Good day, ladies and gentlemen. Welcome to Maxeon Solar Technologies' third quarter 2023 earnings call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. And now, I would like to turn the call over. One moment. Thank you, operator. Good day, everyone, and welcome to Maxeon's third quarter 2023 earnings conference call. With us today, our Chief Executive Officer, Bill Mulligan, Chief Financial Officer, Kai Strohbecke, and Chief Strategy Officer, Peter Aschenbrenner. Let me cover a few housekeeping items before I turn the call over to Bill. As a reminder, a replay of this call will be available later today on the investor relations page of Maxeon's website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the Safe Harbor slide of today's presentation, today's press release, the 6-K and other SEC filings. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. To enhance this call, we have also posted a supplemental slide deck on the Events and Presentations page of Maxeon's investor relations website. Also, we will reference certain non-GAAP measures during today's call. Please refer to the appendix of our supplemental slide deck, as well as today's earnings press release, both of which are available on Maxeon's investor relations website, for a presentation of the most directly comparable GAAP measure, as well as the relevant GAAP to non-GAAP reconciliations. With that, let me turn the call over to Maxeon's CEO, Bill Mulligan. Thanks, Rob. Maxeon experienced dramatically different trajectories in our two businesses during the third quarter. Our U.S. utility scale revenue was up 10% versus the previous quarter, and we are on track to exit the year with fully ramped manufacturing facilities, a sold-out backlog at higher prices that we expect to make material margin contributions in 2024, and the achievement of important milestones with respect to our planned U.S. factory. In our DG business, we face significant demand challenges caused by the suspension of shipments to SunPower and the effects of a broad market dislocation in Europe. I'll spend a few minutes now detailing these different market environments and the respective implications for Maxeon. Kai will then review our Q3 financial performance and provide guidance for the rest of the year, and then we'll conclude with Q&A. The U.S. utility scale market is a key focus for us and our primary growth driver. With our existing North America utility scale supply chain reaching important operating efficiency and profitability milestones and our planned New Mexico factory entering the engineering and design stage, we believe that Maxeon is positioned to be a leader in helping reshore advanced solar cell and panel manufacturing to the United States at meaningful scale. Towards this end, we are working intensively with the U.S. Department of Energy's Loan Program Office to finance a 3.5-GW solar cell and panel factory in Albuquerque. This capacity represents an increase of 500 MW compared with our original design. With site pre-construction work well underway, we've hired a general manager for the facility and have secured options on adjacent parcels to allow for future capacity expansion. In order to accelerate and de-risk the ramp of our U.S. factory, we plan to install a TOPCon pilot line in our existing Fab 3 in Malaysia and expect this line to be up and running next year, well ahead of the anticipated factory ramp in Albuquerque. We expect this pilot line will provide valuable process development experience and serve as a training platform for copy-exact technology transfer to our U.S. factory. Finally, we are advancing well in negotiations for multiple offtake agreements, which we plan to execute prior to the closing of the DOE loan. Q3 shipments in our utility scale business were at an annual run rate of over 1.3 GW, with 100% of this volume shipped into the United States. Pricing increased from the first half of the year, and we expect pricing to further increase in 2024 as we transition to shipments for orders booked during 2022. Note that ASPs may fluctuate from 2024 onwards as we transition to index pricing structures tied to certain cost inputs. Contracted backlog now stands at 3.3 GW for delivery through 2025, plus an additional 500 MW of supply allocated in each of 2025, 2026 and 2027. Let's now turn the attention to our DG business. Since June of this year, conditions have deteriorated rapidly due to an oversupply of Chinese commodity modules in Europe and SunPower falling short of their contractual purchase obligations. However, we continue to be bullish regarding the importance of this sector in the mid to long term. This view is supported by increasing global retail electric prices, the integration of battery storage to create smart and dispatchable systems, and the avoidance of grid congestion as a potential barrier to continued renewable energy penetration. The DG sector is currently experiencing headwinds associated with high interest rates, policy disruptions, as well as excess supply and inventory. None of these challenges are unique or unprecedented, but in combination, they have produced what is a very challenging industry environment. We are confident, however, that the DG sector will continue to be a vital part of the solar industry in the long run. We remain focused on our DG strategy, namely developing, manufacturing, and selling the world's best solar panels through a differentiated direct-to-installer sales channel, with increasing attachment of Beyond the Panel hardware and software that enables homeowners to control their energy usage. As many of you know, our recent financial performance in DG has been severely hampered by a dispute with SunPower that led us to suspend shipments from July through the end of Q3. I'm pleased to announce that we have reached a settlement with SunPower earlier this week that enables us to resume shipments. The settlement calls for the parties to transact on 85 MW of IBC panels through February 2024 at previously contracted prices and resolves outstanding claims and contract breaches. The parties have also agreed to end other contractual supply obligations by the end of this quarter, including purchase obligations by SunPower beyond the 85 MW and constraints on Maxeon product sales to SunPower installers. Offering panels directly to installers will eliminate the markup SunPower has historically added to our products, allowing us to deliver the world's best panels to customers at more competitive pricing. This will enable our plans to aggressively ramp our sales in the U.S. market, leveraging our recent Solaria