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Segment and Geographical Information
 9 Months Ended
Oct. 03, 2021
Segment Reporting [Abstract]  
Segment and Geographical Information SEGMENT AND GEOGRAPHICAL INFORMATION
Our Residential, Light Commercial ("RLC") segment refers to sales of fully integrated solar, storage and home energy solutions and components, through a combination of our third-party installing and non-installing dealer network and resellers and our in-house sales team. The Commercial and Industrial Solutions ("C&I Solutions") segment refers to direct sales of turn-key EPC services and sales of energy under power purchase agreements ("PPAs"). Certain legacy businesses consisting of worldwide power plant project development and project sales that we are winding down, as well as U.S. manufacturing, are not significant to overall operations, and are deemed non-core to our other businesses and classified as "Others." Certain key cross-functional support functions and responsibilities including corporate strategy, treasury, tax and accounting support and services, among others, continue to be centrally managed within the Corporate function.

Each segment is managed by a business general manager that reports to our chief executive officer, as the chief operating decision maker (“CODM”), who reviews our business, manages resource allocations and measures performance of our activities between the RLC, C&I Solutions and Other segments. The CODM further views the business performance of each segment under two key sources of revenues - Dev Co and Power Co. Dev Co refers to our solar origination and installation revenue stream within each segment such as sale of solar power systems with our dealers and resellers network as well as installation and EPC revenue, while Power Co refers to our post-system sale recurring services revenue, mainly from asset management services and O&M services through our SunStrong partnership dealer services for RLC and our commercial dealer network for C&I Solutions. The risk profile of each revenue stream is different, and therefore the segregation of Dev Co and Power Co provides the CODM with appropriate information to review business performance and allocate resources to each segment.
Adjustments Made for Segment Purposes

Adjustments Based on International Financial Reporting Standards (“IFRS”)

Mark-to-market gain (loss) on equity investments

We recognize adjustments related to the fair value of equity investments with readily determinable fair value based on the changes in the stock price of these equity investments at every reporting period. Under U.S. GAAP, mark-to-market gains and losses due to changes in stock prices for these securities are recorded in earnings while under IFRS, an election can be made to recognize such gains and losses in other comprehensive income. Such an election was made by TotalEnergies SE. Further, we elected the FVO for some of our equity investments, and we adjust the carrying value of those investments based on their fair market value calculated periodically. Such option is not available under IFRS, and equity method accounting is required for those investments. Management believes that excluding these adjustments on equity investments is consistent with our internal reporting process as part of our status as a consolidated subsidiary of TotalEnergies SE and better reflects our ongoing results.

Other Adjustments

Intersegment gross margin

Our U.S. manufacturing operations that are part of the Others segment manufacture and sell solar modules to both operating segments, RLC and C&I Solutions, based on transfer prices determined by management's assessment of market-based pricing terms. Such intersegment sales and related costs are eliminated at the corporate level to derive our unaudited condensed consolidated financial results.

Gain or Loss on sale and impairment of residential lease assets

In fiscal 2018 and 2019, in an effort to sell all the residential lease assets owned by us, we sold membership units representing a 49% membership interest in majority of our residential lease business and retained a 51% membership interest. We record an impairment charge based on the expected fair value for a portion of residential lease assets portfolio that was retained. Any charges or credits on these remaining unsold residential lease assets, as well as corresponding depreciation savings, are excluded from our non-GAAP results as they are not reflective of ongoing operating results.

Stock-based compensation

Stock-based compensation relates primarily to our equity incentive awards. Stock-based compensation is a non-cash expense that is dependent on market forces that are difficult to predict. We believe that this adjustment for stock-based compensation provides investors with a basis to measure our core performance, including the ability to compare our performance with the performance of other companies, without the period-to-period variability created by stock-based compensation.

Gain or Loss on business divestitures, net

In the second quarter of fiscal 2021, we sold a portion of our residential lease business and certain commercial projects recognizing a gain and a loss, respectively relating to these business divestitures. We believe that it is appropriate to exclude this gain and loss from our segment results as they are not reflective of ongoing operating results.

Transaction-related costs

In connection with material transactions such as acquisition or divestiture of a business, we incur transaction costs including legal and accounting fees. We believe that it is appropriate to exclude these costs from our segment results as they would not have otherwise been incurred as part of our business operations and are therefore not reflective of ongoing operating results.
Executive transition costs

We incur non-recurring charges related to the hiring and transition of new executive officers. During the second quarter of fiscal 2021, we appointed a new chief executive officer and chief legal officer, and are investing resources in those executive transitions and in developing new members of management as we complete our restructuring transformation. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.

Business reorganization costs

In connection with the Spin-Off of Maxeon Solar in fiscal 2020, we incurred, and expect to continue to incur in upcoming quarters, non-recurring charges on third-party consulting expenses, primarily to enable the separation of shared information technology systems and applications. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.

Restructuring charges or credits

We incur restructuring expenses related to reorganization plans aimed towards realigning resources consistent with our global strategy and improving our overall operating efficiency and cost structure. Although we have engaged in restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.

Results of operations of legacy business to be exited

We excluded the first quarter 2021 results of operations of our Hillsboro, Oregon, facility from our non-GAAP results given that the Hillsboro, Oregon, facility ceased revenue generation in the first fiscal quarter of 2021 and all subsequent activities are focused on the wind-down of operations. As such, they are not reflective of ongoing operating results.

