Good afternoon, and welcome to SunPower Corporation's Fourth Quarter 2016 Results Conference Call. Today's call is being recorded. If you have any objections, you may disconnect at this time. I would like to turn the call over to Mr. Bob Okunski, Vice President of Corporation. Thank you, sir. You may begin.

Thank you, Ashley. I'd like to welcome everyone to our fourth quarter 2016 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 review our fourth quarter 2016 financial results. Tom will then discuss our updated outlook for Q1 and fiscal year 2017. 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 2015 10-K, and on our Quarterly Reports on Form 10-Q. Please see those documents for additional information regarding those factors that may affect our forward-looking statements. To enhance this call, we have also posted a set of PowerPoint slides, which we will reference during the call on the Events & Presentations page of our Investor Relations website. In the same location, we have posted a supplemental datasheet 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 will begin on slide 3. Tom?

Thanks, Bob, and thank you for joining us. Today, I will provide an overview of our Q4 performance and our view of the current state of the solar market. I will then discuss our segment performance in greater detail and highlight our market position for 2017 before turning the call over to Chuck. As you know, given continuing market headwinds, we began a number of restructuring initiatives last quarter to position the company for long-term success. While Chuck and I will provide more details in relation to our progress later in our remarks, I can report that we achieved our restructuring targets for the quarter and our 2017 initiatives are on track. Overall, while industry conditions remain challenging during the quarter, we posted solid results as we met or exceeded our revenue and cost targets. Excluding the charge for sale of excess polysilicon, we materially exceeded our gross margin and adjusted EBITDA guidance. We executed on our power plant project milestones, and gained share in distributed generation in the U.S. where demand for our complete solution continues to grow. Operationally, we reduced capacity at our cost targets and continued the successful ramp of our P-Series product. We exceeded our cash flow goals, as we monetized a number of projects. Now we let me touch on what we are seeing in the market, please turn to slide 4. We believe that long-term growth prospects in the solar power industry are compelling, with solar power widely expected to become the largest contributor to incremental electricity generation globally. We believe that our strategy, focused on developing differentiated technology and deploying it across a diversified portfolio of markets, channels and applications, will allow SunPower to profitably capitalize on this market opportunity. However in the near term, we believe that the solar power market is…

Thanks, Tom, and good afternoon. I will first review our fourth quarter results and then provide an update on our restructuring initiatives before providing additional color on our balance sheet. I will then turn the call back over to Tom for our guidance. Please turn to slide 10. We executed well on our strategic initiatives during the quarter, as we successfully rationalized our capacity, met our project milestones and recorded a strong cash flow quarter. Before moving on to the P&L, I'd like to point out that we took a number of charges during the quarter that influenced our financials. These include approximately $175 million in GAAP restructuring charges as well as a $61 million charge to sell excess poly, which affected both our GAAP and non-GAAP results. As a reminder, when we guided our Q4 2016 results, we specifically excluded the impact of these charges. When we compare the results without the charge, we exceeded our guidance for the quarter. Moving on to the P&L, our non-GAAP revenue was in line with our guidance, as we executed well in all segments with particular strength in power plant, as power plant revenues rose more than 50% sequentially. Per plant, we met our project milestones for the quarter, including selling all or majority stake in our Stanford TID and Boulder Solar I projects. In our commercial segment, non-GAAP revenue also rose more than 50% sequentially due to project completions, while residential rose slightly, in line with guidance. Our non-GAAP gross margin for the quarter was negative 2%, driven by several low margin utility projects as well as the poly charge. Please note this charge accounted for approximately 6 gross margin percentage points overall and was allocated the COGS across all three segments by megawatts recognized. As expected, power plant margins declined…