acquisition, which nearly doubled the number of dealers actively buying our product to over 170. The Solaria transaction also accelerated the development of our channel sales and marketing infrastructure, with the addition of key talent, including Vikas Desai, the former president of Solaria, who is now our North America General Manager. Vikas was the original architect of SunPower's installer channel and successfully grew that business to over a billion-dollar run rate in just five years. He will be focused on replicating that success here at Maxeon. While we currently expect a year-over-year decline in the U.S. residential market demand in the first half of next year, with California being the key variable, we expect that demand will recover by the time we begin sizable shipments of our new Maxeon 7 panels starting in mid-2024. Turning to Europe, our shipments were down 37% sequentially due to elevated industry-wide module inventories. In most key European markets, Maxeon sells primarily directly to installers, which has allowed us to successfully maintain healthy ASPs and positive gross margins, albeit with reduced volume. Our SunPower Reserve battery product is now widely available to our dealers in Belgium, France, Italy, Spain, and Australia, and we have received excellent customer feedback regarding product quality and ease of installation. As we mentioned in our last call, we increased our sales focus into the commercial and industrial segment, and we are pleased to announce an early win as module supplier for Italy's Turin Airport, as well as a growing pipeline of similar high-profile projects in the region. Let me now say a few words about our IBC solar panel technology. Our sixth-generation panels were a big step forward compared with the second-generation products they replaced and have been a critical contributor to our DG business, particularly in the U.S. With near-term U.S. DG volume expected to decrease due to the discontinuation of the SunPower offtake, we have made the decision to phase out our Maxeon 6 technology and focus on Maxeon 7 and future generations. We now plan to bring Maxeon 7 to market a full quarter earlier than previously planned, and we will reserve Fab 5 for future Maxeon 8 capacity. We will pre-manufacture sufficient Maxeon 6 volume to ensure a smooth product transition to Maxeon 7 in all of our key markets and plan to utilize the space freed up in Fab 3 to install the TOPCon pilot line mentioned previously. We are very excited about our seventh-generation IBC platform, which is the first IBC technology developed and commercialized by Maxeon since the spin. Maxeon 7 delivers increased efficiency and other performance attributes that will extend our technology leadership and allow homeowners to generate even more power from their limited roof space, thereby maximizing bill offset in this era of electric vehicle adoption. Since NREL efficiently crowned Maxeon 7 as the world's most efficient solar panel back in June, our early-stage production runs have continued to improve, with nearly half of our module output currently exceeding 24% efficiency. However, as we like to remind people, it's not just about efficiency. Maxeon 7's architecture achieves these record performance levels while simultaneously controlling hotspots and other degradation issues that are common challenges for high-performance solar technologies, and which we observe with regularity in our competitors' products. We expect to start shipping Maxeon 7 panels from next summer, which corresponds with the peak selling season in the U.S. residential market. Finally, I want to say a few words about intellectual property. With Maxeon 7, we are taking another major step forward with respect to IBC architecture, and we are adding to our considerable IP moat in this field. As our competitors attempt to close the performance gap to our products, they are finding it increasingly difficult to navigate around the IP portfolio that we have developed over the last several decades. Earlier this year, we filed a patent infringement action against Tongwei and sent cease and desist letters to several European distributors related to our shingled cell panel technology. Yesterday, we filed a patent infringement action against AIKO and European distributors related to our IBC solar cell architecture. With over 1,600 granted patents and 360 pending patent applications across 30 countries, Maxeon has a formidable IP portfolio addressing fundamental enabling elements for creating high-performance solar cell and panel architectures. We plan to continue to defend our IP aggressively. In summary, our U.S. utility scale business is on track to deliver increasing margins as we prepare to deploy our next major capacity increment in New Mexico. Although we and many others were surprised by the speed and magnitude of the changes in the DG industry this year, we are well positioned with our technology and channel initiatives and expect our DG margins to recover in the back half of 2024 as Maxeon 7 is introduced. With that, I'll turn it over to Kai. Thank you, Bill. I will discuss the drivers and details of last quarter's performance and then provide guidance for the full year. Total shipments for the third quarter were 628 MW and for the first time in Maxeon's history, the majority of shipments went to Utility Scale customers. We expect this to be our new normal for the foreseeable future, though with a continued sizable DG market share in the highest ASP geographies. Also, for the first time in Maxeon history, our Utility Scale shipments went entirely to customers in the United States. Total shipments were consistent with our updated guidance range and down 22% sequentially, largely due to the dispute with SunPower, which also resulted in a significant inventory buildup. Shipments were also impacted by the industry-wide supply demand imbalance in Europe, which caused our European volumes to decline more than 30% year-on-year. Revenues for the third quarter were $228 million, and included a 10% sequential increase in U.S. utility scale revenues attributable to higher volumes. On a blended basis, ASPs declined sequentially due to a lower mix of DG sales. Our ASP in U.S. DG was largely flat sequentially at above $0.70 per watt, with only limited shipments to SunPower early in the quarter. ASPs for our Performance Series in the global DG market were down 13% sequentially, partially offset by COGS reductions. Gross profit in the third quarter was $3 million, or 1% of revenues. This significant sequential decline was driven by the dispute with SunPower, Europe DG oversupply