Title

Presentation

SunPower Corporation misses on earnings expectations. Reported EPS is $0.01 EPS, expectations were $0.02.

Sioban Hickie: 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 speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. 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. Reconciliations of the differences between those 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. Rodgers, SunPower’s Chairman and CEO.

T.J. Rodgers: Good morning. My name is T.J. Rodgers. 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. So 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 turn it to left handed mouse. We 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. So we’ve got as usual GAAP and non-GAAP numbers. The numbers I’m focusing on here are Q1 2025 non-GAAP numbers. So this is the big news. We’ve got 12 — $1.27 million in profit, up from minus $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 a 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%. And on advice lawyers, I put the new numbers in there because these are the quote, audited numbers. They made our numbers better. And I don’t 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 and then we lost $5.9 million in Q4, M&A profit in Q1. So that is our curve. These are audited numbers. These are not. I’d like to congratulate our team. We broke the profit barrier starting here 180 days later bam, we’ve got profit. The rest of this report, that’s really the financial news. We have a relatively simple company. The rest of the report I’m going to talk about what went on and I’m 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 plus 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. So 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. And today, we’re down at 906. The target headcount back here when after we merged was 1,225. The target headcount here, including the beginning of this quarter was 980.

And there’s a reason for those targets. I’ll show you later. So 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. And this is a thing called the requisition auction. It’s a process I used back in the semiconductor industry to maintain the right headcount, very tough industry for maintaining profitability. On Page 1, 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. So in this particular case, we actually added people very rare obviously, given that curve, and ended up at 907.

So this was the third day of workweek 17. Then down here is the summary of cost. So if you add and subtract the dollars associated with the bodies, it says quarter-to-date we’ve saved an annualized $1.6 million. So this is how we track money and get to having profit so quickly. We watch it 3x a week. Now 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. And it says their current target is actually lower yet, it’s 881 people. So this is for work week 13, 14, 15, 16, 17. So this is something you look at a couple 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. So 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. Then we have the overhead functions and you can see each of them has a trajectory. So 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 and 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 and 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 spun out of McKinsey. They are excellent consultants. I’ve used them, for example, in the end phase turnaround. And 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? And then you have data for the median and the top quartile. This is for a couple hundred high tech companies. So the answer is that’s a bad number, it’s median. That’s a good number. It’s 75th percentile and that’s the ratio. So you have those ratios per million dollars of revenue, et cetera. And that’s how we get the lines for these groups and that’s how we drive them.

Point one and point two, they’re small and they have to be small. These guys are judged on revenue per employee. Now they’re judged on the bottom line because their bottom line is my bottom line. But the overall metric I’m looking at here is revenue per employee. So the company right now is at $369,000 per employee per year. That’s a good number, especially for solar. If you go check some other companies, I won’t name them, but all you have to do is look at their headcount and their revenue from the last quarter times four and you’ll see numbers as low as $200,000. And that, that’s going on a business plan as I see it. And then 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 startup that we have and the New Homes.

This is a separate division, which doesn’t sell to people, it sells to corporations that make housing developments. And therefore, it’s got a lot lower headcount because for example, we have a very large salesforce here and less than 10 here and that’s why their targets are different. The businesses are really different. Okay. So point here is, we track this three days a week. Monday, Wednesday and Friday, 8:00 a.m., and I’m involved and it’s what drove the curve and drove the profitability along course with accomplishment of making revenue. This is a disciplined thing. I don’t know startups and I don’t know any solar companies that, 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 specification and it’s always there and it always works on like 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. And your first reaction is the Director of HR, the guy is 19-years-old and no, he’s not 19-years-old, he’s a full 25-years-old and 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 they’re in 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 to not to go over it. But all those graphs you saw come from a spec, spec that I have, spec that I wrote years ago and updated 10x and it tells us how to run that.

And I have transferred approximately 10 business processes, not all the ones, but approximately 10 business processes to the new company and done training. So what you just saw is one little module. Now you can, I say we have discipline. And my joke was going to be, here’s a picture of my staff meeting last Wednesday. But we do have discipline. And I didn’t have it when I came in. Just backstory here, this guy right here, his name is Lee Ermey. The movie is Full Metal Jacket. It’s one of the four movies that define Vietnam. Stanley Kubrick classic. And the story on this guy is they brought him in as a coach to coach the actor who was playing this the Gunnery Sergeant. Check perfection of the tie and pleats and the shirt and the whole thing.

