SunPower (SPWR) Q4 2021 Earnings Call Transcript

SunPower (SPWR -3.18%)
Q4 2021 Earnings Call
Feb 16, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to SunPower Corporation fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session.

[Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your first speaker today, to Mr. Mike Weinstein, vice president of investor relations at SunPower Corporation. Thank you, sir.

You may begin.

Mike Weinstein -- Vice President, Investor Relations

Good afternoon. I would like to welcome everyone to our fourth quarter 2021 earnings conference call. On the call today, we will start with comments from Peter Faricy, CEO of SunPower, who will provide a summary of 2021 strategic plan accomplishments and discuss our forward-looking commitments for 2022 and beyond. Following Peter's comments, Manu Sial, SunPower's CFO, will then review our fourth-quarter financial results as well as provide an update to our guidance.

As a reminder, a replay of the call will be available later today on the Investor Relations page of our website. During today's call, we will be making 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 2021 10-K, and our quarterly reports on Form 10-Q. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. Also, we will reference certain non-GAAP metrics during today's call.

Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate GAAP to non-GAAP reconciliations. Finally, to enhance the call, we have posted a set of PowerPoint slides that we will reference during the call on the Events and Presentations page of the Investor Relations website. In the same location, we've also posted a supplemental data sheet detailing additional historical metrics. With that, I'd like to turn the call over to Peter Faricy, CEO of SunPower.

Peter?

Peter Faricy -- Chief Executive Officer

Thanks, Mike, and good afternoon, everyone. As you are aware, we reported our preliminary fourth-quarter results last month. And today, we are reporting in line results. Before Manu shares the results details, I will review the strength of the underlying business, our five strategic pillars, and progress in 2021, and plans for 2022 for each pillar.

Please turn to Slide No. 4. For the quarter, we continued to see strong top-of-funnel lead generation in our Residential business with nearly 22,500 new customer bookings in the quarter, a 42% increase over last year. This led to a record 17,000 customers added in the quarter, representing 31% year-over-year growth and our largest ever backlog.

Our total customer install base stood at 427,000 at year end. We continue to sustain residential gross margins above 20% with a 100-basis-point increase versus last year at 25.6% for the quarter, a record high. Adjusted EBITDA per customer before product and digital investment was $2,200. Our new home segment continues to grow strongly with a record pipeline of 66,000 customers as we enter 2022, more than 40% higher than a year ago.

Finally, Sun Belt bookings exited 2021 with a run rate of over $130 million. As we disclosed in our preliminary announcement last month, we experienced some installation delays in the fourth quarter due to weather and Omnicron. Similar to the rest of the industry and academy, we were impacted by some cost and availability pressure on our supply chain and labor pool. Despite these short-term challenges for the pandemic, we are very optimistic and excited about our future as we execute our strategic plan to become the world's most customer-centric home energy company.

Please turn to Slide No. 5. As you know, we are transforming SunPower into a residential solar company focused on providing a world-class customer experience that moves well beyond the initial system sale to a full ecosystem of integrated products and services to create a lifetime relationship with SunPower. I believe strategies are only as good as the quality of the leadership team behind them.

So in 2021, I focused on building a talented and experienced leadership team to execute on the following five strategic pillars. Pillar No. 1 is customer care. Customers are at the center of all of our discussions.

After hiring Nuala Murphy last year as vice president of customer care, we have been rapidly improving our entire approach for customer service. Our guiding principle is that if a customer discovers a problem, that is a defect. We are proactively striving to identify any issues well before our customers do, and then we will exceed their expectations with a timely solution. Ultimately, I expect customer feedback to help guide our corporate and product development for ever-increasing levels of equality, which remains a major component of the SunPower brand.

We also recently hired Derek Kuzak as our executive vice president for supply chain quality and field operations. In residential solar today, the process to install and activate new solar and battery systems is slow and bureaucratic. Our goal is to make the process of installing solar fast, easy, affordable, and enjoyable. Derek and his teams are focused on innovations to deliver a world-class customer experience.

Pillar 2 is growth. We are growing our market share with a world-class dealer network supported by the entire SunPower product, digital and financial platform. We are complementing that network with a high-growth SunPower direct channel and a leading new homes business featuring new and expanded partnerships. In October, we welcomed Ben Peterson and the Blue Raven team into the SunPower family.

Blue Raven is off to a terrific start this year. I'm pleased to report the integration process is going very well, and we have already launched SunPower financial products at Blue Raven. We also recently hired June Sauvaget as our chief marketing officer. June comes to us from Brex and Spotify and will help guide the company's customer acquisition and brand strategy.

