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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2023

OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34166


sp2014logoa01a34.gif
SunPower Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware94-3008969
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
1414 Harbour Way SouthSuite 1901RichmondCalifornia94804
(Address of Principal Executive Offices)(Zip Code)

(408) 240-5500
(Registrant's Telephone Number, Including Area Code)


_________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, $0.001 par value per shareSPWRThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒Accelerated filer ☐
Emerging growth company ☐Non-accelerated filer ☐
Smaller reporting company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐ No  x

The total number of outstanding shares of the registrant’s common stock as of July 28, 2023 was 175,191,707.

1
SunPower Corporation
Form 10-Q for the quarterly period ended July 2, 2023



2
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SunPower Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share par values)
(unaudited)

 July 2, 2023January 1, 2023
Assets
Current assets:
Cash and cash equivalents$114,104 $377,026 
Restricted cash and cash equivalents, current portion1,233 9,855 
Short-term investments— 132,480 
Accounts receivable, net1
214,378 174,577 
Contract assets49,357 50,692 
Loan receivables held for sale, net12,917 — 
Inventories424,040 316,815 
Advances to suppliers, current portion1,895 9,309 
Prepaid expenses and other current assets1
228,283 197,760 
Total current assets1,046,207 1,268,514 
Restricted cash and cash equivalents, net of current portion15,937 15,151 
Property, plant and equipment, net95,715 74,522 
Operating lease right-of-use assets35,219 36,926 
Solar power systems leased, net39,767 41,779 
Goodwill126,338 126,338 
Other intangible assets, net20,682 24,192 
Other long-term assets1
193,912 192,585 
Total assets$1,573,777 $1,780,007 
Liabilities and Equity  
Current liabilities:  
Accounts payable1
$229,008 $242,229 
Accrued liabilities1
131,694 145,229 
Operating lease liabilities, current portion11,501 11,356 
Contract liabilities, current portion1
223,302 144,209 
Short-term debt42,285 82,404 
Convertible debt, current portion1
— 424,919 
Total current liabilities637,790 1,050,346 
Long-term debt305,709 308 
Operating lease liabilities, net of current portion26,873 29,347 
Contract liabilities, net of current portion11,024 11,555 
Other long-term liabilities1
114,705 112,797 
Total liabilities1,096,101 1,204,353 
Commitments and contingencies (Note 8)
Equity:  
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding as of July 2, 2023 and January 1, 2023
— — 
Common stock, $0.001 par value, 367,500 shares authorized; 189,644 shares issued and 175,173 shares outstanding as of July 2, 2023; 188,287 shares issued and 174,269 shares outstanding as of January 1, 2023
175 174 
Additional paid-in capital2,847,884 2,855,930 
Accumulated deficit(2,149,927)(2,066,175)
Accumulated other comprehensive income11,586 11,568 
Treasury stock, at cost: 14,471 shares of common stock as of July 2, 2023; 14,018 shares of common stock as of January 1, 2023
(232,940)(226,646)
Total stockholders' equity476,778 574,851 
Noncontrolling interests in subsidiaries898 803 
Total equity477,676 575,654 
Total liabilities and equity$1,573,777 $1,780,007 

1 We have related-party balances for transactions made with TotalEnergies SE and its affiliates, Maxeon Solar Technologies, Ltd. (“Maxeon Solar”), and unconsolidated entities in which we have a direct equity investment. These related-party balances are recorded within the “accounts receivable, net,” “prepaid expenses and other current assets,” “other long-term assets,” “accounts payable,” “accrued liabilities,” “convertible debt, current portion,” “contract liabilities, current portion,” and “other long-term liabilities” financial statement line items on our condensed consolidated balance sheets (see Note 2, Note 8, Note 9, and Note 11).


The accompanying notes are an integral part of these condensed consolidated financial statements.
3

SunPower Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)

