Good day, ladies and gentlemen, and welcome to the Maxeon Solar Technologies Fourth Quarter 2022 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Robert Lahey of Maxeon Solar Technologies. Sir, you may begin.

Thank you, operator. Good day, everyone, and welcome to Maxeon's fourth quarter 2022 earnings conference call. With us today are Chief Executive Officer, Bill Mulligan; Chief Financial Officer, Kai Strohbecke; and Chief Strategy Officer, Peter Aschenbrenner. Let me cover a few housekeeping items before I turn the call over to Bill. As a reminder, a replay of this call will be available later today on the Investor Relations page of Maxeon's website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the safe harbor slide of today's presentation, today's press release, the 20-F and other SEC filings. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. To enhance this call, we have also posted a supplemental slide deck on the Events and Presentations page of Maxeon's Investor Relations website. Also, we will reference certain non-GAAP measures during today's call. Please refer to the appendix of our supplemental slide deck as well as today's earnings press release, both of which are available on Maxeon's Investor Relations website for a presentation of the most directly comparable GAAP measure as well as the relevant GAAP to non-GAAP reconciliations. With that, let me turn the call over to Maxeon's CEO, Bill Mulligan.

Thank you, Rob, and hello, everyone. This is my first earnings call as Maxeon's CEO, and it is great to be back following over 20 years of experience leading SunPower's R&D and operations teams. During my first months and a half as CEO, I spent time at our California R&D headquarters, both of our cell fabs in Asia with our sales and marketing team in Europe and with employees and customers at our Modcos in Mexico. I was reminded by these visits that Maxeon has two strong competitive advantages, one in the global distributed generation market and the other in U.S. utility scale. These markets offer exciting profitable growth opportunities with strong customer demand for high-performance panels, and we have a well-established presence in both of them. I give great credit to our executive leadership team and to our Board for putting Maxeon in a position to take advantage of these opportunities by executing bold transformation initiatives over the last two years. And I’d also like to give credit to my predecessor, Jeff Waters, for leading behind the high-performing cohesive management team. Thanks to their efforts, today we have an updated and expanded manufacturing fleet, strong sales channels in the highest-margin markets, expanding beyond the panel revenue streams, and the latest generation of the world's highest-efficiency panel technology ready to ramp. Technology innovation has been a legacy strength of ours for decades. Going forward, one of my highest priorities will be to accelerate the development and deployment of more efficient and cost-effective solar panel technologies that can be scaled quickly. We will continue to invest in beyond the panel offerings that will improve the end customer experience and provide additional differentiation and strength in our DG channels. We will also aggressively pursue manufacturing cost reduction and operational excellence in our existing manufacturing facilities. I believe that this combination can make Maxeon one of the most profitable companies in the solar industry. And now I'll provide an update on our fourth quarter key initiatives and accomplishments through the lens of our distributed generation and utility scale businesses. Kai will then review our financial performance and outlook, and we’ll conclude with Q&A. Let me start by reporting that Maxeon delivered financial results in Q4 that were well above plan, driven by strong shipment growth, solid ASPs, and outstanding work by our operations group to significantly beat our COGS targets. As a result, we generated over $20 million of gross profit in Q4 and are well positioned for positive adjusted EBITDA in the current quarter. Our DG business was led once again in volume and revenue by our European team and their strong direct-to-installer channel. Shipments in Europe grew more than 25% year-on-year. We are now approaching an annualized deployment run rate of roughly 1 gigawatt in our European DG business. Our European sales network comprises over 1,000 partners and incorporates services such as direct shipping, credit, in-person sales training, and strategic business planning that make this channel fundamentally different from our competition. We gained market share in several key countries, including the Netherlands, France, Germany, and Belgium, driven largely by increased shipments from our HSPV joint venture. Belgium was a particular bright spot with shipments up roughly 40% year-over-year and market share in the double digits, joining other long-term Maxeon strongholds, such as Italy and France. Blended DG ASPs in Europe increased more than 5% sequentially on stable module pricing and a higher mix of power electronic shipments and were up more than 30% year-on-year. In the fourth quarter, our AC module attach rate was above 20% of total DG shipments outside the United States, led by France and the Netherlands, where AC continues to account for a majority of sales. We expect our AC mix to continue to increase this year, driven by growth in markets where AC modules are relatively new. We also expect increasing