SunPower Reports Third Quarter 2020 Results
SAN JOSE, Calif., Oct. 28, 2020 /PRNewswire/ -- SunPower Corp. (NASDAQ:SPWR) today announced financial results for its third quarter ended September 27, 2020.
Third Quarter Company Highlights
-- Successfully completed spin-off of Maxeon Solar Technologies; new
segmentation announced
-- Exceeded revenue and Adjusted EBITDA guidance; expanded gross margin per
watt
-- Ended quarter with $325 million in cash
Residential and Light Commercial (RLC)
-- Residential strength - $15 million Adjusted EBITDA, added 10,000
customers
-- New product success - significant SunVault(TM) storage demand; >100
OneRoof(TM) installs to date
-- Closed new residential solar plus storage financing facility to drive
substantially better economics
-- Secured committed tax equity capacity to meet demand through mid-2021
Commercial and Industrial Solutions (C&I Solutions)
-- Posted positive Adjusted EBITDA for the quarter
-- More than doubled gross margin per watt year over year
-- Storage adding $0.20/w to pipeline, > 30 percent attach rates for
projects in backlog
-- Fully booked for the fourth quarter; >275 megawatts (MW) projects
contracted / awarded
($ Millions, except percentages and per-share data)
3rd Quarter 2020
2nd Quarter 2020
3rd Quarter 2019
GAAP revenue $274.8 $217.7 $286
GAAP gross margin from continuing operations 13.5% 11.8% 15.9%
GAAP net income from continuing operations $109.5 $55.9 $18.6
GAAP net income (loss) from continuing operations per diluted share $0.57 $0.31 $0.12
Non-GAAP revenue(1) $274.8 $217.7 $301.8
Non-GAAP gross margin(1) 14.0% 12.6% 16.1%
Non-GAAP net (loss) income(1) $(6.5) $(17.2) $9.1
Non-GAAP net (loss) income from continuing operations per diluted share(1) $(0.04) $(0.10) $0.06
Adjusted EBITDA(1) $8.6 $(4.3) $25.1
MW Recognized 108 91 124
Cash(2) $324.7 $235.3 $189.0
Information presented above is for continuing operations only and excludes results of Maxeon for all periods presented, other than Cash for 2nd quarter 2020 and 3rd quarter 2019.
(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
(2)Includes cash, and cash
equivalents, excluding
restricted cash
Third Quarter 2020 Results
"Our solid third quarter results reflect the strong demand for our industry-leading solutions in both our residential and commercial markets," said Tom Werner, SunPower CEO and chairman of the board.
"Overall, we executed well as MW recognized grew 20% sequentially, we further expanded our gross margin, generated positive cash flow and added to our significant backlog. Additionally, we are pleased with the customer response to our recent product introductions as demand for our SunVault residential storage solution remains very strong while we continue to add partners for our OneRoof product for the new homes market. We expect these positive trends to continue in the fourth quarter. Further, we remain confident in our 2021 targets that we presented at our Capital Markets Day in September given improving industry trends, our integrated The Power of One® platform, the company's new product's and our continued focus on maximizing long term cash flow".
RLC
"Our RLC business executed well for the quarter with sequential improvement in MW recognized, gross margin and Adjusted EBITDA. Our residential business performed well with MW recognized up 33% sequentially as we benefited from the continued improvement in demand throughout the quarter with significant demand for our new loan product in partnership with Technology Credit Union. Also, customer interest for our SunVault residential storage remains very high with current attach rates in California exceeding 20%. In new homes, we continued to expand our market leading footprint as we saw record bookings during the quarter and our backlog grew to more than 50,000 homes, another record. Finally, we continue to expect 30-50% revenue growth in both our residential and new homes businesses for fiscal year 2021."
C&I Solutions
"Our C&I Solutions business also performed well as installs rose 30% sequentially in addition to posting positive Adjusted EBITDA for the quarter. We added to our $3.5 billion pipeline and expanded our footprint in the fast-growing community solar market as we secured 13MW of community solar projects. Helix® storage demand remains high with our pipeline now exceeding 630 MWh and Q4 attach rates of 50%."
