SunPower - Earnings Call - Q1 2025

Transcript

Sioban Hickie (VP of Investor Relations)

Hello, my name is Sioban Hickie, VP of Investor Relations, and I would like to welcome everyone to SunPower's Q1 2025 earnings call. A few housekeeping items before we get started today. First, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, and if you have joined via a webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. For our audiences watching via the webcast, there is an Ask a Question tab on the right-side flyout of the screen where you can submit a written question. Please note today's conference call may contain projections and other forward-looking statements.

These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in our statements. Also, on today's conference call, we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the press release issued this morning. I'll now turn the call over to T.J. Rogers, SunPower's Chairman and CEO.

T.J. Rodgers (Chairman and CEO)

Good morning. My name is T.J. Rogers. I'm the CEO of SunPower. We've got the quarterly call, and I've got some added remarks that I actually delivered at the company. Let's get on with it. Okay. My computer is not advancing. Backward. Try to make it work and see what happens from here. Okay, I'm trying to get rid of that. Apologize. This is not okay. Did you guys give me a left-handed mouse? Can I just have a normal mouse? They're trying to help me by giving me a left-handed mouse, so everything I do is backwards. Just turned it to a left-handed mouse. I want a right-handed mouse that works. Okay, the title is SunPower Reports Q1 2025, $80 million in revenue, $1.3 million in profit. That's the big news, really. I'll talk later about the ad. I'll actually show it to you. The numbers are here.

We've got, as usual, GAAP and non-GAAP numbers. The numbers I'm focusing on here are Q1 2025 non-GAAP numbers. This is the big news. We've got $1.27 million in profit, up from -$5.9 million in the prior quarter. The GAAP numbers have bigger losses. Those are all related to the acquisition and the write-offs that we've had. We actually were profitable, both profitable and cash flow positive in the quarter. That's the good financial news. I'll point out on the non-GAAP numbers, this is not what we reported last quarter. It was $81.1 million we reported. This is what we would have reported with the new three-company revenue recognition rules. The reason I'm telling you that is the number was $81.1 million. This was not 47%. It was 36%.

On advice of lawyers, I put the new numbers in there because these are the quote audited numbers. They made our numbers better. I do not want to report better numbers here today. Okay, this is our profit. Q3 is a truly unofficial number where I simply added the profitability of the three companies. The merger occurred right here. We lost $5.9 million in Q4 and made profit in Q1. That is our curve. These are audited numbers. These are not. I would like to congratulate our team. We broke the profit barrier starting here. 180 days later, bam, we have got profit. The rest of this report, that is really the financial news. We have a relatively simple company. The rest of the report, I am going to talk about what went on, and I am going to talk a little bit about our view of the future.

Our $80 million was in line with expectations. We are currently an $80+ million per quarter company in revenue. The next step is to move away from that. I'll talk about that later. SunPower, the new company, the new name is now properly and leanly staffed. If you look at the headcount history, if you go back to the third quarter of last year, the three combined companies had 3,500 employees. The first stop was post-merger day one. We chopped down immediately to 1,341. One quarter post-merger, we were down to 1,140. I'm going to talk about these layoffs. They're critical. How we do them and whether or not they hurt the company does matter. Today we're down at 906. The target headcount back here after we merged was 1,225. The target headcount here, including the beginning of this quarter, was 980.

There is a reason for those targets I'll show you later. The good news is, of course, if you're worried about money, this is a dramatic cost-cutting effort. The problem you've got is that you can't let it harm the company, and you have to balance those off against each other. Here's how we do that. This is a memo just in our standard format. We haven't changed our logos yet. This is a thing called the requisition auction. It's a process I used back in the semiconductor industry to maintain the right headcount, a very tough industry for maintaining profitability. On page one, it says how many people we had at the beginning of the week who left, who wants to come in, and what's our ending headcount.

In this particular case, we actually added people, very rare, obviously, given that curve, and ended up at 907. This was the third day of workweek 17. Down here is a summary of costs. If you add and subtract the dollars associated with the bodies, it says quarter to date, we've saved and annualized $1.6 million. This is how we track money and get to having profit so quickly. We watch it three times a week. This is a very disciplined process. Forget the box for a minute. This is the total company headcount. It says we've gone down over time. These numbers are the actual headcount. It says our current target is actually lower yet, say, 181 people. This is for workweek 13, 14, 15, 16, 17.

This is something you look at a couple of times a week to make sure it's on track, and you can see it is. The total company headcount is then divided into six parts. There are two divisions. I believe in having profit and loss divisions that control the company. My function in the company is more like that of a meddling director than it is CEO. I am obviously into a lot of details, but these division managers, they make our revenue, and they're responsible for making our profit. We have the overhead functions. You can see each of them has a trajectory. You can see, for example, administration is below its target. IT is at its target. Finance is getting to its target. This we had because we had a quarter closed with three companies, a huge amount of work.

Quality and engineering, I've got together one VP running both. We have to have two hats in a company like this in order to make ends meet. That is the name of the game of solar. That's the challenge for me as a manager. Okay, this is data. We have a set of consultants. They're called Ayna, A-Y-N-A. They're a spinout of McKinsey. They are excellent consultants. I've used them, for example, in the Enphase turnaround. They come in and give you a bunch of numbers like this. I'll give you one number. It says, for example, in HR, how many people should you have per HR employee? Then you have data for the median and the top quartile. This is for a couple of hundred high-tech companies. The answer is that's a bad number. It's median. That's a good number. It's 75th percentile.

That is a ratio. You have those ratios per million dollars of revenue, etc. That is how we get the lines for these groups. That is how we drive them point one and point two. They are small, and they have to be small. These guys are judged on revenue per employee now. They are judged on the bottom line because their bottom line is my bottom line. The overall metric I am looking at here is revenue per employee. The company right now is at $369,000 per employee per year. That is a good number, especially for solar. If you go check some other companies, I will not name them, but all you have to do is look at their headcount and their revenue from the last quarter times four, and you will see numbers as low as $200,000. That is going on a business plan as I see it.