 Three Months EndedSix Months Ended
 July 2, 2023July 3, 2022July 2, 2023July 3, 2022
Total revenues1
$463,851 $417,772 $904,729 $768,049 
Total cost of revenues399,724 336,273 769,667 614,241 
Gross profit64,127 81,499 135,062 153,808 
Operating expenses:
Research and development1
6,508 7,405 13,755 12,415 
Sales, general, and administrative1
82,709 93,043 173,054 170,039 
Restructuring charges (credits)— (494)— 133 
Expense (income) from transition services agreement, net1
84 (494)(140)(228)
 Total operating expenses89,301 99,460 186,669 182,359 
Operating (loss) income(25,174)(17,961)(51,607)(28,551)
Other (expense) income, net:
Interest income329 92 1,160 134 
Interest expense1
(5,786)(5,964)(11,464)(11,008)
Other, net289 (14,652)(10,694)(13,208)
Other (expense) income, net(5,168)(20,524)(20,998)(24,082)
(Loss) income from continuing operations before income taxes and equity in earnings (losses) of unconsolidated investees(30,342)(38,485)(72,605)(52,633)
(Provision for) benefits from income taxes(227)(3,226)(1,454)8,417 
Equity in earnings (losses) of unconsolidated investees311 — 558 — 
Net (loss) income from continuing operations(30,258)(41,711)(73,501)(44,216)
(Loss) income from discontinued operations before income taxes and equity in earnings (losses) of unconsolidated investees1
(2,796)(20,857)(10,156)(47,155)
Benefits from (provision for) income taxes from discontinued operations— 241 — 584 
Net (loss) income from discontinued operations(2,796)(20,616)(10,156)(46,571)
Net (loss) income(33,054)(62,327)(83,657)(90,787)
Net (income) loss from continuing operations attributable to noncontrolling interests(14)(785)(95)(446)
Net loss (income) from discontinued operations attributable to noncontrolling interests— — — 250 
Net (income) loss attributable to noncontrolling interests(14)(785)(95)(196)
Net (loss) income from continuing operations attributable to stockholders(30,272)(42,496)(73,596)(44,662)
Net (loss) income from discontinued operations attributable to stockholders(2,796)(20,616)(10,156)(46,321)
Net (loss) income attributable to stockholders$(33,068)$(63,112)$(83,752)$(90,983)
Net (loss) income per share attributable to stockholders - basic and diluted:
Continuing operations$(0.17)$(0.24)$(0.42)$(0.26)
Discontinued operations$(0.02)$(0.12)$(0.06)$(0.27)
Net (loss) income per share – basic and diluted
$(0.19)$(0.36)$(0.48)$(0.53)
Weighted-average shares:
Basic175,042 173,951 174,785 173,664 
Diluted175,042 173,951 174,785 173,664 

1 We have related-party transactions with TotalEnergies SE and its affiliates, Maxeon Solar, and unconsolidated entities in which we have a direct equity investment. These related-party transactions are recorded within the “total revenues,” “total cost of revenues,” “operating expenses: research and development,” “operating expenses: sales, general, and administrative,” “operating expenses: (income) expense from transition services agreement, net,” “other income (expense), net: interest expense,” and “(loss) income from discontinued operations before income taxes” financial statement line items in our condensed consolidated statements of operations (see Note 2, Note 9, and Note 11).


The accompanying notes are an integral part of these condensed consolidated financial statements.
4

SunPower Corporation
Condensed Consolidated Statements of Comprehensive (Loss) Income
(In thousands)
(unaudited)

 Three Months EndedSix Months Ended
July 2, 2023July 3, 2022July 2, 2023July 3, 2022
Net (loss) income $(33,054)$(62,327)$(83,657)$(90,787)
Components of other comprehensive income (loss):
Translation adjustment13 (31)18 (29)
Total other comprehensive income (loss)13 (31)18 (29)
Total comprehensive (loss) income(33,041)(62,358)(83,639)(90,816)
Comprehensive (income) loss attributable to noncontrolling interests(14)(785)(95)(196)
Comprehensive (loss) income attributable to stockholders$(33,055)$(63,143)$(83,734)$(91,012)


The accompanying notes are an integral part of these condensed consolidated financial statements.

5

SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital		Treasury
Stock		Accumulated Other
Comprehensive Income (Loss)		Accumulated DeficitTotal
Stockholders’
Equity		Noncontrolling Interests in SubsidiariesTotal Equity
Balances at January 1, 2023174,269 $174 $2,855,930 $(226,646)$11,568 $(2,066,175)$574,851 $803 $575,654 
Net (loss) income— — — — — (50,684)(50,684)81 (50,603)
Other comprehensive income— — — — 5 — 5 — 5 
Issuance of restricted stock to employees, net of cancellations959 1 — — — — 1 — 1 
Stock-based compensation expense— — 6,877 — — — 6,877 — 6,877 
Purchases of treasury stock(327)— — (5,071)— — (5,071)— (5,071)
Net working capital settlement related to the sale of our C&I Solutions business, net of taxes of $0.3 million
— — (23,574)— — — (23,574)— (23,574)
Balances at April 2, 2023174,901 $175 $2,839,233 $(231,717)$11,573 $(2,116,859)$502,405 $884 $503,289 
Net (loss) income— — — — — (33,068)(33,068)14 (33,054)
Other comprehensive income— — — — 13 — 13 — 13 
Issuance of restricted stock to employees, net of cancellations399 — — — — — — — — 
Stock-based compensation expense— — 8,659 — — — 8,659 — 8,659 
Purchases of treasury stock(127)— — (1,223)— — (1,223)— (1,223)
Other adjustments— — (8)— — — (8)— (8)
Balances at July 2, 2023175,173 $175 $2,847,884 $(232,940)$11,586 $(2,149,927)$476,778 $898 $477,676 
6


SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital		Treasury
Stock		Accumulated Other
Comprehensive Income (Loss)		Accumulated DeficitTotal
Stockholders’
Equity		Noncontrolling Interests in SubsidiariesTotal Equity
Balances at January 2, 2022173,051 $173 $2,714,500 $(215,240)$11,168 $(2,122,212)$388,389 $1,635 $390,024 
Net (loss) income— — — — — (27,871)(27,871)(589)(28,460)
Other comprehensive income— — — — 2 — 2 — 2 
Issuance of restricted stock to employees, net of cancellations1,201 1 — — — — 1 — 1 
Stock-based compensation expense— — 5,427 — — — 5,427 — 5,427 
Purchases of treasury stock(407)— — (7,333)— — (7,333)— (7,333)
Balances at April 3, 2022173,845 $174 $2,719,927 $(222,573)$11,170 $(2,150,083)$358,615 $1,046 $359,661 
Net income (loss)— — — — — (63,112)(63,112)785 (62,327)
Other comprehensive income— — — — (31)— (31)— (31)
Issuance of restricted stock to employees, net of cancellations359 — — — — — — — — 
Stock-based compensation expense— — 7,071 — — — 7,071 — 7,071 
Purchases of treasury stock(123)— — (2,256)— — (2,256)— (2,256)
Gain on sale of C&I Solutions business, net of tax— — 113,030 — — — 113,030 3,943 116,973 
Balances at July 3, 2022174,081 $174 $2,840,028 $(224,829)$11,139 $(2,213,195)$413,317 $5,774 $419,091 




The accompanying notes are an integral part of these condensed consolidated financial statements.
7

SunPower Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
    
Six Months Ended
 July 2, 2023July 3, 2022
Cash flows from operating activities:
Net (loss) income$(83,657)$(90,787)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization25,224 15,155 
Amortization of cloud computing arrangements2,678 1,893 
Stock-based compensation15,536 12,499 
Non-cash interest expense1,163 1,559 
Equity in (earnings) losses of unconsolidated investees(558)— 
Loss (gain) on equity investments10,805 13,940 
Unrealized (gain) loss on derivatives(294)— 
Dividend from equity method investee596 — 
Deferred income taxes(532)(11,196)
Loss (gain) on loan receivables held for sale2,163 — 
Other, net575 949 
Changes in operating assets and liabilities:
       Accounts receivable(40,380)(37,939)
       Contract assets1,335 7,333 
       Inventories(107,225)(17,059)
       Project assets— 295 
Loan receivables held for sale(15,081)— 
       Prepaid expenses and other assets(24,841)(169,798)
       Operating lease right-of-use assets5,516 5,432 
       Advances to suppliers7,414 (2,072)
       Accounts payable and other accrued liabilities(25,213)46,518 
       Contract liabilities78,562 66,273 
       Operating lease liabilities(6,134)(7,572)
Net cash (used in) provided by operating activities(152,348)(164,577)
Cash flows from investing activities:
Purchases of property, plant, and equipment(26,283)(21,583)
Investments in software development costs(2,320)(2,725)
Cash paid for working capital settlement related to C&I Solutions sale(30,892)— 
Cash received from C&I Solutions sale, net of de-consolidated cash— 146,303 
Cash paid for equity investments under the Dealer Accelerator Program and other(7,500)(16,420)
Proceeds from sale of equity investment121,675 149,830 
Cash paid for investments in unconsolidated investees(7,677)(3,318)
Dividend from equity method investee, in excess of cumulative earnings149 — 
Net cash provided by (used in) investing activities47,152 252,087 
Cash flows from financing activities:
Proceeds from bank loans and other debt439,101 100,276 
Repayment of bank loans and other debt(171,573)(98,044)
Repayment of convertible debt(424,991)— 
Payments for financing leases(1,806)(118)
Purchases of stock for tax withholding obligations on vested restricted stock(6,293)(9,588)
Net cash (used in) provided by financing activities(165,562)(7,474)
Net (decrease) increase in cash, cash equivalents, and restricted cash(270,758)80,036 
Cash, cash equivalents, and restricted cash, beginning of period402,032 148,613 
Cash, cash equivalents, and restricted cash, end of period$131,274 $228,649 
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents$114,104 $206,355 
Restricted cash and cash equivalents, current portion1,233 1,024 
Restricted cash and cash equivalents, net of current portion15,937 21,270 
Total cash, cash equivalents, and restricted cash$131,274 $228,649 
Supplemental disclosure of non-cash activities:
Property, plant and equipment acquisitions funded by liabilities (including financing leases)$8,717 $4,635 
Right-of-use assets obtained in exchange for lease obligations3,809 1,526 
Net working capital settlement related to C&I Solutions sale— 6,265 
Supplemental cash flow disclosures:
Cash paid for interest18,004 11,186 
Cash paid for income taxes1,236 2,500 



The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

SunPower Corporation (together with its subsidiaries, “SunPower,” the “Company,” “we,” “us,” or “our”) is a leading residential solar technology and energy services provider that offers fully integrated solar, storage, and home energy solutions to customers in North America. Through a multi-channel strategy of distributed dealer network, SunPower direct sales channel, and new home builder partnerships, we provide customers control over electricity consumption, resiliency during power outages, and cost savings, while also reducing carbon emissions and contributing to a more sustainable grid.