conditions, and inventory write-downs. GAAP operating expenses were $67 million and included restructuring charges of $24 million, primarily in connection with the cancellation of purchase orders for the previously planned capacity expansion of Maxeon 7 at our Fab 5 in the Philippines. As announced in early October, our decision to convert existing Maxeon 3 manufacturing capacities to Maxeon 7 at our Fab 4, instead of expanding in Fab 5, is expected to result in net CapEx savings of approximately $100 million after accounting for these cancellation charges, and allows us to accelerate the introduction of Maxeon 7. Non-GAAP operating expenses were $38 million in the third quarter, below our guidance range of $43 million ± $2 million, due to austerity measures that we put in place. The decline does not include any impact from our announced reduction in force, which I will discuss in the context of our fourth quarter outlook. Adjusted EBITDA in the third quarter was negative $20 million, consistent with our October pre-announcement. Net loss attributable to stockholders came in at $108 million, compared to $2 million in the previous quarter. The sequential decline was primarily driven by lower gross profit, combined with the $24 million in restructuring charges and $37 million attributable to the remeasurement loss on our prepaid forward. Moving on to the balance sheet, we closed the third quarter with cash, cash equivalents, restricted cash, and short-term investment of $277 million, compared to $456 million at the end of the second quarter. Total inventory levels increased sequentially from $349 million- $386 million, due in part to suspended shipments to SunPower. Cash levels were also impacted by lower shipments and margin dollars from our global DG business, the reduction of contract liabilities related to our U.S. utility-scale business, capital expenditures during the quarter, restructuring expenses, and a reduction in short-term debt. Capital expenditure came in at $15 million for the third quarter, below the low end of our guidance range as we took actions to execute the lower CapEx plan associated with the introduction of Maxeon 7. Going into the fourth quarter, we expect the distinct dynamics that have been unfolding in our utility-scale and distributed-generation businesses to largely continue. Volume shipments and ASPs in our utility scale business for the United States have been contractually locked in and are increasing over time, and manufacturing costs are tracking favorably. By comparison, the DG business outlook has more uncertainties due to the industry headwinds in Europe and elsewhere. Given the ferocity of those headwinds that have developed over the course of only a few short months, we have taken decisive action to quickly pivot our manufacturing capacity while maintaining strict austerity measures to ensure healthy liquidity and safeguard our ability to invest in our priorities, most notably into Maxeon 7, as well as the preparations for our manufacturing project in the United States. Cash and working capital management have always been a high priority for Maxeon's finance organization, and we are redoubling our efforts in this area. We have reduced raw material orders and are modulating our IBC manufacturing volumes in line with inventory on hand and existing orders, while right sizing our manufacturing footprint and related resources. As a result, we expect significantly reduced inventory levels as we exit the year. We have also negotiated more favorable payment terms with many of our suppliers. As mentioned, our CapEx plan is substantially reduced by our pivot of the Maxeon 7 ramp. On the sales side, we are focusing on a narrow set of DG growth initiatives. First, expansion of our Maxeon branded U.S. residential channel and leveraging the Solaria acquisition. Second, further penetration of the commercial and industrial segment of the DG market in Europe and the United States. Third, scaling of our Beyond the Panel offerings, and finally, market introduction of Maxeon 7 in mid of next year. With this context in mind, I now turn to our guidance for the fourth quarter and its implications on the full year guidance. We project fourth quarter shipments of between 610 and 650 MW. This includes shipments to SunPower, as contractually agreed under the settlement agreement. Also, the midpoint of this guidance includes continued growth in our U.S. utility scale volume, while Europe is projected to be relatively flat sequentially, with growth in C&I, offset by a decline in residential. We project fourth quarter revenues of $220 million-$260 million, a slight sequential increase at the midpoint, mainly due to higher shipments to SunPower. Incremental sales resulting from our Solaria acquisition will start having a net positive impact on sequential revenue, but carry a lower ASP than our previous IBC-only pricing in the United States. Non-GAAP gross loss is expected to be in the range of $5 million-$15 million, which includes certain idle charges and excess costs related to our IBC capacity pivot, potential liquidated damages because of delivery delays in U.S. utility scale, as well as the risk of further inventory write-downs, adding up to approximately $25 million combined. GAAP operating expenses are expected to be $113 million ±$4 million. These include restructuring expenses totaling approximately $70 million for the write-down and accelerated depreciation of certain Maxeon 6 manufacturing assets, charges for Maxeon 7-related purchase orders canceled in the beginning of the fourth quarter, as well as severance costs for our previously announced reduction in force. We originally expected that 15% of our global workforce would be affected, but with the decision to entirely phase out Maxeon 6, as well as other operational realignments, we now expect that number to be approximately 22%. Non-GAAP operating expenses are expected to be $38 million, ±$2 million. As an increase in U.S. sales and marketing headcount is offset by austerity measures. Note that the vast majority of the reduction in force initiated during the quarter impacts our manufacturing operations and therefore will have a disproportionate impact on costs versus OpEx. Adjusted EBITDA in the fourth quarter is expected to be between -$27 million and $37 million. The expected sequential decline is attributable to lower gross income on largely unchanged non-GAAP OpEx levels. Fourth quarter capital expenditures are projected to be in the range of $10 million-$20 million, a majority of which is planned for our Maxeon 7 ramp and initially preparatory