Welcome to the SunPower First Quarter 2018 Earnings Call. At this time, all participants will be in a listen-only mode until the question-and-answer portion of today's conference. Now, I'll turn the meeting over to your host, Bob Okunski, Vice President of Investor Relations with SunPower. You may begin.

Thank you, Ryan. I'd like to welcome everyone to our first quarter 2018 earnings conference call. On the call today, we will start off with an operational and strategic review from Tom Werner, our CEO followed by Chuck Boynton, our CFO, who will review our first quarter 2018 financial results before turning the call back to Tom for guidance. As a reminder, a replay of this call will be available later today on the Investor Relations page of our 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, our 2017 10-K and our quarterly reports on Form 10-Q. 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 set of PowerPoint slides, which we'll reference during this call, on the Events & Presentations page of our Investor Relations website. In the same location, we have posted a supplemental data sheet detailing some of our historical metrics as well. With that, I'd like to turn the call over to Tom Werner, CEO of SunPower, who'll begin on slide 3. Tom?

Thanks, Bob, and thank you for joining us. On this call, we will review our first quarter 2018 financial performance and provide an update on our strategic initiatives, including the proposed acquisition of SolarWorld Americas. We executed well in Q1 with strong segment performance across the board. In particular, I'd like to highlight our U.S. residential business which posted a record Q1 quarter. We also met key milestones in our commercial and power plant businesses, while further expanding our SunPower Solutions global footprint. Finally, we've surpassed our revenue and EBITDA forecasts and reduced operating expenses. I'll now move on to our segment performance. Please turn to slide 4 for a review of our DG business. In Residential, our strong fourth quarter momentum carried into Q1 as we exceeded our forecast for the quarter. We executed well despite Q1 seasonality and believe that we gained share in all key markets. In the U.S., we posted record Q1 performance with 35% year-over-year megawatt growth. Outside of the U.S., we again beat plan in both Europe and Japan as demand in pricing in both markets remain favorable. In commercial, we executed well during Q1, expanding our number one market share and growing year-over-year megawatt deployment by over 50%. Accomplishments include the completion and sale of a number of key projects, including the 7-megawatt JBAB project for Constellation Energy, as well as our 4-megawatt carport, rooftop and ground-mount system for Campbell Soup. We continue to see particularly strong interest in our Helix solar-plus-storage solutions, with storage attach rates approaching 30%. Looking forward, we intend to further consolidate our leading role in the U.S. DG segment and in key international markets with expected annual megawatt deployment growth of 20% in 2018. Demand visibility is strong, particularly in U.S. commercial, by virtue of our $2.5 billion…

Thanks, Tom. Good afternoon. Before getting started, I'd like to thank Tom and the board of directors for allowing me to serve the company the last eight years. SunPower is a great company and I have enjoyed working with a world-class team. With the significant progress we have made in our transformation and the company on solid footing, I felt that this is the right time to step down. To remind everyone, we started this transformation over a year ago, we made a decision to sell 8point3. This was followed by the plan to sell other assets to generate cash, de-lever our balance sheet and simplify our financial statements. I'll comment more on this later. But now as we near completion of this phase of our transformation plan, I decided to take a break. I will officially hand the reins to our new CFO after our 10-Q is filed, but will remain with SunPower for a couple months to ensure the asset sales are complete and a smooth transition to our new CFO, Manavendra Sial. In addition, I've agreed to remain as the Chairman and CEO of 8point3 until we complete the sale. Now, let me review the financials. Please turn to slide 12. We are pleased with our results for the quarter as we exceeded our revenue, margin and adjusted EBITDA forecasts. Our non-GAAP revenue was above guidance as we executed well in all segments. Power plants was lower sequentially due to a large project sale in Q4, but better than planned due to the sale of our 128-megawatt (sic) [126-megawatt] (20:47) Guajiro development project. Our commercial business was in line with prior year with solid bookings. We saw a strong year-over-year growth in our residential business as our North American team posted a record Q1. Overall, our consolidated…

