Good day, and thank you for standing by. Welcome to the Maxeon Solar Technologies Second Quarter 2021 Earnings Call. Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Robert Laney, Head of Investor Relations.
Please
conference call. Good day, everyone. Welcome to Maxion's Q2 2021 earnings conference call. This is my first earnings call with Maxion, call. Thank you, Mr.
Cai Strobeck and Chief Strategy Officer, Peter Aschenbrenner. Let me cover a few housekeeping items before I turn the call over conference call. During today's call, we will make forward looking statements that are subject to various risks and uncertainties conference. To enhance this call, we have also posted a supplemental slide deck on the Events and Presentations page of Maxeon's Investor Relations website. We will reference certain non GAAP measures during today's call.
Conference call. Please refer to the appendix of
our supplemental slide deck as well as today's earnings press release, both of which are available on Maxion's Investor Relations website, for a presentation of the most directly comparable GAAP measure as well as the relevant GAAP to non GAAP reconciliations. I also want to remind everyone of a few changes that we started last quarter in the presentation of our numbers. First, expenses and restructuring charges. Finally, we want to point out that comparisons to the Q2 of 2020 reflect a carve out of Maxion's results, while it was still part of SunPower last year. We began operating as an independent company on August 27, 2020.
With that, let me turn the call over to Maxion's CEO, conference. Jeff
Waters? Thank you, Rob, and good day, everyone. I'll start by giving a business overview and covering recent accomplishments. Conference. Kai will then review our financial performance and outlook and we'll conclude with Q and A.
Before we get to the results, I have some comments on employee health. Malaysia is currently experiencing a difficult wave of the COVID-nineteen pandemic and proactive testing at our Malaysia facility has revealed an increasing number of positive cases. We have therefore temporarily paused production in line with government regulations, while we deep cleaned the facilities and focus on our highest priority, call. All other Maxion facilities, including Mexico, France and the Philippines are undergoing proactive testing comp and we're pleased to report there are no indications of material positivity rates. I continue to be proud of the work done by our teams globally as we defend against this global pandemic.
Moving to 2nd quarter results. The quarter was very productive operationally in our push to drive in the second half of the year. Our distributed generation business in Europe performed especially well, posting record revenue for the quarter, conference. And we believe that we will continue to grow our share in 2021 in nearly every European market we serve, with especially significant share growth in Italy, conference in the Netherlands. European DG is important to us for many reasons, not the least of which comp is that it is among our most profitable markets.
As supply chain costs normalize and we grow revenue beyond the panel, comp. Coupled with the successful equity raise in April, we are firming up our balance sheet. With respect to key margin drivers, We completed the phase out of our oldest cell technology. During the Q2, we produced our last Maxeon II solar cell and commence installation of Maxion 6 equipment. Our new technology will deliver significantly higher margins than Maxion 2, comp.
We are on schedule to ship our first panels later this year. This shift will also be coincident with logistics savings from the optimization of our factory network, comp, where by the end of the year, we will be servicing Asian and European Maxion III and VI customers from Malaysia rather than Mexico. The company is focused on our 3 strategic pillars for profitable growth that we believe will transform the company. Comp. Our execution on these three pillars will enable us to achieve our target business model within 2023 of at least 20% revenue growth, comp greater than 15% gross margin and greater than 12% adjusted EBITDA.
In our panel innovation pillar, The highlights this quarter were the progress on our Maxeon 7 cell development and the announcement of our disruptive new Maxeon Air technology platform. We've been manufacturing the solar industry's highest efficiency commercially available solar panels for over 15 years. Comp. That legacy is solidly intact today with Maxion 56, and we expect that Maxion 7 will extend our module performance lead. Comp.
We took successful steps this quarter to demonstrate critical Maxion 7 performance milestones on the pilot line being built in our Fab 4. Comp. As both residential and commercial consumers get more educated on sustainability and the benefits their panels are creating both locally and for the planet, comp. They are increasingly thinking about panel lifetime, namely how long will those panels sustain sufficient power output and how long will they reliably and safely work on their rooftop. In this area, no other commercially produced technologies come close to our products performance.
Both our Maxion and Performance series offer outstanding longevity. Panel performance is about more than efficiency comp. A super thin, super light panel that we believe will enable an annual market of around 4 gigawatts worth of commercial rooftops in Europe alone. We expect to begin shipping Maxeon Air in 2022. For our DG channel pillar, we're seeing strong growth broadly.
