Earnings Call Transcript - SPWR Q4 2025

Sioban Hickie, VP of Investor Relations

Good morning. My name is Sioban Hickie, and I am the VP of Investor Relations. I want to welcome everyone to SunPower's Fourth Quarter earnings call. I will cover a few housekeeping items before handing it over to our CEO, Dr. T.J. Rodgers. This call is being recorded, and a replay will be accessible in the Events Section of SunPower's Investor Relations website. Please be aware that today's presentation may include projections and other forward-looking statements. These statements involve known and unknown risks and uncertainties that could result in actual outcomes differing from those indicated in our statements. Additionally, we may discuss certain non-GAAP financial measures during today's call. A reconciliation of any differences between those non-GAAP measures and the most comparable GAAP measures can be found in our press release. Finally, we will have a question-and-answer session following the formal remarks. I will now turn the call over to Dr. T.J. Rodgers, SunPower's Chairman and CEO.

Thurman Rodgers, Chairman & CEO

Good morning. We have some guests here today. First, we have John Berger, whom I'll introduce later. Also joining us are two directors of SunPower, Dan McCranie and Will Anderson, both of whom I'll introduce with slides. Let me dive right in. Our logo is the Helios airplane, which had 35,000 watts of SunPower solar cells when it flew under its own power, taking off at 92,000 feet, setting an unbroken record. I'll mention one more aspect of this airplane today: the reflection you see means the bottom side of the wing is clear plastic. This allows you to see through it, revealing the struts and clear plastic on one side, while solar panels are on the other side. This means all the light coming from below can enter the bottom of the wing and generate power. This is what's referred to as bifacial technology, allowing the cells to capture energy from either side. I'll elaborate on that later. Dan McCranie has been on 10 NASDAQ boards and, after leaving Cypress Semiconductor, served as VP of Marketing and Sales. He also chaired both divisions of Motorola when they separated into Freescale, and he was part of the Cypress Board. He led SST Technology, which spun out of Intel for non-volatile memories. Will Anderson, who is on the far side, has credentials from MIT and Stanford. He has been on the SunPower Board since 2010 and was the Founder and CEO of Complete Solar, the company that acquired SunPower. Now he serves on our Board and is exploring financing with his new startup called Same-Day Solar, which could open new business avenues for us. Now, I've shown you this slide before, but I want to highlight it again because it's impressive. This image shows the Helios flying at 80,000 feet, with the curvature of the Earth visible above the atmosphere and abundant sunlight coming in. More sunlight means more energy. I've done a bit of engineering work since you last saw this. At 80,000 feet, atmospheric pressure drops to 0.4 pounds per square inch from 14.7 psi at sea level. What does this mean? Well, while you can't breathe up there, it's more significant than that. The boiling point of water at sea level is 212°F, but at that pressure, it's only 59°F. If your body temperature is 98.6°F, it’s enough to boil your blood, which is why you have to wear a space suit when flying in such airplanes. This airplane is designed to stay up indefinitely due to its batteries. We released a report this morning highlighting record financials. I'll cover that, along with mentioning two acquisitions and the signing of a $55 million equity line of credit, which I'll detail on the next page. Key points include a record revenue of $88.5 million, up from $70 million last quarter, with two acquisitions contributing significantly—Sunder contributing a full quarter of revenue and Ambia a partial quarter. Our operating income reached a record $3.5 million, which is 4% of revenue, and our goal is to increase operating income to 10%. Our ending cash balance saw an increase to $9.3 million from $5.1 million in the prior quarter. I already mentioned the increase in our equity line of credit with White Line Capital to $55 million. This agreement is now signed and pending shareholder approval as it's an equity transaction. As for preliminary financials, I don’t expect changes but will focus on key numbers vital for investors. Non-GAAP revenue jumped 26% quarter-on-quarter to $88.5 million. We observed exceptional gross margin improvements after clearing some old backlog from SunPower. Our typical gross margin is around 38%, and I advise against adjusting models to predict unsustainable large numbers. Operating expenses rose only 8.5% quarter-on-quarter, and while we are striving to improve that, we achieved a record profit of $3.5 million, up from $2 million last quarter, supplemented by an additional $4.3 million in cash. This figure did not include funds from the ELOC mentioned earlier; it was based solely on our natural revenue growth. This graph illustrates our operating income over time, showing periods before and after our acquisition, marking a significant shift from losses to consistent profits. Post-acquisition, we hovered around $80 million in revenue with a run rate of $320 million. The record was achieved in the second quarter, but we faced a downturn with the ITC cut, leading to a revenue drop. However, we had already implemented cost-cutting strategies that allowed us to maintain profits despite lower revenue. By Q3, we recovered slightly to $70 million in revenue, and my prior estimate of $3.1 million profit was adjusted as we set aside $1.1 million for reserves, now estimated in the $8 million range to cushion against future financial hiccups. In the current quarter, we reached $88.5 million in revenue, largely driven by our growing acquisitions, leading to record profits. For Q1 '26, I conservatively estimate $84 million in revenue, acknowledging its uncertainty, though I remain confident we will reach that figure, despite these winter months typically being slower for solar and ongoing ITC uncertainties. This could still be our second-best