Consolidated Financials
"Solid execution in the third quarter enabled us to exceed our revenue and Adjusted EBITDA financial guidance, strengthen our cash position and further invested in our storage and services initiatives," said Manavendra Sial, SunPower chief financial officer. "We also closed our second innovative residential lease financing facility with Bank of America during the quarter which materially lowers our cost of capital while providing funding through the middle of next year. Additionally, we are building our Powerco with the recurring revenue pipeline continuing to grow and SunStrong's retained value above forecast at $358 million at the end of the third quarter. Related to the balance sheet, our cash increased by approximately $90 million to $325 million. Additionally, we expect total cash flow to be positive in the fourth quarter. With our current cash position and expected cash flow in the fourth quarter, we now have the ability to pay off the convert early if we so choose."
Third quarter of fiscal year 2020 non-GAAP results exclude net adjustments that, in the aggregate, increased GAAP income by $115.9 million, including $155.4 million related to a mark-to-market gain on equity investments. This was partially offset by $33.8 for income taxes, $4.5 million related to stock-based compensation expense, and $1.2 million related to amortization of intangible assets and other non-recurring items.
Financial Outlook
The company's fourth quarter and fiscal year 2020 guidance is as follows:
Fourth quarter GAAP revenue of $330 to $370 million, GAAP net income of $11 million to $21 million, and MW recognized in the range of 145 MW to 175 MW.
For fiscal year 2020, the company expects GAAP revenue of $1.12 billion to $1.16 billion, compared to its previous fiscal year 2020 guidance of $1.06 billion to $1.10. Fiscal year 2020 GAAP net income of $190 million to $200 million and MW recognized in the range of 465 MW to 515 MW.
The company now expects fourth quarter Adjusted EBITDA to be in the range of $26 million to $36 million and fiscal year 2020 Adjusted EBITDA to be in the range of $30 million to $40 million compared to its previous fiscal year 2020 guidance of $20 million to $30 million.
The company will host a conference call for investors this afternoon to discuss its third quarter 2020 performance at 1:30 p.m. Pacific Time. The call will be webcast and can be accessed from SunPower's website at
https://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 third quarter 2020 performance on the Events and Presentations section of SunPower's Investor Relations page at
https://investors.sunpower.com/events.cfm.
About SunPower
Headquartered in California's Silicon Valley, SunPower (NASDAQ:SPWR) is a leading Distributed Generation Storage and Energy Services provider in North America. SunPower offers the only solar + storage solution designed by one company that gives customers complete control over energy consumption, delivering grid independence, resiliency during power outages and cost savings to homeowners, businesses, governments, schools and utilities. For more information, 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 plans and expectations for our products, including anticipated demand and impacts on our market position and our ability to meet our targets and goals; (b) the anticipated financial impacts of our new residential leasing facility and expectations for demand, capacity and timing of full utilization; (c) expectations regarding our future performance based on bookings, backlog, and pipelines in our sales channels; (d) our expectations regarding our industry and market factors, including market and industry trends, and anticipated demand and volume; (e) the expected performance of our business lines, including confidence in 2021 forecasts, areas of focus, and new product cycles, as well as projected growth and attach rates; (f) our expectations for our SunStrong joint venture, including recurring revenue and anticipated retained value; (g) our fourth quarter fiscal 2020 guidance, including GAAP revenue, net income, MW recognized, and Adjusted EBITDA, and related assumptions; and (h) our fiscal 2020 guidance, including GAAP revenue, net income, MW recognized, 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) potential disruptions to our operations and supply chain that may result from epidemics or natural disasters, including impacts of the Covid-19 pandemic; (2) competition in the solar and general energy industry and downward pressure on selling prices and wholesale energy pricing; (3) regulatory changes and the availability of economic incentives promoting use of solar energy; (4) 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; (5) changes in public policy, including the imposition and applicability of tariffs; (6) our dependence on sole- or limited-source supply relationships, including our exclusive supply relationship with Maxeon Solar Technologies; (7) our liquidity, substantial indebtedness, and ability to obtain additional financing for our projects and customers; and (8) challenges managing our acquisitions, joint ventures and partnerships, including our ability to successfully manage acquired assets and supplier relationships. 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 reports on Form 10-K and Form 10-Q, 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.