Comp. As a reminder, we have a unique downstream sales approach where we have 1200 and growing channel partners that represent our technology and brand and who have the ability to convey the value of our industry best panels to their customers. These relationships comps built on trust that are developed over time. And we're building on a decade plus of investment. Our channel sits at the foundation of our Biama Panel strategy as our partners are in a position to effectively communicate the value of new technologies like microinverters and storage.
Comp. As a reminder, our approach is to pursue markets where we have a unique value proposition. As a U. S. Publicly listed company especially attractive partner to many developers across the globe.
This led to our announcement of 1.8 gigawatts of production expansion for the U. S. Market, comp, where our corporate culture and experience are especially important. In the near term, our early success in winning Primergy's 1 gigawatt Gemini power plant in Nevada has put us in a strong position to selectively fill out our remaining 2022 available capacity and a focus primarily on booking 2023 and beyond. Since our announcement in April regarding our P Series capacity expansion to supply the U.
S. Market, comp. We have seen sustained strong interest from utility scale developers, which has led us to accelerate our planning for a second phase of capacity. We're very encouraged by the recent U. S.
Legislative proposals with incentives that support domestic solar manufacturing. Conference. We believe that if enacted, they provide a great platform for Maxion to help the U. S. Government achieve their goal to reestablish comp, a domestic solar manufacturing value chain and to do so deploying cutting edge solar technology at critical scale.
Performance series solar cell and module factory. We intend to move forward with this project pending successful negotiation of a DOE loan guarantee and the passage of enabling legislation including the Solar Energy Manufacturing for America Act and the America Jobs in Energy Manufacturing Compact of 2021. The goal is to start solar panel production in the U. S. As early as 2023.
Comp. Shifting outside of the U. S. In the rest of world utility scale business, supply chain costs are still elevated, comp. Our customer pricing expectations are getting more in line with these higher costs.
Given that, we expect to begin converting our sales pipeline into booked business in the near future. Confident in renewed shipment growth in our rest of world utility scale business as we enter 2022. As a reminder, comp. Our JV structure enabled Maxion to largely reallocate our volume to the Chinese market during the first half of twenty twenty one. Comp.
We expect to provide an update regarding our utility scale backlog in Q4. Before I turn the call to Kai, achievements and plans related to the key ESG themes. Our commitment to responsible manufacturing and supply chain sourcing goes back to the inception of SunPower. Cover. Now as Maxion, we aim to establish our leadership in driving a holistic approach to sustainability in our industry.
This report 2020. We believe we generate long term value for our employees, customers, shareholders in the communities where we operate by holding ourselves to a higher standard in the way we conduct our business as highlighted in the sustainability report. I will turn the call over to Kai to review our financial performance.
Thank you, Jeff, and hello, everyone. At $0.41 per watt on a blended basis, down $0.03 from the Q1 of 2021. Comp. The sequential ASP decline is mainly attributable to product mix as P Series products accounted for 47% of total shipments compared with 36% in the Q1 of 2021. Comp.
Overall, sales revenues for the Q2 were again dominated by the DG business, with utility scale accounting for only 11%. Comp. As a reminder, like in recent quarters, we intentionally reduced our exposure to utility scale. Comp as industry price trends have not been supportive of our margin targets for that business. These trends started to change in the Q2.
But due to fairly long sales cycles, this does not did not affect our 2Q revenue. Gross loss came in at $2,800,000 or negative 1.6 percent of sales. Comp.5 percent of sales from our out of market polysilicon contract, dollars 2,500,000 of which was a loss on the sale of ancillary polysilicon in the market. Apart from those factors, the sequential decline in gross margin is the result of a slight shift in product mix towards more P Series as well as continued cost increases from industry wide comp. About onethree of it was due to the freight cost inflation.
Non GAAP operating expenses, comp, which adjusts our GAAP operating expenses for restructuring charges and stock compensation expenses, came in at $31,000,000 right at the midpoint of our guidance and compared to $35,000,000 in Q1 2021. The sequential operating expense decline was expected as the efficiencies of having a largely Asia based cost structure become visible, comp, while transition costs related to the separation from SunPower continue to ramp down. Comp. Adjusted EBITDA for the 2nd quarter was negative $27,300,000 as compared to negative 20 cost. $5,700,000 in Q1 2021 and better than our guidance range of negative $30,000,000 to $40,000,000 due in large compared to the before mentioned $5,500,000 tax reversal.