quarter even during this difficult Q1 '26 period. This marks our fourth consecutive quarter of profits, indicating a turnaround from four years of losses experienced by the previous SunPower company. Our total revenue for 2025 reached $308.8 million, showing resilience despite factors that typically hinder revenue retention. I’ll discuss future profit considerations later. Our Q1 '26 revenue is expected at $84 million, which I assess as highly uncertain. I believe we've set the foundation to maintain positive operating income in Q1, which remains a pivotal milestone for our outlook for 2026. As for marketing insights, data from the Energy Information Agency reveals that as of 2024, the U.S. residential solar market has penetrated 5.6%, up from 3.7% in 2020. California, the sunny state, sees even higher penetrations but still maxes out at 15.5%. This reinforces my belief that our market is vast and expansive. I'm not fixated on competition like I was in the chip industry; instead, I view the market as an ocean where we all have room to grow without hindering each other. Over 94% of qualifying homes still lack solar, and prices continue to rise, outpacing inflation. This presents a significant opportunity for us to take market share rather than worry about potential challenges. This graph shows our growth in sales representative headcount. In the solar sector, we work with independent contractors, or 1099s, which means we don’t directly employ them and can’t force them to stay. The challenge here is that the sales force can shift frequently as people look for better opportunities. At the start of this year, we had 1,126 reps from the previous SunPower, many of whom left during its decline. In Q3, we acquired Sunder, which was a crucial sales company based in Salt Lake City, allowing us to more than double our sales force by bringing in over 1,800 sales reps. As our sales force declined in Q3, the new Sunder team grew under the leadership of Eric Nielsen. In Q4, we announced Ambia, which added 203 salespeople. We also took advantage of Purolite’s bankruptcy, which had 350 highly regarded sales reps, to bring them into our team. Now, our headcount has grown from 1,100 to nearly 2,000 sales reps. On another note, our direct employee headcount, designated as W-2s, is critical to our cost structure. We need to keep this stable, as increases here typically raise costs and reduce gross profits. Our combined companies originally had 3,499 employees, and we used an ARC strategy to reduce this and reach a goal of 980, which we accomplished. After realigning to leverage synergy, we scaled back slightly to 947 and aim for 820, focusing on integrating the best talent from our three companies. Maintaining stable headcount while achieving record revenues helps us track revenue per employee effectively. We began in Q1 with $285,000 revenue per employee per year, though we initially faced losses. Following expense reductions, we recorded a breakeven level at that time. Subsequently, we increased that to $360, falling to $304 in another quarter, then up to $337 last quarter. Now, for the first time, we've achieved over $400,000 per employee per year. The contributions from Sunder and Ambia increased both revenue and sales productivity. I compare our performance to Sunrun because I respect their model; with their published revenue and a large employee base, they achieve about $217,000 per employee. This isn’t a perfect comparison, given that they run utilities and maintain jobs differently, but I'm proud of our productivity per employee and believe we’re among the best in the industry. We clearly see a path toward achieving $0.5 million per employee per year since incremental revenue doesn’t require adding more overhead in terms of staff. Next, this graph represents our market cap in relation to revenue. The price-to-sales ratio is around 0.55 for SunPower, relatively stable in the range, while Sunrun has seen a recovery. This presents both a challenge and an opportunity for us as we aim to improve our valuation multiples. The PS ratio for the tech index and other companies like Enphase signifies that our industry remains undervalued, and we want to align more closely with their multiples; that’s a priority for us. Why did Sunrun manage to bounce back from the ITC cut while we struggled? I’ve identified three factors. First is cash flow; I previously reported $5.1 million in cash, which led to concerns about our sustainability. We've since raised our equity line of credit, allowing us more options without the immediate need to raise capital at a high cost. Our late SEC filing in Q3 was simply due to coordination challenges between our various financial systems acquired during our growth phase. I've enlisted Cal Hoagland, a financial expert who has worked for many organizations, to help us refine our finances. I have been searching for a CFO for six months with the intent of finding someone local in Salt Lake. Lastly, contrary to rumors, we are not under SEC investigation; I’m frustrated by misinformation in financial circles, which I intend to clarify. We recently announced a new solar panel called Monolith, inspired by a 2001: A Space Odyssey screening, which signifies our aim for continuous innovation. This panel has a record output of 470 watts, limited by weight regulations to ensure safe installation in residential areas. We’ve partnered with REC, the largest non-Chinese solar panel producer, to develop our products further. Additionally, we’re focusing on creating bifacial panels, enhancing energy generation by utilizing light from both sides. I’m excited to share that we signed a letter of intent on January 16 to acquire Cobalt Power Systems, a leading solar company known for handling larger installations. Our first project together will be a partnership on a significant 111-kilowatt installation at a notable building in Sunnyvale. We're entering a promising phase, unencumbered by governmental delays, ready to operate efficiently in a free market, with ambitions to expand our sales force while maintaining our 847-person workforce, all of whom hold options. John, I'd like to turn it over to you now. What would you like to add?

