SunPower Reports First Quarter 2019 Results
SAN JOSE, Calif., May 9, 2019 /PRNewswire/ -- SunPower Corp. (NASDAQ:SPWR) today announced financial results for its first quarter ended March 31, 2019.
First Quarter Highlights
-- Launched new portfolio of Maxeon and Performance Series (P-Series)
panels in U.S. and international markets
-- Agreement to monetize commercial sale-leaseback portfolio for $87
million; sold first C&I project under innovative financing partnership
with Goldman Sachs Renewable Power
-- SunPower Energy Services (SPES)
-- Commenced U.S. shipments of 415-watt residential A-Series panel
-- Helix storage solutions pipeline increased to 110 megawatts (MW)
with 35 percent attach rate
-- SunPower Technologies (SPT)
-- World record 25 percent Maxeon Gen 5 solar cells in volume
production; initiated tool install for second manufacturing line
-- Strong volume growth in international distributed generation (DG)
markets
($ Millions, except percentages and per-share
1st Quarter
4th Quarter
1st Quarter
data) 2019 2018 2018
GAAP revenue $348.2 $456.8 $391.9
GAAP gross margin (10.7)% (1.7)% 2.6%
GAAP net loss $(89.7) $(158.2) $(116.0)
GAAP net loss per diluted share $(0.63) $(1.12) $(0.83)
Non-GAAP revenue(1) $411.6 $525.4 $398.9
Non-GAAP gross margin(1) 6.0% 6.9% 6.5%
Non-GAAP net loss(1) $(57.4) $(30.3) $(28.2)
Non-GAAP net loss per diluted share(1) $(0.41) $(0.21) $(0.20)
Adjusted EBITDA(1) $(23.8) $13.6 $32.3
MW Deployed 455 441 326
(1)Information about SunPower's
use of non-GAAP financial
information, including a
reconciliation to U.S. GAAP, is
provided under "Use of Non-GAAP
Financial Measures" below.
"We executed well as we met or exceeded our key financial guidance metrics for the first quarter while laying the foundation for improved profitability in the second half of the year," said Tom Werner, SunPower CEO and chairman of the board.
"Demand in our global DG business remains strong and we expanded shipments into the international power plant market. In the first quarter, we introduced exciting new products in both the upstream and downstream parts of the value chain. Upstream, we introduced a new portfolio of residential Maxeon and P-Series panels for both U.S. and international residential markets and we are already seeing significant demand for these new products in our global DG business. We also began shipment of P-Series panels from our Oregon factory and the ramp of our 25 percent efficient Maxeon Gen 5 cell technology in Fab 3 is continuing. In our downstream business we unveiled a revolutionary online, instant design platform for our North American residential market that will improve customer experience while reducing costs.
SunPower Energy Services (SPES) - North American Residential and Commercial Businesses
"In the first quarter, our residential business was impacted by unusually severe weather and related installation delays in several key markets which limited MW volume. However, we offset this impact due to our prudent management of expenses, improved operational efficiency and a stable pricing environment. Customer response to the launch of our new A-Series panel, the industry's first 415-watt residential module, has been very strong and we expect to allocate all of our capacity for this product to the U.S. market at least through the end of 2019. Additionally, we continued to see further traction for our loan product as deployed MW tripled year over year. With forecasted MW growth of 15 percent, our New Homes backlog of 35,000 customers and the launch of both our Equinox storage and services platform and our instant design digital application in the second half of the year, we are confident in our ability to meet our residential installation targets in 2019.
"In Commercial, we continued to build on our market leadership position, adding both new and existing customers to our 1.3 gigawatt (GW) installed base. Interest in our Helix solar-plus-storage solution remains high as our storage pipeline now exceeds 110-MW with attach rates in excess of 35 percent. We are also well positioned for significant growth in the second half of the year given our first quarter bookings, with more than 80 percent of our 2019 volume forecast now in backlog.
SunPower Technologies (SPT) - Manufacturing, International DG / Power Plant panel businesses
"SunPower Technologies, which manufactures, designs and sells the world's most efficient solar cells and panels, also posted solid financial performance for the quarter, exceeding revenue and shipment forecasts. The ramp of our Maxeon Gen 5 solar cell and panel technology is continuing and we recently commenced tool installation for our second manufacturing line which will bring nameplate Maxeon Gen 5 capacity to approximately 250 MW by the end of the year. Additionally, the ramp of P-Series production in Oregon is also continuing with U.S. shipments planned for up to 150 MW this year. In our panel sales business, we are benefitting from our new, DG-focused international channel strategy as Europe, Japan and Australia all exceeded their revenue and shipment plans in the first quarter. Customer response in our core international DG markets to our new 400-watt Maxeon and new P-19 residential panels has been very strong, and we are currently fully allocated for both of these products in the second quarter with bookings now building for the second half of 2019. We are also executing on our robust pipeline of P-19 demand for the global power plant business, where we are fully booked for the balance of 2019. Finally, we are operating our fabs at 100 percent utilization to meet the strong demand for our products as well as the production of up to 200 MW of panels for our 2019 U.S. safe harbor program," Werner concluded.
"Solid execution enabled us to meet or exceed our key financial guidance targets for the quarter as we positioned ourselves for a strong second half of the year," said Manavendra Sial, SunPower chief financial officer. "We continued our focus on improving cash flow while further investing in our growth initiatives. We also expect to receive $87 million from closings under the previously announced sale of our commercial sale-leaseback portfolio in the second quarter, as well as finalizing certain strategic DG financing programs that we believe are more capital efficient while improving margins. We remain committed to achieving positive cash flow at the business unit level in the second half of the year while improving our profitability throughout 2019."