The weighted average pretty much of our two divisions is what the company is. This is our classic solar division, which is the Blue Raven embedded start-up that we have in the new homes. This is a separate division, which does not sell to people. It sells to corporations that make housing developments. Therefore, it has a lot lower headcount because, for example, we have a very large sales force here and less than 10 here. That is why their targets are different. The businesses are really different. The point here is we track this three days a week, Monday, Wednesday, and Friday, 8:00 A.M. I am involved, and it is what drove the curve and drove the profitability along the course of the accomplishment of making revenue. This is a disciplined thing. I do not know start-ups, and I do not know any solar companies that run tightly.

This comes from the semiconductor industry. Here's the discipline right here. Director of HR. He does this report. He does it to his specification. And it's always there, and it always works unlike my mouse today. More to come on that. I'm not going to tell you his name because the vultures would be all over him. Your first reaction is the Director of HR. The guy is 19 years old. No, he's not 19 years old. He's a full 25 years old. He's very competent, and he is representative of the kind of employees we have in Salt Lake. They work hard. They're young, and Salt Lake is the center of the world for solar. If you go look at where the solar companies are located by headcount, that's there. Salt Lake is the Silicon Valley of solar.

I was going to show you the REC auction spec, but when I was timing this thing earlier today, I decided not to go over it. All those graphs you saw come from a spec, a spec that I have, a spec that I wrote years ago and updated 10 times. It tells us how to run that. I have transferred approximately 10 business processes, not all the ones, but approximately 10 business processes to the new company and done training. What you just saw is one little module. I say we have discipline. My joke was going to be, "Here's a picture of my staff meeting last Wednesday." We do have discipline. I did not have it when I came in. Just backstory here. This guy right here, his name is R. Lee Ermey. The movie is Full Metal Jacket.

It's one of the four movies that defined Vietnam. Stanley Kubrick, classic. The story on this guy is they brought him in as a coach to coach the actor who was playing the gunnery sergeant, check perfection of the tie and the pleats and the shirt and the whole thing. Guy who played the gunnery sergeant, how to be that. Stanley Kubrick, 2001: A Space Odyssey, a genius, said, "Fire the actor. He's my gunnery sergeant." This is a real honest-to-God gunnery sergeant. If you ever watch this scene, it's a classic. It's a classic of the drill sergeant who's hated by the recruits right up until the time they get in war, and then all of a sudden, he looks a whole lot better than he did. The first movie that did this was The Sands of Iwo Jima starring John Wayne.

He was Sergeant Stryker. Same story. This guy's the best of all of them. Okay. Another thing I've transferred is to make the point of the dichotomy of having to do two opposite things at the same time. That's always been true. This is a memo I wrote in 1987 and rewrote four times up to 2013. The title of the memo, and this is one of my specs, internal specs that I've transferred. This document exists in our system. It says, "10 Things to Do When a Valued Employee Quits." Here's how it goes. This is the first three steps on page one. It goes on for five pages and defines a process. At the very same time, we're going down a roller coaster for headcount. We have executives working on keeping key people. Just read one thing. React immediately within five minutes.

There is nothing more important than to react immediately to an employee has quit. I repeat, there is nothing that takes priority over working with employees resigned, presuming you want to keep them. Just in case you did not get it, I say the phrase, "Nothing more important," means that your action should happen immediately. The next activity you have scheduled should be canceled. Any delay, such as, "I'll talk to you after our staff meeting," is unacceptable. I finally got this one across one time when I canceled my own staff meeting because we had an engineer who was a really good guy. I walked out and said, "I got to do." Anyway, this is a process for keeping people. We have a process for evaluating people. I did not show you to save time. Key new employees.

We are now able to recycle a fraction of the salaries. I showed you savings this quarter today is $1 million and obviously saved tens of millions on those curves. We now recycle a fraction of salaries saved from headcount reductions bringing key industry players. At the very same time you're cutting, you're hiring. And you're hiring people using the money with people that left. That's a rolling process. Happens, like I said, three times a week. You're building it up. Last week, we kind of hit the jackpot. We had two great hires. I brought those guys in to meet you today. Actually, I've got their bios here. The guy sitting next to me used to look like that. His name is Dick Swanson. That's me in 1972. This is what a conference room looked like before whiteboards.

This guy became the head of the Electrical Engineering Department at Stanford. We all worked in the Stanford Integrated Circuits Lab, which at that time put out more papers per capita than Japanese, Hitachi, Fujitsu, all of them. This was the center of Silicon Valley and the Stanford campus. This is how he looks now. Actually weathered pretty well. He gave me his resume. He wrote this. I asked for a short resume. I'll make three points. He's the Co-founder, President, and CTO of SunPower Corporation. After that, he was, and during that time, overlapping, his assistant and associate professor of electrical engineering at Stanford. He taught students. In our world, like the National Academy of Sciences and the National Academy of Engineering, that's sort of the Oscar world. He's a member of that.

I called him up this morning and I said, "Dick, I'm going to introduce you today. We don't have a title. It's a one-year contract to help us out for obvious things. We don't have a title. What do you want to be called?" He didn't help me. He said, "Well, I'll be a technology consultant." I said, "I love it. Gives me a chance to make a point. The solar industry is saturated with title-hungry people. Chief Revenue Officer, Chief this, Chief that. Here's a guy that really is the Chief. And he's a quote technology consultant," unquote. I'll use this as a moral lesson inside the company. Right now, I'd like to introduce Dick Swanson to you, and he's got a few words to say.

Dick Swanson (CTO)

Thank you, T.J. Today, we're at a pivotal moment in the renewable revolution. About a year and a half ago, we surpassed 1 TW of installed PV capacity globally. As we speak right now, we're bumping up to 2 TW of global PV capacity. To give you some idea of the magnitude of this, the entire U.S. electrical generation capacity is 1 TW. We're going to be very soon producing 1 TW per year of photovoltaics. The reason for this is simply that PV has become the lowest cost form of electrical energy. This is sort of a transition point in our industry, the way I see it. We are entering a new phase. The question is, "Okay, we've done this. What now? How do we take our energy supply from sub-5% of the global generation to the dominant source of generation? How do we do that?" This is a whole new phase in our industry.