revenue and profit contribution in 2023 from our SunPower reserve storage solution and SunPower drive EV chargers. The first storage orders were received last quarter in Australia, and our products team is launching storage in Europe soon, starting in Belgium, Italy, and Spain. Turning to our United States DG business, we are seeing an excellent 2023 demand environment in terms of volume growth and price. Unlike some segments of the U.S. DG market that are experiencing cooling demand, Maxeon's products are positioned in segments of the market where demand for our premium products is healthy, led by high cost of power locations, including California and the Northeast. Our product value proposition is particularly strong in these markets because of the relatively small roof sizes and common installation conditions, both factors leading to constrained roof areas and playing to the ability of our products to deliver more power on our customers' roofs. We are seeing a strong cash business in these states based on long-term savings with utility rate inflation absorbing part of the cost increases on loans and competitive leases and PPAs as alternatives to loans. Also, in these more mature markets, installers often have sales processes engineered around the long-term value of solar rather than a simple focus on year one savings. Even in states experiencing some cooling demand for solar due to higher interest rates, we are seeing cases of countercyclical growth from installers who sell long-term value. We are pleased to have recently announced the expansion of our SunPower relationship with new commercial terms for 2023 and mutual exclusivity for Maxeon 6 in the U.S. through 2024. And as we discussed last year, we see opportunity in large segments of the U.S. residential market where SunPower isn’t present and where demand for our premium modules has increased due to the abrupt exit of LG. We’re excited to take advantage of this opportunity with our new U.S. channel, partnering with Greentech Renewables. In this relationship, we expect to leverage Greentech’s unparalleled distribution capabilities and focus our energy on training installers on the benefits of our technology and how to translate those benefits into improved financial outcomes for both installers and homeowners. During 2023, we plan to roll out elements of a multi-tiered channel program in the United States, similar to our European structure. We are planning to exit 2023 with over 100 new Maxeon channel partners in the U.S., all incremental to SunPower's channel. We're selling our Maxeon 3 technology in this channel, which combines industry-leading efficiency with our new 40-year warranty, which offers installers another unique selling proposition and provides homeowners with enhanced peace of mind. In summary, our confidence in the strength of our global DG business is high. We expect strong ongoing demand in Europe, increased availability of performance line panels from HSPV, and meaningful contributions from our reserve and drive products will support continued growth in Europe and Australia. In the U.S., we believe that the addition of our new U.S. channel through Greentech on top of our contracted minimum volumes with SunPower sets us up for strong DG volume growth in 2023. Let’s now transition to our utility-scale business. We remain primarily focused on the United States market where our uniquely positioned North American manufacturing footprint allows us to provide our customers with reliable supply of leading-edge technology. We also have a unique corporate profile anchored in strong ESG values, which is becoming increasingly important to various stakeholders. Earlier this year, we were honored to be the sole silicon module manufacturer named on the Corporate Knights list of the world’s 100 most sustainable corporations, a welcome recognition of our focus on becoming an industry leader in sustainability. Our value proposition has been validated by a number of key customers who have contracted for 4.2 gigawatts of supply backlog extending deep into 2025 plus options with advanced deposits for an additional 1.5 gigawatts through 2027. Since our last earnings call, all new bookings have been secured with repeat customers and, in some cases, include adjustments to 2023 commercial terms, which Kai will discuss in his guidance commentary. With a solid and growing multiyear backlog in place, our attention in this business is primarily focused on completing the ramp of our mono PERC cell and module production and driving cost reduction. Our performance line is expected to ramp to the full 1.8 gigawatt of capacity by this summer. On the supply chain front, we are finally seeing cost decreases on key input materials, which contributed to our better-than-expected fourth quarter results and which support the trajectory toward achievement of our long-term financial model targets within 2023. We continue to progress with the planning of our U.S. manufacturing facility and are in due diligence with the Department of Energy's Loan Program Office, which is the final stage of the LPO process. Subject to successful completion of this process, we expect to significantly benefit from the IRA incentive in future years as we ramp our planned U.S. manufacturing capacity. There is a lot of excitement at Maxeon currently as we expect to deliver our first adjusted EBITDA positive quarter at the end of this month and are on plan to achieve our long-term financial model within the next 10 months.