spending for our Albuquerque site. While this initial CapEx for the U.S. facility may be bridged by our balance sheet, the expectation is that we will secure the majority of capital needed to build the facility in the months ahead from the DOE and customer co-investments. As implied by our Q3 results and Q4 guidance, we update our 2023 revenue guidance to $1.114 billion-$1.154 billion. Our Adjusted EBITDA guidance to $4 milion-$14 million, and our annual CapEx guidance to $66 million-$76 million. With that, I turn the call back to Bill to summarize before we go to Q&A. Thanks, Kai. Reducing our headcount this quarter was a painful but necessary decision in response to a suddenly decreased DG demand profile. I am pleased by the professionalism displayed by Maxeon's leadership team and the speed of our response. Acceleration of Maxeon 7, rightsizing our IBC capacity, settling our SunPower dispute, and related channel expansion initiatives should get DG back on track by the second half of next year. Kai and his team are laser-focused on cash management, and our operations group continues to grind out cost reduction and yield improvements. We expect success on these fronts will get us back to Adjusted EBITDA profitability within 2024, as we work toward deploying our Albuquerque cell and module factory. We appreciate your support. Now let's go to Q&A. Operator, please proceed. Thank you. Ladies and gentlemen, to ask a question, please press star one one on your telephone and then wait to hear your name announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Julian Dumoulin-Smith with Bank of America. Your line is open. Hey, guys, it's actually Alex Vrabel for Julian. Maybe if I may, I mean, you guys have made a lot of adjustments, I think, to kind of what your manufacturing footprint was versus, you know, what it will look like in 2024. Obviously some one-time items causing a gross loss, which were alluded to previously. And it sounds like the Adjusted EBITDA losses might continue into the first half. I'm wondering if you can kind of just help us with the cadence that you guys are putting out there. You know, how big is this TOPCon line, for example? What's the phase down of Maxeon 6 look like, as far as revenue contributions? When do you expect to kind of be able to get back on track from an Adjusted EBITDA lens in 2024 with all these moving pieces? Yeah. Hi, Alex. Bill Mulligan. Yeah, thanks for the question. I think, you know, we had incredibly strong demand in the first half of this year, and the silver lining of this downturn is it's given us an opportunity to pivot quickly to our new next generation Maxeon 7 technology. And we're going to do so in a much more cost-effective manner than what we had previously planned. You know, I always think it's important to respond to an industry downturn like this very aggressively. You know, our outlook for Europe for next year is fairly sober. So, we decided to bring the capacity down to what we view as a more balanced structure looking forward. All of these actions together, you know, we're doing a good job of keeping inventory in line. Absent the SunPower dislocation, we actually would have reduced our inventory this quarter. So we're ahead of this. We're trying to get out in front of it. It's going to take a little time to recover, but I think by the second half of next year, we should be in a, you know, returning to profitability. Yeah, I would maybe—this is Kai, Alex. I would maybe add for the inventories. You've seen kind of a record high number here at the end of the third quarter that, as Bill mentioned, was mostly because of the build-up of inventories for SunPower and also some other DG markets, but mostly SunPower, really, because we suspended shipments. Now, as you have seen, we've come to a settlement with SunPower. We're going to ship them 85 MW through February timeframe. And frankly, all that stuff is in inventory as we speak. So there's also from a cash standpoint, not much more cash that we need to put into working capital. It's all going to come out and turn into cash. So that's kind of where we are, where we are turning that part of the machine around. And, in terms of the Maxeon 6, phaseout that we alluded to, we are running at about half capacity right now. We are, you know, using up the remaining materials, putting those into inventory and think that we're gonna have enough Maxeon 6 inventory, to bridge the transition to, Maxeon 7, then, from the mid of next year. Got it. And maybe just a follow-up. As you guys think about, you know, sort of, looking at your exposures as the way I'll frame it, on Maxeon 7, into mid-2024, I think is when you sort of talked about, unveiling that product to the market. What—I mean, with the breakage with SunPower, what's sort of your sales strategy going forward? Obviously, you guys have the Solaria channel, which seems like one opportunity. The Greent ech channel has already existed. But how are you thinking about sort of bringing that into market, you know, relative to kind of, you know, what your brand has been associated with or associated to in the past versus, what it will be going forward? Thanks. Yeah. Yeah, thanks. Well, you know, our IBC products are still absolutely the best panel on the market, and, MAX 7 just really helps take that to a next level. And there, there's a large base of folks in the United States that know that, and believe that, and want that product. And so, there, there's latent demand for this product out there. I think this transition from SunPower allows us to, you know, control our own destiny. As we mentioned in the prepared remarks, adding, you know, Vikas Desai and the Solaria team is a big plus for us. It's really jump-starting our a build-out of our own channel here. So we're really optimistic about that, bringing in a great product with a, you know, rebuilt team to a market that knows this product and appreciates this product, and has, you know, historically, a very strong ASP. So, we feel, we feel good about it. It's gonna take a little while to rebuild, and... But like I said, by the back half of next year, we should be in a much stronger position. Awesome. Just a quick clarification, if I may. Just on the SunPower MW, is there any sort of cadence commentary you can give us? Otherwise, we'll take the rest offline. I would say out of the 85, the majority, the 85, I think we have disclosed, is gonna run through February. The majority is gonna be in this current fourth quarter. Awesome. Thanks, guys. We'll take the rest offline. Thank you. Please stand by for our next question. Our next question