GAAP net loss was $77,000,000 as compared to $39,000,000 in the Q1 of 2021. The sequential decline was mainly driven by a $35,000,000 in the Q1 to a $27,000,000 loss in Q2. Recall that this item is closely related comp, in line with our guidance range of $5,000,000 to $6,000,000 As mentioned in our last call, these charges, comp, which are included in our GAAP operating expenses, are largely related to the closure of our module factory in
cum to lose fraud.
Moving on to our balance sheet. We are pleased to have closed the quarter with 2 comp in net proceeds from our equity issue in April and $33,000,000 in positive operating cash flow in the 2nd quarter and comp. Inventories were up by $12,000,000 and DIO up 3 days sequentially to $212,000,000 and were primarily funding the transition from our legacy Maxeon II technology to our higher margin Maxeon VI technology. The purchase of cell and module equipment for our 1.8 gigawatt of P Series capacity for the U. S.
Market as well as our Maxion 7 pilot line investment. Now I'd like to turn everyone's attention to our outlook for the Q3. Comp. As we leave the first half of twenty twenty one in the rearview mirror and enter the seasonally stronger comp. In the second half of the year, we continue to face fierce headwinds from a supply chain cost perspective.
Comp as logistics costs have skyrocketed amidst global disruption and polysilicon prices have plateaued at levels not experienced call. At the same time, we are incurring expenses and opportunity costs for phasing out Maxion II and transitioning to Maxion call. We are taking action to manage the exposure from our out of market polysilicon purchase contract. These transient challenges as well as our investments in operational improvements continue to drag down margins in the second half. Comp, but we are confident that the current disruptions will taper off and the improvements to our operations and our business, including technology and be a catalyst for additional business opportunities once the situation has normalized.
With that in mind, our guidance is as follows. Comp. At the midpoint, this revenue guidance reflects a year on year growth of 11% over the Q3 of 2020. Non GAAP gross loss is expected to be in the $10,000,000 to $20,000,000 range, which includes charges related to our out of from our supplier is stepping up in the Q3. We plan to take advantage of high pricing levels in the polysilicon market to opportunistically sell any excess poly that is not consumed into our value chain during the quarter.
Comp. In that context comp. And to keep you abreast of our remaining purchase obligations, as per the end of the second quarter, those stood at $191,000,000 worth of polysilicon at the contracted prices to be purchased through the end of 2022, comp, for which we have made $74,000,000 in prepayments already. In summary, comp. We expect non GAAP gross loss for Q3 to be larger than Q2 due to a higher out of market polysilicon charge, comp, rising supply chain costs, increased costs relating to our transformational activities and comp, while we keep investing in the improvement of our business.
Non GAAP operating expenses are expected to be $31,000,000 comp, plus or minus $2,000,000 We see this operating expense level as our near term baseline now that the spin off activities are largely behind us. Comp. In future quarters, you can expect us to be disciplined on spending as a percentage of revenue. But on an absolute basis, you'll also comp. We continue to expect the continued OpEx investment in our future technology platform, global channels and focused approach expected to be in the range of $55,000,000 to $65,000,000 for the Q3.
Based on our guided comp. 2021 CapEx of $170,000,000 and internal cash flow projections, we expect to maintain a strong liquidity position through the end of this year, and we will provide further information about 2022 CapEx plans and business outlook by the time of our Q4 2021 earnings call in early 2022. In conclusion, comp. We are pleased with how our team performed this quarter. Hitting or beating our plan and guidance is a practice we intend to maintain.
Comp. At the same time, we will continue to set ambitious targets for ourselves. Our sales team for expected first half twenty twenty two bookings. And in the U. S.
Utility scale, we are actively discussing exciting opportunities for potential made in America products from 2023. On the margin side,
Excitement levels are growing here at Maxeon. Our collective focus is on achieving increasingly ambitious quarterly targets, on executing key operational initiatives to enhance our financial profile in 2022 and on our 3 strategic pillars transform Axion in 2023 beyond. Those pillars again are our leading panel innovation, as we execute this strategic plan and intend to hold Maxion's first ever Capital Markets Day as an independent public company in the first half of twenty twenty two. Conference. Now let's go to the Q and A session.
Operator, please proceed.
Conference. Your first question comes from the line of Pavel Molchanov with Raymond James. Your line is now open.
Conference. Thanks for taking the question. Based on your guidance for Q3, it looks like comp. Yes. You did not have the out of market charges.
Gross margin would have been in the kind of 5% to 7% range. What would that number be in a more normalized comp? Logistics and just generally supply chain environment as well. In other words,
Thank you for the question, Pavel. And I'll turn it over to Kai for more detail. But as you pointed out, there are some significant headwinds
comp. As we said, for the Q2, we have provided in my remarks kind of the comparison compared to a year ago, which we consider About $15,000,000 as I said in the remarks. I would expect something similar probably in that range also for the 3rd quarter. So, dollars 50,000,000 is probably a good mark for that as well.