Thanks, Chuck. I would now like to discuss our guidance for the second quarter and fiscal year 2018. As a reminder, our guidance assumes our estimated impact of the 201 ruling for Q2 and 2018 as a whole. Please turn to slide 15. Second quarter fiscal 2018 GAAP guidance is as follows: revenue of $360 million to $410 million; gross margin of 2.5% to 4.5%; and a net loss of $125 million to $100 million. Second quarter 2018 GAAP guidance also includes the impact of revenue and timing deferrals due to sale-leaseback transactions, as well as the impact of charges related to the company's restructuring initiatives. On a non-GAAP basis, the company expects revenue of $375 million to $425 million, gross margin of 6% to 8%, EBITDA of $10 million to $35 million, and megawatts deployed in the range of 350 to 380. Second quarter non-GAAP guidance reflects timing differences related to the revenue recognition of certain power plant projects during the quarter. For 2018, please turn to slide 16, we expect revenue of $1.6 billion to $2 billion on a GAAP basis and $1.8 billion to $2.2 billion on a non-GAAP basis with gigawatts deployed in the range of 1.5 to 1.9. The balance of the company's fiscal year 2018 guidance is as follows: non-GAAP operational expenses of less than $290 million and capital expenditures of approximately $100 million. Our 2018 guidance does not include the impact from our proposed acquisition of SolarWorld Americas. Also, we now expect fiscal year 2018 adjusted EBITDA to be in the range of $75 million to $125 million. This range assumes a $55 million negative impact related to tariffs associated with the section 201 trade case as well as a reduction of approximately $50 million of non-controlling interest income resulting from the anticipated sale of the company's lease portfolio in the second half of the year. On a comparative basis, under the same assumptions, guidance reflects 10% to 15% year-over-year adjusted EBITDA growth, and we expect further EBITDA improvement in 2019. We'll take questions now, please.

Thank you. At this time, we are now ready to begin the question-and-answer session. Our first question comes from Tyler Frank, and please state your company name. Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management): Robert Baird. Thanks for taking the question. Can you just discuss the overall outlook now for potentially getting an exemption for Section 201? Is that off the table completely? And then, it seems like you're going to transfer more to a U.S. focus. How should we think about that given the ramp of P-Series both in Mexico and then here in the U.S. after the acquisition of SolarWorld? Thank you.

All right. So, you should absolutely not interpret that we incorporated tariffs into the rest of the year that we do not think were going to be excluded. We just chose to be really clear about the size of the tariffs this year and rather than go down from a bigger number, we just subtracted it. We absolutely expect to be exempted. We think that we need to criteria better than anyone. So, if anybody is exempted, it should be SunPower. I think those criteria are familiar to most. Obviously, we've never been subsidized by the Chinese. We have a unique technology, only we can make it. The American consumer wants it. It's exactly what USTR has asked. Now, having said that, we don't know the timing of that and, of course, we don't know the answer. I will be in Washington D.C. again this Thursday, making sure that we've communicated and answered any questions that needed to be answered. In terms of U.S. concentration, what I would say is that it would be fair to say that we're increasingly focused on the U.S. because we are a U.S. company. Our product works great in this market. The U.S. market is increasingly a DG market that plays to SunPower's strength. However, as you point out in your question, we have other module technologies, that being the P-Series technology, and that address the power plant market and, most importantly, the international market. So, I wouldn't say that we're overly dependent on any region. And those of you that have tracked us as a company know that we've always focused on being regionally diversified because policies can change. And I think we continue to be well diversified. Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management): Excellent. Thank you.

Our next question comes from Brian Lee. Please state your company name. Hank Elder - Goldman Sachs & Co. LLC: Hey, guys. This is Hank Elder on for Brian Lee from Goldman Sachs. So, in some of the states, solar data is beginning to pick up and then your strong results suggest trends are improving year-over-year. So, I know you said 20% year-over-year for DG is the growth we can expect, but can you quantify what you think the residential segment will do, and then how does that compare to kind of the industry expectations?

Thank you, Hank. I think what we're seeing in U.S. resi has been a record Q1. We believe that we're taking share. We expect to have continued share gains. And I think what we would say for the U.S. market in light of the various policies is that there will be growth and we expect to grow faster than the market. Also, we're number one in commercial. We expect to maintain that and grow share in commercial. Hank Elder - Goldman Sachs & Co. LLC: Do you think that 35% that you guys did in 1Q can continue, or do you expect that to kind of head down towards 20% as we get through the year?