comes from the line of Brian Lee with Goldman Sachs & Company. Your line is open. Hey, guys. Good afternoon. Thanks for taking the questions. I had several. Maybe just to start off, I wanted to understand kind of the evolution of the SunPower, you know, dispute resolution here. So, you know, they got—you got 85 MW of volume committed, you know, pricing fixed at the original terms. But, effectively, at least it sounds like you're allowing them to, you know, terminate the prior contracts that you had for 2024 and 2025. But I guess I don't really hear what you guys are getting in exchange for letting them out of those contracts, because they effectively, I don't think they're fulfilling volume commitments under the 2023 deal, and then 2024 and 2025 are going away. So I just guess I'm struggling to understand how this... I know you wanted the dispute behind you, and you can move forward and, you know, strategically, this gives you better clarity heading into the next few years. But, is there anything I'm missing? Just, it feels like this was a one-way, a bit of a one-sided resolution. Yeah. Yeah. Thanks, Brian. The settlement does include warrants for us, so that's part of the upside for us. I come back to, though, that you know, the primary reason was for us to be able to go out directly to these installers, really cutting out the middleman with SunPower. In a challenged market like this, there's just really not a lot of room for stacked margins. So we're going to be able to offer installers you know, better pricing and also achieve higher ASPs ourselves by you know, eliminating the markup that SunPower has historically applied to our products. So you know, that is really our view is you know, we wanted to be able to get out of this exclusive relationship, diversify our customer base. It was really a strategic move, and we felt, you know, this was the right time to do so. Okay. That makes sense. I guess, as a follow-up to that, you know, it's gonna take a little bit of time, right, to recover, if you will. But in the medium term, it sounds like this is a good transition for you, Bill. As you mentioned, you're gonna get higher ASPs. You cut the middleman out. Presumably higher ASPs, I would assume that means higher margins for you as well. So in the interim, it does sound like, you know, margins are gonna be pretty negatively impacted by underutilization on IBC relative to Performance. When do you think we see kind of margins... Get back to a point where you're significantly higher on IBC versus performance like we were, you know, probably seeing in the first half of this year when you were doing consolidated, you know, mid- to high-teens gross margins? Yeah. You know, we're absolutely excited about this for the long term, right? You know, just taking control of our destiny and the U.S. market, which is just becoming increasingly important to us, you know, with the world's best product. We think we're well positioned for the long haul. You're right, that there's, you know, there's a little bit of time between here and there. You know, it's the reason we're taking pretty dramatic action on re-rightsizing our capacity, because we don't want underutilized capacity, right? So, we're dealing with that now so that we can work through the problem quickly. And so I think we've sort of struck the right balance there between, you know, capacity for growth and maintaining profitability and positive cash flow in the near term, to the extent possible, so that we're strong coming in out of the second half next year. Yeah, and I would add that, talking about the second half of next year, if you think about it, we're gonna have a completely revamped product portfolio for the DG markets. In Europe, we're gonna introduce Performance Series 7, so the latest incarnation of that product, which the sales team is really excited about. And also, we are gonna have 100% of our IBC production on Maxeon 7 on the very latest technology. So all these moves are designed to bring us back to these margin profiles that we have, that we have enjoyed in the past. And in the United States, we're also gonna deploy Maxeon 7, and then we'll also have the new Solaria suite of products that we are importing into the United States. In addition to that, we are ramping up Beyond the Panel complementary offerings to really have a full suite of products for DG homeowners. So that's our strategy, and we think that's gonna play out successfully after the transition in the first half, and then coming to full swing in the second half of next year. Okay, great. That's helpful. Well, last one for me, and I'll pass it on. I think, Kai, you mentioned during your prepared remarks, you, you alluded to some customer co-investments as it relates to the New Mexico facility. Can you, you know, maybe elaborate a little bit on that? What kind of discussions are you having? What's sort of the magnitude you could potentially expect if you see those come to fruition? And then time-wise, is it, you know, right ahead of construction, or what, what's sort of what should we be thinking about as we look to that potentially being a cash-in source? Yeah, it's something, Brian, that we have talked about pretty consistently, actually, as the two main pillars of our financing of the U.S. manufacturing site, which are the DOE loan and customer co-investments. Customers are very, very excited about that new facility, and we've been in touch with them and discussing all these things that you just mentioned around volumes, pricing, timing, terms and conditions, and so on. We're not in a position right now where we would disclose the details, but I think, suffice it to say that these things have to come together, the DOE loan and the customer co-investment as the two main pillars of that financing, and both of these items are on track. Okay. Thanks, guys. Appreciate all the color. Thanks, Brian. Thank you. Please stand by for our next question. Our next question comes from the line of Pavel Molchanov with Raymond James. Your line is open. Yeah, thanks for taking the question. Let me shift gears and ask about Europe. Given that all the changes surrounding SunPower, is it fair to say that Europe will be more than half, potentially, you know, a lot more than half of your sales in first half of 2024 or even all of 2024? No. I mean, keep in mind that, you know, the other huge segment for us is the U.S. utility-scale market, and right now that's, you know, becoming the major part of our shipments. So that's going to be growing very nicely right now and moving into, you know, double-digit gross margins next year. So