Thanks, Chuck. I would now like to discuss our guidance for the first quarter as well as reaffirm our fiscal year 2017 outlook that we gave in December. Please turn to slide 14. The company's first quarter of fiscal 2017 GAAP guidance is as follows. Revenue of $315 million to $365 million, gross margin of negative 2% to 0%, and a net loss of $175 million to $150 million. First quarter 2017 GAAP guidance includes the impact of the company's HoldCo asset strategy in revenue and timing deferrals due to real estate accounting. On a non-GAAP basis, the company expects revenue of $370 million to $420 million, gross margin of 0% to 2%, EBITDA of negative $45 million to a negative $20 million and megawatts deployed in the range of 150 megawatts to 180 megawatts. For 2017, the only changes from our previously disclosed guidance in December are that we expect adjusted EBITDA to be positive for the year though EBITDA growth will be weighted to the second half of the year. Additionally, we expect a slight increase in CapEx for 2017 as well as lower restructuring charges for the year versus our previous guidance. This change is due purely to timing. The balance of our guidance remains unchanged, as can be seen on slide 15. With that, I would like to turn the call over for the questions.

Thank you. Our first question is from Tyler Frank. You may state your company name. Your line is open. Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management): Hi, Robert Baird. Thanks for taking the questions, guys. Can you talk a little bit about what has changed since you last gave guidance? And why you're confident now that you can guide to positive EBITDA for 2017? And then looking at your Q1 guidance and the commentary so far, it looks as though, it may be second half weighted. Can you discuss how good your visibility is for the second half this year?

Sure. This is Tom. The changes since the last call would be impact of the new administration in the White House, and that would be speculation on tax reform, and also the exchange rate between different currencies, and lastly interest rates. That is added on top of the continuing trend of the large American and Chinese markets continue to grow but not as fast as projected, and supplies continue to come on as those markets continue to grow as fast as expected. So we have continuing oversupply, and pricing models has continued to come down albeit at a declining rate. So there is a number of changes that are mostly unfavorable. Having said that, what gives us confidence in our guidance is the following. First, our commercial business is predominantly a direct sale business and 90% of that business is in the backlog, the remaining 10% is under contract and will soon be in the backlog. Our power plant business, we've scaled that business to be more modest in 2017. So we have lots of that business and soon that business will be 100% booked for the projects that we self-developed. So we have clear visibility to what we're going to build in the back half of the year. And then I would add to that, that we've had two significant restructurings. We've also worked aggressively to lower cost of both our panel, module and BOS, and we're seeing the benefits – we will see the benefits of that start even as soon as next quarter but materially by midyear. So really, really strong visibility, much better than the last year in terms of backlog. And then secondly we've restructured the company and got costs out that put us in a better position on the things that we control. Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management): Great. Thank you. And then just a follow-up. Have you seen the certainty around either the tax situation or potential changes to subsidies? How has that impacted each one of the three markets being residential, commercial, and utility scale?

So let me first talk about residential. There's a combination effect there. I'll talk about residential America. California is a dominant market and we've had epic rain in California, much needed but epic rain. And then, tax speculation has caused some customers to pause, and so I would say that the Q1 growth rate is not what we expected. Although we're doing fine. The commercial business has seen perhaps early signs of changes in buyer behavior. But our projects end up preferentially, and so I think we're fine there as well. In the light commercial business, that's more of a short cycle sales business and there's been a policy announcement by the California Public Utilities Commission that grandfathers projects through the end of January. So that date has already passed. So there's uncertainty on rates for like commercial customers for the balance of this year. It is possible but that decision will be modified and we're working constructively or certainly advocating for that. In the power plant business, we have reduced our exposure to power plant business. So we're less susceptible to the macroenvironment that is part of your question. And I would say though that the Mexican projects are more challenging because of the exchange rate with the peso. And there is a sense of economic uncertainty in Mexico that may impact the value of the projects that is offset by cost reductions that we can do and in fact that which we produce in Mexico is lower cost now. So we can offset that. There may be an impact on few projects that we need to sell this year although that would be not significant at this point. So that would be a broad overview. Tyler Charles Frank - Robert W. Baird & Co., Inc. (Private Wealth Management): Great. Thank you.

Our next question is from Brian Lee. Kindly state your company name. Thank you. Brian Lee - Goldman Sachs & Co.: Hi, guys. Thanks for taking my question. It's Goldman Sachs. Chuck, if I can dig into the cash balance target of $300 million a little bit, you mentioned the positive operating cash flow target for this year. Do you think you can be free cash flow positive as well? And then with respect to debt, I know you're talking about delevering. Can you give us some sense of how much you're implying in terms of delevering in that cash balance forecast and then what pieces of debt you'd particularly be targeting? If I do the back of the envelope math, it seems like it would be less than $100 million, but would be curious to hear your take? Thanks.