Okay. That's helpful. Obviously, a lot of manufacturing in the Philippines where COVID is now yet again serious as it is throughout Southeast Asia. Are any of your fabs in the Philippines Disrupted, running below capacity or otherwise affected by The pandemic and by the social distancing restrictions?
Yes. So first, as I Within the Philippines, as you said, there is also an increase in the infection rates. I would say across all of our plants, and I would include Malaysia in that over the course of the last year plus. And within the Philippines now, we're not seeing any disruption to our operations. Plans and have processes in place to help mitigate any effects from that as well.
So I'm very pleased to say that we have been able to keep Not only keep our employees safe across all of our factories, but in particular in the Philippines, things are operating at full operating capacity. The same is true with our comp. Mexico plants as well.
Okay. And what's the capacity statistics in Malaysia at the moment?
Sorry, so the capacity
Or just what utilization Are you able to run at in Malaysia at the moment?
Sure. So with the current Issues that are being faced across Malaysia and the country, our plant is going to be shut down until August 19, And we will be reopening. We are in discussions to open up some specific smaller operations for some critical path activities. Comp. But for now, it is closed until August 19.
We expect, given the great track record that we have and also the very positive feedback we've gotten from local health authorities in Malaysia, we're confident that we'll be able to reopen. And comp. But I would say more importantly, we're confident in being able to keep our employees safe. As you know, the rise in Malaysia has really been countrywide. We're still, comp.
I would say confident across all of our factories with the procedures we have in place that we have we've not to date in any of our plants seen any kind of implant spreading of COVID. But as you know, our employees don't sit our factories 20 fourseven. And we do have good plans in place and processes in place to help mitigate the stopping of any employees coming in that are infected.
Okay. And then lastly, just at a high level, have you had any revenue shortfall revenue Dislocation because of inability to produce on schedule per the customer's needs.
Comp? We have not. And certainly, it's if you look at the production stoppages that we have comp. In Malaysia, we do have inventory that will help, especially in the near term to make sure that our module factories are able to still producing comp as there is a brief stoppage in cell production and we'll continue to work to mitigate those effects. If there were to be any kind of a bubble, you might see it happen in Q4.
Comp. But again, with the inventories that we have in place, I'm confident that we'll be able to manage it the way that based on current plans to reopen that
question comes from the line of Julien Dumoulin Smith with Bank of America Securities. Your line is
now open. [SPEAKER JULIEN
DUMOULIN SMITH:]
Thank you, operator. Good afternoon, team. Thanks for the opportunity. Appreciate it. Well done on holding the line here.
Thank you.
Absolutely. So perhaps just comp. If I can focus on the financing side and talking about this new angle around U. S. Expansion, can you talk about some of the parameters of what it might cost you?
Comp. What is the size of a DOE loan guarantee? And then ultimately, a little bit preempting some of the commentary looking forward comp. Maybe some of the parameters around the U. S.
Investment principally, I suppose that's more tangible.
Yes. I'll cover the first part and Cai, certainly you can fill in with any details that you see, FED. As we said, the plant expansion is for both a fab and for a Modco and 3 gigawatt requirements or the CapEx requirements with the loan guarantee. And maybe with that, Cai, I don't know if you want to add any additional color to help with question.
Yes. I think just overall, we really believe that this project represents a unique opportunity for us for really, really strong value creation. And one of the cornerstones is the loan program, as Jeff just mentioned. Comp. We also believe that there are maybe further state and local level incentives available that can go towards that initiative.
So overall, we are really confident that with a strong backing from the U. S. Government for this project and given a strong value proposition comment that we will be able to secure sufficient and appropriate funding for this. But we are not in a position right now to discuss further details, but we are really excited
Just to clarify on that, can you tell us that a loan guarantee may or may not materialize? What about under the AFSAP bill? Would that suffice? Comp. Would that be adequate differently to make the economics work for you, if you will?
Comp? Yes, I think we would need to consider that situation. What I would say is that our we have a very high level of confidence in the DOE loan guarantee. As we said, it is fully funded. We've been having a number of conversations with various constituents in the government, in Washington, D.
C. Comp? So I'd say we're very confident that that DOE loan guarantee will come through. As we said in the prepared remarks, the OSOP bill is also very important. We'll say as we went through and did the analysis, the incentives that they put in place are actually you can tell that they did it in an educated way, very much meets the needs and requirements that you would need to produce in the U.