First quarter fiscal year 2019 non-GAAP results exclude net adjustments that, in the aggregate, improved non-GAAP earnings by $32.3 million, including $49.4 million related to cost of above-market polysilicon, $8.3 million related to impairment and sale of residential lease assets, $5.7 million related to stock-based compensation expense, $4.9 million related to legacy sale-leaseback transactions, $2.6 million related to business reorganization costs, $1.8 million related to intangibles, $1.5 million related to tax effect, $1.4 million transaction-related costs, and $0.1 million related to utility and power plant projects, partially offset by $33.0 million related to unrealized gain on equity investment, $6.1 million related to gain on business divestiture, $3.7 million related to construction revenue on solar services contracts, and $0.6 million related to restructuring expense.
Financial Outlook
The company continues to expect financial performance to improve on a quarterly basis throughout fiscal year 2019 with performance weighted towards the second half of the year.
The company's second quarter 2019 GAAP and non-GAAP guidance is as follows: on a GAAP basis, revenue of $370 million to $410 million, gross margin of 0 percent to 3 percent and net income of $0 million to $20 million. On a non-GAAP basis, the company expects revenue of $420 million to $460 million, gross margin of 7 percent to 10 percent, Adjusted EBITDA of $(5) million to $15 million and MW deployed in the range of 550 MW to 600 MW.
The company's fiscal year 2019 GAAP and non-GAAP guidance is as follows: on a GAAP basis, revenue of $1.8 billion to $1.9 billion and a net loss of $120 million to $100 million. On a non-GAAP basis, revenue of $1.9 billion to $2.0 billion and operational expenses of less than $270 million. Gigawatts deployed is expected to be in the range of 1.9 GW to 2.1 GW in addition to the company's safe harbor program and capital expenditures of approximately $65 million.
The company is also raising its fiscal year 2019 Adjusted EBITDA guidance to the range of $90 million to $110 million compared to previous guidance of $80 million to $110 million.
The company will also host a conference call for investors this afternoon to discuss its first quarter 2019 performance at 1:30 p.m. Pacific Time. The call will be webcast and can be accessed from SunPower's website at http://investors.sunpower.com/events.cfm.
This press release contains both GAAP and non-GAAP financial information. Non-GAAP figures are reconciled to the closest GAAP equivalent categories in the financial attachment of this press release. Please note that the company has posted supplemental information and slides related to its first quarter 2019 performance on the Events and Presentations section of SunPower's Investor Relations page at http://investors.sunpower.com/events.cfm. The capacity of power plants in this release is described in approximate MW on a direct current (dc) basis unless otherwise noted.
About SunPower
As one of the world's most innovative and sustainable energy companies, SunPower Corporation (NASDAQ: SPWR) provides a diverse group of customers with complete solar solutions and services. Residential customers, businesses, governments, schools and utilities around the globe rely on SunPower's more than 30 years of proven experience. From the first flip of the switch, SunPower delivers maximum value and superb performance throughout the long life of every solar system. Headquartered in Silicon Valley, SunPower has dedicated, customer-focused employees in Africa, Asia, Australia, Europe, North and South America. For more information about how SunPower is changing the way our world is powered, visit www.sunpower.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: (a) our expectations regarding our future financial performance, including with respect to profitability, cash flow, and margins; (b) our plans and expectations regarding manufacturing expansion, and production goals and ramps, including the timing of our ramp of Maxeon and P-Series production expansion and planned shipments; (c) our plans and expectations for our products and planned products, including product allocation, anticipated customer adoption and cost impacts, launch timing, and impacts on our financial performance and our ability to meet our targets and goals; (d) our expectations and plans regarding growth, demand, revenue, and volume; (e) our plans and expectations regarding fab utilization and our safe harbor program; (f) the anticipated timing and financial impact of future closings under our commercial lease portfolio sale; (g) our plans and expectations for strategic DG financing programs, including their impact on capital efficiency and margins; (h) our positioning for future success and profitability and long-term competitiveness, and our ability to achieve our financial and strategic goals; (g) our expectations regarding financial performance improvement and timing during fiscal year 2019; (h) our second quarter fiscal 2019 guidance, including GAAP revenue, gross margin, and net income, as well as non-GAAP revenue, gross margin, Adjusted EBITDA, and MW deployed, and related assumptions; and (i) fiscal year 2019 guidance, including, GAAP and non-GAAP revenue, non-GAAP GW deployed, non-GAAP operational expenses, non- GAAP capital expenditures, and Adjusted EBITDA, and related assumptions. These forward-looking statements are based on our current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (1) competition in the solar and general energy industry and downward pressure on selling prices and wholesale energy pricing; (2) our liquidity, substantial indebtedness, and ability to obtain additional financing for our projects and customers; (3) changes in public policy, including the imposition and applicability of tariffs; (4) regulatory changes and the availability of economic incentives promoting use of solar energy; (5) challenges inherent in constructing certain of our large projects, including regulatory hurdles and other difficulties that may arise; (6) the success of our ongoing research and development efforts and our ability to commercialize new products and services, including products and services developed through strategic partnerships; (7) fluctuations in our operating results; (8) appropriately sizing our manufacturing capacity and containing manufacturing and logistics difficulties that could arise; (9) challenges managing our acquisitions, joint ventures and partnerships, including our ability to successfully manage acquired assets and supplier relationships; (10) challenges in executing transactions key to our strategic plans; and (11) our ability to successfully implement actions to complete our restructuring plan and associated initiatives, including plans to streamline our business and focus. A detailed discussion of these factors and other risks that affect our business is included in filings we make with the Securities and Exchange Commission (SEC) from time to time, including our most recent report on Form 10-K, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or on the SEC Filings section of our Investor Relations website at investors.sunpower.com. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events.
