Good morning, and welcome to SunPower Fourth Quarter Year End 2014 Conference Call. Today’s call is being recorded. If you have any objections, please disconnect at this time. I would like to turn the call over to Mr. Bob Okunski, Senior Director of Investor Relations, SunPower Corporation. Thank you, sir. You may begin.

Thank you, Candy [ph]. I'd like to welcome everyone to our Fourth Quarter 2014 Earnings Conference Call. On the call today, we will start off with an operational review from Tom Werner, our CEO; followed by Chuck Boynton, our CFO who will then review our fourth quarter and fiscal year 2014 financial results. We will then discuss our first quarter 2015 guidance before opening up the call to questions. 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 earnings press release, our 2013 10-K and our quarterly reports on Form 10-Q. Please see these 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 will reference during this call on the Events and Presentations page of our Investor Relations website. In the same location, we have posted a supplemental datasheet detailing some of our historical metrics. Finally, we will not be taking any detailed questions related to last night's announcement of our intention to form a publicly traded joint YieldCo vehicle with First Solar. We expect to file a public S-1 by the end of the first quarter which will disclose additional details about the proposed transaction. With that, I'd like to turn the call over to Tom Werner, CEO of SunPower who will begin on slide three. Tom?

Thanks, Bob, and thank you for joining us today. I'll start by providing some high level comments on our announcement last night related to our intention to form a joint YieldCo vehicle with First Solar. Then I will provide an overview of the quarter before discussing our performance in greater detail. Please turn to slide four. Because we anticipate filing our S-1 by the end of the quarter, we cannot comment on the specifics related to the proposed YieldCo vehicle at this time. However, I wanted to briefly discuss the rational for this strategic decision and explain why this is the right transaction for our shareholders. We chose to partner with First Solar because we are the two most respected companies in the solar space with more than 40 years of total experience, 16 gigawatts of installed capacity, and industry leading balance sheets. Additionally, SunPower and First Solar each bring a diversified set of project assets based on complementary proprietary technologies and business models. We believe this vehicle will enhance both company's ability to finance and construct projects and in turn will drive long-term, stable returns for our shareholders with a joint venture as adoption of renewable energy expands across the globe. Finally, we expect this strategic decision will provide us with a sustainable competitive advantage through lower cost capital, improved visibility, stronger balance sheets, and attractive financing options for existing and future project sales. Moving on to our quarterly performance, please turn to slide five. We exited the year with strong revenue and earnings as demand was solid across all geographies and end channels. Consistent with the trend over the last few quarters, ASPs were stable. Our balance sheet remains strong as we ended Q4 with 1.2 billion in total liquidity. And our power plant business, both the Solar…

Thanks, Tom. Good morning and please turn to slide nine. For today's call I will focus my remarks on our Q4 performance. Q4 was another great quarter for the company, with $85 million of EBITDA and more than $120 million in cash flow from operations. In summary, we executed well in all geographies and end market segments. Again, our strong performance was led by our utility and power plant business, specifically solar star. Additionally, we saw strong demand in our global residential and commercial businesses as North America bookings increased in both residential and cash. Specifically in the P&L non-GAAP revenue was in line with our forecasts as we executed well on our project commitments. As Tom mentioned, we grid connected more than 100 megawatts of Solar Star in Q4, and expect substantial completion by the end of Q2, six months ahead of our original schedule. Our non-GAAP gross margin for the quarter was 20.4%, as we benefited from stable ASPs and better mix in all three geographies. America's margin was on plan, led by our large projects, but we also benefited from strong demand and margin contribution from residential. EMEA margin rose significantly versus Q3, due to solid demand and good pricing. As we had previously noted, APAC margins continue to be impacted by a legacy project from 2012 that we plan to complete by Q2. In residential, our business was solid as we deployed 129 megawatts of residential products globally including 54 in APAC, 26 in Europe, and 49 in North America. In North America, 64% of our shipments were cash sales, while 36% were lease shipments. Please note that cash sales to SunPower include sales to customers who choose loans from one of our financing partners. Leased bookings were 20 megawatts in Q4 with total lease bookings…