Yeah. I would say that the latter that it will moderate. We still expect growth, but it won't be at that rate. What we're pointing to is that Q1 which is a seasonally light quarter for the solar industry, our products, particularly our products and solutions, did particularly well. As the market comes back as it normally does during the summer months, we'll still grow favorably, but not as fast. Hank Elder - Goldman Sachs & Co. LLC: Okay. That's helpful. And then, I guess, sticking with resi, you called out the $200 million of proceeds from the lease monetization in total, but coming in phases with the first one in 3Q. So, how much of that $200 million could we expect in the third quarter and then kind of what's the timeline for realizing the full $200 million?

Yeah. A little more than half in the third quarter and the balance should be in the rest of Q3 and Q4. It could spill into Q1, so we haven't guided that far out. But I would say, out of the $200 million, we expect more than half in Q3. Hank Elder - Goldman Sachs & Co. LLC: Got it. And then just one last one and I'll pass it on. But the development megawatts, you sold the one project in Mexico, but how much is left and what was the impact to the P&L into the power plant segment from that sale? I guess, how should we model this going forward?

I would model it at roughly neutral for the U.S. We took an impairment charge in the U.S. We expect to sell that portfolio. It's about a 2-gigawatt portfolio of various land positions, interconnections. We likely will sell that in the second and third quarter. And we would expect to not have a P&L gain or charge. We took a charge in Q1. There is another portfolio in Mexico and elsewhere around the world that we could have substantial gains in the future, but those are not in the near-term horizon.

And in terms of the impact on Q1 of...

$25 million impairment charge and then there was a small gain in Mexico for the sale of Guajiro. Hank Elder - Goldman Sachs & Co. LLC: Thank you guys very much.

Thank you, Hank.

Thanks, Hank.

Thank you. Our next question comes from Pavel Molchanov, and please state your company name. Pavel S. Molchanov - Raymond James & Associates, Inc.: Raymond James. A simple question, would you do the SolarWorld deal if there were no Section 201 tariff?

Unlikely. Pavel S. Molchanov - Raymond James & Associates, Inc.: Okay. Clear enough. Given that you're not giving any guidance at this point on the incremental uplift on financials from SolarWorld, I guess in advance of that guidance, how do you want us to think about the accretion/dilution of this transaction since we don't know the purchase price or any of the other metrics?

Yeah. Fair enough. What I would say and I'll let Chuck add some color if you'd like. What I would say is, first of all, on the purchase price, we gave you some sense of the materiality which is not to our financials. Next, the fundamental question with SolarWorld is couple-fold. One, how much improvement can we make and how much of it will be complementary to our existing products. We're optimistic on both fronts. So, we think that there'll be a market share gain by virtue of their product and their distribution channel. This gives our DG customers a comprehensive product offering as we did mention in our prepared remarks. So, we would expect that to be favorable. On the other hand, there are some OpEx that we'll need to absorb from the facility that would require us to have complementary sales. I think the net of that is we're optimistic. We're just a few weeks post acquisition announcement. Of course, we're mostly focused at this point on closing which has CPs (37:15) and government approval. So, that's mostly what we're focused on. Hopefully, that was helpful, Pavel.

Yeah. I think, Pavel, on the accretion/dilution, what I would say is the cash purchase price is not material. We can't disclose the terms due to confidentiality, but what I would tell you is the bull case is extremely accretive. And again, that will unfold over the next couple of years. And we think the technical synergies are quite high. We know how to run factories at a world-class level, and we can improve operations and improve reliability and quality. And so there's a very great bull case, and we don't put the downside cases very high. And so I would say neutral from a planning standpoint, but we think that we can do better and really drive good profits and make it significantly accretive over time. Pavel S. Molchanov - Raymond James & Associates, Inc.: Okay. Thank you very much.

Thanks, Pavel.

Thank you. Our next question comes from Julien Dumoulin-Smith, and please state your company name.

Hi, BAML. Can you hear me?