©2019 SunPower Corporation. All rights reserved. SUNPOWER, the SUNPOWER logo, EQUINOX and HELIX are trademarks or registered trademarks of SunPower Corporation in the U.S. and other countries as well.
SUNPOWER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31,
December 30,
2019 2018
Assets
Current assets:
Cash and cash equivalents $185,554 $309,407
Restricted cash and cash
equivalents, current portion 864 41,762
Accounts receivable, net 156,445 175,605
Contract assets 57,282 58,994
Inventories 334,390 308,146
Advances to suppliers, current
portion 95,603 37,878
Project assets -plants and
land, current portion 10,246 10,796
Prepaid expenses and other
current assets 99,675 131,183
Assets held for sale 550,073 -
Total current assets 1,490,132 1,073,771
Restricted cash and cash
equivalents, net of current
portion 13,345 12,594
Restricted long-term
marketable securities 5,948 5,955
Property, plant and equipment,
net 413,347 839,871
Operating lease right-of-use
assets 32,638 -
Solar power systems leased and
to be leased, net 74,134 92,557
Advances to suppliers, net of
current portion 62,914 133,694
Long-term financing
receivables, net - held for
sale 19,044 19,592
Other intangible assets, net 10,858 12,582
Other long-term assets 185,371 162,033
Total assets $2,307,731 $2,352,649
===
Liabilities and Equity
Current liabilities:
Accounts payable $347,233 $325,550
Accrued liabilities 190,095 235,252
Operating lease liabilities,
current portion 8,502 -
Contract liabilities, current
portion 92,621 104,130
Short-term debt 41,838 40,074
Liabilities held for sale 619,538 -
Total current liabilities 1,299,827 705,006
Long-term debt 71,593 40,528
Convertible debt 818,832 818,356
Operating lease liabilities,
net of current portion 29,490 -
Contract liabilities, net of
current portion 75,059 99,509
Other long-term liabilities 234,386 839,136
Total liabilities 2,529,187 2,502,535
Equity:
Preferred stock -
Common stock 142 141
Additional paid-in capital 2,469,998 2,463,370
Accumulated deficit (2,561,561) (2,480,988)
Accumulated other
comprehensive loss (4,051) (4,150)
Treasury stock, at cost (190,940) (187,069)
Total stockholders' deficit (286,412) (208,696)
Noncontrolling interests in
subsidiaries 64,956 58,810
Total equity deficit (221,456) (149,886)
Total liabilities and equity $2,307,731 $2,352,649
===
SUNPOWER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
March 31,
December 30,
April 1,
2019 2018 2018
Revenue:
SunPower Energy Services $178,221 $265,427 $246,928
SunPower Technologies 230,804 277,256 253,834
Intersegment eliminations (60,800) (85,846) (108,874)
Total revenue 348,225 456,837 391,888
Cost of revenue:
SunPower Energy Services 171,078 245,301 206,003
SunPower Technologies 282,868 296,872 278,041
Intersegment eliminations (68,436) (77,765) (102,730)
Total cost of revenue 385,510 464,408 381,314
Gross profit (loss) (37,285) (7,571) 10,574
Operating expenses:
Research and development 14,993 15,481 19,052
Sales, general and administrative 62,857 53,839 65,295
Restructuring charges (credits) (665) (1,107) 11,177
Impairment and sale of residential
lease assets 9,226 81,086 49,092
Gain on business divestiture (6,114)
Total operating expenses 80,297 149,299 144,616
Operating loss (117,582) (156,870) (134,042)
Other income (expense), net:
Interest income 852 777 529
Interest expense (16,791) (30,214) (25,106)
Other, net 33,073 6,539 15,794
Other income (expense), net 17,134 (22,898) (8,783)
Loss before income taxes and equity
in losses of unconsolidated
investees (100,448) (179,768) (142,825)
Benefit from (provision for) income
taxes (5,797) 8,379 (2,628)
Equity in earnings (losses) of
unconsolidated investees 1,680 (757) (2,144)
Net loss (104,565) (172,146) (147,597)
Net loss attributable to
noncontrolling interests and
redeemable noncontrolling
interests 14,841 13,972 31,623
Net loss attributable to
stockholders $(89,724) $(158,174) $(115,974)
Basic and diluted net loss per
share attributable to stockholders $(0.63) $(1.12) $(0.83)
Basic and diluted weighted-average
shares 141,720 141,136 140,212
SUNPOWER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
THREE MONTHS ENDED
March 31,
December 30,
April 1,
2019 2018 2018
Cash flows from operating activities:
Net loss $(104,565) $(172,146) $(147,597)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and
amortization 24,190 24,060 39,833
Stock-based compensation 5,666 6,266 7,053
Non-cash interest expense 2,415 3,213 4,443
Dividend from equity method
investee - 5,399
Equity in (earnings) losses
of unconsolidated
investees (1,680) 756 2,144
Unrealized (gain) loss on
equity investment with
readily determinable fair
value (33,000) 150 -
Gain on business
divestiture (6,114) -
Gain on sale of equity
investments, net - (3,628) (15,576)
Deferred income taxes 2,048 (9,868) (344)
Loss on sale and impairment
of residential lease
assets 9,226 81,086 49,092
Other, net - (1,059) 972
Changes in operating assets and liabilities:
Accounts receivable 12,196 18,916 13,924
Contract assets 1,712 (5,495) (23,561)
Inventories (41,718) 64,617 (34,195)
Project assets 776 48,652 20,484
Prepaid expenses and other
assets 11,727 (17,161) 10,885
Operating lease right-of-
use assets 2,603 -
Long-term financing
receivables, net (1,611) (31,006) (38,114)
Advances to suppliers 13,055 15,236 5,149
Accounts payable and other
accrued liabilities (28,819) (58,230) (100,156)
Contract liabilities (14,578) 9,328 (33,097)
Operating lease liabilities (2,559) -
Net cash used in operating
activities (149,030) (26,313) (233,262)
Cash flows from investing activities:
Purchases of property,
plant and equipment (6,548) (7,198) (8,859)
Cash paid for solar power
systems, leased, net - (12,953) (23,787)
Cash paid for solar power
systems (27,600) (37,468) (2,604)
Cash outflow from sale of
residential lease
portfolio, net of cash
sold - (28,004)
Proceeds from the sale of