I'm really excited about the opportunity to come and help Cypress make that transition and use my 50 years of experience in the industry to work with them on the complex supply chain and technology landscape that we're facing and look forward to great results here. Thank you, T.J., for inviting me.

T.J. Rodgers (Chairman and CEO)

He slipped and said the word Cypress. I'll tell you why.

Dick Swanson (CTO)

Oh, my God.

T.J. Rodgers (Chairman and CEO)

It'll be obvious later why that is. Okay. Next, Ron Settick. He comes in as the Executive Vice President of Storage Systems Division. Storage system is not a battery. It's a system that has batteries in it, among other things. Our Chief Technology Officer, he's a PhD in chemical engineering from USC. He just came out of Enphase, where I would point out that he's built a $500 million storage business at Enphase.

He's connected very well with Enphase. Dick said something that's true, but other people would argue with it. It's true that if you look at the cost per kilowatt-hour from solar, it's the cheapest, like $0.02. Nuclear's $0.06. Gas is $0.06 or $0.08. You've got this little problem. Sun only shines on an average where I live five hours a day. You got to work on that one. That's called batteries. That's what this guy did. Today, what you have to do today and what's going to change the world is during the day, you're going to have what's called a "grid-connected battery". Your solar system will be bigger than the consumption of your house. You'll store that up.

At 7:00 P.M., when the local utility starts screwing you for $0.30, $0.40, $0.50 a kilowatt-hour, you'll run off your battery. In effect, it's like a bulldozer. You scoop up power during the day and dump it back into your house at night. The battery will become the most important ROI component of putting in solar. We need a real battery guy. That's Moran. He's going to run a system where we're going to create system-level storage products, not just sell somebody else's batteries. Moran.

Thank you, T.J. Good morning. Goodbye. Really excited to be joining SunPower. It's a really important junction. SunPower, if you go back to the days that Dick started and T.J. helped push the company forward, it has its roots in innovation This is where we are going to go back to, really, both in products as well as services. T.J. talked about me coming from Enphase. I spent six years there developing three-generation of energy systems, not just a battery. It is true. Battery is a, of course, essential part of any energy management system, but it's not sufficient. Electrification is pushing homes forward more and more toward consuming more energy, electricity. AI is coming to the future in everything we do. It is going to put more pressure on grid. Having an independent energy source, which is sun on our roof, is no longer a nice thing. It's a necessity.

Using that requires sophisticated software development, sophisticated AI-enabled algorithm to manage all that, manage interaction with the grid, making sure the homeowner is taken care of financially with ROI and using the cheapest source of energy available. I'm excited to start coming in, contributing to that process forward with SunPower and having some fun along the way.

My recruitment for these guys was all technical. You guys come in, we get to make changes that will change the world. That's really the message I'm going to give you for our mission going forward. Other stuff. We formed a strategic partnership with a company you haven't heard of called Sunder. If you lived in Salt Lake City, you would know exactly who they are. They're big, highly regarded in their sales firm. We now have them supporting our growth.

They have more salespeople, by the way, than we have employees, just to scale it for you. They're now supporting our growth. That'll be orders coming in now. It'll show up in the third quarter. Next point. We strengthen our Board with three public company ex-CEO Directors. That is, Directors who ran companies. Lothar Maier, a former CEO of Linear Technology, a $1.4 billion chip company. Dan McCranie, who's right here. Can we get a picture of him, please? There he is. He came over. Dan is the former Chairman of five high-tech companies, including Freescale and ON, the two halves of Motorola when Motorola spun out their halves and broke up into two public companies. Jamie Haenggi. She lives in Wichita. She's a former CEO of ADT Solar. We're strengthening our Board. I'll talk about the statistics in a minute. Okay.

When we first went from being a start-up to being a public company, we had a start-up board. You do not follow the independence rules. You get the best person you can. Now we have independence rules. That is, for example, the person who interfaces with the public cannot be me because I am an employee. I am not independent. You have to have an independent Director for that. In that case, we have Ron Pasek, who is the Chairman of our audit committee. He is now the Lead Director. He is the man that interfaces with the public. I am the Chairman, but he is the guy that talks to the public. Secondly, in the comp committee, we have a guy who used to run on Complete Solaria. He is not independent. He will not be for five years. He has been replaced by Dan McCranie that I just met.

Dan has been on the Board of way bigger, more complex companies than ours. The two points I'm making here, of our 11 Directors, we have a relatively large Board. We have eight with CEO experience. We have seven who are independent. We now have a very strong Board going forward. Last point in the primary presentation. I talked about our—I won't say it again, but I talked about our economics. Everybody's worried about the market right now, market price. The best we can say is we haven't been damaged as bad as the other guys. Here I've taken three, four important companies. This is Complete Solaria. These are stock graphs. If I summarize those graphs for you today, performance up to 4/27 when the snapshot was made. We're a little bit ahead of even the industries in the tank.

We feel that we're being recognized for what we're doing financially. Okay. A few things, all-hands meeting. I go to Salt Lake. I go into a big room in the basement. Between that and the people watching, we have 1,000 people, 906. We have an all-hands meeting. By the way, the all-hands meeting, let's just say I was considered an alien from Silicon Valley for a while. I'll talk about that in a minute. Okay. First thing we talked about was SunPower rebranding. Part of the company comes from a start-up called Blue Raven. They're very proud of their company. The concept of getting renamed was something I had to sell to them. I'm going to also talk about that because this is the first meeting we've had since we rebranded as SunPower. There's our logo. I'll explain that in a minute.

First of all, SunPower, this is a list of 70, the second half of a list of 70 companies that are solar and went bankrupt. Many of them are private sales companies, but some of them, SunPower being the biggest, were big real companies that really did go bankrupt. My first point is we have to do everything, including those layoffs you hate, in order to keep solid financials because if you do not have that, you do not have anything. They bought into that. Second point here is that acquiring solar companies to grow rapidly. Now, that in the solar business and semiconductors, when I ran Cypress, I was there for 34 years. We acquired 26 companies.