John Paul Bergh, CEO of Cobalt Power Systems

I do. I'm excited to be here. I've been involved with SunPower since late 2006, where our customers had to wait 6 months to get panels. Well, now they don't have to wait 6 months, and they don't want anything that's safe-harbored and waiting in a warehouse for two years. They want the newest technology deployed on their houses right now. The cost of electricity is going up. Cobalt Power Systems represents a differentiated, scalable revenue vector for SunPower. We are uniquely positioned to integrate sales origination, operational execution, and next-generation renewable energy technology deployment, all within a single platform. Together, our combined capabilities, as T.J. has mentioned earlier, open the doors to address the full spectrum of demand of the market across residential, new construction, multifamily, light commercial, large-scale commercial, and industrial applications, including up to large-scale data center power infrastructure. Operating as a focused subsidiary within a publicly traded enterprise unlocks efficient access to capital for Cobalt. Our scale and institutional resources allow us to effectively grow and meet the market demand for renewable energy power. It takes 5 to 7 years for a gas turbine to be installed, but they need power now. Customers need solar, wind, and infrastructure execution, which we can provide. Cobalt brings a proven track record of building, operating a profitable business unit, uniquely positioned to deliver meaningful, sustainable profitability while accelerating the deployment of industry-leading energy solutions to end users at scale. That’s why when we first got our first shipment of Monolith last Friday, we have customers that have already oversold. We have already garnered interest in our first container. Customers want the most power-dense module that utilizes the best parts of their roofs because they have electric vehicles and complex energy demands requiring more electricity. Quality is at the foundational standard and always has been with SunPower. Quality and technology form the core of our platform. Now, with T.J. and his team, we have the disciplined execution at scale that will reestablish SunPower as a leader in the industry over the coming months and years. I couldn't be more excited.

Thurman Rodgers, Chairman & CEO

Thank you. You said you were excited, and I told you to tell them your plans with enthusiasm, and you did that well. I want to talk about our other acquisitions for a minute. We talked about Sunder; I already mentioned it. Sunder is a sales company with six years of accumulated experience. Eric Nielsen is their Co-Founder and President, and he’s now the EVP of Sales and Marketing for the whole company. He created options to attract 1099s to stock options, which is part of our goal to get as big a sales force as we can. My favorite story about Max Britton, who is the Co-Founder, is that he was an Abrams tank commander in Iraq, and after he got out, he signed up for another service. He manages the Sunder sales division, which means Sunder is selling at higher velocities worth thousands of dollars. Devon Glassman is their first employee, and he's a lawyer with an MBA, and he's the sales ops for the company. So Sunder has helped our footprint expand, we are active now in 45 states, which will make a difference. The next acquisition was Ambia. They are an $80 million company. They've brought in expertise on the operational side to make us more efficient. When we acquired them, they took over our manufacturing for direct, which is the biggest part because they took Blue Raven to the next level in their company; they really understand efficiency. This is a snapshot; the median cycle time in days for projects completed is faster compared to the previous companies shut down. We are consistently aiming for profitable growth from our current $300 million level to $1 billion by 2028. Looking at recent quarters, we did $88 million, and we have set our aspirations high. This is our plan. I'm excited about the future.