Thank you, Bill, and hello, everyone. I will discuss the drivers and details of last quarter's performance and then provide guidance for the current quarter and the full year. Total shipments for the fourth quarter were 734 megawatts, up 21% sequentially and slightly above our guidance range of 680 to 720 megawatts. The growth is attributable to strong DG demand as well as operational progress from our internal performance line capacity for the U.S. utility scale market. Revenues for the fourth quarter were $324 million, near the high end of our guidance range of $290 million to $330 million. The primary drivers were strong output from our Mexico performance line Modco as well as healthy ASPs in DG. ASPs for our top-of-the-line IBC panels were up by 17% quarter-on-quarter, supported by incremental volume shipments into the U.S. for SunPower as well as the new U.S. DG channel. Non-GAAP gross profit in the fourth quarter was $21 million, up $36 million from the previous quarter and $45 million higher than our margin trough in the second quarter of last year. It represents a 6.4% gross profit margin and is the highest ever since Maxeon became a standalone company as well as the first positive gross margin since Q1 of 2021. While we forecasted being gross margin profitable in the quarter, the results exceeded the expectations embedded in our $0 million to $10 million guidance range. The primary reasons for this outperformance were operational improvement at our performance line factories in Malaysia and Mexico as well as supply chain costs, especially freight falling faster than expected. Earlier in 2022, there were opportunities to slightly reduce freight costs in the near term by entering into long-term contracts. While these opportunities were tempting at the time, we believe spot prices would ultimately pull back and Maxeon could realize greater cost savings over time with a more flexible strategy. Last quarter, shipping rates declined sooner and faster than anticipated, hence contributing to a better-than-expected result for our P&L. Polysilicon spot price declines in China have also been positive for our transfer prices with HSPV, which track market indices. On a year-over-year basis, the impact of total supply chain cost inflation on our cost of goods sold was favorable $2 million. This is materially improved from the prior 7 quarters when we saw an average unfavorable impact of more than $30 million per quarter. At the same time, increasing ASPs resulted in an uplift of $43 million, providing a significantly favorable contribution to our bottom line. Because our performance line products for the U.S. utility scale market were introduced less than a year ago, they are excluded as no year-on-year comparison exists. Underutilization charges totaled $9 million in the quarter, demonstrating sequential improvement as we approach completion of the capacity ramp for our performance line products. Our fourth quarter cost of goods sold included a small amount of out-of-market polysilicon costs, which were below our guidance of $1 million. These costs were related to a long-term contract executed 13 years ago that ran until December 31 of 2022. With this contract now expired and any remaining impact expected to be immaterial, we are happy to announce that we will now cease reporting on this metric going forward. Non-GAAP operating expenses were $34 million in the fourth quarter compared to our guidance of $36 million plus or minus $2 million. Adjusted EBITDA in the fourth quarter was negative $4 million and significantly better than our guidance of negative $17 million to $27 million based on the previously mentioned favorable development that impacted our gross margin. GAAP net loss attributable to stockholders came in at $76 million compared to $45 million in the previous quarter, mainly driven by a $42 million quarter-on-quarter swing in the mark-to-market valuation of our prepaid forward as well as $26 million higher income tax provision quarter-on-quarter. Moving on to the balance sheet. We closed the fourth quarter with cash, cash equivalents, restricted cash, and short-term investments of $344 million compared to $314 million at the end of the third quarter. DIO was flat sequentially at 91 days. Capital expenditures in the fourth quarter were $7 million, which was below our guidance range as we maintain payment discipline while continuing to spend on our performance line capacity and other ongoing initiatives. We are very pleased to have exited 2022 with a positive gross margin trajectory, particularly in DG, which now enjoys a much improved cost structure. Thanks to the successful ramp of Maxeon 6 capacity and improved ASPs based on our geographic optimization strategy and execution by the sales team. Our next financial milestones are to post an adjusted EBITDA positive quarter and to achieve our long-term financial model, including a gross margin of at least 15% and adjusted EBITDA margin of at least 12% of sales by the end of 2023. Previously, we indicated that getting from gross margin breakeven to 15% assumes the following key levers: transitioning to higher ASP utility-scale contracts, fully ramping our 1.8 gigawatt performance line facilities, increasing U.S. residential sales, and growing beyond the panel in Europe, all while benefiting to some degree from supply chain cost improvements. Many of these levers are now showing substantial progress and ongoing momentum. First, a portion of our previously below-market utility-scale ASPs has been adjusted as part of a broad package of supply renegotiations. Second, as Bill mentioned, some of the expected supply chain cost reductions have been realized sooner than expected. Our DG business is benefiting from a combination of factors on both the cost and ASP side. As a result, we now expect significant margin improvement to occur in the first quarter with further progress expected in the second half of the year as we progress towards our long-term financial model. With this context in mind, I'll now turn to our guidance for the first quarter of 2023 and then layout our view for the full year. We project first quarter revenues of $305 million to $345 million. The midpoint of these numbers and of our shipment guidance are a product of continued ASP increases for our IBC products, offset by a higher mix of utility scale shipments due to ongoing ramps of performance line shipments to our U.S. utility scale customers. Non-GAAP gross profit is expected to be in the range of $30 million to $40 million. At the relevant guidance midpoint, this represents an 11% gross profit margin. The largest contributor with respect to sequential improvement is unit cost reductions on our performance line due to ramp effects. We also expect to see ASP improvement due to adjustments in some of our utility scale supply agreements as well as the impact of our first quarter shipments through Maxeon's new residential channel, together with improved pricing with SunPower. Non-GAAP operating expenses are expected to be $37 million plus or minus $2 million. This includes a slight increase in our spending for beyond the panel in the U.S. residential channel, both of which are expected to enable significant incremental gross margin. Adjusted EBITDA is expected to be between $10 million and $20 million, driven largely by improvements in our gross profit. At the relevant guidance midpoint, this represents a 5% adjusted EBITDA margin and would be Maxeon's first adjusted EBITDA positive results. First quarter capital expenditures are projected to be in the range of $13 million to $17 million. We expect total CapEx for the year to be in the range of $100 million to $120 million for the completion of manufacturing capacity for performance line channels to be sold into the U.S. market, completion of manufacturing capacity for our Maxeon 6 product platform. Further developing Maxeon 7 technology and operating pilot line preparation of the capacity expansion for our Maxeon 7 technology as well as various corporate initiatives. This annual CapEx guidance excludes spending for any U.S. manufacturing, which we plan to finance primarily with the U.S. Department of Energy loan and customer co-investments. Previously, we have not provided annual P&L guidance. With the majority of our transformation behind us, we are pleased that we are now in a position to do so. We project 2023 revenues to be in the range of $1.35 billion to $1.55 billion. About half of these revenues are based on volumes and prices that are contractually fixed for the entire year. For those parts of our business that are not contracted at fixed terms, we feel well positioned due to diversified and growing demand in Europe and the U.S. 2023 full-year adjusted EBITDA is expected to be between $80 million and $100 million, achieving margin levels consistent with our long-term financial model before we exit the year. As these targets and our first quarter guidance imply, we expect margins to increase further from current levels with the fourth quarter expected to be our best quarter on both margin dollars and percentages. The ramp of our performance line facilities and related operational improvements are primary levers, followed by ASP expansion and utility scale as we commence shipping on our 2022 bookings as well as incremental margin contributions from our new residential channels plus beyond the panel product. With that, I'll turn the call back to Bill to summarize before we go to Q&A.