Guy who played the Gunnery Sergeant, how to be that? And then Stanley Kubrick, 2001: A Space Odyssey genius said fire the actor, he’s my Gunnery Sergeant. So this is a real honest to guy Gunnery Sergeant. And if you ever watch the scene, it’s a classic. And 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 and 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 4x in up to 2013.

And the title of the memo and this is one of my specs, internal specs that I’ve transferred. So this document exists in our system. It says 10 things to do when a valued employee quits. And so here’s it goes. This is the first three steps on Page 1. It goes on for five pages and defines the process. So at the very same time, we’re going down a rollercoaster 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 as quit. I repeat there is nothing that takes priority over working with employee has resigned, presuming you want to keep them. Then just in case you didn’t get it, I say the phrase “nothing more important” means that your actions 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. And I finally got this one across one time when I canceled my own staff meeting because we had an engineer, it was a really good guy and I walked out and said I got to do. So anyway, this is a process for keeping people. We have a process for evaluating people. I didn’t show you 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 save tens of millions on those curves. We now recycle a fraction of salary saved from headcount reductions bringing key industry players. So at the very same time, you’re cutting, you’re hiring and you’re hiring the people using the money with people that left and that, that’s a rolling process, happens like I said, 3x a week and you’re building it up.

So last week, we kind of hit the jackpot. We had two great hires and I brought those guys in to meet you today and actually I’ve got their bios here. The guy sitting next to me used to look like that. That’s his name is Dick Swanson. That’s me in 1972. And this is what a conference room looked like before whiteboards. This guy became the Head of the Electrical Engineering Department Stanford. We all worked in the Stanford Integrated Circuits which at that time put out more papers per capita than Japani, Kitachi [ph], Fujitsu, all of them. This was the center of Silicon Valley and the Stanford campus. This is why 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. He was a — after that he was in during that time overlapping his assistant and Associate Professor of Electrical Engineering at Stanford. So he taught students and in our world like the National Academy of Sciences and the National Academy of Engineering that, that’s sort of the Oscar World, he’s a member of that. So I called him up this morning and I said, Dick, I’m going to introduce you today. And 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. So what do you want to be called? And he didn’t help me. He said, well, I’ll be a Technology Consultant. And 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, and here’s the guy that really is the chief and he’s a “Technology Consultant”. So I’ll use this as a moral lesson inside the company. So right now like to introduce Dick Swanson to you and he’s got a few words to say.

Dick Swanson: Thank you, T.J. Well, today, we’re at a pivotal moment in the renewable revolution. About a year and a half ago, we surpassed 1 terawatt of installed PV capacity globally. And as we speak right now, we’re bumping up to 2 terawatts of global PV capacity. To give you some idea of the magnitude of this, the entire U.S. electrical generation capacity is 1 terawatt. We’re going to be very soon producing 1 terawatt per year of photovoltaics. And the reason for this is simply that PV has become the lowest cost form of electrical energy. So 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 generation?

How do we do that? And so this is a whole new phase in our industry and 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. So thank you T.J. for inviting me.

T.J. Rodgers: So he slipped and said the word Cypress and I’ll tell you why.

Dick Swanson: Oh my God.

T.J. Rodgers: It’ll be obvious later why that is. Okay. Next, Mehran Sedigh, he comes in as the Executive Vice President of Storage Systems division. So Storage System is not a battery, it’s a system that has a battery — batteries in it, among other things. And our Chief Technology Officer, he’s a Ph.D. 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 in Enphase. And 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 take the cost per kilowatt hour from solar, it’s the cheapest, like $0.02. Nuclear $0.06, gas is $0.06 or $0.08. But you’ve got this little problem.

Sun only shines on an average where I live five hours a day. So you got to work on that one that’s called batteries but — and that’s what this guy did. So if you 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. And then you’ll store that up and then at 7:00 at night when the local utility starts screwing you for $0.30, $0.40, $0.50 a kilowatt hour, you’ll run off your battery. So in effect it’s like a bulldozer. You scoop up power during the day and dump it back into your house at night and the battery will become the most important ROI component of putting in solar. So we needed a real battery guy and that’s Mehran and he’s going to run a system where we’re going to create system level storage products not just sell somebody else’s batteries.