Thanks, Chuck. I would now like to discuss some of the highlights of our guidance for the first quarter. Please turn to slide 12. For Q1 non-GAAP guidance is as follows: We expect revenue of $410 million to $460 million, gross margin of 18% to 20%, net income per diluted share of $0.05 to $0.15 and megawatts recognized in the range of 240 to 270 megawatts. On a GAAP basis, the company expects revenue of $420 million to $470 million, gross margin of 18% to 20% and net loss per diluted share of $0.10 to $0.20. Please note that our Q1 guidance includes the impact of the retention of certain projects in our balance sheet related to our previously disclosed holdco strategy. Capital expenditures in the first quarter are expected to be in the range of $40 million to $50 million as we continue to ramp construction of Fab 4. Finally, we believe that the underlying business fundamentals for 2015 remain strong. However, as a result of last night's announcement of our intention to form a joint YieldCo vehicle with First Solar, we are withdrawing our previously disclosed fiscal year 2015 guidance until we can finalize the impact of the proposed YieldCo vehicle on our financial performance. We will provide an update at a later date. For questions, in addition to Chuck, we also have Howard Wenger, President Business Units; Bob Okunski, our Senior Director of Investor Relations. We'll take questions now.

[Operator Instructions]:

Hi. Robert W. Baird. Congratulations, guys and congratulations on the partnership. Just on the residential portion of the business it seems like that you increased the amount in your holding company. Should we infer that that will be part of the YieldCo or do you -- will you remain some type of optionality there.

Ben, thank you for the question. We're not going to take detailed comments on the YieldCo model, but we'd refer you to the S-1 that we'll file later this quarter.

Okay. Got it. And then as far as Japan goes, we've heard lots of headlines -- headline risks there about curtailment. Could you guys just talk about how you -- you had had a strong quarter here, but going forward how you view that business?

Hey, Ben, this is Howard Wenger. Japan historically has been a really strong country for the company. We expect that to continue. We're mainly in distributed generation, residential and commercial. So the curtailment issue doesn't really affect us very much at all and also we think it has been a little bit overblown. We're not seeing real impact in most of the areas that we're working. So we think it's going to continue to be a strong market for the company.

Got it. And then Tom, could you just talk about the U.S. market and specifically we know the residential side is going good, but on the utility side, are there any developments they, we're seeing a pickup on utility bids. Thanks, and I'll jump back in queue.

Thanks, Ben. Yeah, the U.S. utility business is in transition, but I think potentially in transition very favorably. What we see is the completion of RPS driven utility scale projects in America over the next couple years. In our case, finishing Solar Star this quarter or in the near term, starting Quinto, building Henrietta next year and of course you know we have the Xcel project in Colorado to build as well. And we announced what we would consider to be part of the transition of the main streaming of solar is the – a bid that we won in SoCalEdison in 50 megawatt. I would also point to on, I think what will be an emerging trend which is large companies and typically multinational companies that will choose to go renewable because it's in line with their company brand and beliefs as well as its economic. And I think those will be an increasing trend. So I think the U.S. utility market's going to be a very good market and it just won't be the large RPS driven projects which is actually good, because it's really consistent with the main streaming of solar. And Let me end with, don't forget that California's likely going to increase their RPS to 50% and that will be a catalyst as well. I think we're seeing the mainstreaming of solar and a transition and business will be good.

Thanks, guys.

Thank you. Next question is Patrick Jobin. Your line is open and state your company, please.

Hi, Credit Suisse. Can you hear me?

We can.

Great. Thanks for taking the question and congrats on the partnership. So just a few quick ones; first, with strong guidance, is it fair to assume kind of underlying value assumptions, it's really just YieldCo, Holdco related timing?

Yes.

Okay. And then I appreciate there is probably only so many details that can be shared, but from a high level, how do you approach kind of partnering with an entity that is perhaps competing for the underlying PPAs. Is that a solvable challenge or how should we think about that?