Under June's leadership, our goal is to build a true direct-to-consumer brand with a much more cost-efficient customer acquisition process. Pillar 3 is best in affordable products. We are expanding our offerings to include not only our premium solar systems SunPower has been known for but also an array of quality and affordable products. We recognize the value of a lifetime customer relationship, and we will nurture that by providing an entire ecosystem of fully designed and integrated products and services that are simple to use and money savings with clean and reliable energy at their core.

As you know, we hired Nate Coleman as our chief products officer in November, and Nate has already accelerated this effort. Pillar 4 is digital innovation. Our vision is to make buying solar as easy as it is to buy a book on Amazon. To accelerate innovation of the customer experience, we recently hired Ellen Kinney, who's our vice president for digital products.

Ellen will help push our digital innovation strategy to include major upgrades to the mySunPower app to provide a more efficient sales process, more control options for our customers, and increased ease of use to boost adoption. In addition, we are pleased to announce our most recent new hire, Kumar Brahnmath, EVP of software technology. Kumar is a world-class technology leader from Amazon who will build best-in-class solutions for our customers and dealers. Pillar 5 is world-class financial solutions.

We recently hired Jason MacRae with the objectives to drive higher sales rates, faster closings, and a broader customer base while contributing to our lifetime customer value. Please turn to Slide No. 6. We have already made major strides toward the achievement of our strategic goals.

First, we've made measurable progress toward improving customer care in 2021 with our commitment to proactively discover and correct issues before customers even notice, whenever possible. Our handling of the recent connectors issue on the commercial equipment reflects this philosophy. Additionally, we reduced customer issue resolution time by greater than 50% and the number of customer interactions required to obtain resolution has improved by 1,300 basis points into the high double digits. Second, Blue Raven Solar expands our presence outside California and adds firepower to our direct channel, especially in states without a significant SunPower dealership network and no or low SunPower share.

Our pipeline of potential new home installations continues to grow. We executed an exclusive agreement with Toll Brothers last year in California that provides a framework for further expansion nationally. We grew our market share in new homes and continue to work toward new partnerships. We announced our 25x25 Initiative in 2021, which includes the goal of diversifying our residential customer base to include 25% from historically underrepresented communities by 2025.

We're very proud of this commitment, which we will meet with new high-value product offerings at various price points, among other initiatives. We've already added new financial products for customers with expanded eligibility and low-interest rates to help capture this important market segment. Third, on the product side, we restarted sales of our SunVault storage product last summer with rapidly growing bookings and healthy inventory. We also recently introduced our first residential Virtual Power Plant offering under ConnectedSolutions.

This is a program that enables our customers to receive payments from their interconnected utility in exchange for degrees of partial control over customer SunVault systems. We are also very pleased to announce our new partnership with OhmConnect that we expect will expand our ability to bring financial value to customers quickly and meaningfully. Most importantly, these programs bring real tangible benefits to utilities and their nonsolar customers as well. They provide a source of highly distributed storage that could help offset the need for distribution upgrades as increasing numbers of electric vehicles and rooftop solar systems get interconnected.

Fourth, as I mentioned, we have the right leadership team now in place to accelerate our digital efforts to enhance the mySunPower app as well as our design software to greatly support both our customers and our sales teams. Fifth, SunPower Financial was launched in December, which provides us a platform for off-balance-sheet customer financing, and we entered into a forward flow loan purchase agreement with an affiliate of Credit Suisse. Thanks to our strong leadership team and the dedicated mission-driven talent at SunPower, we got a lot done in 2021, and we have a lot more planned for this year. Please turn to Slide 7.  In 2022, we are leaning in and investing for growth.

You can expect to see meaningful progress along several strategic lines, including, first, SunPower is making major investments to upgrade customer services. We believe that exceeding customer expectations for support is key to creating and maintaining our premium brand and growing lifetime customer relationships. You can expect more updates about this initiative at our Analyst Day. Second, continued rapid expansion of sales throughout the country, especially outside California, as we invest in our dealer network and expand our team at SunPower Direct.

Third, we plan to introduce new high-value, high-performance panel and storage options that will have strong appeal beyond the premium Residential segment that we currently capture. As we explore our options in the coming weeks and months, we look forward to providing you with a more detailed update at our Analyst Day. Fourth, we are making a digital product investment to improve our customer experience and our operational efficiency. And finally, at SunPower Financial, we are reiterating our plan to increase the origination of residential financing from 35% in 2021 to 45% in 2022.