Sioban Hickie, VP of Investor Relations

We will now begin our Q&A session. Our first question today comes from Derek Soderberg at Cantor Fitzgerald.

Derek Soderberg, Analyst

T.J., you just touched on your vision for becoming an advanced technology solar company with software-controlled systems. From an investor perspective, why is this the most sustainable, profitable model for residential solar and commercial? What’s the most exciting part of the business as things have come together on the sales front and hardware front?

Thurman Rodgers, Chairman & CEO

That’s a really good question. I had an analyst, a really well-respected analyst the other day, asked me why do we need a national company. If all solar is driving to your house and installing anything, aluminum siding, then you don't need a national company. But these systems require intelligence to know the weather, monitoring use or storage of current, charge your car or both; and change actions as the cloud crosses the sun. Guys in pickup trucks aren't going to do that. The hardware systems, like the Enphase inverter, required dedication times thousands of man-years to create, which means competition will struggle to copy it. Solar panels have become commoditized, but we will differentiate ourselves with technology. There’s a need for national companies to have the resources to enforce these partnerships, funds, tools to develop and evolve that model.

Derek Soderberg, Analyst

Who will be facilitating the software piece of the business? Can you upsell software?

Thurman Rodgers, Chairman & CEO

I'm not a software guy; however, I have dozens of software guys engaged. Right now, we need to develop a software vision for our company. Partnerships are important, and we’ll enhance our capabilities in this space.

Derek Soderberg, Analyst

Is the $84 million guidance with $4 million of uncertainty interpreted as $80 million of high likelihood revenue?

Thurman Rodgers, Chairman & CEO

Yes, the number $84 million was put together to ensure we can meet our forecasts and set internal goals. I have confidence in our figures.

Derek Soderberg, Analyst

Operating expenses were up 41% sequentially on a GAAP basis. Can you help us understand this growth?

Thurman Rodgers, Chairman & CEO

The GAAP basis isn’t a genuine reflection; our OpEx part that matters is almost constant. Look at the OpEx without commission—it’s under tight control. There’s no slop or one-time distortion there.

Derek Soderberg, Analyst

The silver prices are rising. Do you view that as a risk for the industry?

Thurman Rodgers, Chairman & CEO

No, I think the panel industry is set to wash itself clean. We’re not tied to those safe-harbored panels that cause problems. Right now, there’s an overabundance of supply production. Many plants in the U.S. operate abroad; the actual panel business isn’t profitable. We're in a favorable position.

Auguste Richard, Analyst

How are you doing converting Sunder sales into installs?

Thurman Rodgers, Chairman & CEO

We have positives with Sunder. Their sales force has booked significant orders, and we’re growing rapidly. We expect Sunder will contribute more as we enhance our installs.

Unknown Executive, Executive

We're pleased with the growth in bookings from the 1099s brought by Sunder. Rapid expansion this year is looking promising.

Thurman Rodgers, Chairman & CEO

There's a difference in how the original SunPower sales force sells. The new teams are more TPO-friendly, which benefits our sales efforts in the states.

Auguste Richard, Analyst

Can you provide an overview of the markets you address, particularly in industrial?

Unknown Executive, Executive

Cobalt has installed numerous large projects like a 12-megawatt project in Stockton. We have expertise to expand operations now with support from SunPower.

Thurman Rodgers, Chairman & CEO

We are engaging in the growing market capacity with specialized capabilities. We were limited but can now achieve excellence across the country through Cobalt.

Sioban Hickie, VP of Investor Relations

We will be attending several conferences, including Jefferies Power, Utilities and Clean Energy Conference in March, and the Cantor Technology and Industrials Conference.

Unknown Executive, Executive

We are set to regain share with New Homes, aiming to significantly grow bookings to around $110 million in 2026. We are accelerating our New Homes pipeline and partnering with additional dealers for ample growth.

Thurman Rodgers, Chairman & CEO

Yes, we’ll partner across broader dealers, perform well, and aim for substantial growth to our total SunPower revenue.

Sioban Hickie, VP of Investor Relations

That concludes today's call. Thank you for tuning in. We appreciate your support.