SunPower Inc (SPWR) 2025 Q3 法說會逐字稿

Good morning. My name is Sioban Hickie, VP of IR, and I would like to welcome everyone to SunPower's third-quarter earnings call. I will review a few housekeeping items before turning the call over to our CEO, Dr. TJ Rodgers. To begin, this call is being recorded, and a replay will be available on our company's Investor Relations website within the Events section.

Please note, today's presentation 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 call, we may discuss certain non-GAAP financial measures. A reconciliation of any differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures are available within our press release. Lastly, we will hold a question-and-answer session after the end of formal remarks today. (Event Instructions)

I will now turn the call over to TJ Rodgers, SunPower's Chairman and CEO.

Thank you, Sioban. We've got a quarterly report here, third quarter. We've got our logo, the Helios, the airplane that set a record still standing in 2001 of taking off under the solar power -- SunPower solar cells, which by the way, took light through the bottom of the wings, which are clear plastic from both sides, bifacial, and hasn't been matched by any airplane, fighter plane, SR-71.

I'm tracking down. I can't afford this right now, but I should be able to buy one of these pretty cheap since they're now obsolete. And I want to -- I'd say I want to put it in the lobby, except it's a 247-foot wingspan. So I got to figure out what to do with it. I tracked down an engineer. It's got one on a hangar. He actually was part of it. He gave me this picture. This is the thing actually flying in about 80,000 feet, clearly, above the atmosphere, clearly 99.2% of the atmosphere out there.

Okay. You've got here Dan. Can we get -- you got here the administrative officers of SunPower, all of us. Dan just joined me. I have announced that before. He's had a storied career in marketing and sales. He helped me -- even helped me. He ramrodded the Sunder acquisition we're going to talk about today.

So he and I are the only two people in SunPower above the rank of Executive Vice President or equivalent. Sounds weird, but the way this business works, that's what we can afford. I kind of like it because I can micromanage and not have to justify it because there's no possibility of doing anything else.

This is our report that I sent out last night and our new logo. I created a commemorative postage stamp for it. Now I'm going to go into it. These are the details of the P&L, a simple P&L that it's easy to read. But there's a lot in there, and I'll go slowly over the lines to explain it.

First of all, this is how we run the company. And most companies are that way. We grew in the prior quarter, bad quarter. ITC hit the quarter a little bit. And there are two reasons for that. The ITC has not gotten any worse, and people are accommodating it and actually reacting to it. And we did the Sunder acquisition and there were like four, five days of sub revenue, not consequential, but in there. And those two things are what caused the number to go up. I'll talk about the next quarter in a while.

We had fall through to gross margin, good gross margin. I want to warn you that our gross margin isn't really 48%. We're doing some deals that we bought from SunPower, and they're on the books at a favorable price and they add about 4 to 5 points on the gross margin. Also, the merger of Sunder will take away another few points. So for those of you tracking the company, please don't put that in there because then I'll have to live up to it. Put that in there for gross margin going forward. It's still a good number.

We have two forms of OpEx here. FASB demands that OpEx include sales costs, commissions. I do an OpEx-less commission, so I can get that out of there and look at the company. Because as I've already said, keeping costs on our -- is extremely important. So then you'd look at last quarter, $17 million; in this quarter, $23 million; and say, well, $6 million, staying lean isn't exactly an accomplishment. I'll point out that our costs this quarter, actually flat to a little bit down, and there are some reserves in here that have added up to the quarter.

We had a good quarter, and we are lean and we are generating good gross profit. So what I asked them to do is clean the house this quarter. So we had some accounts receivable that were a year old or more. We got rid of them. One of our finance companies went bankrupt. We put reserves on the questionable line items for that. So this is a very clean number, and we still ended up even with that extra $5 million, $6 million in there with an operating income of $3.1 million. So that was, I think, a good accomplishment.

We're now up to 4.5% of revenue. Our target is 10%. I think that's totally achievable, and I'll explain how we go forward. As I said, it's a record. Bad news is we've got -- we've had $10 million or $11 million in cash, and I've actually enjoyed -- I never had that in my life as chip guy as you know. And I always had several hundred million dollars in the bank.

And that cash flow stuff, somebody else worried about in finance. Now I got to worry about it. And I found that I'm quite comfortable with $10 million or $11 million. That's the way we run for a year now. This quarter, we had some large payments on our convertible debentures. And I ran down -- we ran down to $4 million. So I'm out raising money right now. I'll leave it there. I'm out raising money right now.

Okay, to summarize, revenue increased to $70 million from $67.5 million, the low bottom point of the quarter. We made $3.12 million in profit, up from $2.42 million in the prior quarter, and our cash balance I just discussed. Okay. This is a graph of operating income. And by operating income, I mean the full definition of operating income in the GAAP sense, but there are -- let me tell you what the corrections are.

If you look at our operating income, then there's a correction on GAAP. So this is stock compensation and amortization of intangibles -- amortization or depreciation and intangibles of charge of $5.4 million, meaning the GAAP profit is minus $2.3 million.

Let me tell you what's in there. All but $1.3 million is stock compensation charges. Nobody expenses stock compensation. The price of stock is dilution. We have 83.11 million shares -- yes, 83.11 million. And we give our employee stock options, and we think that's better for shareholders, Silicon Valley style. The other $1.3 million, this is an important thing. And I'd like you to take note and make sure you keep this in your models.

We are now depreciating the name SunPower, came across to us in the acquisition of assets. We also are depreciating our software, which we built and paid for called Albatross. It's our main operating system. And we're depreciating that because in both cases, the name and the software, we had to buy it back, get it appraised, pay money for the appraisal, and now we're depreciating it.