Yeah.

Yeah, Julien.

Hey, excellent. Could we go just back to the NCI impact here on the residential solar piece?

Sure.

Can you talk a little about how that annualizes into 2019? And then to also talk about how much of the backlog of the 2 gigawatts is reflected in the initial adjusted EBITDA for 2018. I think you said relatively limited impact there, but just want to make sure.

That's correct. So, I'll first do the impact on the pipeline sale. We don't think it's going to have a material impact up or down on the rest of the year. We took a $25 million charge in Q1. There could be some gains in international portfolios, but they would be modest likely in 2018. So, that one, I would say, from a modeling standpoint, the core EBITDA is their core operating performance, not asset divestitures. As it relates to NCI, Julien, as, of course, you know, NCI is effectively the tax benefit that we generate by monetizing tax equity for residential leases and, in some cases, commercial. What we're guiding is there would be no NCI income in Q3 and Q4 as we would expect to deconsolidate leases going forward. And that has a negative or adverse impact because we will not take that NCI income, HLBV income to our P&L. On a run rate basis, that is, and you can look historically, it's $25 million to $30 million a quarter of NCI benefit and there is some seasonality. So, going forward, we would not be booking that. Our core view on EBITDA generally is we will have growth year-over-year, 2017 to 2018, and we'll have growth again into 2019. We expect even more growth into 2019. And so, what I would tell you is the core performance is improving and we feel like we're turning the corner overall on the core operating performance. NCI adds a little bit of complexity and noise to the system and so we wanted to kind of guide you that we'll take that out going forward or likely would have that out. And if things go well, we would be in that position in Q3 to not be recording NCI income.

Got it. What about just adjusted EBITDA altogether with respect to the residential solar piece rolling off? Just to understand like sort of on a run rate basis, if you were to kind of think about the composition there, net of the (40:39) back half of the year.

Yeah. What I'd tell you is that it's a really good business. The core residential business is a really good business. We've seen margins that are, this past quarter, 19%. We think that business is 20% to 30%, I'd call that 20% to 25% in the near term. But we're taking costs out in a fairly rapid way. And we see margin expansion in residential, not just in the U.S. quite frankly, in Europe, we had a really strong quarter. We see Q2 being a good quarter in Europe as well. So, globally, residential and DG, in general, is a terrific business.

Excellent. Thank you, all.

Okay. We're going to take one more question. I believe it's from Colin.

One more question comes from Colin Rusch, and please state your company name. Colin Rusch - Oppenheimer & Co., Inc.: Oppenheimer & Company. Thanks for squeezing me in, guys. Can you just talk about the relationship with the SunPower technology on an ongoing basis with that utility portfolio that's for sale? Will the technology continue to be assigned into those projects? And do you expect to negotiate equipment sale pricing in conjunction with the portfolio sale?

So, all to be determined. I would say, as a rule, we'll separate the two, and SunPower Solutions will sell on its own merits which given the multi-gigawatts of the installed capacity, we have lots of experience in, I think, a great solution. So, we're going to separate those two things, and it's hard to project what percent would have the attach rate of SunPower Solutions. We're not banking on that in our guidance for SunPower Solutions, by the way. Colin Rusch - Oppenheimer & Co., Inc.: Great. And then there's a lot of moving pieces here on the restructuring of the business. And do you have a sense of the full timeline for seeing the company kind of cleaned up and ready for that sustainable run rate? Is that two quarters away, three quarters away? Do you think it's going to take longer than that?

So, I think we're turning the corner this quarter. We are materially through the asset divestitures or they're at least materially on course, and thank you, Chuck, for accomplishing that. We've had a significant reduction in operations expense and we're going to see the benefit of that as we get to the back half of this year and go into next year. So, the culmination of that effort, plus greater focus on two businesses, that being upstream and downstream, happens over the next quarter or two. And we think we're in sustained profitability by the fourth quarter of this year going into 2019. Colin Rusch - Oppenheimer & Co., Inc.: Great. Thanks so much, guys.

Thank you very much for your time, everyone. We look forward to our next call. And also, I should mention, we will have an Analyst Day in the second half of the year, so we look forward to seeing you there.