This helps our customers qualify for financing quicker while helping our dealers and direct salespeople close sales faster. It also brings new fee income that we've never previously captured. When you add all this up, SunPower is on a path to change the world for millions of solar customers. We are passionate about our mission, and we are just getting started.

The seeds that we are planting now will bear fruit for years to come as we build the world's most customer-centric home energy company. Before I turn the call over to Manu, I'd like to address our new module supply agreement. The new contract terms allow us to continue offering our existing residential products while exploring additional panel providers immediately. Most importantly, the new deal will ensure we can serve customers and dealers, given the strong demand for residential solar.

I'll close my comments by reemphasizing how pleased I am with the strength of customer demand. From my perspective, consumer demand is the single most important metric of our health. Now our focus is on serving and delighting our customers. We plan on having an Analyst Day on March 31 in San Diego.

I look forward to seeing you there and introducing you to our leadership team. With that, I'd like to turn the call over to Manu Sial, CFO of SunPower. Manu?

Manu Sial -- Chief Financial Officer

Thanks, Peter. Please turn to Slide 9. Our results for the quarter were in line with our preannouncement on January 20. We are reporting negative $8 million of adjusted EBITDA, which includes the previously disclosed $27 million charge for cracked connectors in commercial equipment with an incremental $4 million charge expected in the first quarter of 2022.

It also includes $3 million of higher sales and marketing expenses as well as the $6.5 million impact from weather and COVID-related delays. We're also reporting $385 million of revenue, 12% higher than a year ago and 19% higher sequentially versus third quarter of 2021, driven by the underlying strength of our Residential business. We exited the year with a healthy balance sheet with $127 million of unrestricted cash and another 2.5 million shares of Enphase held for future sales. As a reminder, the acquisition of Blue Raven Solar in October was funded with the prior sale of 1 million shares of Enphase, and I'm happy to report that the integration of the Blue Raven team is going very smoothly.

We enter 2022 with very strong residential fundamentals and a record high backlog, now the sole business of our company. Please turn to Slide 10. Top of the funnel customer appointments and bookings continue to climb, and our residential gross margins for the quarter were the highest in nearly 6 years. Specifically, I'm pleased to report that we exited 2021 with residential gross margins greater than $0.70 a watt at 25.6%, up 100 basis points year over year.

We are very excited and optimistic about the opportunities in front of us, and we remain committed to reinvesting the proceeds from the sale of Enphase shares and our C&I Solutions business back into the execution of our strategic plan. Please turn to Slide 11. We are providing guidance for 2022 adjusted EBITDA in a range of $90 million to $110 million. Relative to our prior color for 2022, the midpoint represents a reduction of approximately $35 million with $15 million coming off as a result of our plan to exit the Light Commercial business this year.

The remaining $20 million impact to the Residential business is primarily driven by our updated supply agreement with Maxeon as we accelerate the shift toward a more diversified customer offering and supply chain. It assumes limited customer price increases during the transition. The guidance continues to assume strong demand and is based on a projection of greater than 35% volume growth versus 2021 to a range of 73,000 to 80,000 new customers. Our projection for residential adjusted EBITDA per customer calculates to a range of $2,000 to $2,400 per customer before product and digital opex investment.

SunPower is nearing the completion of its transformation to a residential customer-focused renewables business. We are now firmly on a strategic path for rapid long-term growth based on a growing basket of products and service offerings to our customers. As such, we plan to provide annual guidance going forward for adjusted EBITDA, customer growth, and residential adjusted EBITDA before product and digital opex investment per customer. We think the valuation of our company is most easily and accurately determined by these metrics, which will also be based on customers rather than megawatts, an approach that makes more sense as we add more long-term customer value to the initial sale of our solar systems.

With that, operator, I would like to turn the call over for questions.

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] I show our first question comes from the line of Sean Morgan from Evercore. Please go ahead.

Sean Morgan -- Ever

Hey, guys. Thanks for taking my question. So Peter, I think on the call, you guys mentioned that you're leaning into the Blue Raven acquisition a little bit, and maybe that's a little bit in light of NEM3. So as you're obviously going to be diversifying the portfolio away from California, what steps are you taking proactively to sort of, I guess, boost the growth that you're seeing outside of kind of that core historic base of your company?

Peter Faricy -- Chief Executive Officer

Yes. Hi, Sean. Thanks for the question. You're absolutely right.