So these charges, and there's a footnote in there what we -- we play a straight-on GAAP. We believe in GAAP, except for these foolish charges. And we've been conservative, as I said. All right, having said that, this is a graph of operating income minus those charges. And that's how we report and that's how we run the company.

It shows since we acquired. So the acquisition came here of the assets. We lost money. That was the division that we took from SunPower that we thought could work, didn't work, as soon as we got rid of it. We started making money. We made money ever since. We came out of the bankruptcy, the SunPower bankruptcy, with about $320 million in revenue.

We got hammered about like everybody else. This is no special charts, but it's disappointing to make this a very profitable number for us and then have it go down. But we still made profit at that number because we have a very, I'll explain later, aggressive campaign to keep costs down. And then this quarter, we recovered, as I said, the $70 million. And even with the reserves we took, we had $3.12 million in op inc.

Okay. That takes us up to Q3 '25. The future is here. We just acquired Sunder. There's -- in the first quarter, there won't be a lot of revenue from Sunder because their revenue comes from selling solar. The revenue is the solar sale, and their profit is minus their sales cost. Their sales costs are COGS for sales company. And therefore, all the deals they've done up to the time we acquired them got sold to somebody else.

Now we have to start to fill the pipe from scratch. So this quarter, we're going to put -- start putting and we already have started putting jobs. We're on plan. We got a plan for them. They're already integrated in that way. So we'll -- there's a pop in revenue. That's non-trivial. And it gets us back to where we were. And we're hoping for a record. Worst case, it will be above 80.

Then I had debates all day yesterday with the executive staff on what to say about Q1. I said, if I don't tell them about Q1, they will ask me about Q1. I need to get my off-the-cuff answer, which is almost always worse than an answer you thought about. And it is so uncertain. I won't know until the end of this quarter what we shipped and what backlog we'll have left to go into the next quarter. I won't know that.

Our bookings rate right now is fine. Our bookings rate just doubled because of Sunder, literally. But that's delayed. So we -- I have good FP&A and we gained -- meaning did simulations of what happens if this is bad, that's bad. And our worst simulation said, we're going to make at least $2 million in Q1. And I mean, at least, our goal is to beat that.

But I wanted to tell you -- and then, of course, I believe Q1, which is always the weak quarter, the winter quarter -- and half our states are snow on the roofs. The winter quarter will be gone, and we'll move into the spring quarter, which is a much better quarter and then the fall quarter, which is always a big quarter. So that's the best I can do. I didn't do any revenue. But I know for the minimum revenue, I have simulated that we're going to make $2 million. And I think we're going to do okay on revenue.

I've shown this many times, the way we put together the company, starting with 3,499 people from three companies was the art plan. I didn't inherit a huge number of people and go through the screaming and wailing of layoffs. We hired what we could afford. And at that time, it was 1,225, and we've been upping the bar or lowering the bar, if you will, since that time.

And that leads to this graph, which I've shown before. This is our headcount history. So 3,499 was back in July. When we acquired the company, the assets, we went to 1,341. And then when we started, post-merger day one, so this is our very first quarter here as a company, we had it down to 1,280. We got to our plan -- well, that was all I was going to hire, so I could guarantee it. We get to the plan. I told HR, how many -- how much hiring we could do?

And then that led to a healthy debate on who should we hire. Why should we hire them? Are they good enough? Should we leave the spot open and hire as we get into it and get an access to better people? And we did all of the above. So there's a target dropping to 980 and 820. You can see, our system, it's called the REC auction. I explained it before. It's a process I developed back at Cypress.

It works by forcing management every week to debate how many people we have, who left, do you really need to replace them? And if you replace them, is the best hire for the company the person that left or somebody else? And that means you have no RECs. Your VPs can hire all the time. And the VP of HR walks into the executive staff meeting and says, we lost six people -- now, this is in dollars, of course, but I can explain it in headcount easier.

So you say we lost six people last week. Out of 1,000, we can hire six people. And then the VPs together perhaps have 12 people they want to hire. Then we debate among us. And this gets rid of the President versus all the VPs, all the VPs arguing why they need to be bigger. This has then the guy who wants to hire against the President and all the other VPs, and the dynamic is better, and it typically goes into a merit-based discussion when the culture is there.

Okay. Having said all that, without of lot of hoopla, without any warning -- warnings, the government-required thing, we've managed our headcount down. And by the way, that last number, 829, includes 19 current employees from Sunder. So think about that, 19 people left. They were declared to be less important, and we decided the new 19 people would be those from Sunder. And of course, that's transformed the company. I'll explain that later.

So this is a great system. Looking at the number 829, then the next question is, so who do you hire and where? And I've shown this graph before, and I'm going to go over it again. It's a graph of headcount. So here, we see our headcount of 829. That's the number of the bridges to the last slide. Now this is a breakout. We look at five running weeks to see if we are growing or shrinking.

And then we put -- there's a target, 820, and we're almost there now, including the Sunder folks. And you can see here, we've already started talking about new number. And I'm not sure I'm going to force that number completely or quickly. Because as I look at the company, we're at the right size right now, and I can see a few spots. We're at threat there and we need more bodies. So we're at talking about upgrading, getting more efficient, in particular, quality in the solar industry ain't there, not like chips. And we're working on quality programs. Hence, if you look at my quality group, it's big because it needs to be.

All right. The major point here is, the red is revenue per employee per year. So Blue Raven, which is our sales and fulfillment organization internal, the old SunPower, if you will, is $293,000 per year per employee. I start griping at $300,000. I get happy at $350,000. So these guys have to either grow or shrink their headcount. And here you can see the headcount requirement for them, and they've been working on getting there.