Litigation

We may be involved in various litigation, claims, and proceedings that result in payments or recoveries. We exclude gains or losses associated with such events because the gains or losses do not reflect our underlying financial results in the period incurred. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.
Segment and Geographical Information

The following tables present segment results for the three and nine months ended October 3, 2021 for revenues, gross margin, and adjusted EBITDA, each as reviewed by the CODM, and their reconciliation to our unaudited condensed consolidated results under U.S. GAAP, as well as information about significant customers and revenues by geography based on the destination of the shipments, and property, plant and equipment, net by segment.
Three Months Ended
October 3, 2021September 27, 2020
(In thousands): Residential, Light CommercialCommercial and Industrial SolutionsOthersResidential, Light CommercialCommercial and Industrial SolutionsOthers
Revenues from external customers:
Dev Co$274,747 $36,596 $980 $190,480 $73,790 $2,688 
Power Co6,888 3,728 697 7,230 544 75 
Intersegment revenue— — — — — 7,293 
Total segment revenues as reviewed by CODM$281,635 $40,324 $1,677 $197,710 $74,334 $10,056 
Segment gross profit as reviewed by CODM$63,108 $(2,387)$(19)$34,779 $5,120 $(3,168)
Adjusted EBITDA$30,825 $(8,133)$(649)$15,521 $1,228 $(3,192)

Nine Months Ended
October 3, 2021September 27, 2020
(In thousands): Residential, Light CommercialCommercial and Industrial SolutionsOthersResidential, Light CommercialCommercial and Industrial SolutionsOthers
Revenues from external customers:
Dev Co$753,429 $139,486 $7,320 $571,236 $167,544 $2,954 
Power Co20,262 15,277 2,562 18,904 7,721 19,846 
Intersegment revenue— — (11)— — 32,815 
Total segment revenues as reviewed by CODM$773,691 $154,763 $9,871 $590,140 $175,265 $55,615 
Segment gross profit as reviewed by CODM$173,239 $2,527 $5,013 $94,501 $14,533 $(18,906)
Adjusted EBITDA$83,771 $(13,125)$3,615 $31,346 $(1,244)$(19,278)

Reconciliation of Segment Revenues to Unaudited Condensed Consolidated GAAP RevenuesThree Months EndedNine Months Ended
(In thousands): October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Total segment revenues as reviewed by CODM$323,636 $282,100 $938,325 $821,020 
Adjustments to segment revenues:
Intersegment elimination— (7,294)11 (32,816)
Legacy utility and power plant projects— — — 207 
Construction revenue on solar services contracts— — — (5,392)
Results of operations of legacy business to be exited— — 625 — 
Unaudited Condensed consolidated GAAP revenues$323,636 $274,806 $938,961 $783,019 
Reconciliation of Segment Gross Profit to Unaudited Condensed Consolidated GAAP Gross ProfitThree Months EndedNine Months Ended
(In thousands): October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Segment gross profit$60,702 $36,731 $180,779 $90,128 
Adjustments to segment gross profit:
Intersegment elimination(83)1,752 785 11,604 
Legacy utility and power plant projects— — — 34 
Legacy sale-leaseback transactions— — — (20)
Gain (loss) on sale and impairment of residential lease assets249 469 1,262 1,375 
Construction revenue on solar services contracts— — — (4,735)
Stock-based compensation expense(1,055)(623)(3,011)(1,653)
Amortization of intangible assets— (1,189)— (4,757)
Gain (loss) on business divestitures, net(81)— (81)— 
Results of operations of legacy business to be exited(82)— (9,179)— 
Unaudited Condensed consolidated GAAP gross profit$59,650 $37,140 $170,555 $91,976 
Reconciliation of Segments EBITDA to Loss before income taxes and equity in losses of unconsolidated investeesThree Months EndedNine Months Ended
(In thousands): October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Segment adjusted EBITDA$22,043 $13,557 $74,261 $10,824 
Adjustments to segment adjusted EBITDA:
Legacy utility and power plant projects— — — 34 
Legacy sale-leaseback transactions— — — (20)
Mark-to-market gain (loss) on equity investments(86,254)155,431 (47,238)274,362 
Gain (loss) on sale and impairment of residential lease assets249 83 6,219 1,122 
Construction revenue on solar services contracts— — — (4,734)
Stock-based compensation expense(4,726)(4,454)(19,776)(13,387)
Amortization of intangible assets— (1,189)— (4,759)
Gain (loss) on business divestitures, net(81)— 143 10,529 
Transaction-related costs(1,328)— (1,683)(1,862)
Executive transition costs(827)— (1,329)— 
Business reorganization costs(1,045)— (2,903)— 
Restructuring credits (charges)230 97 (4,344)(2,738)
Results of operations of legacy business to be exited(82)— (9,179)— 
Litigation(1,623)(395)(10,326)(880)
Gain on convertible debt repurchased— 104 — 3,060 
Net loss (income) attributable to noncontrolling interests69 230 (1,482)(2,512)
Cash interest expense, net of interest income(6,628)(6,918)(22,149)(24,102)
Depreciation and amortization(1,929)(5,156)(8,757)(12,589)
Corporate(4,569)(4,985)(15,486)(9,264)
(Loss) Income before income taxes and equity in loss of unconsolidated investees$(86,501)$146,405 $(64,029)$223,084