Maxeon's Q2 revenue plunges, FY guidance clouded by customs delays

Singapore-based solar cells and panel maker Maxeon Solar Technologies Ltd (NASDAQ:MAXN) reported a sharp decline in second-quarter revenues, citing a slew of challenges including customs delays, intense competition, order cancellations, and a weakened market for distributed generation (DG) systems.

The company's revenue fell to USD 184 million (EUR 166.5m) from USD 348 million a year earlier, but stayed in line with the already conservative second-quarter outlook. The quarterly loss before interest, taxes, depreciation and amortisation, while anticipated, stood at USD 36.6 million, compared to earnings of USD 30.2 million in the year-ago period.

“Maxeon faces significant and unprecedented challenges primarily due to external market and policy factors,” CEO Bill Mulligan said in a statement.

Maxeon’s broader market woes were compounded by the detention of its Mexico-made solar panels by the US Customs and Border Protection (CBP), which has been halting shipments into the company's largest market since July. The customs delays, stemming from compliance checks related to the Uyghur Forced Labor Prevention Act, have significantly impacted revenue and cash flow seeing that the US market accounted for over 60% of Maxeon’s second-quarter revenue.

Maxeon said it is working with the CBP but has no visibility into the timeline and cannot say when it will be able to restart shipments into the US.

This “unprecedented level of uncertainty” forced Maxeon to withdraw its full-year revenue and adjusted EBITDA guidance. The company will also not provide third-quarter guidance, though it expects the revenue for the period to decline significantly due to the customs hold-up.

Additionally, Maxeon is grappling with intense competition in the solar market, particularly in Europe and Australia. The company's DG business has been impacted by oversupply from Southeast Asia and China, leading to lower prices.

On the policy front, the reinstated Section 201 tariffs on bifacial modules and proposed anti-dumping and countervailing duties on solar cells could potentially impact both the cells produced in Malaysia and the modules produced in Mexico. To mitigate the impact of the new trade policy and support the planned Albuquerque cell and module factories, Maxeon is evaluating the closure of its Malaysian Fab 3 facility, which could result in significant non-cash charges.

Maxeon said that is taking steps to improve its financial position and strengthen its balance sheet. The company has restructured maturing debt and raised new financing from TCL Zhonghuan Renewable Energy Technology Co Ltd (TZE), but at the cost of significant dilution for existing shareholders. A proposed 100-to-1 reverse stock split was approved by the shareholders during the recent annual general meeting.

“[O]ur assets include almost 40 years of industry experience, a reputation for technology and product leadership, the industry's leading IP portfolio, a unique DG channel strategy, and a strong legacy of participation in utility-scale projects in the U.S. With critical financial support now in place from TZE, we look forward to utilizing these assets to first stabilize our business and then restore growth and profitability,” Mulligan concluded.

Selected Q2 unaudited financial summary as provided by Maxeon is presented in the table:

(USD 1.0 = EUR 0.905)

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