New Homes is the other part of SunPower, separate division, doing a separate job, putting solar on new homes in projects, even including helping design the project. They have higher revenue per employee, and they also have higher profit. Now here's why Sunder is a good deal for shareholders. $4.2 million per employee per year, there are many software companies that don't have that. And why is that?

In the solar industry, based on custom and reasonable custom, the sales forces don't work for the company. They're contractors. So you pay big bucks, you pay a commission, to the sales force. And it's typically 30%, even a little bit higher. And then you get your job, you own the job, and then you make your money with the revenue from the thing. Minus 30% you pay to the sales company, you make your money underneath that.

So this company, if you look at the structure, what came in back when there is our first quarter -- first day, it's 20 people, 20 smart W-2 employees, running a sales force of almost 1,000. So they specialize in managing sales. We don't. We specialize in everything from managing sales all the way down through O&M, keeping your customers happy over the years when their system breaks and they can call a 1-800 number and get somebody that cares.

Okay. So that -- if you want to ask one reason economically anyway, there's more. Why is it a good deal? Now if I take the weighted average of these, this number has jumped over 400,000 for the first time for the company, and I'll show you that in a minute. I want to make one more point. These are efficiency numbers from our consultants. They're for 200 high-tech companies, and they give the median and top quartile being cheapest, lowest headcount, lowest cost for overhead.

So it says, for example, IT full-time equivalent per $1 billion of revenue should be $77 million and the best companies are at $62 million. And you have spend per FTE, you have percentage of revenue, and you have matrices -- you have a matrix for each of the important parameters. That's how we do it.

Based on that, you now can see the deployment of the company. And because I don't have a fetish about it, I just go over it twice a week in detail with a full meeting. So I already talked to you that quality is 18, and I don't cut them below that. They -- we need, if anything, more quality people. We need to develop a quality culture in the company. We need to develop quality awareness. We need to do training.

Finance, we had targeted 22. We're down to 12. We're now subcontracting some of the accounting functions that don't really need a full-expense American employee, and we're actually doing it as a fee per month. I have an IT guy from Cypress, my old company. He runs really lean. And this function is -- I'm happy with it.

Dan and I have 21 -- 19 people in admin that do all of admin. We're the top admin guys. I got six lawyers when I -- legal department with six employees. That's Drew Wanker that we introduced last time. We are on a third lawyer, he's really good, and I'm happy. My old lawyer at Cypress, who's Drew -- and I just conflated names. We're going to compromise on that, and we're asking Nick Wanker to change his name to Drew Wanker.

Anyway, when I came in, I had 57 lawyers in the company. All gone, 100%. Customer care, this is important. We've got 62 people. We're about at target. This is when you call in when something's wrong, the company proves that it cares. And we have a good star rating. But in terms of doing what we need to do, it's not as much as we need to do, and I'm asking them to do more.

Okay, so I've been able to tell you about our efficiency, the bodies, the fact that our overhead is lean, that is carefully managed. And we have a process for it. And that process has gotten us profit numbers you can brag about.

Okay. We talk about revenue per employee. This is our graph going back to the first quarter after the merger. We had nice trajectory, then we got hammered. We didn't lose employees as fast as we lost revenue because we lost like 15% of revenue in one quarter. Sunder brought in revenue and that improved it.

In this quarter, we're in the middle of the quarter, so I can already tell you. Well, I just showed you my twice-a-week estimate is $425,000. So in the letter, I promised $400,000. So I've got margin, and we're going to beat that. And that's the number -- if you drive that number in the solar business, you will make money. I made that point in the letter. Consequently, our only effective cost control method is to control employee expenses. First step, reducing headcount to the right number of employees is done. From now on, growing revenue will be our earnings driver; hence, our current focus on acquisitions.

Okay. This report went up at 4:00 AM California time this morning, and I took the snapshot literally as I got in the car to come here to talk to you. So what does the snapshot say? Over a long period of time, they're unsure, and we bounce between -- if you forget the anomalies, they bounce between $1.50 and $2. So this is the confined space we're in. This looks to be a breakout. What's the volume today?

37.7 million.

37 million shares traded today. So in our attempt to raise money that we're -- I'm in right now, I'm going to try to get some of the big guys to have enough confidence to get into us and trade toward institutional shareholders from retail shareholders, which is where we've been. And they supported us, so I'm not griping.

Okay, share price. This is a graph of market cap on revenue. Market capitalization of revenue, the price to sales ratio, so I can have a short term for it. So it's nothing but revenue in a quarter times 4 times price-to-sales divided by share count equals share price. This says that our peer group -- and this is a reasonable peer group, and it's got good and bad companies, and it trades at about 2. And this shows that the industry is together going down.

We're dragging along here. And it is what it is. We have given shareholders our employee shares, and our executives have a significant number of shares. So we will make up as individuals when our company makes up. That's Silicon Valley all the way. Our headquarters is in Utah. Less common for that to happen there, less broad belief in it, but it's coming around.

So if you take even this last low quarter we had, not the 80, but 70 times 4, if you assume we can get to a PS ratio of 1, up from -- up to here, still below our peers. And our official 83.11 million shares, that's $3.37. And that's not a pipe dream, an unreachable goal, or anything like that. That's a calculation of something as soon as we have big investors that belief in us will happen.

So why hasn't it happened? There's one. There's always been a concern for viability. It's reasonable. I can just tell you that I'm 77. I don't need to do this economically. And I didn't start playing this game to lose. So I'll just make that statement. And the second thing, which is also important, maybe even more important, is we have disinformation from retail market data companies.

I gave a talk at Canaccord in Boston. And their format was to have separate rooms, and they invest in the -- the company team would go in there and set up a PowerPoint. And about the 10 to 12 investors would show up and they would operate on cycles, 45-minute cycles. And I was sitting behind the guy, and I was given this pitch, and he wanted to find out more about us, obviously.