Thank you, Kai. As I mentioned in my opening remarks, my goal is to help make Maxeon one of the most profitable companies in the solar industry by driving aggressive manufacturing cost reduction and operational excellence while capitalizing on our leadership in panel technology and global channels. The company has a strong start in 2023 with positive adjusted EBITDA guidance for the first quarter and expected increase in profit throughout the year. As we look beyond the current year, we are pursuing several significant growth opportunities that we expect to drive future top and bottom line expansion. Now let's go to Q&A. Operator, please proceed.

And our first question comes from the line of Alexander Bavel with Bank of America. Please proceed.

Julien, you want to take it?

Yes. Hi, good afternoon. It's Julien Dumoulin-Smith here. Thank you very much, truly well done, impressive. I got to say. So to that end, I just want to talk a little bit about the margin inflection we're seeing here in the fourth quarter and obviously talking about it here in the first quarter. What's the cadence as we think through the course of the year here? I mean you're already achieving a good chunk of what you want to do in '23 from a gross margin perspective in the first quarter as far as you're suggesting here in the guidance. Can you talk a little bit about how you get to that 15% in the course of the year here into the exit run rate? And then also similarly, can you talk about what the outline looks like even for the year ahead, considering the utility scale comments that you made and what that might imply for your domestic manufacturing effort?

Yes. Hi Julien, Bill Mulligan. Yes. Thanks for the question. Yes, we're obviously starting off 2023 strong, and we expect that business to continue to improve throughout the year. As you probably know, Q4 is typically seasonally our strongest quarter, but we also expect some Maxeon specific parameters to come into play here. Perhaps Kai could say a few words about that.