S. In a cost competitive way. The combination of those 2, combined with who we are as a company, with manufacturing capability that we have, with the technology that we have, we think it creates comp. Great opportunity for us to really help the administration and the government achieve their goals of producing comp. Very competitive, leading edge, cost effective solar in the U.
S.
I just wanted to
clarify this just real quickly if
you can. Are you still expecting to ship primarily from 2Q 2022 as initially planned? Or are there signs of delay given the broader utility slippages we see delayed? Just sorry to
Everything is still absolutely to plan and that still will absolutely be coming out of Mexicali. So comp. What we're talking about with this 3 gigawatt expansion, that is an expansion over and above the 1.8 gigawatt that we announced last quarter coming out of Malaysia and Mexicali.
Comp. Thank you. Your next question comes from the line of Philip Shen with ROTH Capital Partners. Your line is now open.
Hi, everyone. Thanks for taking my questions. Comp. First one is on P Series. I think you said you might give a more detailed update later this year, but I was wondering comp.
If you can share how much volume you might expect for P Series in Q3 and Q4? And then maybe just
comp.
Thanks. Thank you, Phil. Yes, so as you know, we've been carefully tracking and monitoring comp. The market in the rest of the world utility scale market for the product that's coming out of our Chinese power Chinese P Series production. Comp.
And what we have begun to see is getting more of an equilibrium between the pricing that's out there in the rest of world market and the current supply chain costs. And we have begun to see some more of that business become profitable. And we've seen that with some comp. And so our confidence is very much building for 2022 return to volume in the utility scale market.
Great. And
Question in terms of the growth of P Series in the near term. So the growth that we have guided comp. As you know, our IBC capacity is kind of kept at levels comes roughly around where we have been shipping. So most of the growth in the near term is going to come from P Series from our joint venture and then, of course, in 2022 also from the additional, our own supply chain from Malaysia and Mexicari.
Great. Thank you for that. And as it relates to I think you talked call. Just briefly, shipping and logistics. What's your sense as to when and sorry if I missed it, but what's your sense as to when you think The shipping situation improves.
I think this morning or overnight in Asia, yet another plant sorry, ports in China shut down, I think the port of Ningbo and due to COVID. So comp. It seems like things are incrementally getting worse, but do you expect things to improve in Q1 or Q2 or it's more of a Call?
Yes, it's a great question, Phil. I think everybody is trying to understand exactly what's going to be going on with logistics and forecasting. Comp? It is a very dynamic situation. I think it's probably too tough for us to handicap at the moment.
What I will say we are doing contribution to panels and then we then ship panels out of Mexico to the European and Asian markets. So we are, I would say, have a high level of exposure to transportation. And this goes back to when we were part of SunPower, it was very much a U. S. Focused business.
We're in the process, as we've to be able to really cut down on shipping and logistics, which it's that kind of infrastructural change that we think will make us less sensitive comp to logistics as we have been and are today. The other thing that I would add, it's also one of the things that we like a lot about the incentives that are going in place to help with the U. S. Market. Comp.
Certainly, being able to produce in region is not only very good from a cycle time, but from a logistics cost perspective, from a working capital comp. It's good all around. So it's one of the reasons why we're aggressively pursuing a U. S. Presence as well.
Great. I think you may have presented the Maxeon Air at the SNEC conference this year in China. How was the reception there? And then can you talk about what the order book looks like for Axion Air? What are you seeing that might be promising?
Yes. First, it was very well received at SNC. I think it is comp? You can explain Maxion there. I think when you actually see it in person, it's a bit of a game changer.
And And I think what's been interesting as well is the reach out that we've heard from customers, including roofers and others that traditionally comp. We are going to be scaling up production, at least the initial production for it in 2022. That product really starts to hit the sweet spot when our Maxion 7 cells are available. So you can start to think of Maxair as building up in 2022 using the current cell technology. In 2023, we will then get into more of a scale using Maxeon 7.
And Maxeon 7, because of some of the heat and reliability improvements that it has that make it even better than what we currently have with IBC. It helps us do cost reductions and improve the performance of Maxeon Air in a way we think that will broaden its applicability and marketability. So I see some nominal revenues for that in 2022. It's really 2023 when you'll
comp. With a microinverter by the end of this year, I think you reaffirmed that in a slide. I was wondering if you might be able to give a little comp? And what the future might hold for that segment?