I watched him type through a bankrupt company, has been delisted. Then the bot questions, the brain-dead bot questions: is SunPower a good buy? No, SunPower is not a good buy since they just filed for bankruptcy. Of course, that was 1.25 years ago. So we've got companies that pretend to give good advice to investors and they don't. And we're starting to b**** about it and the b******* will get stronger.

We've had a breakthrough. We called CNET. They're a company that says, printing the truth is important. It's one of their core values. I put their quote -- that quote in the quarterly report. And we said, its hurting us. We're a new company. We're doing well. We feel good about ourselves, and we're having trouble getting people to know that.

And they said, you're right. We understand. And the pushback, we've been getting some. Oh, man, this is all over. It's difficult to fix. Yada, yada, yada. They fixed it in two weeks. Now I have a data point to show to our other companies and start getting us recognized for what we do, good or bad, not the history of the old company.

This guy is Eric Nielsen. He's our new EVP of Sales. You can just look at him. You can see he is a sales guy. You can see he's got enthusiasm. He's big, like 6'2. He's athletic, and he's got a lot of life about him. And he was the President of Sunder, and he's now our EVP of Sales. I'm going to talk about the Sunder thing briefly because I've reported on it before, but I want to remind you what it did for us.

And then I want Dan to talk about Sunder. The way it works is Eric reports to Dan. And Dan and I are the top two guys in the company. And since Dan is a sales expert and I'm not, we're doing better with him there. That's why I asked him -- he's on the Board and I asked him to come in.

SunPower closed the strategic acquisition of Sunder Energy. That makes us the number five residential solar company. Their sales force was complementarily distributed relative to ours. So we went from 22 to 45 states. Our dealers -- so the number of 1099 contractors in our dealer sales force went up from 888 to 1,744. I track that. There's another graph I decided not to show, but that was last week's graph.

And what's interesting is I asked Dan to tell me what our bookings rate was doing, and he got a little frown. Doubling, as a matter of fact, a little more than doubling. And then, of course, when I'm promising double revenue, so I've got this sentence I got to deal with. So I put in a footnote for you. Remember, a 2x increase in bookings equates to 1.3x increase in revenue.

That is, the bookings only produce 30% of the revenue and then the EPC function, taking the booking and turning it into a system, creates the other 70% of revenue that's how the industry works. And right now, they're filling our pipeline in new bookings because their old bookings got sold to somebody else before they came in. So I just -- and what I'm worried about is you guys look at that, write some big numbers, and then I have to explain why I missed forecast in the future. So I'm putting that warning. Tell us about Sunder, Dan.

So there's two things I'd like you to take away from this. First off is that Sunder knows what they're doing in this space. They are the acknowledged experts in how to hire, motivate, drive, retain and fire, when necessary, a 1099 sales force. This shows up fast inside of SunPower. In the first 3.5 weeks, the Sunder team has captured the imagination, frankly, the heart of our existing sales force. They are now totally behind Sunder. They're modifying their behavior. They're modifying their sales strategies to be more like Sunder.

So the first thing I'd like you to remember is that Sunder knows what they're doing. They are absolute pros of this. And they are not only contributing to bookings organically from the previous Sunder organization; they are causing an increase in bookings in our SunPower organization.

The second thing is that Sunder is strong where we were weak. We were in about 22 states. We're now in 45 states. The important thing to remember there is that there was very little overlap between where Sunder was and where SunPower was. In other words, Sunder was strong in California, Texas, Florida. We were not.

So what you're seeing now is no negative synergies in bookings. And as TJ pointed out before, our booking numbers are extremely strong in Q1. The first three weeks were at 120% of plan discounting to Sunder. So it's even more when you add the Sunder bookings on top of that. So we're proud of the bookings. We're proud of the way that the SunPower sales organization is aligning with and joining with the Sunder team.

Okay, so a couple more points. Because of that feeling, Sunder -- we said, Sunder, you maintain your own practices. Normally, the acquiring company says, this is how we do business. And when you acquire a company that does business in a given area better than you, you take it. So we said, maintain your own practice. In particular, they are known in Solar Valley, Salt Lake. They have state-of-the-art sales force in recruiting and training, getting good people. And they have a fast training, so they can take a raw recruit and put them on the street as effective.

That word is getting around in the industry. Since they came in, we've had 232 inquiries about joining SunPower's Sunder division. I'm glad I left it that way, and we've already signed up 195. So my experience is that the dealers scatter when something changes in the main company. We're not having that problem.

The other thing we did is we merged already faster than our plan into a single 1,744-member sales force led by Eric. Dan talked about that. Then I had to socialize it inside because I did -- I've done a lot of acquisitions in semiconductors. So you bring in a little chip company, they got some hot new chip that does something, you've got the fab and the sales force and the infrastructure in the public, so they want to come in.

Then you bring them in, and then synergy comes from -- you've got two of these, two of those, two of those, and you pick the best. And that means there's layoffs and promotions necessary in order to get the synergy, the benefit that comes from the merger. So we had -- I tracked down our VP of Sales. His name is Evan Dwyer. This is SunPower's VP of Sales, our sales force. And I threw out some broad areas to talk about. In other words, I didn't ask him specific questions.

That was now a day before yesterday. And he said, quote, now we have the people, systems, and management to achieve the growth we need. Bingo. Because if you don't have your sales force behind you in the spirit, it doesn't matter how tough a manager you are. It ain't going to happen.