We are looking to diversify the company across the country. What's interesting is if you take a look at the growth rate so far just in the first quarter of this year, we're growing very fast in California, but we're actually growing as fast in the rest of the country, particularly strength in the Northeast and the Southeast. And you might remember, Blue Raven was sort of that sweet spot right in the middle of the country where we weren't. And Blue Raven will continue to expand and grow.

We're going to talk to you more about our Blue Raven plans at Analyst Day. But we'll also fill you in at Analyst Day about how we plan to accelerate our growth, both in the Northeast and the Southeast. The other interesting thing I'll highlight is it's not just solar panels. Battery storage, I think, is really beginning to take off.

And I think we're quite pleased with how we started the year with our SunVault product. I think it's both the combination of the extreme weather conditions that people are seeing in different parts of the country and the power outages that are driving more and more consumer demand. One of the things we measure and share with you guys in color is our attach rate. And our attach rate for SunVault was trending, let's say, 25%, 28% in our direct channel last year.

That's up to the mid-30s as of last week. And what's interesting is the attach rate is just as high non-California as it is in California. So as you could hear from our comments, we're extremely pleased with the sales that we're seeing, and we're so pleased to see that we're diversifying our sales base all across the country.

Sean Morgan -- Ever

OK. That's interesting. And since you brought up SunVault and you've been able to sort of bring that back online and get past, I guess, some of the supply chain hiccups that you had previously. Now that you're sort of pairing that with the Wallbox and the potential for the bidirectional charging, are you seeing any trends in terms of attach rate on SunVault versus people with EVs that might be looking to eventually incorporate car battery storage as part of their home energy solutions? Anything interesting that you're sort of picking up?

Peter Faricy -- Chief Executive Officer

Yes. I think, Sean, you guys have seen -- we've announced a couple of programs with new home builders. So I think what I would predict is for this year, the channel -- well, this combination of solar plus battery plus EV will probably take off the fastest is with new homes. And it kind of makes sense because most new homeowners roll their solar package right into their mortgage, which makes it very affordable.

And that's the perfect time to kind of get all three done at the same time. We are excited to share with you coming up at our Analyst Day, both our plans on the EV side and also some interesting plans related to battery storage with Virtual Power Plants. So lots more to go there. I think the biggest thing that gets me excited about storage, coming back to SunVault for a minute, is that today we're really offering a product for a partial home backup.

It's the product I have in my house. I think it's terrific. But I think if you take a look at the storage market, we're seeing much stronger demand for whole-home backup. And so we're going to talk more about our SunVault plans and we see you at the end of March.

But suffice to say, we're going to be aggressive at rolling out a number of new products in the whole home backup category, and that leads us to believe that this could be a terrific year on the SunVault side.

Sean Morgan -- Ever

OK. That's great. Thanks, Peter.

Operator

Thank you. I show our next question comes from the line of Pavel Molchanov from Raymond James. Please go ahead.

Pavel Molchanov -- Raymond James -- Analyst

Thanks for the question. Last December, you unveiled SunPower Financial, but I didn't hear a lot about that in your discussion of this year's guidance. Can you talk about how that new initiative fits into your revenue mix?

Peter Faricy -- Chief Executive Officer

Absolutely. Thank you for the question, Pavel. The hiring of Jason MacRae has really allowed us to build out a proper financial products business. The big goal that we laid out for you guys is that we're going to improve the number of systems financed from 35% of the total to 45% next year.

Maybe as exciting to me is we're building up a scale in both lease and loan that's going to allow us to really lower our cost of capital over time. And then maybe as exciting, and I can't wait to share this with you in more detail at the Analyst Day, is we're really building out the financial products for customers and dealers that will scale very, very well as our business gets larger and larger. So we're quite excited about that part of the business. I think at the core of it, it's not only about making some money from helping customers finance their solar.

When you take a look at customer research, the no. 1 reason people say they can't get solar is they don't think they can afford to down payment. The no. 2 reason they say they can't get solar is they don't think they can get approved for financing.

And we're excited to share with customers the new financial products will be rolling out this year and beyond that, we think are going to make solar accessible to 100 million people here in the U.S. So a lot more detail to come, but we're very excited to share more detail with you on that at the end of March.

Pavel Molchanov -- Raymond James -- Analyst

So just to clarify, are you going to be putting solar leases on loans on the SunPower balance sheet as a number of the other major national rooftop providers are doing?