Yes, absolutely. Hi, Julien, and thank you for your encouraging words. We have included a slide on Page 6 of our deck that you might want to look at regarding the gross margin trajectory. You are correct in noting the significant improvement in our gross profit margin on a non-GAAP basis for the fourth quarter. Several factors contributed to this. We had guided for breakeven levels and exceeded that expectation, in part due to better performance in our U.S. operations and the earlier and faster drop in specialty freight costs than we had anticipated. Looking ahead to the first quarter, we expect further improvements driven by continued enhancements in our U.S. performance areas. We are ramping up, and costs are anticipated to decrease further. We also expect to reverse some of the lower cost inventory write-downs, which typically provides a boost. Additionally, we've gained economic benefits from renegotiated delivery contracts with our customers that will take effect in the first quarter. I would also highlight the robust U.S. business; we've renegotiated and expanded our supply agreement with SunPower, and our new U.S. residential channel is getting underway. Europe is performing very strongly as well, with notable increases in IBC and ASP during the fourth quarter, and we expect this trend to continue in the first quarter. There are numerous factors aligning to help us reach our projected levels, and we anticipate further advancements throughout the year, particularly in the fourth quarter, when we aim to achieve our long-term financial model within 2023.

Got it, guys. And just if you want to talk a little bit on the sustainability of the ASPs here. I mean, obviously, given the backdrop, given the trends here, it's a nice benefit here. How do you think about cost input and the ability to hold on to some of that improvement yourself or passing along that to your customers here through the course of this year, if you will?

Yes, we have really, really good confidence in our projections here that we put out. And as we said in our prepared remarks, about half of our ASPs are locked in for the year based on those projections. So that definitely gives us some comfort, but also we have some very, very strong positions, product positioning, really with our products in some markets. So we think the projections that we have put out here are really high confidence.

Got it. Excellent. Just on the build-out on the utility scale side. Just any comment on status with DOE, et cetera, just considering how much demand there seems to be. I mean it's quite a statement on the prepayments.

Yes, sure, Julien, Bill again. Yes, I'm really excited about this U.S. project. As you may know, I've been working in the battery industry for the last few years, and we've been following what became the IRA legislation very closely. For a while there, we didn't think it was going to happen, but we applaud the administration for getting it done and DOE for their mandate to enable the funding. So the IRA is a real game-changer for renewable energy in the U.S., bringing back good manufacturing jobs, increasing national security by controlling our energy economy. Given Maxeon Silicon Valley heritage, our strong North American footprint, and long experience in the U.S. market, we believe Maxeon is really well positioned to benefit from this. And we believe the project we've got out there is really consistent with the administration's objective and the project economics, I think, were really quite favorable given the IRA incentives. So as I mentioned in my prepared remarks, we're now into the due diligence phase with DOE. And this is the last step in the Loan Program Office process. And we're working to bring this capacity online as soon as possible.

Got it. Excellent. Well, congrats again, speak to you guys soon. And welcome, Bill.

Thank you. And one moment for our next question, please. And it comes from the line of Philip Shen with ROTH MKM. Please proceed.

Hi, everyone. Thanks for the questions. I want to congratulate you on the margin improvement and positive outlook. I’d like to discuss the updated relationship with SunPower. You made an announcement earlier this year that seems promising. In the last quarter, you mentioned that SunPower might account for around 50% of your DG mix in 2023, down from 75% in 2022. Given the expansion of your relationship, I assume SunPower will take a larger share of your IBC volumes. Can you provide some insights on that? I also have a few follow-up questions. Thanks.

Yes. Hi, Philip. Yes, SunPower of course is an extremely important customer for us. We're really excited about this relationship. And I think it's mutually beneficial and we hope to keep it going for a long, long time. I think in terms of the specific contribution towards overall volume, that's something we generally don't disclose. But Kai, I don't know if there's any more color you could add there.

We don’t typically provide a breakdown of our business by customers. I recommend checking our prepared deck, which shows that the DG business revenue increased in the fourth quarter to €244 million from €228 million in the third quarter. The deck also includes some regional breakdowns. Regarding the Americas, specifically the U.S. and Canada, this includes our utility scale operations along with challenges faced in the U.S. DG channel.

Got it, guys. And I totally get it, but as a quick follow-up there, you did share a little bit last quarter and just on a forward-looking basis, given the announcement earlier this year, I got to imagine incrementally, there's more volume to SunPower than you guys had expected perhaps from the end of 2022. Is that a fair statement?

Phil, this is Peter. Maybe I can take that one. So again, as Bill said, we don't, I think, typically break out volume by customer or price for that matter. I think it's fair to say that there's more volume, there's more demand for our product, particularly our IBC product than we can serve. And we've been in the process of shifting some of the allocation around to optimize overall ASP. In general, I think that means more of the product going to the U.S. where ASPs are the highest. And there though, we have the two options of bringing up our own new channel, which is very healthy ASPs and also strategically important in the long term. So there's a balance there between supply to SunPower and supply to the new Greentech channel.