cost method investments - 33,402
Cash paid for acquisitions,
net of cash acquired - (17,000)
Dividend from equity method
investee - 2,694
Proceeds from sale of
equity method investments - 2,540 27,282
Proceeds from business
divestiture 9,677 10,000 -
Cash paid for investments
in unconsolidated
investees - (626) (6,349)
Net cash used in investing
activities (24,471) (57,307) (11,623)
Cash flows from financing activities:
Proceeds from bank loans
and other debt 67,979 60,199 49,794
Repayment of bank loans and
other debt (58,372) (59,023) (51,052)
Proceeds from issuance of
non-recourse residential
financing, net of issuance
costs 22,255 5,079 32,687
Repayment of non-recourse
residential financing - (2,427) (3,781)
Contributions from
noncontrolling interests
and redeemable
noncontrolling interests
attributable to
residential projects 20,987 43,526 36,726
Distributions to
noncontrolling interests
and redeemable
noncontrolling interests
attributable to
residential projects - (2,742) (5,422)
Proceeds from issuance of
non-recourse power plant
and commercial financing,
net of issuance costs - 75,754 9,104
Repayment of non-recourse
power plant and commercial
financing - (26,383) (890)
Settlement of contingenet
consideration arrangement (2,448) -
Purchases of stock for tax
withholding obligations on
vested restricted stock (3,872) (281) (4,526)
Net cash provided by
financing activities 46,529 93,702 62,640
Effect of exchange rate
changes on cash, cash
equivalents, restricted
cash and restricted cash
equivalents 112 1,296 477
Net increase (decrease) in
cash, cash equivalents,
restricted cash and
restricted cash
equivalents (126,860) 11,378 (181,768)
Cash, cash equivalents,
restricted cash and
restricted cash
equivalents, beginning of
period 363,763 352,385 544,337
Cash, cash equivalents,
restricted cash and
restricted cash
equivalents, end of period $236,903 $363,763 $362,569
===
Non-cash transactions:
Costs of solar power
systems, leased, sourced
from existing inventory
$ - $5,975 $14,354
Costs of solar power
systems, leased, funded by
liabilities
$ - $3,631 $5,835
Costs of solar power
systems sourced from
existing inventory $16,406
$ -
$ -
Costs of solar power
systems funded by
liabilities $4,553
$ -
$ -
Costs of solar power
systems under sale-
leaseback financing
arrangements, sourced from
project assets
$ - $56,332 $9,791
Property, plant and
equipment acquisitions
funded by liabilities $10,792 $8,214 $12,768
Acquisition funded by
liabilities
$ - $9,000
$ -
Contractual obligations
satisfied with inventory
$ - $7,924 $17,517
Assumption of debt by buyer
upon sale of equity
interest
$ -
$ - $27,321
Assumption of mezzanine
loan by SunStrong in
connection with sale of
residential lease assets
$ - $106,958
$ -
Assumption of back leverage
loans by SunStrong in
connection with sale of
residential lease assets
$ - $454,630
$ -
Retained interest in
SunStrong lease portfolio
$ - $9,750
$ -
Receivables in connection
with sale of residential
lease portfolio
$ - $12,510
$ -
Right-of-use assets
obtained in exchange for
lease obligations $81,525
$ -
$ -
Use of Non-GAAP Financial Measures
To supplement its consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the company uses non-GAAP measures that are adjusted for certain items from the most directly comparable GAAP measures. The specific non-GAAP measures listed below are: revenue; gross margin; net loss; net loss per diluted share; and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"). Management believes that each of these non-GAAP measures is useful to investors, enabling them to better assess changes in each of these key elements of the company's results of operations across different reporting periods on a consistent basis, independent of certain items as described below. Thus, each of these non-GAAP financial measures provides investors with another method to assess the company's operating results in a manner that is focused on its ongoing, core operating performance, absent the effects of these items. Management uses these non-GAAP measures internally to assess the business, its financial performance, current and historical results, as well as for strategic decision-making and forecasting future results. Many of the analysts covering the company also use these non-GAAP measures in their analyses. Given management's use of these non-GAAP measures, the company believes these measures are important to investors in understanding the company's operating results as seen through the eyes of management. These non-GAAP measures are not prepared in accordance with GAAP or intended to be a replacement for GAAP financial data; and therefore, should be reviewed together with the GAAP measures and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies.
Non-GAAP revenue includes adjustments relating to 8point3, legacy utility and power plant projects, legacy sale-leaseback transactions and construction services for residential customer contracts, each of which described below. In addition to the above adjustments, non-GAAP gross margin includes adjustments relating to impairment and sale of residential lease assets, cost of above-market polysilicon, stock-based compensation, amortization of intangible assets, and depreciation of idle equipment, each of which is described below. In addition to the above adjustments, non-GAAP net loss and non-GAAP net loss per diluted share are adjusted for adjustments relating to gain on business divestiture, transaction-related costs, business reorganization costs, non-cash interest expense, restructuring expense, the tax effect of these non-GAAP adjustments, and other items, each of which is described below. In addition to the above adjustments as non-GAAP net loss, Adjusted EBITDA includes adjustments relating to cash interest expense (net of interest income), provision for (benefit from) income taxes, and depreciation.