Peter Faricy -- Chief Executive Officer

No. We are not changing our strategy on that at all. So we're still going to move these leases and loans off-balance sheet. That means that we don't take the risk.

But by actually beginning to do the loan servicing, which we plan to do this year, we'll have a much better understanding of what the real risk is. And we believe that would allow us to get a much lower cost of capital and a greater share of the economics over time. So we'll walk you through that in more detail. But no, we're not changing our strategy in terms of loans on the balance sheet.

Pavel Molchanov -- Raymond James -- Analyst

Clear enough. Thanks.

Peter Faricy -- Chief Executive Officer

Thank you.

Operator

Thank you. I show our next question comes from the line of Brian Lee from Goldman Sachs. Please go ahead. 

Peter Faricy -- Chief Executive Officer

Hey, Brian.

Brian Lee -- Goldman Sachs -- Analyst

Hey, guys. Good afternoon. Thanks for taking the questions. Maybe the first one, just on these new metrics, right? I understand some of the rationale.

But given you're kind of moving the goalpost a little bit again, I just wanted to dive in a bit, so the adjusted EBITDA per customer. First one on that, I guess, can you kind of break out -- as your customer mix is changing, you even acknowledged there's more than solar-only customers going forward. You're going to be selling a lot more services and other products. What sort of the $2,000 to $2,400 per customer range represents? Is that $2,000 for solar only? And then at the higher end, $2,400 represents like a solar-only -- or solar plus SunVault battery customer.

Just kind of give us a sense of the range of where your EBITDA shakes out on an individual customer basis because I feel like the blended mix kind of maybe doesn't represent where incremental customers are really being sourced at in terms of your economics. And then I had some follow-ups.

Peter Faricy -- Chief Executive Officer

Yes. Hey, Brian, it's Peter. So thank you. We are excited about the guidance that we're going to give as we go forward.

I think when you think about a direct-to-consumer residential company that's focused on growth, I do believe customers and customer growth and then something like EBITDA per customer or maybe someday we'll get to a lifetime value per customer, those are the two things to look at to really measure the health and well-being and the valuation of the company. Let me have Manu answer a couple of your questions on the EBITDA calculation and how we've been thinking about it.

Manu Sial -- Chief Financial Officer

Hi, Brian. So just to contextualize the three metrics we're giving. We provided the number of customers in the past. I think it's a much better metric than just the megawatts, what we've guided.

And it makes sense, given that we are a revenue-focused or revenue-only company going forward. And then EBITDA per customer is the same basis as what we've talked now in the last couple of quarters. You can reference the total year to what we had said in the third quarter metrics as well. And then just to answer the 2022 question regarding the EBITDA per customer.

The assumption is that what takes it from, let's say, the low end of the range or the high end of the range is a solar customer depending on region as well as a solar customer who is also taking financing from SunPower. So the range of 73,000 to 80,000 customers assumes customers that are going to take solar and then some of the customers are going to take solar plus storage plus EV plus our financing. And then EBITDA, it's the same basically as last time.

Brian Lee -- Goldman Sachs -- Analyst

OK. That's helpful context. I guess maybe as a follow-up to that. I may have the numbers off.

But I think in the past, you said -- or last quarter, you said $35 million on this product and digital spending efforts. That was the drag on EBITDA. If I do that across your customer base, I guess, or your customer count, it sounds like it's about a $400 million to $500 million -- or sorry, $400 to $500 per customer EBITDA drag from those spending initiatives. Is that going to be pretty constant going forward? And is there a reason to be stripping that out, I suppose, because -- are those may be essential to running the resi solar segment? Just trying to understand what that EBITDA drag is from that ongoing spend and if it changes over time.

Manu Sial -- Chief Financial Officer

Yes. So what we've talked in the fourth quarter was about $35 million of incremental spend that we were financing effectively through Enphase proceeds that we sold in the third quarter of 2021, just to tie the comment back. I think where it shows up is half of it shows up in the EBITDA per customer calculation, and then the other half of it shows up in the products and digital opex. The way to think about the spend from a SunPower perspective, whether it's on a per customer, I think 2022 is a high watermark.

And while we'll continue to spend on the growth of the business on a per-customer basis, that spend is going to be tapering off as we go from '22 to some of the outyears.

Peter Faricy -- Chief Executive Officer

Yes. I think what I'd add on that, Brian, is that from my time at Amazon, the two pieces of investment that scale the best over time are spending -- investing in software and investing in products. And they're the kind of investments that once you make them, they'll scale over a larger and larger customer base over time. So I just gave on the previous answer the example of financial products.