Certainly, Brian, thank you for the question. So the cash balance end of the year of $300 million is after paying pretty significant CapEx, primarily from building out Fab 4. And so I think we will be operating cash flow positive. However, as you know, the statement of cash flows has a lot of moving parts with sale leasebacks and residential financings. So the way we look at it is we sort of look at all non-recourse debt flowing as operating cash flows. And when you take all that into account, we think we will drive positive operating cash flow. On the statement of cash flows, it will be more significant because the debt part of non-recourse debt is in financing. And so the delevering that we mentioned, we did – we really had a strong Q4 delevering and paying down $500 million of project level debt. We'll increase that a little bit in Q1 and Q2, and then pay that down significantly in Q3 and Q4. As far as the exact number, we're not guiding to that level of specificity but I would expect it to be more than the $100 million that you mentioned. Brian Lee - Goldman Sachs & Co.: Okay, great. Thanks. That's helpful. And just second question from me and I'll pass it on is, when I look at the non-GAAP gross margins by segment, if I just specifically focus on the residential and I try to back out the $60 million plus that you allocated across the three segments from the poly charge, I'm getting to a number where you were well less than 10% non-GAAP gross margin in the residential segment, which – I guess the question will be, is that in line with the targets you had coming into the quarter? And secondarily, it just seems like the pricing there has been relatively more sticky than in some of your other categories. So would be a little bit surprised that the margins came down as much as they did versus where they're trending in 2016. Maybe if you could talk to the drivers behind that. Thank you.

Yeah, certainly. Thank you for that question as well, Brian. There's one more part to the margin impact and that is we had capacity charges due to lines that we're not running in Q4. That was about $25 million. And so when we look at the overall margin profile on a pro forma basis for residential, it's close to 20%, which is in line with our expectations and where that's been historically. And we'd expect it to maintain that level and possibly increase over time. Of course, that's dependent on FX for our European businesses and business in Japan. But largely, we expect the residential margins to stay fairly strong in a 20% range, and you have the same impact on commercial and power plants. So if you exclude the impact of poly, as well as capacity charges, it was a decent margin quarter. And we'd expect that trend to strengthen in the next year. Q1, as we mentioned, is going to be a little more challenging but we see the margin profile improving throughout the year. Brian Lee - Goldman Sachs & Co.: The capacity charges those are related to Fab 2, and so those are behind you, is that fair?

Yes. That's correct. Brian Lee - Goldman Sachs & Co.: Okay. Thanks, guys.

Next question is from Krish Sankar. Please state your company name.

Hey, guys. This is Chirag Odhav on for Krish at Bank of America. Could you give some insight on how much cost of goods sold are for – domestically versus internationally?

In Q4, it was about 90% of our revenue and correspondingly COGS was, in North America. If you're talking about the allocation of COGS, we don't really break out poly coming from U.S., or glass, or whatnot, but if the question specifically on the revenue and COGS breakout, it was roughly 90% in the U.S. in Q4 and less than that throughout the year as we have more international earlier in 2016.

And do you see that increasing throughout 2017, or do you think the 90% to 10% spread would be pretty consistent throughout the year?

Yeah. It'll be more international in 2017, because we have some really great projects in Chile and Mexico that we'll monetize. So you'll see that number probably significantly lower than 90% throughout 2017.

All right. Thanks.

Our next question is from Vishal Shah. Kindly state your company name. Thank you.

Deutsche Bank. Thank you. So, Tom, thanks for the update on the 8point3 valuation. I'm just trying to understand what the strategy is longer term given that your power plant business focus is decreasing and the model has become more complex. Do you have any thoughts on just splitting that off separately and just completely disengaging from 8point3?