Non-GAAP Adjustments Based on International Financial Reporting Standards ("IFRS")
The company's non-GAAP results include adjustments under IFRS that are consistent with the adjustments made in connection with the company's internal reporting process as part of its status as a consolidated subsidiary of Total S.A., our controlling shareholder and a foreign public registrant that reports under IFRS. Differences between GAAP and IFRS reflected in the company's non-GAAP results are further described below. In these situations, management believes that IFRS enables investors to better evaluate the company's performance, and assists in aligning the perspectives of the management with those of Total S.A.
-- 8point3: The company includes adjustments related to the sales of
projects contributed to 8point3 Energy Partners based on the difference
between the fair market value of the consideration received and the net
carrying value of the projects contributed, of which, a portion was
deferred in proportion to its retained equity interest in 8point3 Energy
Partners, at the time. Prior to the adoption of ASC 606, these sales
were recognized under either real estate, lease, or consolidation
accounting guidance depending upon the nature of the individual asset
contributed, with outcomes ranging from no, partial, or full profit
recognition. The company adopted ASC 606 on January 1, 2018, using the
full retrospective method, which required it to restate each prior
period presented. The company recorded a material amount of deferred
profit associated with projects sold to 8point3 Energy Partners in 2015,
the majority of which had previously been deferred under real estate
accounting. Accordingly, the carrying value in the 8point3 Group
materially increased upon adoption which required us to evaluate the
company's investment in 8point3 Energy Partners for other-than-temporary
impairment ("OTTI"). In accordance with such evaluation, the company
recognized an OTTI charge on the 8point3 investment balance in fiscal
2017. On June 19, 2018, the company sold its equity interest in the
8point3 Group.
-- Legacy utility and power plant projects: The company includes
adjustments related to revenue recognition of certain utility and power
plant projects based on the ratio of costs incurred to date to the total
estimated costs at completion of the performance obligations and, when
relevant, the allocation of revenue and margin to the company's project
development efforts at the time of initial project sale. Prior to the
adoption of ASC 606, such projects were accounted for under real estate
accounting guidance, under which no separate allocation to the company's
project development efforts occurs and the amount of revenue and margin
that is recognized may be limited in circumstances where the company has
certain forms of continuing involvement in the project. Under ASC 606,
such projects are accounted for when the customer obtains control of the
promised goods or services which generally results in earlier
recognition of revenue and margin than previous GAAP. Over the life of
each project, cumulative revenue and gross profit will eventually be
equivalent under both ASC 606 and non-GAAP once these projects are
completed.
-- Legacy sale-leaseback transactions: The company includes adjustments
primarily related to revenue recognition on certain legacy
sale-leaseback transactions based on the net proceeds received from the
buyer-lessor. Under GAAP, these transactions were accounted for under
the financing method in accordance with the applicable accounting
guidance. Under such guidance, no revenue or profit is recognized at the
inception of the transaction, and the net proceeds from the buyer-lessor
are recorded as a financing liability. Imputed interest is recorded on
the liability equal to the company's incremental borrowing rate adjusted
solely to prevent negative amortization. Under IFRS, revenue and profit
are recognized at the time of sale to the buyer-lessor if certain
criteria are met.
-- Unrealized (gain) loss in equity investments: The company recognizes
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 GAAP, unrealized
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 Total S.A. Management believes that excluding the
unrealized gain or loss on the equity investments is consistent with the
company's internal reporting process as part of its status as a
consolidated subsidiary of Total S.A. and better reflects the company's
ongoing results.
Other Non-GAAP Adjustments
-- Impairment and sale of residential lease assets: In the fourth quarter
of fiscal 2017, the company made the decision to sell or refinance its
interest in the residential lease portfolio and as a result of this
triggering event, determined it was necessary to evaluate the potential
for impairment in its ability to recover the carrying amount of the
residential lease portfolio. In accordance with such evaluation, the
company recognized a non-cash impairment charge on its solar power
systems leased and to be leased and an allowance for losses related
financing receivables. In connection with the impairment loss, the
carrying values of the company's solar power systems leased and to be
leased were reduced which resulted in lower depreciation charges. In the
fourth quarter of fiscal 2018, the company sold membership units
representing a 49% membership interest in its residential lease business
and retained a 51% membership interest. The loss on divestment and the
remaining unsold residential lease assets impairment with its
corresponding depreciation savings are excluded from the company's
non-GAAP results as they are non-cash in nature and not reflective of
ongoing operating results.
-- Construction revenue on solar services contracts: Upon adoption of the
new lease accounting guidance ("ASC 842") in the first quarter of fiscal
2019, revenue and cost of revenue on solar services contracts with
residential customers are recognized ratably over the term of those
contracts, once the projects are placed in service. For non-GAAP
results, the company recognizes revenue and cost of revenue upfront
based on the expected cash proceeds to align with the legacy lease
accounting guidance. Management believes it is appropriate to recognize
revenue and cost of revenue upfront based on total expected cash
proceeds, as it better reflects our ongoing results as such method
aligns revenue and costs incurred most accurately in the same period.
-- Cost of above-market polysilicon: The company has entered into multiple
long-term, fixed-price supply agreements to purchase polysilicon for
periods of up to 10 years. The prices in select legacy supply
agreements, which incorporate a cash portion and a non-cash portion
attributable to the amortization of prepayments made under the
agreements, significantly exceed current market prices. Additionally, in
order to reduce inventory and improve working capital, the company has
periodically elected to sell polysilicon inventory in the marketplace at
prices below the company's purchase price, thereby incurring a loss.