So that was my closing line in the quarterly report. The big guy over here is Eric, unfortunately preparing this thing. I didn't get to see the factory name until midnight last night. That's [Mike Caves]. That's California and Eric. Here's Evan Dwyer, and he's -- we invited them to the party.

Okay. Outlook. $83 million in revenue, which is an estimated record; $3.5 million profit, an estimated record. These are both estimates. Subsequent events, other stuff that happened that matters, so it should matter to shareholders. We signed a joint development agreement with REC. There will be a press release coming out on it. We're working. We signed the agreement, and we have a formal agreement. We're now working out on who does what, when.

They are the largest seller of panels in the United States. They're currently overbooked tremendously. Nobody wants Chinese panels. They are risky. They make stuff as good as the best Chinese companies. They're out in Singapore. And we've got Safe Harbor stuff going on, so they're booked. And the question is, what can we do now to get going? We're working on that. And when we have an answer to that question, I'll come back and do a press release.

And by the way, they are our panel partner. Our inverter partner is Enphase. There is a lot of details behind that I won't go into today, unless somebody asked a question. But Enphase sales batteries as well. And we just received a $200,000 battery opportunity through Enphase. So our company, which has not done a good job in batteries, primarily because our company equals Blue Raven and New Homes, neither of which is fertile territory for new batteries, Sunder has a 50% attach rate with batteries.

We just got this big opportunity, so we can start flexing our muscle. I qualified two quarters ago, 100 technicians who got more pay and status pump and last to get laid off status in the company when they went -- did formal training on how to install batteries and do it quickly and efficiently. So we've got them waiting. We are doing about a 10% attach rate. So think about 100 batteries a quarter or something like that. But -- so they're keeping in shape is my point.

Now all of a sudden, we're going to have a battery opportunity. Going forward, I want to show a mission statement. I created this last month. Consistently, profitable growth from $300 million in 2025, we did $303 million to $1 billion in 2028. So three years to $1 billion is 50% per year, very close. It requires internal growth and acquisition.

And then this was an estimate I put out. I left the estimate in there. The bottom line, the quarter we just reported, share count I just reported and our goal for share price, I gave you the equivalent calculation for today. So in Q3 '28, we'll grow to $250 million a quarter. That is $100 million per quarter less than all SunPower once did, so it's doable. The acquisitions I want, and I'm currently targeting six companies. And now I want more Eric Nielsens. I want the economics, obviously. I want companies that are already efficient, so I don't have to pare down the company. And then I want companies to bring technology to us.

And there are -- those Venn diagrams do overlap, and there are a few companies in that category. Even with 100 -- even saying we're going to pay 60 million shares to pay for those guys, our revenue per share is going to be $7.14 and at a PS ratio of 1. That means $7.14 share price and PS ratio of 1.6, which is currently Sun run. Therefore, achievable, if we get recognized as being a contender in their category, $11. So this is the pitch I made to investors.

Second part of it, SunPower will again be recognized as number one in solar by introducing the advanced technology hardware and software controller system products. So the advanced technology hardware, we're working with Enphase. They just introduced a gallium nitride version of their inverter. And people don't understand how important that is. I'm going to try to help them by writing a paper on that.

And software control system products, everybody thinks of solar as something you kind of patch together or you buy your panels here and your inverter from Tesla or Enphase, which is architectural change. And they don't understand you're buying an electronic system, and that electronic system has to do its function. And that means the parts have to talk to each other and control each other.

I'll give you one factoid on Enphase. First of all, if you go look at their app, punch on your cell phone, you'll see a satellite picture of your house, and you'll see the power of every one of your panels displayed from sunrise till the time you look at it. Secondly, they have a new app, which is, you activate it, it tells your system, and it's AI driven. It tells your system, this is a California thing, I want to charge my electric car with only solar energy.

When you think about it, that is a technological breakthrough, a pyramid. I mean stacking the rock pyramid proportion. It means you can drive your car with sunlight. Your car doesn't burn in the oil because -- or any gas because it's electric, and it doesn't use any electricity that burnt oil to be created. So it allows and it gives a picture for a significant population in California, how we can drive around all we want in the future without burning oil.

Now some of you are in the oil business, and I have nothing against oil, will say, okay, that's fine. But there's a bunch of people in California who care about it. That is an application on an Enphase-based system. Undoable, if you patch in anything else because you disrupt, you cut the cables, you change the computer, you change the language, you change the communication bus which, by the way, is the automotive CAN bus, cheap highly reliable. The thing that connects your steering wheel and your brakes to the activators in your car.

So anyway, SunPower will again be recognized as number one in solar by introducing advanced technology hardware. I'm hoping to do that with REC and software-controlled solar system products that already exists with Enphase, and we're going to -- that is going to be a stream of products that aren't about hardware. Okay. We are ready for questions.

(Event Instructions) Derek Soderberg, Cantor Fitzgerald.

Yes. Hey, guys, thanks for taking the questions. TJ, you just mentioned the $200,000 battery opportunity with Enphase. I'm imagining those are part of a solar install as well, but curious if those are Enphase batteries. And then how should we sort of quantify that opportunity for SunPower?

Well, first of all, let me say, as one of only two people above the Vice President level, I asked about our AVL, and we kind of had one, but we kind of didn't use it. So I took over the AVL and there's only one battery in it. It's called Enphase. And the reason is exactly what I said. The Enphase battery is the only battery compatible with future electronic systems. So it came through Enphase. I am not at liberty right now to say what it is. It's not new stuff, dig it out. It is an opportunity for an existing group, and I'll leave it there.