Sure. I'll say a few words and then Chuck as CEO of 8point3, he may want to say a few words as well. First, we believe that 8point3 is undervalued. And it's the reason that we've said repeatedly, it's solar only, therefore we think it is de-risked, we had two greater developers dropping projects, has long-term PPAs, so the quality of the PPAs are outstanding. It is important to note that what has been dropped down already will allow 8point3 to grow its dividend through this year and that there's a gigawatt in the ROFO portfolio beyond that, so there's quite a pipeline of projects. Specifically, SunPower support of 8point3, includes not only power plant projects but importantly commercial and residential, so we have a diversified set of segments that we developed that can be dropped down into 8point3. So we think patience is a virtue here. Having said that, we will look at on our ownership position in 8point3 and, of course, continue to check if that fits our long-term model and that makes the most sense. And I can tell you right now the answer is yes. Chuck, you want to add anything?

Yeah, I would just add that we have 1.6 gigawatts of assets in our HoldCo and 443 megawatts are currently in operation, generating great cash flow for SunPower. And over time we'll continue to develop and grow projects, both commercial as well as utility scale. And certainly in the U.S., utility scale is more challenged today, but in the future that's going to be a very, very strong business. So, over time, we think it fits with of our core strategy.

That's great. Thank you. And just can you clarify the comments you've made about what's changed since the last call, especially as it relates to the new administration. It sounds like you're not really making any major changes to your assumptions about the ITC. So, what else has changed?

Well, specifically what has changed is that foreign exchange rates which means that the projects in Mexico that we have, have that headwind. That's obviously a tailwind in what we make in Mexico. That same FX challenge is true also for example in Japan and, to some degree, in Europe as well. And secondly, on tax reform is speculated to be more likely in America than less likely. We are not in a position of course to project where that would land. However our counterparties will certainly want to talk to us about where it's likely to land and then build that into whatever structure that they buy project. So, it's topical at minimum. So, those two things for sure, are things that we're dealing with the new administration. With the ITC, you have the tax credit itself, as you're well aware, and that's already planned to phase down. And so that's the nature of our comment. Don't forget the bonus depreciation and ongoing depreciation depending on how you read the tea leaves that could be impacted or not. So, that was all contemplated in our planned remarks.

Okay, great. Thank you.

Next question is from Colin Rusch. State your company name, please. Kristen Owen - Oppenheimer & Co., Inc. (Broker): Yes. Hi, this is Kristen Owen on for Colin from Oppenheimer. Just wanted to ask a little bit about some of your premium markets like Japan. Are you guys seeing any competition for the high efficiency modules there, or are you seeing any new products that are competing with the X-Series?

I would say a couple of things here. We are hearing announcements about higher efficiency. We have not seen products that come close to – certainly not close to our X-Series. Although we are seeing products that are coming closer to E-Series. There is in the mainstream in our market, there is a clear trend towards moving from basic front contact design into a PERC. And I think over the next year or two or three we'll see a transition. Couple of things I'd say beyond that. One, you heard the performance of our Fab 4, it's rather phenomenal, when we IPO-ed the company which I was part of, we said that 25% was beyond the theoretical limit, and that is the median efficiency that we achieved last week in Fab 4. So we're improving our efficiency. Secondly, we have P-Series as a product, that product is performing great. We've already produced this year in the first seven weeks of the year as much as we produced cumulatively prior to that, which of course you'd expect, it's an expanding product line. That product line capitalizes on the increased efficiency of the mainstream solar cells at pricing consistent with the new market. So we think that we've balanced capacity of E and X, consistent with the markets that they best fit and the P-Series is a complementary product that will work great in the other markets. Kristen Owen - Oppenheimer & Co., Inc. (Broker): Great. Thank you for that color. And then I'm wondering to see if I could get a little bit more on the point that you made about your pipeline of storage solutions. I think you mentioned $25 million there. Can you just give us a little bit more color on what you're seeing across your geographies for any accelerating interest in energy storage plus solar?

Yes. First of all, there are incentives in place in a number of markets. And clearly, California is one of those markets. Second of all, the cost of storage has come down. And then, third, what we see is there's just an undeniable trend towards storage as being an enabler of solar because solar penetration rates in a number of markets, California inclusive, have inverted the so called duck curve or the peak is coincident with when solar produces. And therefore, we've reduced the peak rather substantially and therefore the value of solar energy at other times of the day is increasing while the cost of storage is going down. So the most notable markets of course are California, Hawaii, Germany, which has incentives as well. New York with the REV proceedings, I think, will encourage the use of storage, but because of the importance of solar energy outside of the traditional peak and the cost of storage going down, we think it's inevitable that storage will be part of a growing number of markets. Kristen Owen - Oppenheimer & Co., Inc. (Broker): Great. Thank you so much.