Management believes that it is appropriate to exclude the impact of its
above-market cost of polysilicon, including the effect of above-market
polysilicon on product costs, losses incurred on sales of polysilicon to
third parties, and inventory reserves and project asset impairments from
the company's non-GAAP financial measures as they are not reflective of
ongoing operating results and do not contribute to a meaningful
evaluation of a company's past operating performance.
-- Stock-based compensation: Stock-based compensation relates primarily to
the company's equity incentive awards. Stock-based compensation is a
non-cash expense that is dependent on market forces that are difficult
to predict. Management believes that this adjustment for stock-based
compensation provides investors with a basis to measure the company's
core performance, including compared with the performance of other
companies, without the period-to-period variability created by
stock-based compensation.
-- Amortization of intangible assets: The company incurs amortization of
intangible assets as a result of acquisitions, which includes patents,
purchased technology, project pipeline assets, and in-process research
and development. Management believes that it is appropriate to exclude
these amortization charges from the company's non-GAAP financial
measures as they arise from prior acquisitions, are not reflective of
ongoing operating results, and do not contribute to a meaningful
evaluation of a company's past operating performance.
-- Depreciation of idle equipment: In the fourth quarter of 2017, the
company changed the deployment plan for its next generation of solar
cell technology, and revised its depreciation estimates to reflect the
use of certain assets over its shortened useful life. Such asset
depreciation is excluded from the company's non-GAAP financial measures
as it is non-cash in nature and not reflective of ongoing operating
results. Excluding this data provides investors with a basis to compare
the company's performance against the performance of other companies
without such charges.
-- Gain on business divestiture: In the first quarter of fiscal 2019, the
company entered into a transaction pursuant to which it sold membership
interest in certain of its subsidiaries that own leasehold interests in
projects subject to sale-leaseback financing arrangements. In connection
with this sale, the company recognized a gain relating to this business
divestiture. Management believes that it is appropriate to exclude this
gain from our non-GAAP results as it is not reflective of ongoing
operating results.
-- Transaction-related costs: In connection with material transactions such
as acquisition or divestiture of a business, the company incurred
transaction costs including legal and accounting fees. Management
believes that it is appropriate to exclude these costs from the
company's non-GAAP financial measures as they would not have otherwise
been incurred as part of its business operations and are therefore not
reflective of ongoing operating results.
-- Business reorganization costs: In connection with the reorganization of
our business into an upstream and downstream business unit structure,
the company incurred and expect to continue incurring expenses in the
upcoming quarters associated with reclassifying prior period segment
information, reorganization of corporate functions and responsibilities
to the business units, updating accounting policies and processes and
implementing systems to fulfill the requirements of the master supply
agreement between the segments. Management believes that it is
appropriate to exclude these from the company's non-GAAP financial
measures as they would not have otherwise been incurred as part of its
business operations and are therefore not reflective of ongoing
operating results.
-- Non-cash interest expense: The company incurs non-cash interest expense
related to the amortization of items such as original issuance discounts
on its debt. The company excludes non-cash interest expense because the
expense does not reflect its financial results in the period incurred.
Management believes that this adjustment for non-cash interest expense
provides investors with a basis to evaluate the company's performance,
including compared with the performance of other companies, without
non-cash interest expense.
-- Restructuring expenses: The company incurs restructuring expenses
related to reorganization plans aimed towards realigning resources
consistent with the company's global strategy and improving its overall
operating efficiency and cost structure. Restructuring charges are
excluded from non-GAAP financial measures because they are not
considered core operating activities and such costs have historically
occurred infrequently. Although the company has engaged in restructuring
activities in the past, each has been a discrete event based on a unique
set of business objectives. As such, management believes that it is
appropriate to exclude restructuring charges from the company's non-GAAP
financial measures as they are not reflective of ongoing operating
results or contribute to a meaningful evaluation of a company's past
operating performance.
-- Tax effect: This amount is used to present each of the adjustments
described above on an after-tax basis in connection with the
presentation of non-GAAP net income (loss) and non-GAAP net income
(loss) per diluted share. The company's non-GAAP tax amount is based on
estimated cash tax expense and reserves. The company forecasts its
annual cash tax liability and allocates the tax to each quarter in a
manner generally consistent with its GAAP methodology. This approach is
designed to enhance investors' ability to understand the impact of the
company's tax expense on its current operations, provide improved
modeling accuracy, and substantially reduce fluctuations caused by GAAP
to non-GAAP adjustments, which may not reflect actual cash tax expense.
-- Adjusted EBITDA adjustments. When calculating Adjusted EBITDA, in
addition to adjustments described above, the company excludes the impact
of the following items during the period:
-- Cash interest expense, net of interest income
-- Provision for (benefit from) income taxes
-- Depreciation
For more information about these non-GAAP financial measures, please see the tables captioned "Reconciliations of GAAP Measures to Non-GAAP Measures" set forth at the end of this release, which should be read together with the preceding financial statements prepared in accordance with GAAP.