Thank you, Peter. I understand that you recently initiated your dealer network, approximately a month ago. Could you discuss the possibility of dealers switching from SunPower to your network? Is that something you anticipate could occur, or do you think it’s unlikely? Additionally, regarding Greentech, you mentioned it earlier. How is the volume looking considering that we have observed a decline in module prices for residential solar since the end of last year? It seems that trend has changed recently. Has this price reduction affected your operations at all? I assume the impact on the premium segment is minimal, but I would appreciate your insights on these dynamics. Thank you.

The overall strategy with Greentech Renewables is to focus on market segments where SunPower is absent. There is a significant portion of the market that remains unaddressed, which we aim to target. Many of our dealers are unable to access the Maxeon product, and this gap became evident when LG exited the market recently. Our goal is to fill that gap while avoiding competition with SunPower dealers.

Great. One last one, if I may. Can you talk through what the margin structure looks like for residential or DG in Europe versus the U.S.? I know the pricing is better here in the U.S., but does that directly correspond to higher margins here? And if not, maybe talk us through how Europe is able to kind of maintain the smaller margins for the U.S.?

So I would say on the IBC side, pricing, we oftentimes talk about it as a proxy, and that's why we are optimizing for prices. But in fact, what we're optimizing for is margins. So - and here, the reason why we have been moving more volume to the U.S. is not only better price, but also better margins. So directionally, the margin is better in the U.S., and that's why we are doing it. In addition to that, another extra point to make is our Beyond the Panel business, which includes the established microinverter business, and we just talked about that we are now at a point where we are enjoying more than 20% attach rate, and we're not going to stop there. In Europe, we are starting with Beyond the Panel in Australia and soon going to Europe with storage and then afterward EV charging products. So these are the initiatives that we have that are going to boost margin percent, but also margin dollars.

So maybe I can just add one note to that, and that is that our product portfolio currently is a little different in Europe and the U.S. and that in the U.S. - in the European DG market, we have not only our IBC products for sale, but also a healthy dose of our performance line, which we source from HSPV joint venture. So we've got a different sort of portfolio of products there, and we're able to increase overall volume through our channel there in two ways. The optimization that we're talking about really is an optimization across not only the relatively constrained IBC capacity but also a little bit more of capacity on tap in Europe with performance line.

Great, Peter, Kai, Bill, thank you guys very much. Bill, looking forward to working with you more.

Yes, great likewise.

One moment for our next question, please. And it comes from the line of Brian Lee with Goldman Sachs. Please proceed.

Hi guys, good afternoon. Thanks for taking the questions. I apologize I hopped on late, so if some of these have been asked, I apologize in advance and in the interest of time, I'll just ask three questions I had, I'll just ask them all at once. One was on the DOE loan guarantee process, it sounds like there's an update here. Could you kind of elaborate as to what the next steps are and any kind of the timeframe on that? Second question would be around ASP's in 4Q. They seem to have jumped up double-digits. Is that just mix related or did you see like-for-like price increases maybe give us a bit of color around that? And then lastly on domestic content, I know you guys have been talking about being sold out through '25, maybe you have sales even into '26 and beyond? Have you gone back and embedded any pricing uplift for domestic content adders for your customers giving you that premium. I think your peer first of all talked about $0.03 or $0.04 a lot recently on their call; I'm just wondering what your status is on kind of capturing some of that value.

Yes, hi, Brian. Peter has been managing the DOE project pretty closely. So I'll let him speak to where we are with the loan program office.

Okay. Actually, let me just start with the second question first, Brian. The other two are related. So we did, yes, we did mention ASP uplift in Q4 specifically our IBC prices were up fairly significantly double-digits. And so most of the ASP increase you saw there was a factor of real ASP strength within the individual product lines, not a mix issue. With respect to the DOE loan, we said on the prepared remarks that we were now in the due diligence phase, which is the last phase of the process in the next milestone will be conditional approval of the loan. And so, we're working towards that very hard with the DOE. In terms of the domestic content, we're not really exposed to that yet, since we are not manufacturing anything in the U.S. And we haven't signed any supply contracts yet around our U.S. factory, so that's where we're going to see how that plays out. We are confident that we'll be able to see both sales and margins in the U.S.; we're confident that we'll be able to take credit for that domestic content in the ITC adder, but it's not something that we're contracting for yet.