If you acquire a company, you acquire designs, you acquire the people that designed it, you acquire the marketing people, they all come to a new place, their products are there, and acquisition sticks. Solar is not like that. The solar sales forces are mobile. If you bring them in and piss them off, then they go away and don't come back. We will acquire with trepidation. We will have all kinds of golden handcuffs on the people that we acquire. That's my only point. Okay. Going back in time, saving SunPower. San Francisco Chronicle, SunPower had a great idea and strategy, but cash was running short until it received a $750,000 personal check from someone who saw the light. I think that's the only thing that San Francisco Chronicle ever wrote about me that was favorable. Here we are on top of Cypress.

Cypress was, this is, I think, like 2002. We just had put on a roof, British Petroleum panels. Dick and I went on the roof. We were doing some sort of promotion. CEOs of the two companies. That is Silicon Valley. That is San Francisco Bay. Okay. SunPower's reason for being was not we have the best sales force in the world. It was we have the best panels in the world. Ours are smaller and higher in power. These are half panels that I could get into one picture. You got a smaller panel. It is pretty. It is all black. It is more wattage than the competing panel. That is what SunPower sold, technology. Although I will admit sales is dominant in this industry today, technology still matters.

Hence the techie guys that we did not have, that we took a few percent of our savings from the overstaffing in the company and recycled it into building a technology team. These guys will both work on that. This is an old slide. It was made in 2009. Cypress still owned SunPower at that time. We built an automatic line for them to make solar panels. They got to $79 million in 2005. Made a profit. We took them public. We, Cypress, took them public. I was the Chairman. They grew a factor of 18. The guy that did that was Tom Werner. Also, I worked with Tom. They went up to $1 billion. This is a rocket ride to make SunPower the predominant company in the world. At that time, our investors, we owned 40% of the economics, but there were 10 vote shares.

We owned control and 40% of the economics. Our investors were raising hell. They didn't give a damn about our little semiconductor company. They wanted direct access to the solar stock. We spun it out. That was a one-time stock dividend worth $2.6 billion at the time we did it, putting the value of SunPower at that time at $6 billion. Two years later, the French went in the market, the oil company Total, big bucks. They bought 60% of the stock of the company in the open market. We all enjoyed the share price ride. They took it over. It was no longer a Silicon Valley company, which is unique in the way it works. You don't have your Board meetings in Paris. Just let you know that one doesn't work. That's when I left. Okay.

The point is, this is old SunPower. After it was "saved" back here, that's where we are right now. Let me tell you what I didn't say explicitly. I did not say our next step is 774. You can write it down, divide it by four. That's the next quarter. I'm talking about our vision for the future. All I'm saying is if you measure our vision of a prior company in a different era, we're moving along. We're not done. That's all I said. The SunPower brand is hugely valuable. I'll make that point with this graph. This is a company called EnergySage, their East Coast company. They quote solar deals. They quote what are called long-tail solar deals. This is to the homeowner, full retail.

In this case, they have a graph of price difference from the least expensive equipment pairing. Here, the least expensive equipment is Tesla. They brought out a new battery. It's cheap. REC is a high-volume manufacturer. They make great panels. Fortunately, not in China. We use their panels right now. This is 0% to the cheapest. That's the lowest cost option. We have to be lean enough to compete there. I'll fire the marketing guy who competes there. Simple. You go along and you see there are the guys that sell volume at whatever price is required. There's a group of companies that have some sort of advantage. They have a premium. In this case, the first advantage company or group of companies uses Enphase inverters, not Tesla. There's a reason for that.

REC panels. Then you go up. There is this tier of 20%-30% premium. You go up here. You go, "Who the hell are those guys?" The answer is, and this, by the way, is last August. The asterisk down here, SunPower filed for bankruptcy on August 5th, 2024. We expect this to be the last report, including its products. You would walk in and say, "I'm SunPower. What kind of panels do you have?" Worry from India. Who are they? What kind of inverter do you have? We have our own proprietary inverter. I know about that because I'm replacing them right now with Enphase inverters so the thing works right. SunPower name, even with a lackluster product line, was 50%. That is what I want to get back. We do not have good marketing.

We're going to have one of these meetings coming up. I'm going to introduce a marketing star and say how we're going to go forward. Right now, me griping about reading reports and griping about price is quote marketing. Okay. To get back to where SunPower used to be, I want to replace, I want to bring back that technology edge against the guys we just met. We're going to partner with REC on panels. We already have. We already use their panels. When the SunPower inverters go away, we're going to partner. We're partnering with Enphase. We use only Enphase inverters right now. One good thing about being the CEO is we now have a Bombspec ABL list. I have to sign it. That's what's on it, among other things. That's where we're headed.

Back to having a technology advantage so our salespeople can talk why you want this one. And only if you say, "I can't afford it," then they'll say, "Well, we've got one you can't afford." Okay. The vision. This is one of my favorite pictures ever. It's a real airplane. It was made by NASA through a contractor. It had 65,000 solar cells on it, producing 35,000 W. And it had electric motors on it, two horsepower electric motors, 1,500 W motors. You can see these propellers. They look like windmills because they are. Because at 96,800 ft, there's no air. So you need a giant propeller to grab enough air to cause something to fly. And this airplane took off under its own power, flew to 96,000 ft, maintained it. And that's a world record that still stands today. And it was done in 2001.

To me, I'm not going in the airplane business. I wish I could. We sold these for $200 a watt. Today, it's $0.31 a watt. I'm not going in the airplane business. This is an image of what can happen with solar, with technology, and a vision as opposed to selling solar cells in the neighborhood. Okay. I thought about that. This is my kitchen. I was working on this, actually, the report I'm giving right now. I mocked up an old copy of The Wall Street Journal with an ad telling what I'm going to tell you right now. This is the text of it. I'm also the IR guy in case you haven't figured that out. My wife and our two-person venture company helps with this. That became this.