Our next question is from Julien Dumoulin-Smith. Your line is open. State your company, please.

Thank you, gentlemen. UBS. Just wanted to follow up a little bit on Brian's earlier question, if I may. I just wanted to understand a little bit around liquidity at the end of the year. Obviously, you have a cash position that you've disclosed. What about revolver balance and availability, as well as just can you discuss a little bit to the extent you know today assets that you'll have on the balance sheet as of yearend 2017 and/or working capital in those projects that are underway, just expound on the full details of liquidity position?

Sure, Julien. So, we expect to be north of $300 million at the end of the year. And of course, that's our estimate today. Counting in there is, Total is doing a pre-pay of $90 million as a direct sign of support for the company. And so, we feel that's a real strength of the company. In addition, if you look at today, the current balance sheet, you've got north of $1 billion of equity. And if you look at the assets that we have in there, there's not like a lot of goodwill or intangibles. So, it's a pretty solid asset balance, that does really not count the $400 million of equity value of 8point3. So we kind of look that there's a $1.5 billion roughly kind of equity value in our balance sheet. In this year, we're really focused on working capital and driving cash conversion of the balance sheet. We drove over $400 million of operating cash flow in Q4 and then those numbers will move around a little bit this year as I mentioned in the earlier call comment that we are building some projects specifically in Chile and Mexico that we expect to sell throughout the year. And we would expect at the end of the year to have less project assets and have paid down more of our project debt which we think improves the profile and lowers the capital tied-up in the balance sheet. And then that trend will continue, we believe, into 2018, as we then accelerate improved profitability. So we're not providing a very detailed working capital numbers, but I will just point you to that our inventory balance is north of $400 million, or around $400 million. We expect that to come down dramatically over the year. Receivables will go up and down, obviously. We had a really strong fourth quarter. And so we're focused on working capital as a really key part of our core near-term strategy in driving strong return on invested capital and that will happen obviously through the transition period, Julien.

Can you elaborate just quickly on the revolver, the status there and also – I'm sorry, yeah.

The revolver is not currently available. It was expected in our plan. So we have not drawn the revolver and it is currently not available, and given our restructuring plans, we do not anticipate it being available throughout 2017. We have not commented beyond that period but at some point we'd expect it to be available again but we are not planning on using it.

It's based on a metric, to be clear?

Yeah. Based on our EBITDA metrics, 4.5 times.

And the balance sheet of $1 billion, that was based on current balance sheet, or is that projected yearend 2017?

The current balance sheet has north of a $1 billion of equity and that does not count roughly $400 million of 8point3 equity. In fact, I mentioned in the prepared remarks that it's actually carried a negative $60 million because of these real estate accounting rules. So if you added that $460 million to our north of a $1 billion of equity, you'd get this kind of pro forma $1.5 billion.

Would that change materially through the course of the year just as you think about the $300 million in cash, you're monetizing lot of assets to get that there?

I don't think the net equity value is going to change a lot. It's a composition, we expect to pull cash out of working capital. We're obviously investing north of $100 million in CapEx. We're investing $100 million a little bit less than that in R&D, that's flowing through OpEx. So we're making significant investments in the future of the company.

Excellent. Thank you.

Next question is from Pavel Molchanov. State your company, please. Pavel S. Molchanov - Raymond James & Associates, Inc.: Raymond James. Last week, India's Power Minister reported that they have reached 9 gigawatt of installed solar capacity and their target for this year is somewhere between 6 gigawatt and 8 gigawatt, which is going to make them the third biggest solar market in the world. Can you talk about your leverage to the Indian value chain and are there any partnerships or alliances that we can look forward to in that market?