Yes, I will point out, although we're not able to take advantage of the domestic content yet directly, we do benefit from being viewed as a Western solar provider with reliable supply reliable guarantees and bankable so, that does give us tailwinds in the U.S. market today.

And of course, our supply chain out of Mexico is extremely efficient into the - into certainly the Southwest portion of the U.S.

Okay. I appreciate the color, guys. Thanks, I'll pass it on.

Thank you. And one moment for our next question, please. And it comes from the line of Pavel Molchanov with Raymond James. Please proceed.

Thanks for taking the question. Let me stick with the European theme, but on the supply side of the equation, we're hearing more and more about this European Green Deal Industrial Plan, which will subsidize domestic manufacturing a lot like the Inflation Reduction Act. And if that were to materialize, would you for example revive the factory that you have in France or perhaps seek to expand your European manufacturing in some other way?

Yes, we of course monitor that situation closely, and I think it's too early at this point in time to say how we would respond, but we're always looking at these things carefully and the policies in place and it makes economic sense - we'll consider any option.

Yes, Pavel, maybe I can just add one thing. As you know, I think as well or better than many Europe is a long-term key market for us with a very strong position there. And of course, we would be interested in bringing the same sorts of local supply chain advantages that we're planning on doing here in the U.S. and have already put in place in Mexico. What I would say is that the industry evolves pretty quickly and both from a technology perspective and a scale perspective. Anything that we would build in Europe would be quite different from historically what we had in France. So without going deep into any particular jurisdictions or regions, I would say that to the extent that we decide to build something in Europe, it would probably be quite different than what we were operating in the past few years.

Yes, but we're in a - Maxeon, we believe given our strong global footprint, we have a lot of experience in Europe well over a decade of experience. So, we're very familiar, we've got lots of talented people on the ground so or something like that to develop, we're well positioned to execute on it.

Understood. Turning to our guidance, you obviously you're looking for this kind of back end weighted ramp in revenue through the second half of the year, given that should we assume that you will be essentially at full utilization of your existing capacity Asia plus Mexico in Q4 of 2023?

Pavel, this is Kai. Yes, I think that's going to be a good assumption. We think that sometime around the mid of the year that we're going to achieve full capacity utilization. First in the cell fab and then of course in the most - there is of course the transit time in between so by the end of the year. I think everything should be running and humming at full capacity of that U.S. performance line capacity.

And so maybe looking a little bit ahead into 2024, will there be additional expansion in any of your existing manufacturing facilities? Into 2024 again not talking about the U.S.?

Yes, our long-term financial target is to show at least 20% year-on-year revenue growth. If you look back historically, we did 35% last year, and based on our guidance mid-point guidance, you can expect about the same this year, maybe a little higher. So we feel confident we're going to be able to stay on that long-term financial model. We do have things in flight that will allow us to increase capacity as Kai mentioned we'll be fully ramped with the P-Series capacity by the end of the year. So we'll have a full year production as opposed to partial year at full capacity. We've got some debottlenecking activities going on our Maxeon 6 - and 6, technology primarily. So that will be coming online and then we do have our Beyond the Panel revenue stream that's going to be coming online, so all those should really contribute strongly to 2024.

Well, the only thing I would add to that is we also have of course capacity on tap at our HSPV joint venture for sale into Europe in particular.

Got it. Thank you very much.

Thank you. One moment for our next question, please. And it comes from the line of David Arcaro with Morgan Stanley. Please proceed.

Hi, thanks so much for taking my question and congrats on great results. You mentioned the long-term financial model. I was just wondering, getting closer more in the sights at this point. I'm wondering if there's a natural timeframe when you might reassess and refresh what the long-term financial model how it should be?

So David, I would say first of all, I would like to point out that the long-term financial model stayed at least 20% growth. And as Bill just pointed out, we have outperformed that over the past year. We expecting to outperform this year, and we are expecting to be roughly on it in 2024, and of course, then some other activities are probably going to kick in beyond 2024 to put us back on a higher growth trajectory again. And also as far as the gross profit margin and the EBITDA margin is concerned, all of them state that these are numbers that we want to at least achieve and hopefully overachieve over time. So we don't see a need right now to restate that. I think we have talked about the target margin profile of some of our different businesses. We actually on the IBC side and on the DG side, I would say we are already at or above those target margins in the fourth quarter. And moving beyond that in the first quarter as far as IBC and the performance line from HSPV is concerned into the DG market. And then some other businesses like beyond the panel is still ramping up and it’s going to provide top line and bottom line growth over the next quarters to come. So right now, we stick with our long-term financial model. We expect to achieve it within 2023, and then we are going to talk about other things at the appropriate time.