Mehran?

Mehran Sedigh: Thank you, T.J. Good morning. Really excited to be joining the SunPower. It’s really important junction, SunPower if you go back to the days that they started and T.J. helped push the company forward. It’s — has its roots in innovation and 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 regeneration of energy system 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 to our consuming more energy electricity. AI is coming to the picture in everything we do. It is going to put more pressure on grid and having an independent energy source, which is Sun on our roof is no longer a nice, which is said, it’s a necessity and using that requires a 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.

So I’m excited to start coming in, contributing to that process forward with SunPower and having some fun along the way.

T.J. Rodgers: We — my recruitment for these guys was all technical. You guys come in, we get to make changes that’ll change the world. And that, that’s really the message I’m going to give you for our mission going forward. Okay. Other stuff and 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. So 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 and 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, former CEO of Linear Technology, a $1.4 billion chip company; Dan McCranie, who is right here, can we get a picture of him, please? There he is. He came over. Dan, he’s the former Chairman of five high-tech companies including Freescale and On, the two halves of Motorola, when Motorola spun out their halves and became and broke up into two public companies. And then Jamie Haenggi, she’s — she lives in Wichita and she’s a former CEO of ADT Solar. So we’ve got — we’re strengthening our Board and I’ll talk about the statistics in a minute. Okay. When we first went from being a startup to being a public company, we had a startup Board. And you don’t follow the independence rules. You get the best person you can. Now we have independence rules.

That is for example, the people, person who interfaces with the public can’t be me because I’m an employee. That’s, I’m not independent. You have to have an independent director for that. So in that case, we’ve got Ron Pasek, who’s the Chairman of our Audit Committee and he’s now the lead director and he’s the man that interfaces with the public. I’m Chairman, but he’s the guy that talks to the public. And secondly in the Comp Committee and we’ve got a guy used to run a complete solar. So he’s not independent, won’t be for five years. And he’s been replaced by Dan McCranie that I just met and Dan has been on the Board, way bigger, more complex companies than ours. So the two points I’m making here, of our 11 Directors, we have a relatively large Board, we have eight with CEO experience and we have seven who are independent.

So 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 and everybody’s worried about the market right now, market price. And the best we can say is we haven’t been damaged as bad as the other guys. So here I’ve taken three, four important companies. This is complete solar visa stock graphs. And if I summarize those graphs for year-to-date performance up to 427 when the snapshot was made. We’re a little bit ahead of even in the industries in the tank. So we feel that we’re being recognized for what we’re doing financially. Okay, a few things all-hands meeting. So I go to Salt Lake, I go into a big room in the basement. Between that and the people watching, we have a 1,000 people, 906, we have an all-hands meeting.

And by the way, the all-hands meeting, let’s just say I was considered an alien from Silicon Valley for a while. And I’ll talk about that in a minute. Okay. First thing we talked about was SunPower rebranding. Part of the company comes from a startup called Blue Raven. They’re very proud of their company and the concept of getting renamed, something I had to sell to them. So that I’m going to also talk about that because this is the first meeting we’ve had since we rebranded the 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 to go bankrupt.

So my first point is, we have to do everything, including those layoffs you hate in order to keep solid financials because you don’t have that, you don’t have anything. And they bought into that. Second point here is that acquiring solar companies to grow rapidly, now that in the solar business, in semiconductors, when I ran Cypress, I was there for 34 years, we acquired 26 companies. So if you acquire a company, 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’s not like that. The solar salesforces are mobile. And if you bring them in and piss them off, then they go away and don’t come back. So with we will acquire with trepidation and 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 person check from someone who saw the night light. I think that’s the only thing that San Francisco Chronicle ever wrote about me that was favorable. And here we are on top of Cypress. Cypress was, this is I think like 2002. And we just put on a roof British Petroleum panels. And Dick and I went on the roof. We were doing some sort of promotion. CEOs of the two companies, that is Silicon Valley and that’s San Francisco Bay. Okay. And SunPower is reason for being wasn’t we have the best salesforce 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 but you got a smaller panel. It’s pretty, it’s all black and it’s more wattage than the competing panel. So that, that’s what SunPower sold technology. And although, I’ll admit sales is dominant in this industry today, technology still matters. Hence the techie guys that we didn’t have that we took a few percent of our savings from the overstaffing in the company and recycled it into building a technology team and these guys will both work on that. This is an old slide that was made in 2009. Cypress still owned SunPower at that time. We built an automatic line for them to make solar panels and they got to $79 million in 2005, made a profit. We took them public. We, Cypress took them public and I was the Chairman.