A lot of what we're going to build this year is what we need for the next 10 years and beyond. And so the $35 million number may -- it's possible that could increase in absolute terms. But I think as a rate of the total, I think that will scale nicely over time and begin to shrink over time.

Manu Sial -- Chief Financial Officer

Thanks, Brian.

Brian Lee -- Goldman Sachs -- Analyst

All Right. Thanks, guys. I'll take it offline.

Operator

Thank you. I show our next question comes from the line of Philip Shen from ROTH Capital. Please go ahead.

Phil Shen -- ROTH Capital Partners -- Analyst

Hi, everyone. Thanks for taking my questions. 

Peter Faricy -- Chief Executive Officer

Hi, Phil.

Phil Shen -- ROTH Capital Partners -- Analyst

First one is on the '22 outlook and the 76,000 customers. How many of those are Blue Raven? I'm guesstimating 9,000 with the strong growth outlook for Blue Raven. But just curious if you can help us understand ultimately what the organic growth is. I'm guessing roughly 25% year over year and then the impact of Blue Raven.

Thanks.

Peter Faricy -- Chief Executive Officer

Phil, we don't break out Blue Raven customers separately, but I would say you're in the ballpark. I think that's pretty close to what the number will be. But we do think about constantly is our total direct channel, which includes SunPower Direct plus Blue Raven. We're very, very pleased with the growth and the profitability of that channel.

So to give you some color on that, that was, let's say, 15% of our business before Blue Raven. It became 20% by the end of the year and will get to 30% of our total business this year. So not only is it growing a lot faster than our total business, but it's also a channel that's much more profitable for us. So we're quite pleased, as I mentioned in my comments, with the Blue Raven acquisition and both of them running as an independent company and also our ability to find synergies between the 2 companies.

It's been terrific so far. And we're also very, very pleased with our SunPower Direct business.

Phil Shen -- ROTH Capital Partners -- Analyst

Great. Thanks for the color, Peter. And then as it relates to OhmConnect, can you talk a bit more about the revenue model there and the go-to-market strategy? And what kind of impact to revenue margins could we see in '22 or in '23? Do you expect it to be meaningful? Or is it still kind of going to be ramping from smaller numbers? Thanks.

Peter Faricy -- Chief Executive Officer

Yes. Thanks, Phil. I'm so glad you brought up Ohm because I can't wait to spend time with you guys on this. It's a terrific partnership.

I don't want to give away all of the punch lines for our Analyst Day, but let me give you a couple of sneak previews. So first of all, there's a couple of things about Ohm that we find really attractive. One is for all the talk about Virtual Power Plants, the hardest thing is getting the customer experience right. If you think about the idea that you're going to let someone else control your battery storage or someone else controls your thermostat, that's not something that most people wake up every day and are comfortable with.

So they have really demonstrated in our opinion, the ability to influence customer behavior in a very positive way. And we're going to talk to you about that. And then also, they're really the first company that we've seen that's been able to connect consumer energy with the energy markets. So there's a lot of talk about VPP.

But when you actually take a look at who has made a direct connection to the bidding and energy between residential batteries -- residential actions, if you will, and the energy markets, I think these guys are way ahead. We're going to give you a lot more details at the Analyst Day about our partnership, but our partnership is a very big and comprehensive one. We're going to be their exclusive partner on things like solar and battery storage. And I really want to get into a lot more detail with all of you on our VPP investments and the seeds we're planning.

To answer your last question directly, I don't think it will be material in 2022. I think it's early. There's still a lot for us to figure out. But I will tell you that it's one of the seeds that is exciting because if you take a look at the three-year plan and the five-year plan, I think it does become a very material part of our business.

The economics are really attractive. And frankly, I've been looking for an opportunity for us to work productively with utilities. I mean this is a win-win-win if we can get the consumer behavior right. Consumers get money from it.

Utilities hopefully save having to build new distribution because they can take advantage of distributed energy storage, and we think we can be a partner to both and participate in the economics. So I look forward to going a lot deeper on that topic with all of you in about a month. Thanks.

Phil Shen -- ROTH Capital Partners -- Analyst

Great. One last one, if I may. In terms of the Enphase partnership, there might be some near-term deadlines there in terms of how things are governed. What do you expect there? And do you have any real alternatives besides Enphase if you want to go a different direction?