that is a primary growth for us. Europe is still gonna be very important, and we expect that market is sort of flattish, though, for this year and next year. We hope to, you know, expand share in various segments of that market. We always play in the premium segments. We're introducing our, you know, complete Beyond the Panel solution now with integrated storage and EV charging, and panels, and software, and control software. So we think that product is exciting and getting some traction. So but, you know, I think overall, given the very high levels of inventory in the European channel right now, we have to be, you know, somewhat conservative on what the outlook is there. It's there's a lot of inventory in the channel. So Europe's gonna continue to be very important, but, you know, the U.S. is it continues to be our strongest market, and I think very quickly we'll recover in U.S. DG to the point where it's gonna be, you know, comparable size or even bigger than Europe. Okay. China will be by far the largest market of 2023, and indeed, probably the only market where, you know, new build estimates have actually increased since the year started. What's the latest on the JV in China? How is it benefiting from the domestic installation boom? Yeah, you know, our JV partners, you know, are driving their own domestic consumption. We use the JV primarily or exclusively for offtake in our international markets. So I don't really want to comment too much on the domestic Chinese market. It's extremely competitive, let's just say right now. There's just not enough homes for all these panels worldwide based on the massive amount of production capacity that's out there. For us, the JV has been very successful because we're able to take off a residential format panel that has been a great product for us in Europe. We're just introducing our seventh generation performance line panel. That's a TOPCon-based panel that's really state-of-the-art. We expect that to have you know really strong competitiveness in Europe. So that's going to be one of our major growth products for Europe. So we're benefiting from the the joint venture in that regard. You're right, the majority of the volume from the joint venture does goes into the domestic, Chinese market. That, helps us from the standpoint that they have scale and a very attractive cost structure, which we benefit for our, you know, foreign offtake. Last question, deliberately zooming, zooming out here. Module pricing, when we look at the benchmarks, is down 30% over the last six months, deepest drop since the global financial crisis. Do we have evidence to suggest whether this magnitude of price decline is starting to stimulate a bounce on the demand side, which sort of Econ 101 would suggest to be the case? Hey, Pavel, this is Peter. I would say not yet. There have been a few folks talking about that possibility. Keep in mind that module pricing, particularly in the DG segment, is, you know, a fraction of the total installed cost to the homeowner. And, in both in Europe and the U.S., higher interest rates are kind of working against lower module prices in terms of end user payback periods. So I'd say, we haven't seen that. I don't believe we're seeing that yet. On the utility scale side, there's a lag, of course, due to project cycle times and PPA cycle times. So, maybe we'll see that in the rest of world power plant business first. In the U.S., I think we're also seeing the effects of higher interest rates being a counterbalance to a potentially lower module costs, you know, on the spot market here in the near term. All right. Thank you, guys. Yeah, long-winded, no, not yet, I think. Yep. Appreciate it. Thanks, Pavel. Please stand by for our next question. Our next question comes from the line of Philip Shen with Roth MKM. Your line is open. Guys, thanks for taking the questions. First one's on margins. I know you're not providing guidance for 2024, but you did make a commentary that you expect margins don't recover until back half 2024. And so I was wondering if you might be able to quantify in any way, you know, what margins might look like in Q1 and Q2. Should we expect it to be similar to current levels, or a modest recovery in Q1 and Q2, and then stronger performance in the back half of 2024? Thanks. Hi, Philip, it's Kai. Thanks for the question. Yes, we've... You know, we're not giving guidance yet. You know, as you said, we hinted to margin and EBITDA recovery in the second half, which is, of course, based on the new introductions that we're going to have of seventh-generation Performance Series, the Maxeon 7. Further progress also on our U.S. utility-scale. I think we had something in our prepared remarks where we said that we expect further cost reductions there, efficiency improvements, and ASP increases, which we should get these margins up potentially into the double digits. So, that's going to be a positive thing, of course. Working through inventories, of course, of some Maxeon 3 and Maxeon 6 inventory still in the first half of the year and probably also a little bit of a tail in the second half. I would say, you know, in terms of the fourth quarter and how things are going to develop from there, you have seen in my prepared remarks that I was listing some non-recurring items that are going to affect margins in the fourth quarter guidance. We expect those to be non-recurring, and we are still working on some of those. So we also expect that these things are going to get better as we reengineer our overall manufacturing footprint, take costs out, right-size things, and then go into 2024 with better strength. Okay. Thanks, Kai. On the flip side, let's talk about pricing again, if we can, for IBC. You know, you're going to be controlling your own destiny, Bill, as you mentioned earlier a number of times, and so that happens in March. Heading into March, I can imagine you're working on deals to try to secure agreements with different players. So, was wondering if you could share how those conversations might be going now. Is it a little bit premature to get a feel for, you know, how close you are in locking down volume and pricing? And then some of our checks suggest modules in the U.S. resi channel may not clear until after Q2 of next year. So high-efficiency module pricing has already come down dramatically since the summer. What kind of pricing can you guys secure in a, you know, post-SunPower relationship, you know, with your benchmark? Well, you guys are typically the benchmark, but as you think of other peers that are trying to do what you guys do, and their pricing is, I don't