Then they grew a factor of 18. The guy that did that was Tom Werner. Also I worked with Tom and they went up to $1 billion. So this is a rocket ride made SunPower the predominant company in the world. At that time, our investors, we own 40% of the economics. But there were 10 vote shares. So we own control and 40% of the economics. Our investors were racing hell, but they didn’t give a damn about our little semiconductor company. They wanted direct access to the solar stock. So we spun it out and 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 $6 billion. Two years later, the French went in the market, the oil company to a tall big bucks and they bought 60% of the stock of the company in the open market.

We all enjoyed the share price ride, but they took it over and it was no longer Silicon Valley Company, which is unique in the way it works. You don’t go; you don’t have your Board meetings in Paris. Just, I’ll just let you know that one doesn’t work. So that’s when I left. Okay. So the point is this is old SunPower after it was quote, saved back here. That’s where we are right now. Now let me tell you what I didn’t say explicitly. I did not say our next step is 774 and you can write it down, divide it by four and that’s the next quarter. I’m talking about our vision for the future. And all I’m saying is if you measure our vision on the — of a prior company in a different era, we’re moving along and we’re not done. That’s all I said. The SunPower brand is hugely valuable and I’ll make that point with this graph.

This is a company called EnergySage or East Coast Company and they quote solar deals and they quote what are called long tail solar deals. So this is to the homeowner, full retail. And in this case, they have a graph of price difference from the least expensive equipment pairing. So here the least expensive equipment is Tesla. They brought out a new battery and it’s cheap. And then REC is a high volume manufacturer and there they make great panels, fortunately not in China. And we use their panels right now. Okay. So this is 0% to the cheapest and that’s the lowest cost option. And we may have — we have to be lean enough to compete there. But I’ll fire the marketing guy who competes there, simple. Okay. Now you go along and you see there are the guys that sell volume at whatever price is required.

Then there’s a group of companies that have some sort of advantage and they have a premium. In this case, the first Advantage Company or group of companies uses Enphase inverters, not Tesla. And there’s a reason for that. And then REC panels, then you go up and there’s this tier of 20% to 30% premium. Then you go up here and you go, who the hell are those guys? And the answer is, and this by the way is last August, the asterisk down here, SunPower filed for bankruptcy in August 5, 2024. So we expect this to be the last report including his products. But you’d 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? So SunPower name, even with a lackluster product line was 50% and that’s what I want to get back. And we don’t have good market. And we’re going to have one of these meetings coming up. I’m going to introduce a marketing star and see how we’re going to go forward, right? Right now being griping about reading reports and griping about price is quote marketing. Okay. Now to get back to where SunPower used to be. I want to replace, I want to bring back that technology edge hence the guys you just met. So we’re going to partner with REC on panels. We already have, we already use their panels and when the SunPower inverters go away, we’re going to partner — our partnering with Enphase. So we use only Enphase inverters right now.

One good thing about being the CEOs, we now have a bomb spec AVL list and I have to sign it. So that’s what’s on it, among other things. So 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, division. 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 watts. And it had electric motors on it. 2 horsepower electric motors, 1,500 watt motors. You can see these propellers, they look like windmills because they are. Because at 96,800 feet, 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 feet maintained it. And that’s a world record. It still stands today. And it was done in 2001. And to me, I’m not going in the airplane business. I wish I could. We sold these for $200 dollars a watt today; it’s $0.31 a watt. But I’m not going in the airplane business. But 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 and I mocked up an old copy of the Wall Street Journal with an ad telling what I’m going to tell you right now. And this is the text of it. I’m also the IR guy in case you haven’t figured that out and my wife and our two person venture company is the helps sales with this.