Peter Faricy -- Chief Executive Officer

So on the Enphase partnership, we have a partnership agreement that we're together through Q1 of 2024. We're pleased with that agreement. We're pleased with the relationship we have with them, and I think it's business as usual for 2022.

Phil Shen -- ROTH Capital Partners -- Analyst

Great. Thanks for taking all the questions. I'll pass it on, Peter.

Peter Faricy -- Chief Executive Officer

OK. Thank you, Phil.

Manu Sial -- Chief Financial Officer

Thanks, Phil.

Operator

Thank you. Our next question comes from the line of Kashy Harrison from Piper Sandler. Please go ahead.

Kashy Harrison -- Piper Sandler -- Analyst

Good afternoon, everybody, and thank you for taking the questions. So on slide 11 of the investor deck, so you indicate the guidance excludes the outcome of NEM and potential ITC changes. I was wondering if you could maybe just help us with some sensitivities on those numbers if the proposed decision from December comes to fruition. And in addition, can you also provide us with some sensitivities if the ITC changes?

Peter Faricy -- Chief Executive Officer

Yes. Let me -- before I turn it over to Manu for the sensitivities, let me just make a quick comment on both. I think as the initial negative news came out on California NEM in December, we did believe that that was going to be probably an overreaction in the market. And I think that's proven out to be the case as the events have taken place since.

There's an enormous amount of energy from California residents and California employees and the solar renewable energies business to make sure that the outcome here is much more moderate and much more favorable for the solar customers and the solar employees. So I would just tell you that in California, we're cautiously optimistic that the outcome here will be much improved over the initial reports and that we'll have an outcome at some point in Q2. And then on the ITC, before Manu goes through the sensitivities, I think we feel a similar direction. I think you've seen comments from Senator Manchin that he supports legislation related to climate and clean energy provisions.

There seems to be a lot of support across the Democratic party for that in the Senate. And we're cautiously optimistic that that will get moved along over the next few months. Manu, do you want to talk a little bit about the sensitivities on the NEM and ITC side?

Manu Sial -- Chief Financial Officer

Yes. So on the ITC, we actually covered that in our last earnings call. And I think the way we articulated it is we should see the benefit either from a pricing perspective or increased volume. And I think we calculated as -- using certain growth assumptions about a $14 per share benefit to SunPower.

We can go into a lot more detail on the callback if you like.

Kashy Harrison -- Piper Sandler -- Analyst

And on the NEM sensitivities, if you have that.

Manu Sial -- Chief Financial Officer

I think we -- look, from a NEM perspective, I don't think we've articulated any sensitivities in the past. I think -- like what Peter said, we think we'll all get into the right place from an industry perspective and the policymakers. I think as the policy unfolds, we may see some near-term demand. But I think it's a bit too premature at this point to provide any sensitivities there.

Kashy Harrison -- Piper Sandler -- Analyst

OK. And as my second question. So on -- sticking with slide 11, you indicated that the decline in adjusted EBITDA per customer in '22 was driven by higher sales and marketing in the footnotes. I was wondering if you could just maybe give us some medium-term targets on where you think this estimate could go, thinking through maybe rising storage attachment rates and then also the transition from 35% loan origination to where that might go in a few years? Thank you.

Manu Sial -- Chief Financial Officer

Yes. So I think the way to think about -- so let me take a step back, right? As we've exited 2021, you've seen two things. One, the resi fundamentals continue to be amazing for us, which kind of leads to the focus on that business for us. And you can see that in gross margins.

You can see that in bookings. Also, we are seeing that the top of the funnel is extremely strong. And the investment in sales and marketing expense to contextualize is both to grow geographically as well as helps with broadening our product portfolio. More of it on the Analyst Day, right? In terms of from a modeling perspective, as you bridge from our current guidance to where it could go, a couple of things that will provide tailwinds.

One is increased financing. We've talked about every customer that buys a system and a finance system compared to a nonfinance is about $1,000 a customer. So that should bring the overall margin up. Storage attach rates, as they increase and as the business ramps or that part of the business ramps, that should be incremental margin to the EBITDA per customer as well as EV attach rates.

All those three things should increase the EBITDA per customer going from '22 to '23. And then as Peter and I talked about earlier, some of the investments we are making in the platform and growth in '22 should start to taper off on a per customer basis, and then the volume leverage really kicks in as you go from '22 to the outyears.

Peter Faricy -- Chief Executive Officer

The only thing I'll add is where do we go after 45%? Two things for context. One is we're still the only residential solar company that offers all three financial options. So for customers, we want them to make the choice that's best for them, and that could be cash, lease, or loan. But of the customers who prefer not to pay cash, which is still the majority, we are on a path to have 100% of that business financed by us over time.