Got it. And then just on the sort of 2028 goal for the company to kind of reach a $1 billion run rate in revenue, just to clarify, I'm wondering -- it sounds like the base for gross margin is 38%. Is that including the acquisition of Sunder? That's sort of the range of gross margin we should expect? And then, TJ, I don't know if you can comment on this, but how do you envision earnings per share kind of when you guys are doing $1 billion? Where can we sort of get -- I think, in the past, you've said kind of a 10% profit margin. Is that still the case at $1 billion sort of revenue scale?

So it's a multiple-faceted question giving me many opportunities to commit future s******. First of all, what I put on the slide, and we'll put this pitch on the website so you can get what's in it, it's 38%. That's where I'm at now. Okay, 38% is about where gross margin is about where if you take an order and run it through today's SunPower, we're lean enough to get 38% gross margin and with a little bit more volume get 10% profit on the operating income. So that's our goal.

Now then the question is, what is our reported gross margin at the aggregate level? So for a while, we're going to -- we have -- you can think of as two companies and taking a mix. Right now, Sunder is a sales company. And their margins, gross margins, I want to refine the numbers, but right now are in the 16% range. So I'll gladly take a profitable -- and they have almost an overhead with only 20 people. They're profitable on the bottom line. I'll gladly take a sales order and report it as a SunPower sales order.

But I'll only get for the potential value of a system, 30% of the sales order for the sales money. And for this first month, they're still selling to the companies they've always sold to. Right now, we won't get any revenue because we can't get into our line for a quarter until they fill up our line. Secondly, we cannot double the size of our installed -- installation. We got 150 guys out there. Can't go to 300, train them, the whole thing.

So there will be a ramp during the year. I pointed that out, and it was a confusing, I admit, press release where we go from sales-only revenue, gross margin to sales, plus EPC from us. So it looks like an internal order at zero cost. That's a 38%, 36% if you want to be a little bit conservative.

And eventually -- and it eventually means down the path will be about -- to pick a number for the future, you might want to do a 50-50 mix of those two to calculate the numbers. And in the future -- I'm a big fan of divisions. And in the future, we'll give you some number. And I've been telling you, I've been indicating without giving numbers, the profitability -- revenue and profitability of Blue Raven, our internal sales force and fulfillment organization; and New Homes, our internal New Homes organization, which sells to corporations 300 homes at a time.

And then we have a new one. We'll have a sales organization. We're still in the process of working out how we will report that. One way is to leave the massive sales organization. They simply can sell to us. They sell to Blue Raven. Blue Raven would install. Blue Raven makes 70% of the revenue based on installation, doesn't matter if they bought it from the guy next store or an outside dealer. The sales force can remain pure sales force that's created all of the goodness that they have in that organization for running sales.

That's yet to come. And the whole reason I was ambiguous, all I can say is I'm remodeling the c*** out of this thing, and we understand it pretty well now. And all I can tell you is we're going to make money in the first quarter. And I gave you that number. And you got to wait until this quarter, 90 days from now, and I'll give you more data.

In EPS, ain't there yet. I can calculate it for you. We have gaps as you got to calculate, so we calculate it, it's negative few pennies per share. But until I get the thing profitable and start worrying about EPS -- I'm dealing with operating income. That's my currency of exchange with our shareholders.

Got it. That's all the questions for me. I'll pass it on. Thanks, guys.

Thank you, Derek. Our next question comes from the web. Based on 2Q, SunPower's breakeven revenue has proven defensible in the mid-$60 million revenue range. Post acquisition, do you anticipate any changes to that breakeven revenue level?

No, and that's the beauty. When you think about it, you're struggling for orders, the ITC is screwing everything down, and the guy walks in and says, I got a group of 20 people. And if you hire us, put us on, and give us stock options, we will double your order rate. That's a no-brainer.

So no, we -- the only thing we're going to have to spend more to get bigger is the fulfillment group is going to have to get bigger. And I want them to get bigger. And I want to get them big enough that they -- but I want to have excess orders all the time. So we're selling the orders we can't service, and we are executing on the orders we can service.

Thank you. Our next question comes from Gus Richard from Northland Capital. He asks about battery contract duration. How many years is the battery contract for? If you've got the numbers right, it would be $1 billion revenue for Enphase.

Yes. 50% of what I said is $1 million. I'm hoping for more than that. The opportunity is there, $200,000. 50% is $100,000. When you think battery, think $10,000. There's 5-kilowatt-hour batteries, 10-kilowatt-hour batteries, the average out there is 8.5 kilowatt hours. Batteries now are attractive. Battery-only sales are attractive. The way that happens is, take San Diego Gas & Electric. I mean I like the gripe about PG&E. But they're equally it's bad.

So when we went to NEM 3, net electricity metering revenue 3, or REV3, they stopped paying their customers who had excess power on their roofs and put it back into the grid at the grid rate that they were charging. And they started paying $0.03 a kilowatt hour. Okay, so that means you're losing your power. That means your solar system, new solar system wouldn't have an ROI. Now the other interesting thing is that after 4:00 in the afternoon, they start charging at a high price. I once knew it, but think about $0.40 a kilowatt hour. So they'll give you $0.03 and take $0.40.

All right. So you put a battery in. It's called the grid-tied battery. It's the cheapest and most cost-efficient battery. It sucks up power till noon, saves it, and powers your house starting at 4:00. So you pay $0.03 a kilowatt hour that you could have gotten for it and you give back $0.40 a kilowatt hour. And however big your battery is you get that every day. So it's $0.40 a kilowatt hour times 5-kilowatt hour battery, even small battery. You're looking at $2 a day times 365 days, et cetera. So this thing pays itself quickly.

Batteries are going to become more important that comes from the fundamental problem. The sun only shines on average in North America five hours a day. So if you want to use solar power, which actually getting kilowatts off the system is the cheapest possible power. And what the opponents of solar say is that it's really more expensive than that because you have to have two power plans, one for the day and one for the night. And when you have one for the day, yes, you can have a nominal gain on it, but then you got to turn on the big expensive one and burn natural gas at night. And that's the argument.