Yeah, I'll comment and then I'll let Chuck, who is architect of what we're doing in that -- fill in. I would say broadly that the way we'll construct the YieldCo which we'll have in the S-1, of course, I think accomplishes what you said. And when we think of this, it's really beneficial to both of our shareholders in a significant way. Just to reiterate a little bit, what you have is you have companies with 40 years of experience, 16 gigawatts of deployed solar, two very experienced solar development teams with complementary technology and complementary business models, resulting in a huge benefit to our shareholders, because we just said sustainable cost of capital advantage over the long term due to those factors. Chuck, did you want to add anything?

I think, Tom, well said.

Good. Thanks, guys. And just last housekeeping item. Gross margin guidance, 18% to 20%, down kind of a point at midpoint. How should we think about that impact as that one Japan legacy project kind of finishes up over the next quarter or so? What's driving that slight decline in gross margins?

Yeah, Patrick. The Japan project is somewhat immaterial now for Q1 and Q2. It's winding down. We see a very strong margin year for the company, north of 20%. And Q1 is roughly in that range. I would look at is as a mix issue between large projects. And, again, we are developing and putting assets on our holdco. So think there is a significant amount of business that's not showing up in the P&L we're developing that is strong margin and very good business for the holdco.

Great. Thanks and congratulations again.

Thank you.

Thank you. Next question is Vishal Shah. Your line is open and state your Company name, please.

Yeah, Deutsche Bank. Thanks for taking my question. Maybe Tom, can you talk about the bookings environment right now, where you see trends in terms of overall bookings, which regions and are you seeing any competition from other YieldCo’s or developers for some of the price that you are looking at?

So, what -- I'll do a little geographic overview and then I'll answer your question about new competition. So, we see a really strong American market. Clearly, the DG market in America is quite strong. We expect that to be, if anything, turbo-charged over the next, say, 20 months because of the potential lapse in the ITC. We'll see what happens there, of course. Just talked about U.S. utility, I think we're going to see some really interesting developments that are sustainable for solar in America. So, America's quite strong. Japan remains quite strong, although market in transition. So, I think the dynamic there will change over the next few quarters, but it's still quite strong. Japan is absolutely on fire. It's the world's largest market. It's got nothing but upside. I'm sorry, China is absolutely on fire. It's the world's largest market. And will continue to be so for many, many years. Our position there is quite strong, but China is quite good. Interestingly, we see South Africa is a market that's long-term sustainable and will grow as well because solar just makes sense in South Africa. They need energy and its economic. Some of our best economics in the world are actually in South Africa. Chile and Mexico will be -- more Mexico than Chile will be emerging markets. So you'll note, I didn't mention Europe. I think Europe is stabilizing and is not an area that we look for substantial growth, although that will with an interesting market as it develops to more of a market with complementary or adjacent services. So very strong markets worldwide, which of course means other companies see that which means there's a lot of emerging competition. And, yes, we do see a lot of the YieldCo’s interested in entering this market. It's a little late to become a solar developer, so many of the YieldCo’s are looking to partner with existing solar developers. It's not too late, but it's certainly late in the game. We've been at it for how you count between five and 10 years and have deployed many, many, many projects around the world. So -- but, yes, we do see intensifying competition. Lastly, Vishal, I'd say that look to -- we see the market morphing as time goes on here to being not only solar, but solar plus adjacent services. And so while the competition for selling pure solar intensifies, I think we're in another transition, one of many that we've seen over the last 10 years.

Appreciate it. Thank you.

Thank you. And next question is Krish Sankar. Your line is open and state your company, please.

Good morning, guys. It's Andrew Hughes on for Krish at Bank of America-Merrill Lynch. Congrats on the announcement. High level YieldCo question, I mean, one feature of these vehicles that is prevalent is certainly conflicts of interest, whether it's between the management of the two entities, between two shareholder groups, etcetera. Just at a high level as your thoughts on the structure has evolved, you know, have you thought towards addressing some of those issues? And then to the extent you can talk about the announcement, it would seem with this joint venture that those conflicts of interest might be, right, so how you would seek to address those?

Yes. We can't comment on the details. I would just say that, I think all YieldCo MLPs have a similar structure, whether it’s a sponsor or two of a conflicts committee. We'll talk about that in great detail in the S-1. So would point to you that later this quarter.

