GAAP) This section presents key GAAP and non-GAAP financial metrics for Q2 2022, Q1 2022, and Q2 2021, including non-GAAP gross loss, operating expenses, and Adjusted EBITDA, for a comprehensive performance overview Selected Unaudited Financial Summary | (In thousands) | Fiscal Q2 2022 | Fiscal Q1 2022 | Fiscal Q2 2021 | | :------------- | :------------- | :------------- | :------------- | | Non-GAAP Gross loss | $(23,905) thousand | $(12,542) thousand | $(2,629) thousand | | Non-GAAP Operating expenses | $30,162 thousand | $34,367 thousand | $31,200 thousand | | Adjusted EBITDA | $(36,833) thousand | $(33,590) thousand | $(23,536) thousand | Supplementary Information Affecting GAAP and Non-GAAP Results This section details the impact of polysilicon costs on GAAP and non-GAAP results, including incremental costs from above-market prices and losses from selling excess polysilicon Impact of Polysilicon Costs on Results | (In thousands) | July 3, 2022 | April 3, 2022 | July 4, 2021 | | :------------- | :----------- | :------------ | :----------- | | Incremental cost of above market polysilicon | $3,308 thousand | $7,388 thousand | $12,538 thousand | | Loss on ancillary sales of excess polysilicon | $— thousand | $8,328 thousand | $2,498 thousand | - Incremental cost of above-market polysilicon is calculated as the difference between long-term fixed supply agreements and market prices[5] - Loss on ancillary sales of excess polysilicon resulted from selling inventory at market prices below purchase cost to reduce inventory and improve working capital[5] Outlook - Q3 2022 The company provides its preliminary, unaudited financial outlook for Q3 2022, including expected shipments, revenue, gross loss, operating expenses, Adjusted EBITDA, and capital expenditures Third Quarter 2022 Outlook The company provided preliminary, unaudited Q3 2022 financial outlook, projecting shipments of 580-620 MW, revenue of $270-290 million, and expected ranges for gross loss, operating expenses, Adjusted EBITDA, and capital expenditures, based on current management views Q3 2022 Financial Outlook | (In millions, except shipments in MW) | Outlook | | :------------------------------ | :------ | | Shipments, in MW | 580 - 620 MW | | Revenue | $270 - $290 million | | Gross loss | $10 - $20 million | | Non-GAAP gross loss | $10 - $20 million | | Operating expenses | $38 ± $1 million | | Non-GAAP operating expenses | $35 ± $1 million | | Adjusted EBITDA | $(27) - $(37) million | | Capital expenditures | $21 - $25 million | | Out-of-market polysilicon cost | $1 million | - The outlook is preliminary and unaudited, based on management's current views and estimates regarding market conditions, production capacity, ongoing COVID-19 uncertainties, and the global economic environment[7] Company Information & Disclosures This section provides investor access information, an overview of Maxeon Solar Technologies, forward-looking statements, and reconciliations of non-GAAP financial measures Investor Information This section provides investors access to Maxeon Solar Technologies' Q2 2022 financial results and management commentary via the company website and SEC filings, along with earnings call details - Maxeon's Q2 2022 financial results and management commentary are available on the company's investor relations website and via Form 6-K on the SEC website[8] - The company will host a conference call to discuss results on August 18, 2022, at 5:30 PM ET[9] About Maxeon Solar Technologies Maxeon Solar Technologies, headquartered in Singapore, is a global solar innovation leader designing and manufacturing Maxeon® and SunPower® brand solar panels, operating in over 100 countries - Maxeon Solar Technologies, headquartered in Singapore, is a global leader in solar innovation[11] - Designs and manufactures Maxeon® and SunPower® brand solar panels, with sales operations in over 100 countries[11] - Holds over 1,000 patents, serving global rooftop and power plant markets through a network of over 1,700 partners and distributors[11] Forward-Looking Statements This section contains forward-looking statements regarding pricing trends, demand growth, operational disruptions, product launches, strategic plans, financial needs, technology outlook, and Q3 2022 guidance, along with risks that could cause actual results to differ materially - Forward-looking statements cover pricing trends, demand and growth projections, operational and supply chain disruptions, product launch timing, short- and long-term strategies, cash needs and financing capabilities, technology outlook (Maxeon 5, 6, 7, and Performance Line), strategic goals, and Q3 2022 guidance[12][13] - Risk factors include challenges in executing strategic plans, liquidity, debt, increased supply chain costs, operational