SUNPOWER CORPORATION
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentages and per share data)
(Unaudited)
Adjustments to Revenue:
THREE MONTHS ENDED
March 31,
December 30,
April 1,
2019 2018 2018
GAAP revenue $348,225 $456,837 $391,888
Adjustments based on IFRS:
8point3 (251)
Legacy utility and power plant projects (171) (691) (1,792)
Legacy sale-leaseback transactions 69,254 9,103
Construction revenue on solar services contracts 63,505
Non-GAAP revenue $411,559 $525,400 $398,948
Adjustments to Gross Profit (Loss) /Margin:
THREE MONTHS ENDED
March 31,
December 30,
April 1,
2019 2018 2018
GAAP gross profit (loss) $(37,285) $(7,571) $10,574
Adjustments based on IFRS:
Legacy utility and power plant projects 116 (569) (268)
Legacy sale-leaseback transactions (823) 6,132 (3,039)
Other adjustments:
Impairment and sale of residential lease assets (125) (2,163) (3,853)
Construction revenue on solar services contracts 11,386
Cost of above-market polysilicon 49,428 37,231 18,700
Stock-based compensation expense 168 1,236 941
Amortization of intangible assets 1,786 1,889 2,492
Depreciation of idle equipment 721
Non-GAAP gross profit $24,651 $36,185 $26,268
GAAP gross margin (%) (10.7)% (1.7)% 2.7%
Non-GAAP gross margin (%) 6.0% 6.9% 6.6%
Adjustments to Net income (loss):
THREE MONTHS ENDED
March 31,
December 30,
April 1,
2019 2018 2018
GAAP net loss attributable to stockholders $(89,724) $(158,174) $(115,974)
Adjustments based on IFRS:
8point3 (177)
Legacy utility and power plant projects 116 (569) (268)
Legacy sale-leaseback transactions 4,911 10,984 1,373
Unrealized (gain) loss on equity investment (33,000) 150
Other adjustments:
Impairment and sale of residential lease assets 8,313 81,273 45,139
Construction revenue on solar services contracts (3,740)
Cost of above-market polysilicon 49,428 37,231 18,700
Stock-based compensation expense 5,666 6,424 8,758
Amortization of intangible assets 1,786 1,889 2,492
Depreciation of idle equipment 721
Gain on business divestiture (6,114)
Transaction-related costs 1,422 (3,142)
Business reorganization costs 2,649 1,330
Non-cash interest expense 10 10 22
Restructuring charges (credits) (665) (1,107) 11,177
Tax effect 1,518 (6,605) (170)
Non-GAAP net loss attributable to stockholders $(57,424) $(30,306) $(28,207)
Adjustments to Net income (loss) per diluted share:
THREE MONTHS ENDED
March 31,
December 30,
April 1,
2019 2018 2018
Net loss per diluted share
Numerator:
GAAP net loss available to common stockholders(1) $(89,724) $(158,174) $(115,974)
Non-GAAP net loss available to common stockholders(1) $(57,424) $(30,306) $(28,207)
Denominator:
GAAP weighted-average shares 141,720 141,136 140,212
Effect of dilutive securities:
Restricted stock units
Upfront warrants (held by Total)
Non-GAAP weighted-average shares(1) 141,720 141,136 140,212
GAAP net loss per diluted share $(0.63) $(1.12) $(0.83)
Non-GAAP net loss per diluted share $(0.41) $(0.21) $(0.20)
(1)In accordance with the if-converted method, net loss available to common stockholders excludes interest expense related to the 0.875%, and 4.0% debentures if the debentures are considered converted in the calculation
of net loss per diluted share. If the conversion option for a debenture is not in the money for the relevant period, the potential conversion of the debenture under the if-converted method is excluded from the
calculation of non-GAAP net loss per diluted share.
Adjusted EBITDA:
THREE MONTHS ENDED
March 31,
December 30,
April 1,
2019 2018 2018
GAAP net loss attributable to stockholders $(89,724) $(158,174) $(115,974)
Adjustments based on IFRS:
8point3 (177)
Legacy utility and power plant projects 116 (569) (268)
Legacy sale-leaseback transactions 4,911 10,984 1,373
Unrealized (gain) loss on equity investment (33,000) 150
Other adjustments:
Impairment and sale of residential lease assets 8,313 81,273 45,139
Construction revenue on solar services contracts (3,740)
Cost of above-market polysilicon 49,428 37,231 18,700
Stock-based compensation expense 5,666 6,424 8,758
Amortization of intangible assets 1,786 1,889 2,492
Depreciation of idle equipment 721
Gain on business divestiture (6,114)
Transaction-related costs 1,422 (3,142)
Business reorganization costs 2,649 1,330
Non-cash interest expense 10 10 22
Restructuring charges (credits) (665) (1,107) 11,177
Cash interest expense, net of interest income 10,206 24,584 20,165
Provision for (benefit from) income taxes 5,797 (8,379) 2,628
Depreciation 19,181 21,054 37,576
Adjusted EBITDA $(23,758) $13,558 $32,332
(in
thousands
except
percentages) Q2 2019
FY 2019
Revenue
(GAAP)
$370,000-$410,000
$1,800,000-$1,900,000
Revenue
(non-
GAAP)(1)
$420,000-$460,000
$1,900,000-$2,000,000
Gross
margin
(GAAP) 0% - 3% N/A
Gross
margin
(non-
GAAP)(2) 7% - 10% N/A
Net
income
(loss)
(GAAP)
$0-$20,000
$(120,000)-$(100,000)
Adjusted
EBITDA(3)
$(5,000)-$15,000
$90,000-$110,000
1. Estimated non-GAAP amounts above
for Q2 2019 and fiscal 2019
include net adjustments that
increase revenue by approximately
$50 million and $114 million,
respectively, related to
construction revenue on solar
services contracts.
2. Estimated non-GAAP amounts above
for Q2 2019 include net
adjustments that increase gross
margin by approximately $24
million related to cost of above-
market polysilicon, $4 million
related to construction revenue on
solar services contracts, $2
million related to stock-based
compensation expense, and $2
million related to amortization of
intangible assets.