Well, it just says we need more storage. So right now, storage and utility space is going through the roof. The best storage is if everybody at their load has storage, then I don't have to have some giant battery going into transformers and then putting out power in the neighborhoods. The guy out there can, in effect, reduce his load. If you think about it, you can reduce his load. And that's why batteries are happening now, and it's a big deal.

Now what I just said I actually saw in Oshkosh, and I was trying to sell a battery at the dining room table, kitchen table. We don't have dining rooms in Wisconsin, only kitchens. So I gave them the thing and the guy looked at me, kind of frowned, and said, Wisconsin Power and Electric, their cost is $0.12 a kilowatt hour. And they only go off for a couple of hours every year. Why do I need a battery?

So that's one of the reasons we haven't sold as many batteries as I would like, as we're deployed in those states, Midwest, Blue Raven. Now all of a sudden, this doubles our sales force in all the states where my argument about saving power for nighttime are absolutely valid and are going to get better as time goes on.

Thank you. The next question we have, while appreciating the opportunity in the market to acquire attractive assets currently, can you speak to how you think about the balance between acquisitions and bolstering the balance sheet and the potential need to raise capital?

Okay. I try to make these things look simple, but I think carefully about them. So again, unlike my training, which came from Collins and Porras' Stanford one, the idea of culture and mission statements being better came out, I wrote this mission statement. Because right now, as a culture, we're not ready to write one, consistently profitable growth.

I didn't say grow from $300 million to $1 billion. I say consistently profitable growth. So I plan on putting something on the bottom line every quarter. Period. I don't think you can run a company. The idea of running the whole and I'll burn a lot of money, and then it will get better when things -- when the volume goes up, that's not what we're doing. So I'm looking for acquisitions that are effectively priced, I'll use that word.

We paid -- I forget -- we paid -- our multiple is $0.45. So if I'm paying more than $0.45 times sales for any company, I'm diluting our price-to-sales ratio. So that's kind of like my budget. Then I look around. Then I find the team where kind of like some of the guys and hope they can become our new executives, some of our new executives. And where there's complementary -- they're in different states. And so I'm shopping for things that fit in.

During my time at Cypress, we acquired, as I said, 26 companies. And my observation was that when mergers or acquisitions didn't work is when there was a culture problem. So I'm real big on culture. And the math has also got to work out, and I have a budget. Now as our stock goes up, and I'm able to pay more, right? So I'm able to pay more and maintain my budget. So that will help there too.

In terms of -- then there's the last thing is work. What if I gave you $1 billion worth of orders today? The answer is you'd have $0.9 billion at the end of this quarter left because I can't do $1 billion. The same is true for mergers. In Cypress, we did about one a year. And there is a flurry of activity in a given quarter. Then the second quarter was hard work. The third quarter, they were kind of part of us, and then we moved on. That process is spec.

And Badri Kothandaraman, who worked directly for me, the President of Enphase, has acquired five companies. He's taken that spec to the next level, and he's -- I borrowed that spec from him. So I believe we're capable of acquiring something like two companies a year, maybe only one company in the first year and three quarters later.

So I won't dilute price-to-sales ratio. I will pay stock, if I can. I will raise money with the stock as soon as the price allows me to raise money without being highly dilutive. You guys -- I'll give you a factoid. My current salary at SunPower is zero because I don't want to screw up our profit because I own 30 million shares. I've been working at the company for years, collecting shares from private rounds, stuff like that. So I make money only, literally only. I only charge airplane fare to them. When the stock goes up, that's it. I'm a shareholder and I'm a pure shareholder, and that's what I'm planning on doing.

Thank you. I do want to point out that we are at time, but we do have a few more questions in the queue.

I'm here in -- we're in the [Noviks], by the way. They have a little studio they lent to us for free. So we're here, now go ahead.

Okay. We have a follow-up question from Gus Richard from Northland Capital. How many of the Sunder sales are being converted into sales at this point into EPC?

The question is how many of Sunder orders are being converted into EPC revenue? Okay, that I will report this quarter. The answer is very little because it's going to take me one quarter to fill the pipeline. What our plan is, in the fourth quarter of this year, if we manage to capture half of the orders from Sunder, and that's pretty aggressive, we will then get $20 million per quarter of sales revenue from Sunder just for their orders, and $20 million more of install revenue from internal. And right now, this quarter, we get only the sales part of it.

Okay, thank you. Our next question is, as energy demand accelerates due to data center growth, energy pricing will continue to increase, making solar more attractive. How does the energy price trajectory play into your long-term vision for growth?

I reviewed a startup the other day, and I'm amazed at how brilliant we are as a country. We keep kicking ourself, but we are brilliant as a company -- a country. There's a thing called Helms in Nevada, Sierra Nevada. PG&E once screwed my company by shutting down my power and ruining millions of dollars' worth of wafers. So I had them on the run, and they asked me what would take to get me off their butt. And my first answer was, I want to go to Diablo Canyon Nuclear Plant, and I want to tour on a Saturday morning with a real engineer. No problem, so I drove down a nice little ride on Highway 1.

At the end of the tour, which was amazing, I went to the room and I looked out in the hills. And there are three wires going out of Diablo Canyon. We're talking wires that are this big around going out of Diablo, 2 gigawatts of Diablo Canyon and then up over post and disappearing. What's that? That's our connection to Helms. What's Helms? Helms is where we store energy.