know, maybe $0.40, $0.50, for lower volume, but maybe $0.40 plus or that level for higher volume, are we going to need to see you guys pricing that, you know, kind of 50-ish cents range as we, think about modeling ASPs for IBC volume in 2024? Thanks. Right. Thanks, Phil. Yeah, I think first of all, I want to just clarify that we're actually free to approach SunPower dealers starting January 1. We have exclusivity on the Maxeon 6 product through the end of Q1, but we are able to sell Maxeon 3 and Maxeon 7 starting the first of the year. It is a little early to see how that's going. We've obviously been very careful not to approach SunPower dealers while the contract is still in place, and that remains to be the case for a number of dealers. Not all the dealers, but a number of the dealers through the end of the year. But we're just 6 weeks away or so. Three of those weeks are holiday weeks, so, you know, January one is going to be here very quickly, and, you know, we'll engage, super quickly at that point in time. With regards to ASPs, you know, we're still actually running quite healthy ASPs in Europe. We've, you know, made the choice not to chase ASPs to the bottom. We've always had a premium product. We play in a premium segment. We sort of feel like it's a fool's errand to just, race to the bottom. So we'd prefer to take a little bit lower volume and maintain our pricing. We've done very well with that in Europe, to state. Pricing in the U.S. is actually, you know, still today fairly substantially higher than what it is in Europe, even though it's lower than it has been, for sure. But again, with you know, eliminating the markup that SunPower puts on our panels, being able to access these dealers directly, we think we've got headroom there to to really be competitive in the market in the current situation. Again, a lot of it is being able to sell the premium you know, the premium product story. I'm super excited to have Vikas Desai back. Vikas and I worked together from 2005 to 2010. He was the architect of this. He knows how to tell the story. We've got the best panels in the world. We just got to get out there and tell that story, and it, it's very effective if you do it right. And we're going to be doing that. And again, I think we've got headroom, but you know, we feel good about our pricing. It's going to be higher than what you-- the numbers you were throwing out, for sure. Substantially higher. Great. Okay, thanks. A couple more here, and then I'll pass it on. In the SunPower 8-K, there was some mention of defective components and some sharing or split between you and SunPower on the cost of those defective components. Can you provide a little bit more color on what that is, and maybe quantify what it might be and what the split might be between the two companies? And then shifting over, I think in your release, you guys gave some detail on some $30 million payment security bond that SunPower has put up. Can you provide a little bit of detail on the mechanics of that and how that might work? Thanks. Sure, sure. So the issue you're alluding to is a warranty issue that is a longstanding warranty issue that goes back to the time of the spin. I think it's certainly beneficial for both parties to get that dispute behind us. So I think it's as simple as that. On the payment bond, maybe Kai, you could give some color on that. So, Phil, it's just basically a payment security. Of course, we have experienced a time where SunPower has not paid us at the very beginning of this dispute that we have now settled. I think both parties have an interest that we don't get into such a situation again. So, this payment bond is there to secure our deliveries, because there are payment terms, and that's just the security for making sure that we collect the money. Got it. Okay, thanks very much, guys. That's enough. Thank you. Please stand by for our next question. Our next question comes from the line of Donovan Schafer with Northland Capital Markets. Your line is open. Hey, guys. Thanks for taking the questions. So I first want to ask about an article that was in the Albuquerque Journal reporting. It says you made a request to the city council for a $2.4 billion revenue bond. And according to the article, this revenue bond itself, it's really about, you know, property tax abatement. But this, you know, the $2.4 billion magnitude cited is a reference to, per the requests or filings, that the idea is that that is the dollar amount or the estimated dollar amount you would be investing, you know, within the city limits or whatever the city council's jurisdiction is. So the question is, you know, is $2.4 billion a useful—does that have utility as a reference point or a touch point in terms of expected cost? Or is there something about it that would sort of lead us astray, whether it's, you know, they only—there are only certain... There's a subset of costs that they can be allowed to include in the estimate or something like that, anything where it would be meaningfully misleading to us? And also, do you know if that's tied to the 3 GW initial capacity or the 3.5 GW? Donovan, this is Peter. That's not a useful reference point. We're not planning to invest anywhere close to that amount of money, as we've said pretty consistently. The other thing we've said, in our prepared remarks today, was that we've settled on the 3.5 GW capacity for the project. Okay. That's... Thank you for clarifying. For the DOE, for the timeline, so in the release you guys gave, for the DOE loan guarantee and the offtake agreements, saying, you know, your target is to have updates on both before the fourth quarter call. Does that imply an interplay between these? Or maybe, you know, better than expected outcomes in the offtake agreements could mean, a lesser need on the DOE loan guarantee or vice versa, or is it just a coin-- or is the timing of updates on both fronts just a coincidence in this case? Donovan, this is Peter again. The latter. The timing of the closure of the DOE loan and of the going effective of the customer co-investment agreements would be contemporaneous. Okay. And then my last question is, you know, when you talked about Maxeon 7, you talked about, you know, it's not just the efficiency, but there's also positive attributes around hotspots, degradation improvements. So do you anticipate, or maybe it's too soon to say, but do you see yourselves extending the 40-year warranty that you, I think, offer on Maxeon 6 now to Maxeon 7? Could that potentially end up being a warranty that goes beyond 40 years or would it be maybe less than that? Since it