©2020 SunPower Corporation. All rights reserved. SUNPOWER, the SUNPOWER logo, HELIX, SUNVAULT, ONEROOF and THE POWER OF ONE are trademarks or registered trademarks of SunPower Corporation in the U.S.
SUNPOWER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Sep. 27
Dec. 29,
2020 2019
Assets
Current assets:
Cash and cash
equivalents $324,741 $301,999
Restricted
cash and cash
equivalents,
current
portion 16,605 26,348
Accounts
receivable,
net 94,756 127,878
Contract
assets 126,474 99,426
Inventories 178,139 163,405
Advances to
suppliers,
current
portion - 31,843
Project assets
-plants and
land, current
portion 24,366 12,650
Prepaid
expenses and
other current
assets 96,247 86,755
Current assets
of
discontinued
operations - 530,627
---
Total current
assets 861,328 1,380,931
Restricted
cash and cash
equivalents,
net of
current
portion 8,419 9,354
Property,
plant and
equipment,
net 50,397 57,349
Operating
lease right-
of-use
assets 53,716 40,699
Solar power
systems
leased, net 51,179 54,338
Advances to
suppliers,
net of
current
portion -
Other
intangible
assets, net 1,073 7,121
Other long-
term assets 423,197 277,805
Long-term
assets of
discontinued
operations - 344,324
Total assets $1,449,309 $2,171,921
===
Liabilities and Equity
Current liabilities:
Accounts
payable $162,499 $207,062
Accrued
liabilities 128,647 116,276
Operating
lease
liabilities,
current
portion 9,995 7,559
Contract
liabilities,
current
portion 55,274 91,345
Short-term
debt 96,625 44,473
Convertible
debt, current
portion 301,258 -
Current
liabilities
of
discontinued
operations - 431,694
Total current
liabilities 754,298 898,409
Long-term
debt 68,386 112,340
Convertible
debt 422,132 820,259
Operating
lease
liabilities,
net of
current
portion 44,100 36,657
Contract
liabilities,
net of
current
portion 29,478 31,922
Other long-
term
liabilities 137,981 157,774
Long-term
liabilities
of
discontinued
operations - 93,061
Total
liabilities 1,456,375 2,150,422
Equity:
Common stock 170 168
Additional
paid-in
capital 2,679,960 2,661,819
Accumulated
deficit (2,497,409) (2,449,679)
Accumulated
other
comprehensive
income (loss) 8,070 (9,512)
Treasury
stock, at
cost (201,090) (192,633)
Total
stockholders'
equity (10,299) 10,163
Noncontrolling
interests in
subsidiaries 3,233 11,336
Total equity (7,066) 21,499
Total
liabilities
and equity $1,449,309 $2,171,921
===
SUNPOWER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
Sep. 27,
Jun. 28,
Sep. 29,
Sep. 27,
Sep. 29,
2020 2020 2019 2020 2019
Revenue:
Solar power systems, components, and other $267,619 $212,408 $277,280 $765,316 $665,623
Residential leasing 1,284 1,329 3,523 3,937 9,083
Solar services 5,903 3,930 5,239 13,766 15,902
Total revenue 274,806 217,667 286,042 783,019 690,608
Cost of revenue:
Solar power systems, components, and other 233,144 189,868 236,991 681,649 600,947
Residential leasing 1,209 1,217 1,567 3,722 5,939
Solar services 3,313 930 1,989 5,672 6,319
Total cost of revenue 237,666 192,015 240,547 691,043 613,205
Gross profit 37,140 25,652 45,495 91,976 77,403
Operating expenses:
Research and development 5,344 5,994 8,837 19,106 26,494
Sales, general and administrative 35,462 36,014 41,428 112,193 129,582
Restructuring charges (97) 1,259 4,252 2,738 6,626
Loss on sale and impairment of residential lease assets 386 141 10,756 253 28,283
Income from Transition Services Agreement, net (1,889) (1,889)
Gain on business divestiture (10,458) (10,458) (143,400)
Total operating expenses 39,206 32,950 65,273 121,943 47,585
Operating income (loss) (2,066) (7,298) (19,778) (29,967) 29,818
Other income (expense), net:
Interest income 104 174 951 682 2,184
Interest expense (7,090) (8,448) (8,930) (24,731) (40,570)
Other, net 155,457 71,205 45,111 277,100 145,343
Other income, net 148,471 62,931 37,132 253,051 106,957
Income before income taxes and equity in losses of unconsolidated investees 146,405 55,633 17,354 223,084 136,775