This is the actual full back page ad of The Wall Street Journal yesterday. Normally, I would never do such an extravagance. I figured this change, the branding of SunPower, the new direction warranted it. I already told you about that airplane. By the way, 96,000 ft is 30,000 ft above that. That's F-15 Eagle. In my mind, with a 104 to 0 kill ratio, it's the hottest fighter plane that's ever been made anywhere. The interesting thing is it's really an interceptor, not a fighter. What that means is when the bad guys come over the border, this thing needs to get to fighting altitude about 30,000 ft fast. They made it with an engine. It has 1.17x the thrust of the weight of the airplane. Therefore, it can go vertically. This airplane can take off.

They're actually on, you can go on the website, not our website, but you can go on the Internet and get pictures of a guy taking off and going to 30,000 ft, ready to fly. The record from going from ground to 30,000 ft is 56 seconds, held by that airplane. It won't fly high. It's not stable high. It's a missile when it gets up there. It's not aerodynamic. Of course, there's the airplane of all airplanes, the SR-71 Blackbird. This airplane flew over the nuclear missile silos of Russia for two decades. They never had a problem. The Russians invented a plane called the MiG-25 Foxbat. It was an 1,800 mi an hour airplane. They couldn't touch it.

They actually invented that airplane and long-range missiles so they could take off when they saw the Blackbird coming, get up, get to their highest altitude, then fire a missile to go the rest of the way. Never happened. This thing travels 2x the speed of a deer hunting rifle. All the guy has to do is turn two degrees to one. By the time the missile gets there, he's 20 mi away out of radar lock. In July 1976, this airplane set records for speed, 2,193 mi per hour, and altitude 8,569. For an air-breathing airplane taking off under its own power, not a rocket. That is the record. By the way, a little fact that I really like. Everybody knows that in Denver, you have to boil an egg longer in order to get it cooked.

That's because the boiling point of water reduces as the pressure holding the water down reduces. At 85,000 ft, water boils at 59 degrees Fahrenheit. Said another way, your body temperature is above the boiling point of your blood. That's another way it's not good to be up there. These guys can't just wear an oxygen mask. They actually have to have a full pressure suit to fly that airplane. They would fly for 10 hours at a time over the Soviet Union with the Soviets trying their latest little wiz-bang take them out. Never happened. This is a statement. I've already gone through it. I won't do it again. There are three companies that have combined: Old SunPower, New Homes, Complete Solaria, and Blue Raven Solar. Complete Solaria was my old company. By far the smallest. We brought 65 people into the 900-person company.

I showed you the profit trajectory. I talked about a forecast for revenue. I pointed out I was the Chairman of SunPower. Hence, I have an emotional stake in this. We're now on Nasdaq. We now are SPR and SPRW, our warrants. That's our website. That's our new logo. I'm a, in case you haven't figured it out, former stamp collector. I'm a stamp collector. I turned this logo into a commemorative stamp. Next thing, customers. If you don't treat your customers well, you'll get blown up. In solar, if you've been reading the news lately, some of our competitors are getting famous for not doing well by customers. One thing I learned in my industry is you took care of your customers.

Working on quality and customers was the third of my job at the end of my career at Cypress. Okay. You recognize this guy. He has a house in Nevada. They had a "three-year delay" due to quality issues, including roof leak, communication breakdowns, meaning the panels did not talk to the IoT, legal escalations, etc., etc., etc. These guys decided they were going to—this is in Salt Lake. This is in our boardroom in Salt Lake. They decided they were going to fix it. They did. You can see it barely there. She had her dad sign this jersey. It now hangs in the Hall of Fame. Whenever you do something good for a customer, your name goes up. Customer escalations. We keep a lot of data. This is one graph. The number of customer escalations is down.

Guess what? I answer my phone. I read my email. People know how to get to me. If you screw a customer, you're screwing me. I don't tolerate that. Everybody knows that now. Hence, you can see we're treating them—we always did. Complete Solaria, Blue Raven in particular, has always had a high four-star rating. So did SunPower. The culture's there to begin with. I'm not fighting against the culture. Now we're taking it beyond the right thing to do to fetish. I learned this from another guy. Him. That's Jerry Sanders. Dapper Jerry. Advanced Micro Devices. Still lives in L.A. The only difference now is the silver mains are now shoulder length. I see him every now and then. He was the salesman. He had a BSW. He was a sales guy out of Fairchild.

He was the advocate for the customer. If you screwed one of his customers, the wrath of hell would come down on you. Anyway, what the story I just told you about us, that's where I learned it when I worked at AMD. I was there for three years. One example, homeowner escalation. This came into my email. Turns out she had already talked to this KCVS reporter in New York. I was all set up to be the bad guy that screwed the customer and all that. We fixed it. I just wanted to close the loop here. The tech who facilitated that came to our house in New Jersey, was able to fix our battery issues. There was a laundry list of errors that they showed us, but the sung-strung engineer that you line up for, etc., etc.

Down here, this is a slide again from our company meeting. The heroes, they all go in the Hall of Fame. One more. Thank you for reading my emails and helping me get the two appointments needed to deal with my broken string inverter. I won't tell you that Tesla has a string inverter. We don't. We have a microinverter. Our inverters optimize one panel at a time for maximum power, whereas the string inverter ties, let's say, 10 panels together and can't optimize all 10 because they're different a little bit from each other. Plus, 10 panels at 50 V each is 500 V DC, not something you want around your house. String inverters are yesterday's news. That's why we powered with Enphase. Just getting partnered with Enphase. All right.

This is the last section of I want to just give you a flavor for the culture of the company. I asked for questions. The questions have been very problematic for me. The first meeting I went to, the questions were passive, aggressive, insulting. Now that we have to put up with you, comma, question kind of things. In my last meeting, I showed this slide. As you might gather, I am a movie buff. This is a scene in front of the Frankenstein Castle from the 1931 movie. I told them, I showed them this picture. I said, "That's kind of how I felt when I was looking out into the crowd last quarter when I came here for the meeting." They laughed a little bit. We decided to try to de-escalate the question session.