So that became this, this is the actual back page, full back page ad of the Wall Street Journal yesterday. Normally I would never do such an extravagance, but I figured this changed the branding of SunPower. The new direction warranted it. So I already told you about that airplane. By the way, 96,000 feet is 30,000 feet above that, that’s F-15 Eagle. In my mind with 104 to 0 kill ratio, it’s hottest fighter plane it’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 feet fast. So they made it with an engine. It has 1.17 times the thrust of the weight of the airplane. Therefore it can go vertically and this airplane can take off and they’re actually on — you can go on the website, not our website, but you can go on the Internet and get pictures the guy taking off and going to 30,000 feet ready to fight.

The record from going from ground to 30,000 feet is 56 seconds held by that airplane. So — but it won’t fly high. It won’t, it’s not stable high. It’s a missile. When it gets up there, it’s not aerodynamic. Then 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 and they never had a problem. The Russians invented a plane called the MiG-25 Foxbat. It was 1,800 mile an hour airplane and 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 missile to go the rest of the way. Never happened. This thing travels twice the fat speed of a deer hunting rifle and all the guy has to do is turn 2 degrees to 1 and by the time the missile gets there, he’s 20 miles away out of radar lock.

In July 1976, this airplane set records for speed 2,193 miles per hour and altitude 85,069. For air breathing airplane taking off under zone power, not a rocket. That is the record. This by the way, little factoid I really like. Everybody knows that in Denver, you have to boil an egg longer in order to get it cooked. And that’s because the boiling point of water reduces as the pressure holding the water down reduces. So at 85,000 feet water boils at 59 degrees Fahrenheit. Said another way, your body temperature is above the boiling point of your blood. So that’s another way it’s not good to be up there. And these guys can’t just wear an oxygen mask. They actually have to have a full pressure suit fly that airplane. And they would fly for 10 hours at a time over the Soviet Union with the Soviets trying their latest little whiz bang, take them out, never had.

So this is a statement. I’ve already gone through it. I won’t do it again. There’s three companies that have combined old SunPower, New Homes, Complete Solar and Blue Raven Solar. Complete Solar is 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 forecast for revenue and then I pointed out I was the Chairman of SunPower and hence I have a emotional stake in this, we’re now Nasdaq. We now are SPWR our warrants and that’s our website and that’s our new logo. I’m a case you haven’t figured it out former stamp — I’m a stamp collector and so I turned this logo into a commemorative stamp. Okay, next thing customers. If you don’t treat your customers well, you’ll get blown up.

And Solar’s — 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. And 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 quote a three-year delay due to quality issues including a roofly communication breakdowns meaning that the panels didn’t talk to the in order to, legal escalation, et cetera, et cetera, et cetera. So these guys decided they were going to — they’re both — this is in Salt Lake. This is in our boardroom in Salt Lake. They decided they were going to fix it and they did. And so you can see it barely there.

She had — her dad sign this jersey and it now hangs in the hall of fame. And whenever you do something good for a customer, your name goes up. Customer escalations, this is a — we keep a lot of data. This is one graph. But number of customer escalations is down. And guess what? I answer my phone, I read my email. People know how to get to me and when — if you screw a customer, you’re screwing me. And I don’t tolerate that. And everybody knows that now. Yes, you can see we’re treating them. We always did. Complete Solar, Blue Raven in particular has always had a high four star rating, so did SunPower. So the culture is there to begin with. I’m not fighting against the culture. But 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 LA. The only difference now is the still remains are now shoulder length. And I see him every now and then. And he was the salesman. He had a BSEE but he was a sales guy out of Fairchild and he was the advocate for the customer. And if you screwed one of his customers, the wrath of hell would come down on you. And so 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 KCBS reporter in New York. And so 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. Tech you facilitate — the tack you facilitated that came to our house is New Jersey was able to fix our battery issues. There was a laundry list of errors that they showed us. But the sung strong engineer that you line up for, et cetera, et cetera. Down here, this is a slide again from our company meeting. And 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, string inverter. I won’t tell you that Tesla has a string inverter and we don’t — we have a micro inverter. 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 if at 50 volts each is 500 volts DC, not something you want around your house. String inverters are yesterday’s news and that’s why we powered with Enphase — excuse me, partner to Enphase. All right. This is the last section of — I want to just give you a flavor for the culture of the company. So then I asked for questions. And 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. And in my last meeting, I showed this slide. As you might gather, I am a movie buff. And this is a scene in front of the Frankenstein Castle from the 1931 movie. And I told him, I showed him this picture and 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.