SunPower was a majority-owned subsidiary of TotalEnergies Solar INTL SAS (“Total,” formerly Total Solar International SAS) and TotalEnergies Gaz & Electricité Holdings France SAS (“Total Gaz,” formerly Total Gaz Electricité Holdings France SAS), each a subsidiary of TotalEnergies SE (“TotalEnergies SE,” formerly Total SE). On September 12, 2022, Total and Total Gaz sold to GIP III Sol Acquisition, LLC (“GIP Sol”) 50% less one unit of the equity interests in a newly formed Delaware limited liability company, Sol Holding, LLC (“HoldCo”), which is now the record holder of all of the shares of SunPower common stock (see Note 2. Transactions with Total and TotalEnergies SE).

Liquidity

We currently anticipate that our cash and cash equivalents will be sufficient to meet our obligations over the next 12 months from the date of issuance of our financial statements. We continuously evaluate our liquidity and capital resources, including our access to external capital, to help ensure we can finance our future capital requirements.

Basis of Presentation and Preparation
    
Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared by us in accordance with generally accepted accounting principles in the United States (“United States” or “U.S.,” and such accounting principles, “U.S. GAAP”) for interim financial information, and include the accounts of SunPower, all of our subsidiaries and special purpose entities, as appropriate under U.S. GAAP. All intercompany transactions and balances have been eliminated in consolidation. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The January 1, 2023 consolidated balance sheet data was derived from SunPower’s audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023, as filed with the Securities and Exchange Commission (“SEC”) on March 10, 2023, but does not include all disclosures required by U.S. GAAP. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in SunPower's Annual Report on Form 10-K for the fiscal year ended January 1, 2023. The operating results for the three and six months ended July 2, 2023 are not necessarily indicative of the results that may be expected for fiscal year 2023, or for any other future period.

We have a 52-to-53-week fiscal year that ends on the Sunday closest to December 31. Accordingly, every fifth or sixth year will be a 53-week fiscal year. Both the current fiscal year, fiscal 2023, and prior fiscal year, fiscal 2022, are 52-week fiscal years. The second quarter of fiscal 2023 ended on July 2, 2023, while the second quarter of fiscal 2022 ended on July 3, 2022.

9
Management Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities reported in these condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. Our actual financial results could materially differ from those estimates. Significant estimates in these condensed consolidated financial statements include revenue recognition, specifically nature and timing of satisfaction of performance obligations, standalone selling price of performance obligations, and variable consideration; credit losses, including estimating macroeconomic factors affecting historical recovery rate of receivables; inventory write-downs; long-lived assets and goodwill impairment, specifically estimates for valuation assumptions including discount rates and future cash flows; fair value of investments, including equity investments for which we apply the fair value option and other financial instruments; actuarial estimates related to our self-insured health benefits; valuation of goodwill and intangible assets acquired in a business combination; valuation of contingent consideration in a business combination; valuation of contingencies such as warranty and litigation; the incremental borrowing rate used in discounting of lease liabilities; the fair value of indemnities provided to customers and other parties; and income taxes and tax valuation allowances.

Presentation and disclosure corrections

We determined that certain charges related to indemnifications on warranty obligations and legal costs we have retained in connection with the sale of our C&I Solutions business to TotalEnergies Renewables should have been classified as discontinued operations instead of continuing operations in the condensed consolidated statements of operations. For the three months ended April 2, 2023, warranty claims of $6.8 million, and legal costs of $0.5 million, previously included in the financial statement line items “total cost of revenues” and “sales, general, and administrative expense”, respectively, should be included in the line item “net (loss) income from discontinued operations.” Accordingly, the prior presentation for the three months ended April 2, 2023 has been corrected in the six months ended July 2, 2023. The correction has no effect on “net (loss) income attributable to stockholders,” the condensed consolidated balance sheets, the condensed consolidated statements of equity, or the condensed consolidated statements of cash flows.

Segment Information

We operate in a single operating segment, providing solar power systems and services to residential customers. While our chief executive officer, as the chief operating decision maker (“CODM”), reviews financial information by different functions and revenue streams, he considers the business on a consolidated basis for purposes of allocating resources and reviewing overall business performance.

Summary of Selected Significant Accounting Policies
    
The following significant accounting policies are updates to our significant accounting policies from our Annual Report on Form 10-K for the fiscal year ended January 1, 2023. Refer to our Annual Report on Form 10-K for the fiscal year ended January 1, 2023 for the full list of our significant accounting policies. There have been no material changes or updates to our significant accounting policies disclosed in the Form 10-K except as updated below.