Because they're asking questions, "What are you doing here? What are you doing there? Why are you doing this?" Obviously, the place is getting cut so they have valid objections. It's not like they're just being hard to deal with. I made—this last time, I took this one step farther. I turned the question-and-answer into a game show. I started by showing this slide. That's me, you see, standing in front of the crowd. The game is a quiz game. Let's play Pokemon Monster. I had a guy with a voice like a game show guy. "And now let's play Pokemon Monster." I gave a score for it. If the monster frowns, growls, lunges, loses his neck bolts, or has his head explode, then you get a certain number of points.

We had fun at that. I had two questions to start out. This may make your head explode, but then there was a question. It was we're starting to be able to work together is my point. They have core values. I haven't talked about core values here. It's a big part of management. We have core values. I'm working on them myself. Every week, I work on them. They had core values. One thing I really liked, I walk into a building in Orem, Utah, and on the wall, there's core values. I was going to debunk them. I read them. They were really good. I just read their own core values to them. Hard to gripe about changing your core values when you're following your core values.

Produce results that are worth more than they cost to deliver. That's called make a profit. Obsessively reduce cycle times in every area. That's get the stuff on the roof and make it work. Keep the sales and field experience simple, even if it means adding complexity elsewhere. The last one, stay lean. Eliminate unnecessary costs. With 10% of the unnecessary costs we had and eliminated, we've now got the seeds of two groups that will change our company. And we pay them. This is a bonus. We actually paid them with $100 bills. It was called 10 Bends. We prepaid the taxes. So the 10 Bends were yours. We actually went to the bank, got the money, and gave it out to the people. They walked out. I learned this until Livermore did a weaker version of this 20 years ago.

I did this at Cypress, paying cash. There is something about cash. You look at it, especially the new dollars that are high-tech for copying reasons. It has an impact on your head. You have 10 of those in your hand, and you go, "I did something last quarter. It's valuable." That is different. It turns out that's the lesson I learned from this guy. I knew him when he was alive. He was a professor at Hoover at Stanford. He allowed me to call him to get advice, which I did. I've been in his house. I once asked him, I said, "Did you ever do any—you and me are Adam Smith of my day. Did you ever do anything you weren't happy with?" He said, "Yes." He told me the story. You can find it. Actually, it's well-documented.

Just before World War II, we realized we'd have to spend half the wealth of our country, half of our gross domestic product, to fight that war. He was part of the team that figured out how to get Americans to pay. Because in those days, you paid your tax—you didn't pay your taxes till March 15th. March 15th, you filled out the form and mailed the check. He knew that Americans would not write a check equal to half their yearly wage in order to—even for a war, even if it was adjusting the war. He invented withholding tax. He and his team invented the fact that corporations became the tax collectors for the United States of America and that money disappeared from your check before you got your check. In that way, you never had it.

You looked at your payment from the company as the payment that you got after taxes. If you want to make a bonus not matter, give it to them in their check, which is auto-deposited anyway. Have it be some line in the check bonus. Then do not make a big deal out of it. If you want the bonus to go directly into their head, "I did something good and I got paid for it," give them a handful of money and pay their taxes upfront. That's yours. Again, Intel did that with one $100 bill in their Livermore plant. Anyway, that's the lesson I learned from this guy. That's it. That's our vision. We're now SunPower. Questions.

Sioban Hickie (VP of Investor Relations)

Thank you, T.J. A few instructions before we begin Q&A. For our audience watching via the webcast, there's an Ask a Question tab on the right-side flyout of the screen to submit a written question. If you have dialed in and would like to ask a question, simply click the Raise Hand button located on the bottom of your screen and press star nine to raise hand and star nine to unmute. Once you've been called on, please don't forget to unmute yourself and begin your question. We'll now pause a moment to assemble the queue. Our first call this morning is from Derek Soderberg from Cantor Fitzgerald. Go ahead, Derek.

Derek Soderberg (Senior Equity Research Analyst)

Yeah. Hey, guys. Congrats on the financial results here. Just continuing on your vision, T.J., you've already gotten the business to a strong margin profile. You lowered sales commission significantly. On the revenue side, how do you see the SunPower story playing out over the next year or so just to really set up the business to become a billion-dollar annualized revenue company? Is that going to be through acquisition, through partnerships, organically? Can you provide some color on that vision and reaching that billion-dollar annualized level?

T.J. Rodgers (Chairman and CEO)

I'm glad you didn't ask me, "When are you going to hit the $770 million you showed on the slide?" Our target is $1 billion. That is the vision. It is obviously achievable. What that slide shows is whenever you're in a meeting and somebody says, "We can't do that. How can we do that?" It's obvious it can be done in a day when the solar market was 10x smaller than it is, even more than 10x smaller than it is today.

It is obvious it can get done. First thing you have to have is stability. Now we stabilized at $80 million a quarter. Okay. We have a direct sales force. We sell directly to our customers. We have people that knock on doors. We have people in telephone banks. That effort can grow. That is the $80 million per quarter growing at some reasonable rate. I will not even speculate what it is, but it is a number that would take a while to get to 100. Two, inorganic growth. Based on my career, I am a fan of inorganic growth. Those new companies, by the way, they come in. There is stuff they do better than you do. There is a mixture of managers. You have merit wins in terms of picking the management team of the combined company. I am a big fan of that.

It's very positive. We will do that. You got the caveat I said that the sticking factor in the solar industry is way lower than the sticking factor in the semiconductor industry. I have a plan for that. Part of it—oh, thank you—stock. I want to tell shareholders who are on here, in May, we have our company meeting coming up. That jump from $5.5 million the last quarter of my old company to $80 million came because we got SunPower. We added 1,000 SunPower people to 65 Complete Solaria people. Those SunPower people got letters saying you're going to get a stock option. Now, there's a one-year cliff for vesting on that. They're in their non-vesting period. I need approval in the company meeting—excuse me—in the shareholder meeting for that stock.

I will not go into other details, but you guys need to give me a stock. I need to grow the company. That is part of it. They do not think about it like Silicon Valley. I am an owner of the company. I have a piece of the company. The stock is going to go up. My rent is going to get paid by my salary, but my new house is going to get bought by my stock. That mindset is going to take a while. It has already started. I have had people tell me, "Yeah, keep your stock. Give me a raise," multiple times. In the last company meeting, the guy raised his hand and said, "How do we sell stock?" I said, "We announced it. You were not listening. Fidelity. We have the Fidelity service, which all Silicon Valley companies use. It is the best one. You have an accountant there.