And they laughed a little bit. And then we decided to try to make deescalate the question session, because they’re asking questions. What are you doing here? What are you doing there? Why are you doing this? Obviously, I’m — the place is getting cut. So they have valid objections. It’s not like they’re just being hard to deal with. So then I made. So this last time, I took this step one step farther, and I turned the question-and-answer into a game show. So I started by showing this slide. That’s me you see standing in front of the crowd. And then the game is a quiz game. Let’s play Poke the Monster. And I had a guy with a voice like a game show guy. And now let’s play Poke the Monster. And then 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.

And we had a — we had fun at that. And I had two questions to start out. This may make your head explode, comma, but — and then there was a question, and it was it. We’re starting to be able to work together, is my point. This — 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. But they had core values. And one thing I really liked, I walk into a building and saw in Orem, Utah and on the wall there’s core values. And I was going to debunk them and then I read them and they were really good. So I just read their own core values to them. Hard to gripe about changing your core values when you’re espousing following your core values.

Produce results that are worth more than the 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. And 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 bands. We prepaid the taxes, so the 10 bands were yours. We actually went to the bank, got the money and gave it out to the people. So they walked out. I learned this Intel Livermore did a weaker version of this 20 years ago.

I did this in Cypress pay in cash. And there’s something about cash, you look at it, especially the new dollars that are high tech for copying reasons, and it has an impact on your head. Then you have 10 of those in your hand and you go, I did something last quarter, it’s valuable. And that is different. And 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. And 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? And he said yes. And then he told me this story and you can find it actually it’s as 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. And 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 15. March 15, he filled out the form of mailed a check. And he knew that Americans would not write a check equal to half their yearly wage in order to even for war, even if it was just in the war. So 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. And in that way you never had it. You looked at your payment from the company as the payment that you got after taxes.

So 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 and then don’t 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. And again, Intel did that with $100 — $1,100 bill in their Livermore plan. So anyway, that’s the lesson I learned from this guy. That’s it. That’s our vision. We’re now SunPower. Questions?

A – Sioban Hickie: Thank you, T.J. A few instructions before we begin Q&A. [Operator Instructions]. Our first call this morning is from Derek Soderberg from Cantor Fitzgerald. Go ahead, Derek.

Derek Soderberg: Yes. Hey guys, congrats on the financial results here. Just continuing on your vision, T.J., you’ve already gotten the business to strong margin profile. You lowered sales commission significantly. But 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 $1 billion 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: So 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, 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. So it’s obvious it can’t get done. First thing you have to have is stability. Now we stabilize at $80 million a quarter. Okay. We have a direct salesforce that, that, so we sell directly to our customers. We have people that knock on doors and we have people at, in telephone banks, so that effort can grow and that’s the $80 million per quarter growing at some reasonable rate.

And I won’t even speculate what it is, but it’s a number that would take a while to get to $100 million. Okay. Two, inorganic growth. Based on my career, I am a fan of inorganic growth. And those new companies, by the way, they come in, there’s stuff they do better than you do. You — there’s a mixture of managers. The — you have merit wins in terms of picking the management team of the combined company. So I’m a big fan of that. It’s very positive and we will do that. But 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. So I have a plan for that part of it, oh, thank you, stock. So I want to tell shareholders around here we have our — 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 solar people. Those SunPower people got letters saying you’re going to get a stock option. Now there’s a one year cliff of that for vesting on that. So they’re in their non-vesting period. But I need approval in the company meeting, excuse me, in the shareholder meeting for that stock. And I won’t go into other details but you guys need to give me a stock. I need to grow the company. And that’s part of it. They don’t think about like Silicon Valley. I’m an owner of the company. I have a piece of the company. The stock’s going to go up. I’m — my weekly — my rent’s going to get paid by my salary, but my new house is going to get bought by my stock.