Provision for income taxes (36,725) (1,106) (2,928) (38,716) (10,074)
Equity in losses of unconsolidated investees (960) (716)
Net income from continuing operations 109,680 54,527 13,466 184,368 125,985
Loss from discontinued operations (70,761) (33,278) (29,417) (125,599) (131,181)
Provision for income taxes 6,137 (1,962) (2,450) 3,191 (7,169)
Equity in earnings (losses) of unconsolidated investees 58 (889) (807) (586) (1,334)
Net loss from discontinued operations, net of taxes (64,566) (36,129) (32,674) (122,994) (139,684)
Net income (loss) $45,114 $18,398 $(19,208) $61,374 $(13,699)
Net income (loss) from continuing operations attributable to noncontrolling interests and redeemable noncontrolling interests $(230) $1,363 $5,178 $2,512 $33,474
Net loss from discontinued operations attributable to noncontrolling interests and redeemable noncontrolling interests $(258) $(383) $(987) $(1,313) $(3,057)
Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests $(488) $980 $4,191 $1,199 $30,417
Net income from continuing operations attributable to stockholders $109,450 $55,890 $18,644 $186,880 $159,459
Net loss from discontinued operations attributable to stockholders $(64,824) $(36,512) $(33,661) $(124,307) $(142,741)
Net income (loss) attributable to stockholders $44,626 $19,378 $(15,017) $62,573 $16,718
Net income (loss) per share attributable to stockholders - basic:
Continuing operations $0.64 $0.33 $0.13 $1.10 $1.12
Discontinued operations $(0.38) $(0.21) $(0.24) $(0.73) $(1.00)
Net income (loss) per share - basic $0.26 $0.11 $(0.11) $0.37 $0.12
Net income (loss) per share attributable to stockholders - diluted:
Continuing operations $0.57 $0.31 $0.12 $0.99 $1.03
Discontinued operations $(0.33) $(0.19) $(0.22) $(0.62) $(0.86)
Net income (loss) per share - diluted $0.24 $0.12 $(0.10) $0.37 $0.17
Weighted-average shares:
Basic
Diluted 170,113 170,003 142,553 169,646 142,248
198,526 192,040 155,583 200,124 166,861
SUNPOWER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
Sep. 27,
Jun. 28,
Sep. 29,
Sep. 27,
Sep. 29,
2020 2020 2019 2020 2019
Cash flows from operating activities:
Net income (loss) $45,114 $18,398 $(19,208) $61,374 $(13,699)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 11,927 16,918 15,298 45,737 62,022
Stock-based compensation 6,042 5,879 6,991 18,788 18,927
Non-cash interest expense 1,747 1,838 2,542 5,495 7,468
Non-cash restructuring charges 3,528 5,874
Bad debt expense (2,568) 1,326 (341) 998 1,319
Equity in (earnings) losses of unconsolidated investees (58) 889 1,767 586 2,050
Gain on equity investments (155,431) (71,062) (28,538) (275,645) (129,038)
Gain on retirement of convertible debt (104) (3,060)
Gain on business divestiture (10,458) (10,458) (143,400)
Gain on sale of investments without readily determinable fair value (17,275) (17,275)
Deferred income taxes 607 1,381 (1,545) 1,639 500
Gain (loss) on sale and impairment of residential lease assets 386 140 10,755 815 36,709
Impairment of property, plant and equipment 777
Gain on sale of assets (21,383) (21,383)
Changes in operating assets and liabilities:
Accounts receivable 54,119 79,029 3,262 113,029 (47,029)
Contract assets (19,902) (3,164) (25,516) (22,771) (18,107)
Inventories (5,382) 36,336 (45,989) (12,107) (108,093)
Project assets 703 (3,024) (3,040) (11,202) (9,238)
Prepaid expenses and other assets (32,362) 9,403 16,967 (4,324) 1,482
Operating lease right-of-use assets 2,112 4,863 14,999 9,898 6,219
Long-term financing receivables, net - held for sale 481 (473)
Advances to suppliers 4,267 3,093 8,518 16,296 33,292
Accounts payable and other accrued liabilities 51,095 (33,637) 52,810 (75,141) 64,009
Contract liabilities (3,364) (34,324) 4,709 (53,818) 8,127
Operating lease liabilities (2,620) (3,173) (15,865) (8,642) (7,202)
Net cash provided by (used in) operating activities (43,672) 20,651 (36,073) (202,513) (266,162)
Cash flows from investing activities:
Purchases of property, plant and equipment (2,369) (4,592) (16,896) (13,174) (35,100)
Cash paid for solar power systems (2,747) (2,037) (8,503) (5,394) (51,826)
Proceeds from business divestiture, net of de-consolidated cash 15,418 15,418 40,491
Proceeds from sale of assets 39,742 39,970
Cash outflow upon Maxeon Solar Spin-off, net of proceeds (140,132) (140,132)
Proceeds from maturities of marketable securities 6,588 6,588
Purchases of marketable securities (1,338) (1,338)
Cash outflow from sale of residential lease portfolio (16,397) (16,397)
Proceeds from return of capital of equity investments with fair value option 7,724 7,724
Proceeds from sale of investments 73,290 42,957 119,439 42,957
Cash paid for investments in unconsolidated investees (2,400) (12,400)
Net cash provided by (used in) investing activities (66,708) 16,513 38,503 (10,869) 7,695
Cash flows from financing activities:
Proceeds from bank loans and other debt 62,233 44,954 87,823 183,731 231,489
Repayment of bank loans and other debt (63,735) (53,605) (84,035) (183,070) (209,095)
Proceeds from issuance of non-recourse residential financing, net of issuance costs 6,528 13,434 72,259
Repayment of non-recourse residential financing (7,231) (1,803) (7,231) (2,959)
Contributions from noncontrolling interests and redeemable noncontrolling interests attributable to residential projects 22 1,842 22 31,413
Distributions to noncontrolling interests and redeemable noncontrolling interests attributable to residential projects (302) (302) (316)
Proceeds from issuance of non-recourse power plant and commercial financing, net of issuance costs 2,790 890
Cash paid for repurchase of convertible debt (8,037) (95,178)
Payment for prior business combination (9,000)
Proceeds from issuance of convertible debt 200,000 200,000
Settlement of contingent consideration arrangement, net of cash received 11 1,811 2,245 (2,448)
Equity offering costs paid (928)
Purchases of stock for tax withholding obligations on vested restricted stock (74) (1,467) (292) (8,455) (4,657)
Net cash (used in) provided by financing activities 185,677 (7,417) 10,063 104,268 106,686
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents 109 330 (1,510) 222 (1,247)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 75,406 30,077 10,983 (108,892) (153,028)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 274,359 244,282 199,752 458,657 363,763
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period(1) $349,765 $274,359 $210,735 $349,765 $210,735
Non-cash transactions:
Costs of solar power systems sourced from existing inventory
$ -
$ - $8,033
$ - $29,206
Costs of solar power systems funded by liabilities $598 $1,716 $3,604 $598 $3,604
Property, plant and equipment acquisitions funded by liabilities $36 $5,452 $11,911 $36 $11,911
Assumption of debt by buyer in connection with sale of residential lease assets
$ -
$ - $69,076
$ - $69,076
Right-of-use assets obtained in exchange of lease obligations(2) $7,875 $963 $8,939 $21,786 $103,744
Derecognition of financing obligations upon business divestiture
$ -
$ -
$ -
$ - $590,884
Assumption of liabilities in connection with business divestiture $9,056 $9,056
$ - $9,056
$ -
Holdbacks in connection with business divestiture $7,199 $7,199
$ - $7,199 $2,425
Holdback related to sale of manufacturing facility
$ -
$ - $18,300
$ - $18,300
Contractual obligations satisfied by inventory
$ -
$ - $8,043
$ - $8,043