Revenue Recognition

We recognize revenue from contracts with customers when we have completed our performance obligations under an identified contract. The revenue is recognized in an amount that reflects the consideration for the corresponding performance obligations for the goods and services transferred.

Solar Power Systems and Component Sales

A majority of our revenue is generated by sales of fully functioning solar power systems to our customers. We sell our products through a network of installing and non-installing dealers and resellers, as well as our internal sales team. Usually, our performance obligation is to design and install a fully functioning solar energy system. We recognize revenue when the solar power system is fully installed and the final permit is received from the authority having jurisdiction, as we deem our performance obligation under the contract to be complete at such time, and the customer retains all of the significant risks and rewards of ownership of the solar power system. In situations when we are not responsible for construction and installation of solar power systems, usually when the sales are made by one of our installing dealers or resellers, we recognize revenue when the components of the solar power system are delivered at the customer site. All costs to obtain and fulfill contracts associated with system sales are expensed as a cost of revenue when we have fulfilled our performance obligations.
10

Revenue is generally recognized at transaction price, net of costs of financing, or other consideration paid to the customers that is not in exchange for a distinct good or service. Also, our arrangements may contain clauses that can either increase or decrease the transaction price. Variable consideration is estimated at each measurement date at its most likely amount to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively as such estimates change.

We also provide solar power systems to our customers in the form of 20-year lease agreements which are entered into by the customer with our third-party leasing partners. These third-party leasing partners are special-purpose entities that we do not control or consolidate. We recognize revenue when the system is fully installed, when permit to operate is given by the local utility company, and the solar system has produced meterable quantities of electricity, as we deem our performance obligation under the contract to be complete at such time.

Transfers of financial assets

In April 2023, to support the expansion of our residential solar and storage loan funding capacity, we entered into a series of agreements to sell solar loan receivables to a special-purpose entity in our existing joint venture, SunStrong, with Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“HASI”). Under the agreements, we have secured financing commitments to fund more than $450.0 million for our residential solar and storage loan program, including a $300.0 million revolving credit facility from Credit Agricole Corporate & Investment Bank (“CA-CIB”). The CA-CIB credit revolver serves as a warehouse facility for SunStrong to temporarily finance solar assets prior to arranging long-term financings, such as asset-backed securities. The revolving warehouse facility will allow SunStrong to fund the acquisition of solar loans entered into by SunPower Financial's customers and issue asset-backed securities on an ongoing basis.

In May 2023, to further support the expansion of our residential solar and storage loan funding capacity, we also entered into a series of agreements to sell solar loan receivables to a newly created special-purpose trust beneficially owned by one or more affiliates of KKR Credit Advisors (US) LLC (“KKR Credit”). Under the agreements, we have secured financing commitments to fund up to $550.0 million for our residential solar and storage loan program over a 15-month term, with annual renewal options.

These agreements to sell solar loan receivables to third-parties are accounted for in accordance with ASC 860, Transfers and Servicing. We make judgments, based in part, on supporting legal opinions, on whether these entities should be consolidated as a variable interest entity, as defined in ASC 810, Consolidation, and whether the transfers to these entities are accounted for as a sale of a financial asset or a secured borrowing under ASC 860 (see Note 9. Equity Investments for a discussion of our conclusion under ASC 810).

Under ASC 860, for our loan receivables that are held for sale and the transfer of the financial assets to be considered a sale, the asset must be legally isolated from the transferor and the transferee must have actual and effective control of the asset. When the sale criteria are met, we, as the transferor, derecognize the lower of cost or fair value of the financial asset transferred and recognize a net gain or loss on the sale based on the excess of the proceeds received (less any transaction costs) over the carrying value or fair value. We do not retain actual or effective control in the transferred loan receivables, and therefore, the transfers are accounted for as a sale with the gain or loss from the sales included in our condensed consolidated statements of operations. The gain or loss, and cash proceeds, related to the sales of the financial assets are classified as operating activities in our condensed consolidated statements of cash flows.

Our loan receivables are held for sale and recorded at carrying value when purchased, equal to the purchase price plus fees incurred. We subsequently measure our loan receivables held for sale at the lower of cost or fair value on an aggregate portfolio basis until the loan receivables are sold. Our loan receivables held for sale are typically sold within 30 days of origination. If the purchased loans do not meet the eligibility criteria to be sold, the loan receivables are transferred to held to maturity and included at amortized cost within “accounts receivable, net” and “other long-term assets” on our condensed consolidated balance sheets. These loan receivable agreements held to maturity have a term of typically 20 - 25 years and relate to loans that our customers enter into to pay for their solar power systems.

Note 2. TRANSACTIONS WITH TOTAL AND TOTALENERGIES SE

In June 2011, Total completed a cash tender offer to acquire 60% of our then outstanding shares of common stock at a price of $23.25 per share, for a total cost of approximately $1.4 billion. In December 2011, we entered into a Private Placement Agreement with Total, under which Total purchased, and we issued and sold, 18.6 million shares of our common stock for a purchase price of $8.80 per share, thereby increasing Total's ownership to approximately 66% of our outstanding common stock as of that date.