And then just on Japan, the legacy project rolls off in the first half here. Can we expect those margins to recover back to the sort of more traditional levels or does some of the feed in tariff reductions potentially limit that opportunity in the back half of the year to get back to those sort of high-teens margins?

This is Howard. We expect pricing and margins to hold relatively stable for the first half of 2015. There is pressure sort of from – so it's a two sides of the coin. It's still fundamentally strong market, market in transition as Tom said, going to more of a more of a deregulated energy market where there's more customer choice and there's very strong customer demand for solar and our product plays well there, so that's really good. On the other side of the coin, and really this impacts more the second half, there will be expected a feed in tariff reduction. It's in our plan. We don't expect it to be higher than what's planned. We expect it could be a little bit better on the feed in tariff reduction side. So that's built in. There is a foreign exchange hasn't gone in our direction. Although, we deal in U.S. currency and a as Chuck mentioned we managed foreign exchange quite well to date. But that's still providing some resistance and downward pressure on pricing and then there's always evolving competition. So we think the first half of 2015 strong, good market, pricing, margins in good shape, some pressure going into the second half and we'll manage accordingly, because we're geographically -- we can manage our allocation of our product geographically around the world to where it's best suited from a financial perspective. So we have mitigation measures.

All right. Great. Thanks, guys.

Thank you. The next question is Brian Lee. Your line is open and state your company, please.

Hi. Goldman Sachs. Thanks, guys for taking the questions. First one from me was just again high level on the YieldCo. Thanks, Tom, for walking through some of the motivations. I guess one question I had was just on the partnership. When I was thinking about your potential for doing the YieldCo, against some of your peers, it seems like you guys were in a better position to go standalone especially with the unique relationship you have with Total. So wondering if you can comment at all as to part of the motivation around doing the partnership here with First Solar, how much of it was about potentially accelerating the near term timing of such a vehicle versus the trade-off of, I guess, longer term sustainability of growth by having to like you mentioned very large developers working together on this project.

Brian, we're going to be really careful on how much we say here. What I would point to is this is very thoughtful, very deliberate process and we think this is an outstanding outcome for our shareholders and as I said in my comments previously, I think it gives us a sustainable cost of capital advantage that would plan on taking your question certainly and making sure that our S-1 is comprehensive enough that investors have the knowledge they need to have. So, that's about as much as I can say, and again, we expect an S-1 by the end of the quarter.

Okay. Fair enough. Second question, and then I'll pass it on, was just more of a housekeeping one. On the -- Chuck, you mentioned the holdco update here, 660 megawatts. In terms of the mix of resi, can you quantify what megawatts are ITC backed in that holdco asset base versus cash backed? Thank you.

The vast majority are ITC based. Think of those as Quinto, Henrietta, Hooper. On the residence residential side, only the earlier assets are ITC -- are cash grant based. And I would -- I'm estimating an exact number, of the 220 megawatts, less than half would be cash grant based.

Okay. Thanks, guys.

Okay. I think we'll take one more question.

Thank you. Our next question is from Paul Coster. Your line is open and state your Company, please.

Good morning. This is Mark Strouse on for Paul at JPMorgan. Thanks for taking our questions. Just one quick one for us. So, you're filing an S-1, so it's obviously a U.S. listed company. Some of the other parent companies out there that have formed have YieldCo’s have formed U.S. listed companies with predominantly U.S. assets, but have stated intentions for international YieldCo’s with the international assets. Can you -- to the extent that you're comfortable talking about it, would this partnership be kind of a global YieldCo or this be just for the two company's U.S. listed assets.

Yeah. We can't provide that level of detail. But in the prepared remarks we did talk about a diverse set of project assets and so I think you could infer from that that both companies are great global developers.

Okay. All right, Charles. Thank you.

All right. Well, thank you all very much for joining the call and remember we do plan -- the plan is to have an S-1 filed by the end of the quarter and you know the restrictions post S-1 filing and we will look forward to talking to you at our next earnings call. Thank you again.