You have stock in your account. It will be partly on stock. The other thing is it will be vesting of anything we pay. One is, I'm unlikely to go to the company where the owner owns everything. There are a lot of the small solar companies that are that way. A couple of entrepreneurs start a company. They own 99% of the stock. Everybody else works for salary. Hence the "give me money, not stock" mentality. The consideration we give in an acquisition will be partly cash and partly stock. The stock will pay off big for the guys that come, but there will also be cash. We are going to revest that. The deal will be, "No, you do not get X dollars at the signing.

You get that over a one or two-year period. "So using vesting of the consideration for an acquisition plus significant stock options that they're not used to, that's my theory about how to get and hold people. And once you're on that role, you're profitable. People can see it. They can believe it. Once you're on that role, that'll be a very powerful dynamic in a non-stock economy, which is the solar economy for us. That'll be a winner. That's how it's Silicon Valley. That's why we are who we are.

Derek Soderberg (Senior Equity Research Analyst)

Got it.

Sioban Hickie (VP of Investor Relations)

Thank you. Go ahead, sorry.

Derek Soderberg (Senior Equity Research Analyst)

Can I get a follow-up? Just T.J. wanted to quickly touch on the battery systems commentary. You mentioned the importance of that to the ROI and that you're going to create your own battery systems, not just sell somebody else's battery. Can you talk about that a bit? Are you going to build the batteries? You've got experience with Enovix and SunPower. How should we think about that opportunity in batteries for the company?

T.J. Rodgers (Chairman and CEO)

Thank you for asking that question. I can visualize people pushing the sell button right now. T.J.'s going in the battery industry. No. Our batteries are made by Enphase. It turns out, if you think about the philosophy of the Enphase battery, take a panel, put it on an inverter. It's a box that looks like an old-fashioned VHS tape. DC comes in from the panel, let's say 10 A at 40 V, 400 W. Goes into the inverter. The inverter has a completely digital system that converts the DC to AC. It's not a simple electrical engineering thing. The chip that controls that is 4 million gates with two high-performance computers on it. That talks to the grid.

After eight revisions, we're on, after the IQA, everything the grid can do to screw you. PG&E, Pacific Gas and Electric, specializes in finding new ways to screw up solar systems. It's bulletproof. You take that box, and let's say that box right now can be 1 kW. You put a battery on it. The inverter looks out and says, "I see 40 V. I'll do what I always do. I'll turn it into power. I'll take all the learning I have, turning it into power, and make it work right." Enphase batteries are batteries, lithium-ion batteries, driving through Enphase inverters and connecting to the grid. That's the hard part. That's why Enphase inverters are double the price of the next one because they're really, truly systems.

Now you think about what does the system look like in the Enphase world. That is, you've got the same box, millions of them. They make like 5 million a quarter, very low cost, talking to the grid, and then you hook stuff onto it. You hook a battery onto it. You hook solar panels onto it. What we're going to do is take that product, and we're going to write software for the computer to make that product do special things. Enphase is already doing that. We'll feature a lot of their products. For example, Enphase now has a plug that charges your electric car in the box to charge it. Okay.

You now can go in your Enphase, you can get the Enphase app, and you can see what the output was from sunrise to the time you're looking at it for every panel, one by one on your house. That same application now, you can tell it more sophisticated things. I want you to charge my car. I want you to charge my car only with solar electrons. I don't want to use grid current that would burn oil to charge my car. I want to use only solar electrons. It will do that. That is not a trivial problem, right? The cloud goes over the sun. It's a foggy day. Your car needs a certain amount of charging, and you have to have intelligence between the source of power and the use of power. That is what we're going to build.

We're going to use products from people to build that stuff and make it rugged, bulletproof, and cheap, and bring out products where a customer sees an end product like that. We're not going to make the components. You don't want to make batteries. And I'm in a battery company right here at Enovix. They make high-tech batteries. The batteries used in cars and homes are 10x cheaper than a high-tech battery. Don't want to do that.

Derek Soderberg (Senior Equity Research Analyst)

That's helpful. Thanks, guys.

Sioban Hickie (VP of Investor Relations)

Thank you, Derek. Our next question comes from the web. How realistic is further inorganic growth, and how is the current opportunity set for acquisitions of distressed assets of companies such as Sunova?

T.J. Rodgers (Chairman and CEO)

I don't know about Sunova. That was a major crash. There's a huge amount of money in it. They may or may not ever sell assets. If they do, I'll be there bidding if the assets are priced right. I gave you a list of 70 companies. The answer right now is you want some stock and a job and a good salary and work in a company that's going to grow? We can accommodate that. Right now, for those of us capable of growing, it's a great market.

Sioban Hickie (VP of Investor Relations)

On that note, you actually have a question from the web asking about employment opportunities. How open are you to accepting applications from former SunPower employees?

T.J. Rodgers (Chairman and CEO)

Oh. When these guys ran SunPower, it was a well-run company and the king of the world. For the last three or so years, it wasn't well-run. When I came in there, I found a pretty sick management structure. Expensive, aloof, not detail-oriented. Having said that, SunPower got thousands of really good people in it. People you could not get anywhere else. People came for the vision back when it was what it was. The answer is, if you know solar, if you are smart, you want to work hard and win, send a resume. [email protected]. Rodgers has a D in it.

Sioban Hickie (VP of Investor Relations)

Thank you. The next question is from Kashi Gazag, who asks if you have any comments on the TCL SunPower panels and potential panel partnerships.

T.J. Rodgers (Chairman and CEO)

In the same way I talk about batteries, which the Chinese have driven to prices where even Chinese companies go out. You understand they have got companies going out of business too. When the prices are so bad, Chinese companies go out of business, you do not want to start trying to make them in California. On panels, it is the same thing. They have driven the price of panels.