On May 24, 2022, Total and Total Gaz (collectively, “Sellers”) agreed to sell 50% less one unit of the equity interests in HoldCo, which upon closing of such transaction would be the record holder of all of the shares of our common stock held by Sellers, to GIP Sol (and such transaction, the “Transaction”).
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On September 12, 2022, Sellers closed the Transaction. In connection with the completion of the Transaction, TotalEnergies Renewables, GIP Sol, and HoldCo entered into a Letter Agreement, dated September 12, 2022, concerning certain governance rights with respect to HoldCo and the shares of our common stock held directly by HoldCo. Specifically, TotalEnergies Renewables and GIP Sol agreed to, among other things, take all actions necessary to cause HoldCo to designate and elect to our board of directors (the “Board”) such individuals as HoldCo is entitled to appoint pursuant to the Affiliation Agreement; provided, however, that for so long as HoldCo is entitled to appoint at least five directors to our Board, GIP Sol shall have the right to appoint two of such five directors. The Letter Agreement also contained certain provisions on voting and on the transfer of HoldCo interests and common stock of the Company.

As of July 2, 2023, ownership of our outstanding common stock by TotalEnergies SE and its affiliates, and GIP Sol, was 50.2%.

Sale of C&I Solutions Business

On May 31, 2022, pursuant to the terms of the Definitive Agreement we signed with TotalEnergies Renewables on February 6, 2022, TotalEnergies Renewables acquired all of the issued and outstanding common stock of our C&I Solutions business. The preliminary purchase price of $190.0 million was subject to certain adjustments, including cash, indebtedness, and an estimated closing date working capital adjustment. Upon closing, we received net cash consideration of $149.2 million based on the estimated net assets of the business on that date. As of the third quarter of fiscal 2022, we recorded a payable of $7.0 million to Total, based on our review of the closing date working capital and our submission of the closing statement. On October 25, 2022, we received a notice of disagreement from TotalEnergies Renewables with respect to the closing statement. As set forth in the Definitive Agreement, we appointed an independent accountant to adjudicate the amount owed under the closing statement. On April 12, 2023, the independent accountant issued its final and binding determination with respect to the disputed items and an additional $23.9 million was deemed in favor of TotalEnergies Renewables. We recorded a payable of $30.9 million in our condensed consolidated balance sheets as of April 2, 2023, and such amount was paid on April 19, 2023.

Affiliation Agreement

In April 2011, we and Total entered into an Affiliation Agreement that governs the relationship between Total and us (the “Affiliation Agreement”). Until the expiration of a standstill period specified in the Affiliation Agreement (the “Standstill Period”), and subject to certain exceptions, Total, TotalEnergies SE, and any of their respective affiliates and certain other related parties (collectively, the “Total Group”) may not effect, seek, or enter into discussions with any third party regarding any transaction that would result in the Total Group beneficially owning our shares in excess of certain thresholds, or request us or our independent directors, officers, or employees to amend or waive any of the standstill restrictions applicable to the Total Group. The Standstill Period ends when Total holds less than 15% ownership of us.

The Affiliation Agreement imposes certain limitations on the Total Group’s ability to seek to effect a tender offer or merger to acquire 100% of our outstanding voting power and imposes certain limitations on the Total Group's ability to transfer 40% or more of our outstanding shares or voting power to a single person or group that is not a direct or indirect subsidiary of TotalEnergies SE. During the Standstill Period, no member of the Total Group may, among other things, solicit proxies or become a participant in an election contest relating to the election of directors to our Board.

The Affiliation Agreement provides Total with the right to maintain its percentage ownership in connection with any new securities issued by us, and Total may also purchase shares on the open market or in private transactions with disinterested stockholders, subject in each case to certain restrictions.

The Affiliation Agreement also imposes restrictions with respect to our and our Board’s ability to take certain actions, including specifying certain actions that require approval by the directors other than the directors appointed by Total and other actions that require stockholder approval by Total.

On April 19, 2021, we entered into an amendment to the Affiliation Agreement with Total (the “April Affiliation Agreement Amendment”). The April Affiliation Agreement Amendment provided that our Board would include eleven members, composed of our president and chief executive officer, our immediate past chief executive officer, Tom Werner, six directors designated by Total, and three non-Total-designated directors. If the ownership of our voting securities by Total, together with the controlled subsidiaries of TotalEnergies SE, declined below certain thresholds, the number of members of the Board that Total was entitled to designate would be reduced as set forth in the Affiliation Agreement. Pursuant to the April Affiliation Agreement Amendment, Mr. Werner resigned from his position as a member of the Board on November 1, 2021. On October 29, 2021, we entered into an additional amendment to the Affiliation Agreement (the “October Affiliation Agreement
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Amendment”), which provided that our Board would remain at eleven members until March 31, 2022 and allowed for the appointment of one additional independent director to fill the vacancy created by Mr. Werner’s resignation from the Board, which was filled as of December 31, 2021. The October Affiliation Agreement Amendment further provided that, after March 31, 2022, the Board would revert to nine members, at which time one independent director and one Total designee would resign from the Board. As previously disclosed, on March 31, 2022, one independent director and one Total designee resigned from the Board, and the Board reverted to nine members as of such date.

