SunPower Inc. Q1 FY2025 earnings call

• Headcount reduction: Post-merger, headcount was reduced from 3,500 to 906 through strategic layoffs, with target headcounts in place. - New hires: Brought in Dick Swanson (former Co-Founder, President, and CTO of SunPower Corporation) and Mehran Sedigh (Executive Vice President of Storage Systems division). - Board strengthening: Added three public company ex-CEO directors: Lothar Maier, Dan McCranie, and Jamie Haenggi. - Partnerships: Strategic partnership with Sunder, and partnering with Enphase for inverters. - Branding: Rebranded SunPower with a Wall Street Journal ad, focusing on regaining a technology advantage. - Customer focus: Emphasis on treating customers well, with reduced customer escalations and examples of improving customer experiences.

In Q1 2025, SunPower reported non-GAAP revenue of $80 million and non-GAAP profit of $1.3 million, up from a prior quarter loss of $5.9 million. The company is currently an $80 million plus per quarter revenue company. There is no detailed breakdown of revenue contribution by specific product segments provided beyond general mentions of divisions like solar and storage systems.

• Revenue: Currently at $80 million plus per quarter, aiming to grow further. - Inorganic growth: Open to acquisitions, with consideration of partly cash and partly stock, and using vesting of consideration and stock options to retain talent. - Storage systems: Focus on building battery systems with intelligence for grid connection, using existing products and developing software for optimized energy use.

• Solar industry challenges: Salesforces in solar are mobile, making acquisitions risky as they can leave if not managed properly. - Market risks: Impact of tariffs on profitability, with potential to pass tariffs on to customers, and potential recession impact. - Culture challenges: Transitioning from a non-stock to stock-based culture in the solar industry, which requires adjustment for employees.

Q: How realistic is further inorganic growth and how is the current opportunity set for acquisitions of distressed assets of companies such as Sonova?

A: Well, I don't know about Sonova. That was a major crash. There's a huge amount of money in it and they may or may not ever sell assets. If they do, I'll be their bidding, if the assets are priced right. But I gave you a list of 70 companies. So 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. And so right now it's a, for those of us capable of growing, it's a great market.

Q: How realistic is further commentary on battery systems and how are you going to create your own battery systems, not to sell somebody else's battery?

A: Thank you for asking that question. I can visualize people pushing the sell button right now. T.J. is going in the battery industry. No, our batteries are made by Enphase. And it turns out if you think about the philosophy of the Enphase battery, take a panel, put 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 amperes at 40 volts, 400 watts goes into the inverter. The inverter has a completely digital system that converts the DC to AC. And it's not a simple electrical engineering thing. The chip that controls that is 4 million gates with two high performance computers on it. And then that talks to the grid. And after nine -- eight revisions were on after the IQA, everything the grid can do to screw you. And PG&E, Pacific Gas and Electric specializes in finding new ways to screw up solar systems. It's bulletproof. Okay. So you take that box and let's say that box right now can be a kilowatt and then you put a battery on it and the inverter looks out and says IC 40 volts. 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? So Enphase batteries are batteries, lithium ion batteries, driving through Enphase inverters and connecting to the grid and that's the hard part. And that's why Enphase inverters are double the price of the next one because they're really truly systems. So now you think about what does the system look like in the Enphase world? And that is you've got the same box millions up they make like 5 million a quarter very low cost. Talking to the grid and then you hook stuff onto it. So 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 and 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, only solar electrons. And then it'll do that. And that's trivial. That's not a trivial problem, right? Sun -- 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. So that's what we're going to build. We're going to use products from people and build that stuff and make it rugged bulletproof and cheap and bring out products where our customers see an end product like that. We're not going to make the components there. You don't want to make batteries and the batteries, I'm in a battery company right here and Enovix, they make high tech batteries. The batteries used in cars and homes are 10 times cheaper than a high tech battery. Don't want to do that.

Q: What impact might tariffs have on SunPower's profitability and supply?

A: Well, 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. So what is a tariff? A tariff is simple, a tax. So 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. So I'll pay the tariff as tax, pass that tax on to my customers. So I do care about it in the fact there's a larger feedback loop that if solar becomes too expensive again, then 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.

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

A: Workforce training is a big deal. We're not that good at it. But everything I showed you today, I showed you a couple management systems has a spec, has quality process associated with the spec and has training. So you can go in a room, somebody who knows tell you how it works. So my 19-year-old HR guy can run a -- as good as reports ever got the Cypress in a much bigger division. So yes, we're doing it. No, we're not mature company yet. We are getting more mature every quarter. I didn't introduce him today. I will one of these times; we have a excellent quality guy Surinder Bedi. And he is working in the quality of execution right now. Our products are pretty reliable. We don't have, you saw nine going to two. So the disasters with your stuff not working are gone. So 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's your yield? So in our case, quality is almost synonymous with operational excellence.