disruptions (e.g., pandemics, natural disasters, military conflicts), customer and supplier management, R&D success, industry competition, regulatory and public policy changes, tax requirements, currency fluctuations, manufacturing capacity, changes in customer demand, and litigation activities[15] Use of Non-GAAP Financial Measures The company uses non-GAAP financial measures like non-GAAP gross loss, operating expenses, and Adjusted EBITDA to enhance transparency into ongoing operational performance, adjusting for items such as stock-based compensation, restructuring, and polysilicon-related losses - The company uses non-GAAP gross loss, non-GAAP operating expenses, and Adjusted EBITDA to supplement GAAP financial results, enhancing transparency into ongoing operational performance[17][18] - Adjustments for non-GAAP measures include stock-based compensation, restructuring charges, remeasurement loss on prepaid forward contracts, impairment, equity in losses of unconsolidated investees, and losses related to polysilicon supplier price escalation disputes[19][20] - These adjustments aim to exclude items management believes are not indicative of ongoing operations or may distort long-term operating trends, thereby improving performance comparability[18] Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliation tables for GAAP to non-GAAP financial measures, including gross loss, operating expenses, and Adjusted EBITDA, covering Q2 2022, Q1 2022, and Q2 2021, plus a Q3 2022 non-GAAP operating expenses outlook reconciliation Non-GAAP Gross Loss Reconciliation | (In thousands) | July 3, 2022 | April 3, 2022 | July 4, 2021 | | :------------- | :----------- | :------------ | :----------- | | Gross loss | $(39,324) thousand | $(12,964) thousand | $(2,812) thousand | | Stock-based compensation | $249 thousand | $422 thousand | $183 thousand | | Loss related to settlement of price escalation dispute | $15,170 thousand | $— thousand | $— thousand | | Non-GAAP Gross loss | $(23,905) thousand | $(12,542) thousand | $(2,629) thousand | Non-GAAP Operating Expenses Reconciliation | (In thousands) | July 3, 2022 | April 3, 2022 | July 4, 2021 | | :------------- | :----------- | :------------ | :----------- | | GAAP Operating expenses | $35,701 thousand | $37,410 thousand | $38,069 thousand | | Stock-based compensation | $(1,896) thousand | $(2,275) thousand | $(1,708) thousand | | Restructuring charges and fees | $(3,643) thousand | $(768) thousand | $(5,161) thousand | | Non-GAAP Operating expenses | $30,162 thousand | $34,367 thousand | $31,200 thousand | Adjusted EBITDA Reconciliation | (In thousands) | July 3, 2022 | April 3, 2022 | July 4, 2021 | | :------------- | :----------- | :------------ | :----------- | | GAAP Net loss attributable to the stockholders | $(87,920) thousand | $(59,112) thousand | $(77,011) thousand | | Interest expense, net | $5,685 thousand | $4,786 thousand | $7,054 thousand | | Provision for (benefit from) income taxes | $937 thousand | $825 thousand | $(1,217) thousand | | Depreciation | $15,305 thousand | $12,898 thousand | $9,681 thousand | | Amortization | $75 thousand | $90 thousand | $65 thousand | | EBITDA | $(65,918) thousand | $(40,513) thousand | $(61,428) thousand | | Impairment | $— thousand | $— thousand | $— thousand | | Stock-based compensation | $2,145 thousand | $2,697 thousand | $1,891 thousand | | Loss related to settlement of price escalation dispute | $15,170 thousand | $— thousand | $— thousand | | Restructuring charges and fees | $3,643 thousand | $768 thousand | $5,161 thousand | | Remeasurement loss on prepaid forward | $3,986 thousand | $397 thousand | $27,035 thousand | | Equity in losses of unconsolidated investees | $4,141 thousand | $3,061 thousand | $3,805 thousand | | Adjusted EBITDA | $(36,833) thousand | $(33,590) thousand | $(23,536) thousand | Non-GAAP Outlook Reconciliation (Q3 2022) | (In millions) | Outlook | | :------------ | :------ | | Operating expenses | $38 ± $1 million | | Stock-based compensation | $(2) million | | Restructuring charges and fees | $(1) million | | Non-GAAP operating expenses | $35 ± $1 million | Consolidated Financial Statements This section presents the company's condensed consolidated balance sheets, statements of operations, statements of equity, and statements of cash flows for the reported periods Condensed Consolidated Balance Sheets The condensed consolidated balance sheets as of July 3, 2022, and January 2, 2022, show a slight increase in total assets, a significant rise in total liabilities, and a substantial decrease in total equity attributable to the company Condensed Consolidated Balance Sheets (Selected) | (In thousands) | July 3, 2022 | January 2, 2022 | | :------------- | :----------- | :-------------- | | Total current assets | $606,908 thousand | $533,120 thousand | | Total assets | $1,081,062 thousand | $1,056,543 thousand | | Total current liabilities | $544,725 thousand | $421,036 thousand | | Total liabilities | $912,551 thousand | $701,668 thousand | | Equity attributable to the Company | $163,086 thousand | $349,456 thousand | | Total equity | $168,511 thousand | $354,875 thousand | - Cash and cash equivalents decreased to $138,347 thousand as of July 3, 2022, from $166,542 thousand on January 2, 2022[24] - Inventory increased to $282,440 thousand as of July 3, 2022, from $212,820 thousand on January 2, 2022[24] Condensed Consolidated Statements of Operations The company reported $238,080 thousand in revenue for Q2 2022, with expanded gross and net losses; revenue grew year-over-year, but losses significantly increased, resulting in a basic and diluted net loss per share of $2.15 Condensed Consolidated Statements of Operations (Selected) | (In thousands, except per share data) | Three Months Ended July 3, 2022 | Three Months Ended July 4, 2021 | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenue | $238,080 thousand | $175,895 thousand | $461,161 thousand | $341,312 thousand | | Gross loss | $(39,324) thousand | $(2,812) thousand | $(52,288) thousand | $(1,761) thousand | | Operating expenses | $35,701 thousand | $38,069 thousand | $73,111 thousand | $75,276 thousand | | Operating loss | $(75,025) thousand | $(40,881) thousand | $(125,399) thousand | $(77,037) thousand | | Net loss attributable to the stockholders | $(87,920) thousand | $(77,011) thousand | $(147,032) thousand | $(115,825) thousand | | Basic Net loss per share | $(2.15) | $(1.99) | $(3.61) | $(3.36) | - Q2 2022 revenue increased by 35.35% year-over-year, from $175,895 thousand to $238,080 thousand[27] - Q2 2022 gross loss expanded to $39,324 thousand from $2,812 thousand in the same period of 2021[27] Condensed Consolidated Statements of Equity The condensed consolidated statements of equity show total equity attributable to the company significantly decreased to $163,086 thousand as of July 3, 2022, from $349,456 thousand on January 2, 2022, primarily due to net loss and ASU 2020-06 adoption Condensed Consolidated Statements of Equity (Selected) | (In thousands) | Balance at January 2, 2022 | Net loss (Q1 2022) | Effect of adoption of ASU 2020-06 | Balance at April 3, 2022 | Net (loss) income (Q2 2022) | Balance at July 3, 2022 | | :------------- | :------------------------- | :----------------- | :-------------------------------- | :----------------------- | :-------------------------- | :---------------------- | | Additional Paid In Capital | $624,261 thousand | $— thousand | $(52,189) thousand | $573,536 thousand | $2,823 thousand | $576,359 thousand | | Accumulated Deficit | $(262,961) thousand | $(59,112) thousand | $10,122 thousand | $(311,951) thousand | $(87,920) thousand | $(399,871) thousand | | Accumulated Other Comprehensive Loss | $(11,844) thousand | $— thousand | $— thousand | $(12,647) thousand | $(755) thousand | $(13,402) thousand | | Equity Attributable to the Company | $349,456 thousand | $(59,112) thousand | $(42,067) thousand | $248,938 thousand | $(87,920) thousand | $163,086 thousand | | Total Equity | $354,875 thousand | $(59,197) thousand | $(42,067) thousand | $254,208 thousand | $(87,765) thousand | $168,511 thousand | - Accumulated deficit increased to $399,871 thousand as of July 3, 2022, from $262,961 thousand on January 2, 2022[29] Condensed Consolidated Statements of Cash Flows For the six months ended July 3, 2022, cash flow from operating activities turned into a net inflow of $3,698 thousand from a net outflow of $17,878 thousand in the prior year, with reduced investing and financing outflows leading to a decrease in total period-end cash Condensed Consolidated Statements of Cash Flows (Selected) | (In thousands) | Six Months Ended July 3, 2022 | Six Months Ended July 4, 2021 | | :------------- | :---------------------------- | :---------------------------- | | Net cash provided by (used in) operating activities | $3,698 thousand | $(17,878) thousand | | Net cash used in investing activities | $(39,881) thousand | $(62,809) thousand | | Net cash provided by financing activities | $23,941 thousand | $142,830 thousand | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(12,082) thousand | $62,169 thousand | | Cash, cash equivalents and restricted cash, end of period | $180,150 thousand | $271,741 thousand | - Net cash from operating activities shifted from an outflow of $17,878 thousand in the prior year to an inflow of $3,698 thousand for the six months ended July 3, 2022[33] - Net cash used in investing activities decreased to $39,881 thousand for the six months ended July 3, 2022, from $62,809 thousand in the prior year[33]