In accordance with the Letter Agreement entered into by TotalEnergies Renewables, GIP Sol, and HoldCo on September 12, 2022, GIP had the right to appoint two designees to our Board. On September 23, 2022, two Total designees resigned from the Board, and on September 26, 2022, the Board appointed two GIP designees.

4.00% Debentures Due 2023

In December 2015, we issued $425.0 million in principal amount of our 4.00% debentures due 2023. An aggregate principal amount of $100.0 million of the 4.00% debentures due 2023 was acquired by Total. On January 17, 2023, we repaid the outstanding principal amount of $425.0 million of our 4.00% debentures due 2023, $100.0 million of which was held by TotalEnergies, as well as the remaining interest on the 4.00% debentures due 2023 of $8.5 million which was payable upon maturity.

Related-Party Transactions with Total and its Affiliates:

The following are balances and transactions entered into with Total and its affiliates.

As of
(In thousands)July 2, 2023January 1, 2023
Accounts receivable$489 $489 
Prepaid expenses and other current assets2,924 2,898 
Other long-term assets— 1,284 
Accrued liabilities158 8,033 

Three Months EndedSix Months Ended
(In thousands)July 2, 2023July 3, 2022July 2, 2023July 3, 2022
Other income:
(Income) expense from transition services agreement, net$59 $(518)$(190)$(518)
Interest expense:
Interest expense incurred on the 4.00% debentures due 2023
— 1,000 171 2,000 
Included within discontinued operations:
Total revenues— (2,152)— 335 
Total cost of revenues1,855 2,911 8,679 7,679 

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Note 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following table represents disaggregated revenue from contracts with customers for the three and six months ended July 2, 2023 and July 3, 2022:

Three Months EndedSix Months Ended
(In thousands)July 2, 2023July 3, 2022July 2, 2023July 3, 2022
Solar power systems sales$368,084 $320,294 $714,633 $591,938 
Component sales88,281 74,542 174,812 134,419 
Light commercial sales60 24,569 612 38,765 
Services and other7,426 (1,633)14,672 2,927 
Total revenues$463,851 $417,772 $904,729 $768,049 

We recognize revenue from contracts with customers when we have completed our performance obligations under an identified contract. The revenue is recognized in an amount that reflects the consideration for the corresponding performance obligations for the goods and services transferred.

Contract Assets and Liabilities

Contract assets represent accounts receivable unbilled for transactions where revenue has been recognized in advance of billing the customer. Revenue may be recognized in advance of billing the customer, resulting in an amount recorded to “contract assets” or “accounts receivable, net” depending on the expected timing of payment for such unbilled accounts receivable. Once we have an unconditional right to consideration, we typically bill our customer and reclassify the “contract assets” to “accounts receivable, net.” Contract liabilities consist of deferred revenue and customer advances, which represent consideration received from a customer prior to transferring control of goods or services to the customer under the terms of a sales contract. Total contract assets and contract liabilities balances as of the respective dates are as follows:
As of
(In thousands)July 2, 2023January 1, 2023
Contract assets$49,666 $51,001 
Contract liabilities1
$234,326 $155,764 

1 As of July 2, 2023 and January 1, 2023, we had indemnifications of $1.0 million retained in connection with our C&I Solutions sale, which are presented within “contract liabilities, net of current portion” on our condensed consolidated balance sheets.

During the three and six months ended July 2, 2023, we recognized revenue of $82.1 million and $91.4 million that was included in contract liabilities as of April 2, 2023 and January 1, 2023, respectively. During the three and six months ended July 3, 2022, we recognized revenue of $40.0 million and $38.1 million that was included in contract liabilities as of April 3, 2022 and January 2, 2022.

As of July 2, 2023, we have entered into contracts with customers for sales of solar systems and components for an aggregate transaction price of $755.4 million, the substantial majority of which we expect to recognize over the next 12 months.