Sure. Let me give some comments on that, Phil. And certainly, Kai, if you comp. I think I've left everything out. You can jump in.
I'd say first, what we've talked about publicly is that we expect the penetration of AC panels for our business outside of the U. S. To continue to grow. And as you said, we expect it to approach upwards of 20% by the time we exit 2021, we expect that to continue into 2022. So we would expect it to be above 20% comp.
I'm sure we'll get more specific as we get closer to 2022. In terms of how it's going, I would say it is comp. A product that our channel has embraced. And I would say there are some markets that are better positioned for AC. Comp.
France is a good example of that. There are other markets like Italy where it's a bit from a comp. We are going to be starting to see growth in Italy, especially as we get a certified system for the second half. You'll start to see things grow in Italy. But I think this is really where the value of our comp.
And that education process, in particular across Europe, but also now spreading into Australia for us, comp. I would say it's going very well, which is leading to the growth that we're seeing. What's also adding I would say to the growth is that we've now expanded that AC panel from our Maxeon IBC Panels to our Performance Series Panels. So that also helps us hit a different price level of customers, as well. So comp.
I would say so far so good. We're very excited about it and I think it portends a lot of positive progress for us, especially as we get into 2022.
Comp. Great. And just one follow-up and I'll pass it on. In terms of the AC panels in the countries that are I'm guessing high labor market, more rooftop. But can you comment on what percentage of what you're comp?
Thanks.
Thank you, Phil. Let me provide some upfront commentary and then I'll have Peter Aschenbrenner maybe provide some additional Color on some of the market applicability. Yes, I'd say there are markets. First of all, I would say that where we see the panel, comps. I would say have more of a running start when it comes to AC panel adoption and that's where we've seen more of the early uptick.
Peter, let me hand it off to you and provide some more color. Okay.
Yes, I think that, Phil, the short answer is that comp. All of our ACPV is on rooftop. We think that will continue to be the case for some time. You might get a system or 2 where that's not the case, but comp. By far the majority of the systems are on the roof.
And the value proposition for the installer, Which really drives ACPV penetration is around logistics streamlining design flexibility And ease and speed of installation. So it's something that when installers Reengineer their logistics and installation teams. It's just a much simpler process for them, fewer parts to worry about, Quicker installation, etcetera. For the end user, I think they really like the granularity of the monitoring solution comp and not having to have big boxes on the wall with string inverters. Comp.
So those are things that drive penetration so far. Great.
And sorry, one last question. Is the margin profile for the AC panels comp? Healthily better than corporate average. I'm just I'm wondering if as you grow the segment that might be a source of comp? Margin improvement.
On a margin percentage basis, we're seeing margins comparable. So if you have the DC panel versus the DC panel with the microinverter. The margin percentages are comparable or put another way, we're getting the same effectively the same margin
conference
call. Your next question comes from the line call. David O'Cao with Morgan Stanley. Your line is now open.
Hi. Thanks so much for taking my question. Comp. You had a pretty nice bump up in operating cash flow in the quarter. I was wondering if you could make any comments on how operating cash flow might look for the back half of the year.
Any working capital nuances or just how do you expect operating cash flow to trend in the back half?
Great. Thank you for the question, David. Let me hand it off to Kai.
Yes, absolutely. Thanks. Comp. On the operating cash flow, you have noticed that our inventory levels actually have gone up quarter to quarter. So comp.
The 2nd quarter number has not been helped by inventories, and we expect actually over the back half of the year comp to bring our inventory levels down as we fuel the growth that we have guided in terms of sales. So I would expect some tailwind on the operating cash flow side from those inventory developments. And as we said, we expect for the second half call. The year to continue to be in a good and strong liquidity position, continue to be So we feel pretty good about our liquidity position and the outlook for the back half of the year, and we continue to focus on operating cash flow. Got it.
Understood. That's helpful.
And then I was just wondering, you alluded to it earlier, but maybe just on the volumes that will be coming out of Mexicali next year. Have you made progress booking further orders comp? And I guess how has demand shaped up for locking in orders for next year for that plant
I would say demand has been very strong for 2022. And as you know, we booked up comp. I'd say right now, our focus and attention is more on 2023. And there, again, a lot of opportunities. It's really more around us closing and us looking for the most ideal opportunities that exist for us in 2023.
But when we look at the demand comp? We are seeing great demand that has us really set for 2022. It's really more around 2023 and filling up the book with the best business that we can.
Okay, great. Thanks so much.
Great. Thank you.
Conference. And we have no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may now disconnect.