Okay, understood. That's helpful. And then given the strong demand that you've been seeing in the U.S. market, I was just wondering if you could give your latest thinking on whether there's some potential to self-finance a U.S. manufacturing facility separate from the DOE process if you might consider self-financing and using your balance sheet for additional capacity here.

Yes, that's not something we're looking at right now. We feel like we're pretty far advanced with the DOE program, so I think we'll start there.

We think the DOE loan program is a really attractive source of financing. So that's definitely our plan A.

Yes. Got you. No that's fair. And last thing for me, I was just wondering if you could give an update on what the Maxeon 7 ramp looks like in terms of the latest outlook there.

Yes. Yes. No. We're really excited about the Max 7 technology. I was one of the original developers of our IBC technology. So now that I'm back after a few years away, I'm just really proud that our team continues to push the boundaries of photovoltaic technology. And we're in a position to increase Maxeon's technology leadership again. So the pilot line has been running. It's been quite a great success that's hitting its yield and efficiency targets and getting better all the time. So we've started laying the groundwork for Maxeon 7 expansion in terms of some building and facilities upgrades. We're going to be doing it in one of our existing facilities in the Philippines, that's currently not in operation. And yes, we'll be talking more about our plans later as they come out.

Okay. Great. Appreciate the color. Thanks so much.

Thank you. And one moment for our next question, please. And it comes from the line of Donovan Schafer with Northland Capital Markets. Please proceed.

Hi, guys. Congratulations on the positive gross margin.

Donovan, excuse me. Can you lift your voice?

Is that better?

We can't hear you, Donovan.

Congratulations on achieving positive growth margins and a favorable outlook for adjusted EBITDA. I've been anticipating this moment for a long time, and it's exciting to see it come to fruition. I would like to discuss the Department of Energy loan guarantee further. Many questions have already been raised about it, but could you elaborate on what determinations need to be made at this stage of the due diligence process? Are they evaluating factors like the expected number of jobs created? Are you competing with other applicants within a limited pool? Additionally, what milestones or requirements have you already met? While I understand you can't provide specific probabilities, could you offer a broader context regarding these determinations and the progress you've already made? Are you indeed competing against other projects and working with a limited pool? That information would be greatly appreciated.

Okay, Donovan, this is Peter. I'll respond based on Bill's previous guidance. Your question has a couple of components. First, regarding whether we are competing with other projects, what we've heard from the Department of Energy and what we can infer from the allocated funding suggests that there is currently sufficient financing available to support good projects they are interested in. As we’ve stated before, we entered the queue quite early, well before the Inflation Reduction Act was passed. Therefore, we believe we are well-positioned in terms of the project's quality and the technology's associated risks. While it's not necessarily the DOE’s role to assess job creation on its own, they clearly aim to promote technology scaling in the U.S. and job creation associated with that. Essentially, the DOE functions like a motivated lender, conducting evaluations similar to what any bank would do regarding the risk of repayment. Their primary concern is the likelihood of loan repayment. We might be biased since we're closely involved with the project, but we believe that in terms of technology maturity, familiarity with the market, and strong customer demand, we should receive favorable evaluations related to technology risk, company execution, and demand stability. Additionally, there is an environmental review process called NEPA that we are also navigating. This addresses your question, and we are just about out of time, so I hope I covered all aspects of your inquiry.

Okay. Thank you. If I could squeeze in just one more. Could you talk about the number of megawatts you guys are expecting to ship in 2023? It would just be helpful in terms of thinking about ASPs and utilization. And I think Pavel already kind of asked about that. But if there is a rough megawatt number, that would be helpful.

Hi, this is Kai. So we put out annual guidance at this point for the first time in our corporate history, and we decided to provide some guidance here on the revenue and on the adjusted EBITDA. We'll stay away from specific megawatt guidance for the year. We have obviously given a shipment in megawatt guidance for the quarter, and we'll keep that practice for now.

Okay. I forgot to ask a question that might be helpful for everyone. Based on your current position in the Department of Energy process, are there any updates regarding when a facility might begin production? Will that still be by 2025, or is there a possibility of a delay?

That's still our expectation, Donovan.

Great. Thank you for your cooperation. That concludes our question-and-answer session. As there are no further questions, we'll now conclude the call. Thank you all again. You may now disconnect.