So the 45% that we're at for this year is just the beginning in the way we look at it. And obviously, we're getting 100% of our own direct channel today. But as Jason and his team have a chance to build out some world-class financial products for our dealers, I think we see the opportunity accelerating as we go.

Manu Sial -- Chief Financial Officer

Thank you.

Operator

Thank you. I show our last question comes from the line of Tristan Richardson from Truist. Please go ahead.

Tristan Richardson -- Truist Securities -- Analyst

Hey, appreciate the comments this evening, guys. Just one on the EBITDA as well as customer growth guidance for 2022. Does that include the impact of the previously discussed kind of connectors charge that occurs in 1Q as well? And then also the factors you talked about impacting 4Q, namely the pushout into 2022 from weather. Is that included in that guidance, both on a customer and EBITDA basis?

Manu Sial -- Chief Financial Officer

The answer is both are included.

Tristan Richardson -- Truist Securities -- Analyst

OK, OK, helpful. And then maybe just a quick one to follow up on the Light Commercial exit. Is there any change to sort of a cost structure from an opex perspective going forward, savings, harvest, et cetera? Changes to, yes, overall cost structure by exiting that piece of the business?

Peter Faricy -- Chief Executive Officer

Well, on CVAR, most of the employees we've had working on CVAR were shared between our Residential business and CVAR. So to give you a quick direct answer to your business, no, I don't see a big opex impact. We have a small single-digit sales team that will be impacted, but I think most of the employees will reallocate to this faster growing and more profitable Residential business immediately.

Tristan Richardson -- Truist Securities -- Analyst

Helpful. Appreciate it, guys. Thank you. 

Peter Faricy -- Chief Executive Officer

Thank you. I guess as we wrap up for today, I want to thank everybody for their questions. And I just have two quick closing comments. One of them is I just want to recognize that we've now fully made this transition from a company that was in a lot of different businesses, panels and utility, scale, solar and commercial and industrial and residential, to a company that's now solely focused on the residential solar business as we go forward.

When I took my first earnings call last May with many of you, most of you had a very similar question, which is what are you going to do with the Commercial business and the CVAR business? We've now successfully answered those questions, and now you can see our strategy of where we're headed as we move forward. We are extremely excited to host all of you on March 31 in San Diego for our Analyst Day. This will be my first chance to get a chance to interact with all of you and for you to meet our team. So let me just give you a quick sneak preview of some of the topics that we plan to talk about.

First of all, we have a very exciting product strategy, and that includes the opportunity to participate in a segment of the business that we've never participated in before. And that's the mainstream or mass market panel business. So our existing supplier arrangements have only really allowed us to participate in the premium segment. We are extremely excited as we move forward to finally have a product in the much larger and faster-growing mass market segment.

And if you talk to our dealers, it's the no. 1 thing they bring up when I talk to them. So we're very excited to share our plans with you on that. Two, we're going to talk to you, as I mentioned, a lot more about financial products.

But we're also going to talk a lot more about what are the things that we're going to do to drive lifetime customer value up over time. That includes many more products on the battery storage side, exciting opportunities for us on the EV charging side, and a discussion that I can't wait to have with all of you about our approach in Virtual Power Plants, or VPP, including our partnership with OhmConnect. And then finally, I'll just -- suffice to say, as we started the year, we're seeing tremendous growth in the upper part of our funnel. And if you said to me, what's the best leading indicator of the health of this company and this business, it's always that upper part of the funnel.

So we've committed in our guidance for 35% customer growth this year. But I will tell you, right now at the top of the funnel, we're seeing  3x that growth in things like role appointments and marketing qualified leads. And then the other interesting thing is that we're seeing much higher close rates than we did a year ago. Those are both very good leading signals about where this business is headed.

Thanks to all of you and look forward to seeing you on March 31 down in San Diego. Thanks.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Duration: 50 minutes

Call participants:

Mike Weinstein -- Vice President, Investor Relations

Peter Faricy -- Chief Executive Officer

Manu Sial -- Chief Financial Officer

Sean Morgan -- Ever

Pavel Molchanov -- Raymond James -- Analyst

Brian Lee -- Goldman Sachs -- Analyst

Phil Shen -- ROTH Capital Partners -- Analyst

Kashy Harrison -- Piper Sandler -- Analyst

Tristan Richardson -- Truist Securities -- Analyst

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