3. Estimated Adjusted EBITDA amounts
above for Q2 2019 include net
adjustments that increase
(decrease) net income by
approximately $24 million related
to cost of above-market
polysilicon, $17 million related
to depreciation, $15 million
related to impairment of lease
assets, $10 million related to
interest expense, $8 million
related to stock-based
compensation expense, $6 million
related to income taxes, $5
million related to business
reorganization costs, $2 million
related to amortization of
intangible assets, $2 million
related to restructuring, $(91)
million related to the gain on
sale of our membership interest in
the commercial sale-leaseback
portfolio, and $(3) million
related to construction revenue on
solar services contracts.
Estimated non-GAAP amounts above
for fiscal 2019 include net
adjustments that decrease
(increase) net loss by
approximately $132 million related
to cost of above-market
polysilicon, $70 million related
to depreciation, $40 million
related to interest expense, $32
million related to impairment of
lease assets, $30 million related
to stock-based compensation
expense, $16 million related to
income taxes, $16 million related
to business reorganization costs,
$8 million related to amortization
of intangible assets, $4 million
related to restructuring, $2
million related to transaction-
related costs, $(97) million
related to the gain on sale of our
membership interest in the
commercial sale-leaseback
portfolio, $(33) million related
to unrealized gain on equity
investment, $(6) million related
to gain on sale of previously
impaired project assets, and $(4)
million related to construction
revenue on solar services
contracts.
THREE MONTHS ENDED
March 31, 2019
---
Revenue
Gross profit / margin
Operating expenses
Other income
Benefit from
Equity in
Gain (Loss)
Net income (loss)
(expense), net (provision for) earnings of attributable to non- attributable to
income taxes unconsolidated controlling stockholders
investees interests
SunPower Energy
SunPower
Intersegment SunPower Energy
SunPower
Intersegment
Research and
Sales, general
Restructuring
Impairment of
Gain on business
Services Technologies revenue Services Technologies revenue development and administrative credits residential lease divestiture
eliminations eliminations asset
GAAP $178,221 $230,804 $(60,800) $7,143 4.0% $(52,064) - 22.6% $7,636 $(89,724)
Adjustments based on IFRS:
Legacy utility and power plant projects (171) 125 (9) 116
Legacy sale-leaseback transactions (824) 1 5,734 4,911
Unrealized gain on equity investment (33,000) (33,000)
Other adjustments:
Impairment of residential lease assets (125) 9,226 (788) 8,313
Construction revenue on solar services contracts 63,505 11,386 (15,126) (3,740)
Cost of above-market polysilicon 49,428 49,428
Stock-based compensation expense 168 593 4,905 5,666
Amortization of intangible assets 1,786 1,786
Gain on business divestiture (6,114) (6,114)
Business reorganization costs 2,649 2,649
Transaction-related costs 1,422 1,422
Non-cash interest expense 10 10
Restructuring credits (665) (665)
Tax effect 1,518 1,518
Non-GAAP $241,726 $230,633 $(60,800) $17,873 7.4% $(858) -0.4% $7,636 $(57,424)
December 30, 2018
Revenue
Gross profit / margin
Operating expenses
Other income
Benefit from
Gain (Loss)
Net income (loss)
(expense), net (provision for) attributable to attributable to
income taxes non-controlling stockholders
interests
SunPower Energy
SunPower
Intersegment SunPower Energy
SunPower
Intersegment
Research and
Sales, general
Restructuring
Impairment and
Services Technologies revenue Services Technologies revenue development and credits sale of residential
eliminations eliminations administrative lease asset
GAAP $265,427 $277,256 $(85,846) $20,126 7.6% $(19,616) -7.1% $(8,081) $(158,174)
Adjustments based on IFRS:
Legacy utility and power plant projects (240) (451) (472) (97) (569)
Legacy sale-leaseback transactions 69,254 6,113 19 4,852 10,984
Unrealized loss on equity investment 150 150
Other adjustments:
Impairment and sale of residential lease assets (2,163) 81,086 2,350 81,273
Cost of above-market polysilicon 2,055 35,176 37,231
Stock-based compensation expense 610 626 907 4,281 6,424
Amortization of intangible assets 616 1,273 1,889
Business reorganization costs 1,330 1,330
Transaction-related costs (3,142) (3,142)
Non-cash interest expense 10 10
Restructuring credits (1,107) (1,107)
Tax effect (6,605) (6,605)
Non-GAAP $334,441 $276,805 $(85,846) $26,885 8.0% $17,381 6.3% $(8,081) $(30,306)
April 1, 2018
Revenue
Gross profit / margin
Operating expenses
Other income
Benefit from
Equity in
Gain (Loss)
Net income (loss)
(expense), net (provision for) earnings of attributable to attributable to
income taxes unconsolidated non-controlling stockholders
investees interests
SunPower Energy
SunPower
Intersegment SunPower Energy
SunPower
Intersegment
Research and
Sales, general
Restructuring
Impariment of
Services Technologies revenue Services Technologies revenue development and charges residential lease
eliminations eliminations administrative assets
GAAP $246,928 $253,834 $(108,874) $40,925 16.6% $(24,207) -9.5% $(6,144) $(115,974)
Adjustments based on IFRS:
8point3 (251) (177) (177)
Legacy utility and power plant projects (392) (1,400) (450) 182 (268)
Legacy sale-leaseback transactions 9,103 (3,039) 4,412 1,373
Other adjustments:
Impairment of residential lease assets (3,853) 49,092 (100) 45,139
Cost of above-market polysilicon 18,700 18,700
Stock-based compensation expense 361 580 2,877 4,940 8,758
Amortization of intangible assets 1,402 1,090 2,492
Depreciation of idle equipment 289 432 721
Non-cash interest expense 3 19 22
Restructuring expense 11,177 11,177
Tax effect (170) (170)
Non-GAAP $255,388 $252,434 $(108,874) $35,635 14.0% $(3,223) -1.3% $(6,144) $(28,207)
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SOURCE SunPower Corp.