When I left SunPower, the price of panels was $2 a watt. It's now $0.31 a watt, and they'll deliver it to your door for you like milk. If you want to take the risk of buying the panels and importing them through our customs, which you'd really be dumb to do, their pricing's down as a dime a watt. How do you make money on that? On batteries and panels, I don't want to compete. I wish the Chinese would drop the price way down. All of the revenue would come from creating, with very cheap, high-quality products, systems that people can use and make it work right. Because the same guys that run those factories aren't going to answer their phone, come to your house, fix your problem, install it quickly.

In this industry, the main event is 5,000 AHJs, the last J stands for jurisdiction. All those little building departments that annoy everybody, 5,000 of them, all with different rules, all knowing the right, all being slow, all being out to lunch a lot of the time. That is what we have to do. They're not going to take that job away from us. If we do it efficiently, one, we will be a great service to our customers, and two, it can be very profitable. No, I'm not making panels. No, I'm not making batteries. Low-tech batteries. I'll make high-tech batteries here, the way higher energy density.

Sioban Hickie (VP of Investor Relations)

Thank you. Our next question surrounds tariffs and exposure to China. What impact might this have on SunPower's profitability and supply?

T.J. Rodgers (Chairman and CEO)

What everybody's pointing out to our President, he's got a guy named Navarro telling him how we're going to build back the industry and factories will spring up from the ground. The guy's hallucinating. What is a tariff? A tariff is simply a tax. If they charge me double, $0.60 a watt instead of $0.30 a watt, then our customers will start paying double. I'm not going to pay the tariff and have my company go bankrupt. I'll pay the tariff as a tax, pass that tax on to my customers. I do care about it. The fact is there is a larger feedback loop that if solar becomes too expensive again, the whole market will go down and all the companies in the market will suffer. I'm hoping they will wake up by that time.

Sioban Hickie (VP of Investor Relations)

Thank you. The next question is leaning into forward guidance. Can you share any thoughts on revenue growth, margins for the next couple of years, and the impact of a potential recession?

T.J. Rodgers (Chairman and CEO)

You guys just saw six months of work, right? It's like the job is kind of like being a goalie in hockey, right? I stand there and catch the pucks before they get in the net. Can I have a long-term forecast? I can, but it's based on positioning more so than actually looking at what you project the P&L to be. Right now, we have a very lean workforce, and it's going to get leaner. And it's American. Okay? So one good thing about being an American, if you're selling to American houses, you got to be American. They're not going to import that.

When you have a company that's lean, and we now have a company that's lean, we've actually started, as you heard today, doing some hiring. You know you can survive in the market because just like my stock graph, your stock will be green, and the companies that aren't lean will be red. That's the main event, having a stable company. Will the market go up? One statistic I like comes from the EIA. It's a government organization that tracks it. Right now, close as I can estimate, the number of houses that have solar on them divided by the number of houses that could have solar on them is 4%. We have a toe in the water. This industry we talk about being big is a toe in the water. What we've got to do is continue to hold costs.

We need to supply what they need and what they need is storage. They need storage more than they need solar. You make the cheapest electricity in the world from 9:00 A.M.-3:00 P.M. Okay. What are you going to do in the other hours of the day? That is where the problem is right now. Hence the storage division. By the way, when storage becomes spread around the country, that is a big deal. That gets rid of the utilities as having a giant power plant that took 10 years to build, and they go to the government and say, "I need more money because of blah, blah." All of a sudden, you are there with your own battery. It is not that far to see when you flip the switch and say goodbye. Your solar system, and you make your house more efficient too.

You can't waste energy. You can gather enough energy from your solar system and store it that it'll take care of your house. That vision is not that far away.

Sioban Hickie (VP of Investor Relations)

Thank you. We only have a couple more. The next one is, how does stock price and valuation impact your willingness to use stock for acquisitions? What is your view on the current valuation relative to that?

T.J. Rodgers (Chairman and CEO)

Right now, last time I checked, our stock was $2. We have 80 million shares if you check the SEC website. So we're $160 million. First is, if you're worth $160 million and you want to buy something that's worth $160 million, their proposition is, "Give me half your stock." You have to say, "Look, our stock's not going to be at $2 for the same reason that people invest in it going forward.

You need to do that too." Alternatively, "Okay, you've got your stock. Oh, you don't have stock. Oh, you've got your stock, and your stock is down." Okay? What you're doing is swapping your stock for our stock, and you're betting which one's going to go up faster. There are arguments today. Obviously, what I'd love is the stock to be 20, and then you've got all the currency you want. What I've discovered in the solar industry, I call it money poisoning, that we had in the other industries. At Cypress, I always had $500 million in the bank. I never thought about cash, ever. I thought about beating the bad guys. Right now, for the first time in my life, I'm living in a cash-flow-dominated world. I'll tell you, we run a tighter, leaner company because of that.

It's a dangerous world, but it's an exhilarating world. The market is infinitely large. If they don't help us to death in Washington, we'll be fine.

Sioban Hickie (VP of Investor Relations)

Thank you. With plans to expand capacity, how are you ensuring workforce training aligns with quality benchmarks?

T.J. Rodgers (Chairman and CEO)

Workforce training is a big deal. We're not that good at it. Everything I showed you today, I showed you a couple of management systems, has a spec, has quality processes associated with a spec, and has training. You can go in a room, somebody knows, tell you how it works. My 19-year-old HR guy can run a—as good as the reports I've ever got—at Cypress in a much bigger division. Yeah, we're doing it. No, we're not a mature company yet. We are getting more mature every quarter. I didn't introduce him today. I will one of these times.

We have an excellent quality guy, Surinder Betty. He is working on the quality of execution right now. Our products are pretty reliable. You saw nine going to two. The disasters with your stuff not working are gone. For us, quality means quality of execution. Do you have a spec? Do you do it right? Do you do it right the first time? What is your yield? In our case, quality is almost synonymous with operational excellence.

Sioban Hickie (VP of Investor Relations)

Thank you. That is all the questions we have in the queue today. I will turn it back to T.J. Rodgers for any closing remarks.

T.J. Rodgers (Chairman and CEO)

I talked long as usual, but I thought this was cool stuff. I appreciate your coming in and listening to us. Thank you.