You can't turn a nuclear plant on and off. You might have -- the ramp-up period is a month to get it up, then it runs 24/7. What's that? That's to restore energy at night and then they release the energy at day. So I call back the PG&E guy and I said, well, I'm feeling better, but I need one more thing. Okay, what? And I said, I got to go to Helms. I want to see Helms.

Two lakes, Sierra Nevada, 4,000 feet apart. In the middle, think about a dam, the hydro part of a dam except it's buried inside of a granite mountain, literally a mile inside of granite mountain. And at night through a tunnel, down comes the water, turns the turbines, and this is a big plant and then goes down to the lower lake, so the lakes go 6-feet change. Then at night, they turn the turbines around and they turn into pumps, and they pump water from the bottom like back up again. That's how they -- it's the world's biggest battery.

Getting to the question, I just reviewed a business plan for a guy who -- and by the way, that's known technology and it's not that expensive. It's cheaper than any storage technology, cheaper by a factor of two than the cheapest battery for a car, and cheaper by a factor of 10 than batteries you put in your house. A storage -- a pump storage, it's called.

So what's your plan? Well, we go next to an AI center. We have these machines. The machines that bore make 50-foot-diameter tunnels, and they go at the rate of, I think, like 30 feet a day. We said, well, we dig on down to over 4,000 feet down, that's doable, then we dig a maze of tunnels down there. So we don't have to have a lake and we don't have to be in the mountains. And we have a little artificial lake on top and then we've got those tunnels and we pump water from the tunnels back up and back down. And we're right there, so we don't have to have a transmission line that's expensive when we feed the AI center.

All of a sudden, you realize these problems will be solved. The reason we're worried that they can't be solved is the politicians, both sides, talk about doom and gloom. And it's known psychologically, people worry more about problems than they worry about upside. But these problems are going to be solved and we're going to have our data center.

And by the way, I'll make one more prediction. I don't believe we're going to need all the power. Somebody took the worst power from the earliest generation. It's like, what if you built all the computers today out of vacuum tubes? Well, we need more power than the United States generates today to run all that number of vacuum tubes. Well, don't run vacuum tubes and invent transistors.

So I think the power required to do AI is going to go down. And I've argued that way at a philosophical level, and the AI guys that I know tell me why it can't be. It will be. And it will be ideas I talked about generating the power, but there are a bunch of start-ups I've looked at where they're planning on making AI functionality draw less power for a given result.

Thank you. Our last question, in the last earnings call, TJ mentioned that he may still be -- that he may not still be serving as CEO in a year's time. Is this still expected? And can anything be shared about preparations for this transition or the succession planning process?

Okay. First of all, I didn't set my target to be -- to run another company. I got drafted. My analogy that the lawyers pitched about was it's like you go out in Christmas, and there's a baby in a basket on your front doorstep and it's raining. You take the baby in, all right? So I got drafted. Now I'm having fun, and I'm frustrated sometimes when I'm having fun. And I'm in no hurry to leave. I have been trying in earnest to replace myself. But I'm not going to have a goal and say I'm going to walk out of there.

I've had three actual, nobody knows about them, attempts. And it's a tough job because the financial requirements and every bit of stuff is semiconductors. But the environment, the solar environment, the culture is way different. It's more like semiconductors were in the '80s. So these -- I won't use the word millennial, but these young guys come in and then look at the thing. And then I say, well, I'd like you to meet Dan. We are the administrative executive staff of the corporation.

You may be able to hire one guy in the future because that's all you can afford. I think it's a great challenge to go to the next level in learning how to run a company, really, really lean. So I'm all for three. All for three. I have another target I've started talking to. But it's a tough job, and you got to find the right guy. And if I find the wrong guy, then okay, great, I retire. Guy comes in, doesn't like the job, thing blows up, and okay, I blame him. I don't want that. I want this thing to succeed.

Thank you. And as one of your rank and file, I will say the joy is in the journey, and we appreciate you guys all being here and teaching us and guiding us. With that, this is -- that's the end of our questions. This concludes our Q&A session, and I will turn it back over to Dr. Rodgers for closing remarks.

I've been loquacious for the whole thing, so I don't have a lot more to say. I think that that mission, which, by the way, it looks simple because -- classic Winston Churchill quote. He has a letter that somebody owns now. And he started out, please pardon the long letter. I didn't have the time to write a short one.

So this -- can you put on the mission statement? I don't put it on here because it kind of undermines the meaning of mission statement of the solidity That's REV25 and those used to be paragraphs. And that little middle section got put into some advertisement to get in the last round of investment where we raised the money to acquire Sunder.

That's it. It's real. I mean it. We're going to do it. And every week, I feel the ship turning more toward being part of that vision. Dan, you got drafted too, right? You've been working with me for a long time, and I need some help here because I got sales problems and I need your help.

Yes, since '93. It's a long time. I think there's two things I'd like to leave with on this. First off, the acquisition of this particular company, Sunder, is positively transformational for our bookings, positively. And you're going to be seeing top-line numbers from us as a result of this booking transformation throughout 2026 and 2027.

We're not even talking about possible other upsides that can occur above and beyond the Sunder acquisition, including tailwinds from the industry. Right now, there's a lot of consternation about the removal of the ITC tax credit and the effect that has on what we call cash or loan bookings, and that will be an impact. It's not going to materially impact SunPower because of the Sunder acquisition.

If, in the future, energy prices increase or some other factor occurs from a market point of view, it causes the loan part of the program to increase. We'll enjoy that as well. So I think this is a pivotal point for the company. We've made a positive move in bookings that's going to allow us to have strong, strong revenue growth, independent of outside activity. And as outside external activity starts to improve in the 2026 and 2027 timeframe, you'll see even stronger growth for us.

Thank you. We appreciate listening to my long-winded dissertation.