Yes. We alluded or commented in the prepared remarks about our solar solution group. And that group has been fully staffed over the last year, and it sells complete solutions which includes our Oasis products with predominantly in those markets P-Series. And we are working with a large number of blue chip partners in India. And we would be either co-developing or selling those complete solutions to those large blue chip developers, many of which you know, Pavel. So I would say that we had a presence in India a few years ago. We exited India and we're back now, but it's early innings. And because of P-Series, and because of the nature of P-Series that the large part of it is sourced in China and parts of Asia, we have flexibility and we have solutions that fit that market really well, so we're optimistic that through solar solutions group, we'll have a meaningful Indian business over the next few years. Pavel S. Molchanov - Raymond James & Associates, Inc.: Okay. If I can follow up on your earlier comment about PPA pricing staying pressured. Last August you said that there was a lot of irrational PPA pricing in the marketplace, is that still how you would characterize the current state of affairs?

I would say a few things here. One, largely, yes. I think that we do a lot of analyses and we think that there are some companies selling modules at below cash cost, so that's not rational nor will it last. We think that there's been some bits and parts of the world that are unlikely to be built, and that may be because they thought that currency or a country risk would be different than it's actually materialized. So I do think that there'll be a little bit of a shakeout. Having said that, as a general trend, solar has been, in developed world, the largest new energy generation resource and almost everyone is projecting that it will continue to be in most markets. So that will mean, in our view, intense competition for the foreseeable future in mainstream power plant. There is still ability to differentiate the power plants, location matters, local knowledge matters in terms of the cost of perfecting a site. You can get a premium depending on your transmission position. So selectively, you can get better PPAs, we believe, in Americas. But if you say broadly worldwide, I think our view is changing to intensely competitive certainly for the foreseeable future. And our plan is the Oasis in P-Series in other parts of the world that we'll compete in that intensely competitive market however selectively or as a solutions provider. So kind of a mixed answer, some irrationality that will shake itself out. However the intensity of competition will continue. Pavel S. Molchanov - Raymond James & Associates, Inc.: Appreciate it.

This will be our last question please.

Next question is from Paul Coster. State your company, please.

JPMorgan. Thanks for taking my question. You talked of the recovery in 2018, is there anything specific behind that? Is it for instance a function of where the price points of the modules would be at that time or your expectations around capacity leaving the market, et cetera? And then I've got a quick follow-up.

Okay. So there are two aspects to this, that which we control and that which we don't. The macro environment we don't control, so we are not counting on pricing or supply and demand to rebalance. Although, as we said in our prepared remarks, we would project that to happen over the next few quarters. And we have a really good idea of what cash costs are and there is just a limit to how long the industry can sell at cash cost or below. So it's logical, although we're not betting on it. I should say more importantly there are things that are under our control. That is we've restructured the company. Those benefits will accrue in the succeeding quarters because we're still in the middle of restructuring. So we've pulled cost out and lowered our breakeven point. We've lowered the cost of our modules and balanced the system because it was required to compete – and so we've accelerated cost reduction. And in meaningful parts of our business, we're in a much better bookings position. So we have a predicable pipeline of projects we're going to build because they are booked than we were last year. So we have a more predictable set of economics for the balance of the year. So mostly, our comments are based on that which we control and I would say we're quite confident that our results will improve throughout the rest of this year.

Okay, good. And then, I'm unfamiliar with this situation, but what happens to your early- and mid-stage pipeline in the context of a protracted downturn in the industry?

So we have assets throughout the world, although predominantly in the Americas. And if there was a protracted downturn, we could hibernate and capitalizing those assets later, or we could monetize those assets and we will of course evaluate that depending on how things progress in terms of how we see the market developing, but it is absolutely an asset to have land positions where we do. And so those are options that are good to have. And as we improve our Oasis product line with P-Series, we're optimistic that we'll actually build them out capitalizing those assets, and then eventually some of those will be dropped into 8point3.

So there's no material expense attached to maintaining those assets in the meantime?

There's expense associated with continuing to perfect those, so when I say hibernate, you would not for example continue to spend money on transmission and queue positions, or on permits to build. And so it's depending on the probability that you expect to get a PPA, that you can make money on, you would continue to spend money, otherwise you could hibernate and not continue to spend money. So it can vary depending on the asset.

Got it. Thank you.

Okay. Well, thank you very much, everyone, for calling in. We look forward to having our next call with you in a few months.