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Note 4. BALANCE SHEET COMPONENTS

Accounts Receivable, Net
As of
(In thousands)July 2, 2023January 1, 2023
Accounts receivable, gross$228,415 $189,636 
Less: allowance for credit losses(13,871)(14,750)
Less: allowance for sales returns(166)(309)
     Accounts receivable, net$214,378 $174,577 

Allowance for Credit Losses
Three Months EndedSix Months Ended
(In thousands)July 2, 2023July 3, 2022July 2, 2023July 3, 2022
Balance at beginning of period$13,596 $15,181 $14,750 $14,375 
Provision for credit losses 865 628 1,307 1,928 
Write-offs(590)(150)(2,186)(644)
Balance at end of period$13,871 $15,659 $13,871 $15,659 

Inventories
As of
(In thousands)July 2, 2023January 1, 2023
Photovoltaic modules$244,068 $156,292 
Microinverters68,832 46,088 
Energy storage systems58,670 63,327 
Other solar power system component materials 52,470 51,108 
Inventories1
$424,040 $316,815 

1 Photovoltaic modules are classified as finished goods, while the remaining components of total inventories are classified as raw materials.

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Prepaid Expenses and Other Current Assets
As of
(In thousands)July 2, 2023January 1, 2023
Deferred project costs$101,283 $126,896 
Deferred costs for solar power systems86,637 34,124 
Related-party receivables10,119 3,959 
Derivative assets80 — 
Other30,164 32,781 
Prepaid expenses and other current assets$228,283 $197,760 

Property, Plant and Equipment, Net
As of
(In thousands)July 2, 2023January 1, 2023
Testing equipment and tools$1,804 $1,157 
Leasehold improvements17,368 14,342 
Solar power systems11,100 10,271 
Computer equipment15,576 14,411 
Internal-use software92,082 70,621 
Furniture and fixtures8,105 8,088 
Transportation equipment5,160 3,941 
Vehicle finance leases20,402 12,316 
Work-in-progress7,590 5,958 
   Property, plant and equipment, gross2
179,187 141,105 
Less: accumulated depreciation and impairment2,3
(83,472)(66,583)
   Property, plant, and equipment, net1,3
$95,715 $74,522 

1 Property, plant, and equipment is predominantly located in the U.S.

2 When our property, plant, and equipment are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from our condensed consolidated balance sheets, and any resulting gain or loss is included within our condensed consolidated statements of operations. As of July 2, 2023 and January 1, 2023, $0.2 million and $0.1 million, respectively, of our gross property, plant, and equipment, which were fully depreciated, were retired, thus, no gain or loss was recognized from the disposal.

3 For the three and six months ended July 2, 2023, we recorded depreciation expense, including accretion expense related to our asset retirement obligations, of $11.8 million and $21.1 million, respectively. For the three and six months ended July 3, 2022, we recorded depreciation expense of $4.2 million and $7.6 million, respectively.



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Other Long-term Assets
As of
(In thousands)July 2, 2023January 1, 2023
Equity investments without readily determinable fair value$39,180 $31,751 
Equity investments with fair value option (“FVO”)
26,023 18,346 
Cloud computing arrangements implementation costs, net of current portion1
5,609 9,179 
Deposits with related parties6,550 7,329 
Retail installment contract receivables, net of current portion2, 3
91,203 98,001 
Long-term deferred project costs2,925 3,110 
Derivative assets2,507 2,293 
Debt issuance costs— 3,556 
Loan receivables held to maturity, net of current portion3
1,205 — 
Other18,710 19,020 
Other long-term assets$193,912 $192,585 

1As of July 2, 2023 and January 1, 2023, we recorded $2.7 million and $5.1 million, respectively, of amortization expense related to the amortization of our capitalized CCA costs.

2 Our long-term retail installment contract receivables are presented net of the significant financing component of $21.8 million and $22.5 million, and allowance for credit losses of $0.7 million and $0.4 million as of July 2, 2023 and January 1, 2023, respectively.

3 We are exposed to credit risk from certain customers and their potential payment delinquencies on our retail installment contracts and other loan receivables held to maturity. As of July 2, 2023, the average Fair Isaac Corporation (“FICO”) score of our customers under a retail installment contract agreement remained at or above 750, which is generally categorized as a “Very Good” credit profile by the Fair Isaac Corporation. As of July 2, 2023, the average FICO score of our customers under other loan receivable agreements remained at or above 600, which is generally categorized as a “Fair” credit profile by the Fair Isaac Corporation.

Accrued Liabilities
As of
(In thousands)July 2, 2023January 1, 2023
Employee compensation and employee benefits$18,959 $36,452 
Interest payable595 8,549 
Short-term warranty reserves33,495 29,657 
Legal expenses5,727 2,830 
Taxes payable7,032 8,167 
Payable to related parties
7,887 11,239 
Short-term finance lease liabilities4,724 2,949 
Indemnification obligations retained from C&I Solutions sale1
22,674 20,632 
Other30,601 24,754 
Accrued liabilities$131,694 $145,229 

1 As of July 2, 2023, we had a total of $22.5 million and $0.2 million of warranty reserves and other indemnifications, respectively, retained in connection with the sale of our C&I Solutions business to TotalEnergies Renewables. As of January 1, 2023, we retained a total of $13.5 million and $7.1 million of warranty reserves and other indemnifications, respectively.

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