And that, that mindset is going to take a while. It’s already started in — I’ve had people tell me, yes, keep your stock, give me a raise multiple times. In the last company meeting, the guy raised his hand and said so, how do we sell stock? I said, we announced that you weren’t listening, fidelity; we have the fidelity service, which all Silicon Valley companies use as the best one. You have an accountant there. You have stock in your account. So it’ll be partly on stock. The other thing is it’ll be vesting of anything we pay. So one is, I won’t — I’m unlikely to go the company where the owner owns everything and there are a lot of the small solar companies to that way. A couple entrepreneurs start a company; they own 99% of the stock. Everybody else works for salary.

Hence the give me money, not stock mentality. And we’re — 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 and we’re going to revest that. The deal will be no, you don’t get X dollars at the signing. You get that over a one or two-year period. So using vesting of 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. 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. So that’ll be a winner. That’s also a Silicon Valley.

That’s why we are who we are.

Derek Soderberg: Got it, something new as my…

Sioban Hickie: Go ahead. Sorry.

Derek Soderberg: 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 to 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: 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.

Sioban Hickie: 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 Sonova?

T.J. Rodgers: 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.

Sioban Hickie: 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: 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. And when I came in there, I found a pretty sick management structure, expensive, aloof, not detail oriented. Having said that, the SunPower is got thousands of really good people in it, people you couldn’t get anywhere else. People came for the vision back when it was what it was. So the answer is if you know solar, if you’re smart, you want to work hard and when send a resume at TJRodgers — tjr@tjrodgers.com Rodgers got a D in it.

Sioban Hickie: Thank you. The next question is from [indiscernible] who asks if you have any comments on the TCL SunPower panels and potential panel partnerships.

T.J. Rodgers: In the same way, I talk about batteries which the Chinese have driven to prices where even Chinese companies go up, you understand they’ve got companies going out of business too. So when the prices are so bad, Chinese companies go out of business, you don’t want to start trying to make them in California. So on panels it’s the same thing. They’ve 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. And 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 dime a watt. So how do you make money on that? My — on batteries and panels, I don’t want to compete.

I wish the Chinese would drop the price way down. Then 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 that run those factories aren’t going to answer their phone, come to your house, fix your problem, install it quickly. We — 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 launch a lot of the time. And that is what we have to do. And they’re not going to take that job away from us. And if we do it efficiently, one, 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, 10, the way higher energy density.

Sioban Hickie: 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: 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.

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

T.J. Rodgers: 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. So 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. So 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 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.

So that, that’s the main event being 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. And 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%. So we have a toe in the water. This industry we talk about being big is the toe in the water. And what we’ve got to do is continue to hold costs and now 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. to 3:00 p.m., okay, then what are you going to do in the other hours of the day? And that’s where the problem is right now hence storage division.

That by the way, when storage becomes spread around the country, that’s 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’re there with your own battery and it’s not that far to see when you flip the switch and say goodbye and your solar system and you make your house more efficient too. You can’t waste energy. But you can gather enough energy from your solar system and store it that it’ll take care of your house. That, that vision is not that far away.

Sioban Hickie: 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. And what is your view on the current valuation relative to that?

T.J. Rodgers: 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. So first is, if you’re worth $160 million and they want to buy something that’s worth $160 million, their proposition is give me half your stock. Then 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, so what you’re doing is swapping your stock for our stock and you’re betting which one’s going to go up faster. So there are arguments today. Obviously what I love is the stock to be $20 and then you’ve got all the currency you want.

But what I’ve discovered in the solar industry, I call it money poisoning. That, that we had in the other industries, I always at Cypress I always had, $500 million in the bank. I never thought about cash ever. I thought about beating the bad guys. And right now, for the first time in my life, I’m living in a cash flow dominated world and I’ll tell you, we run a tighter, leaner company because of that. So it’s an — it’s a dangerous world, but it’s an exhilarating world. The market is infinitely large and if they don’t help us to death in Washington, we’ll be fine.

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

T.J. Rodgers: 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.

Sioban Hickie: Thank you. That is all the questions we have in the queue today. I’ll turn it back to T.J. Rodgers for any closing remarks.

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