came up, the warranty dispute, the split between you guys and SunPower, Phil, in the response to Phil's question, can you talk if any of that has to do with having such a long warranty, if, if it's related in any way to, to providing warranties that go out, you know, four decades? Yeah, I mean, it's the warranty length is something we always look at, but I would say at the moment, we're pretty happy with the 40-year warranty, and we haven't seen a lot of customer demand for anything more than that. I think, you know, we always look at, you know, what we're reserving for warranty, and as we have higher reliability products, you know, there may be things we can do there. But, but yeah, I don't see any, any big changes in the warranty. This is more of a, you know, competitive attribute, right? Many of our competitors' products have problems with things like hotspots, and, that, and degradation over time. You know, a technology like HJT that some of our competitors are pursuing, it's fundamentally kind of an unstable compound that's very sensitive to moisture degradation. We see that. We have a lot of field experience with all these different products. So again, you know, we're always we make the world's best panel, and you know, the attributes of that are really important. It's not just about efficiency. So we sell that, and that, as we do. But the warranty is one piece of the equation. We don't think there's a lot of juice in particular to extend that. But we talk about it, and you know, who knows what the future holds? We'll do what the market needs. Hey, Donovan, this is Peter. Just to your last question about the warranty or dispute, that had nothing to do with the solar panel itself. Oh, very helpful. Very helpful. Okay, great. Thanks, guys. I'll take the rest of my questions offline. Thank you. Please stand by for our next question.... Our next question comes from the line of William Grippin with UBS. Your line is open. Great. Thanks for the opportunity, and good to speak with you all here. My first question was just, you talked earlier in the call about getting out there and telling your story on the modules and the premium position that you kind of hold in the market. Could you address maybe what you're thinking in terms of costs for ramping your DG customer base or investments that might be needed to do that and kind of backfill this lost SunPower demand? Yeah. Hi, Will. Yeah, you know, we're trying to do it with, you know, a light touch approach. This is not an area where we feel like we have to make a huge amount of additional investment. You know, we have the model working today in Europe. The basic plan is to replicate that model back here in the U.S. And again, we have a lot of people at this company that have a lot of experience in developing and operating this kind of a channel. So we know how to do it efficiently, and, you know, that's our goal. Yeah, the only thing I would say, Will, is that, you know, our, if you look at our historical OpEx, it's, I think it's fair to say that cost of running a channel, sales organization is, you know, single digit gross margin percentages. So it's not, it's not a tremendously expensive thing to do, number one. Number two, these are people that we already have on staff now, largely as a result of our Solaria acquisition. So, in terms of incremental spend, there's some, you know, some marketing expenses, but for the most part, I think we're there to do what we need to do in 2024. Got it. Appreciate that. Just the last one here. On the production changes, you talked in the pre-announcement about replacing Maxeon 3 capacity with Maxeon 7, and now, you're talking about running down Maxeon 6. So just as you transition here, is there going to be a gap in your DG module production as a result of this shift? Just really trying to understand the cadence and timing of these changes. Yeah. Well, as we mentioned in the remarks, we're, we are going to pre-build some Maxeon 6 technology to bridge us through the transition. And again, you know, this is an opportunistic time, given with demand down, to make a change like this and do a transition, because you obviously can't continue to manufacture at 100% while you're making a transition. So we're gonna pre-build some inventory, manage a fairly rapid transition, then ramp back up, and that's our bridging strategy. I just want to add in, you know, in spite of pre-building that inventory, we still expect inventories to go down from here with the expected shipments to SunPower and also, you know, further shipments into DG channels. So we are kind of modulating it in a way that we continue to sell more than we are making for the time being in order to get closer to an equilibrium. You perfectly anticipated my follow-up. Thank you. That's all I had. Thanks, Will. Please stand by for our next question. Our next question comes from the line of Andrew Percoco with Morgan Stanley. Your line is open. Great. Thanks so much for taking the question. And maybe this is a follow-up, so I'll ask it. But as you just think about moving into next year, obviously, you're highlighting margin pressure could continue into early next year. You know, how are you thinking about the cadence of free cash flow? And at what point would you consider the need to raise additional capital? Are there any liquidity thresholds or balance sheet metrics that you're hoping to maintain as you, you know, go through this transition period? Yeah. Thank you, Andrew. So I think, you know, it has, of course, a lot to do with the things that we have been discussing. You've seen the negative cash flow in this quarter, which had a lot to do with the growing imbalance between our manufacturing operations and sales that has developed during the third quarter, and that's, of course, then reflected in changes in working capital. We have taken all these decisive actions on the working capital side, on the side of our manufacturing footprint and so on, and, you know, modulating the capacities in order to address especially that. So we think that, with the current cash balance that we have and all these measures that we talked about during the call and in the prepared remarks, that we are in a good position to generate sufficient cash and maintain sufficient cash levels for our existing business. Great. That's super helpful. The rest of my questions have been answered, so I'll take the rest offline. Thank you. Thank you. Thanks, Andrew. Ladies and gentlemen, I'm showing no further questions in the queue. This concludes today's conference call. Thank you for your participation. You may now disconnect.