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 are 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 provide 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 analysis. 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 gross margin includes adjustments relating to gain/loss on sale and impairment of residential lease assets, litigation, stock-based compensation, and amortization of intangible assets, 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 mark to market gain on equity investments, gain on business divestiture, impairment of property, plant, and equipment, transaction-related costs, non-cash interest expense, restructuring charges (credits), gain on convertible debt repurchased, tax effect of these non-GAAP adjustments, each of which is described below. In addition to the above adjustments, Adjusted EBITDA includes adjustments relating to cash interest expense (net of interest income), provision for 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 SE, 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 SE.
-- Legacy utility and power plant projects: The company included
adjustments related to the revenue recognition of certain utility and
power plant projects based on percentage-of-completion accounting and,
when relevant, the allocation of revenue and margin to our project
development efforts at the time of initial project sale. Under IFRS,
such projects were accounted for when the customer obtains control of
the promised goods or services which generally results in earlier
recognition of revenue and profit than U.S. GAAP. Over the life of each
project, cumulative revenue and gross margin are eventually equivalent
under both GAAP and IFRS; however, revenue and gross margin is generally
recognized earlier under IFRS.
-- Legacy sale-leaseback transactions: The company included adjustments
related to the revenue recognition on certain legacy sale-leaseback
transactions entered into before December 31, 2018, based on the net
proceeds received from the buyer-lessor. Under U.S. 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 our incremental
borrowing rate adjusted solely to prevent negative amortization. Under
IFRS, such revenue and profit is recognized at the time of sale to the
buyer-lessor if certain criteria are met. Upon adoption of IFRS 16,
Leases, on December 31, 2018, IFRS is aligned with GAAP.
-- Mark-to-market gain 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, mark-to-market
gains and losses due to changes in stock prices for these securities are
recorded in earnings while under IFRS, an election can be made to
recognize such gains and losses in other comprehensive income. Such an
election was made by Total SE. Further, we elected the Fair Value Option
("FVO") for some of our equity method investments, and we adjust the
carrying value of those investments based on their fair market value
calculated periodically. Such option is not available under IFRS, and
equity method accounting is required for such investments. Management
believes that excluding these adjustments on equity investments is
consistent with our internal reporting process as part of its status as
a consolidated subsidiary of Total SE. and better reflects our ongoing
results.
Other Non-GAAP Adjustments
-- Gain/loss on sale and impairment of residential lease assets: In fiscal
2018 and 2019, in an effort to deconsolidate all the residential lease
assets owned by us, 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, including adjustments to
contingent consideration shortly after the closure of the transaction,
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-recurring 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 the company's ongoing results as such
method aligns revenue and costs incurred most accurately in the same
period. Starting in second quarter of fiscal 2020, we no longer have
this non-GAAP measure.
-- 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, which are not reflective
of ongoing operating results.
-- Gain on business divestiture: In second quarter of fiscal 2020, the
company sold its Operations and Maintenance ("O&M") contracts business
to a third-party buyer. Similarly, in fiscal 2019, the company sold all
of its membership interests in certain subsidiaries that own leasehold
interests in projects subject to sale-leaseback financing arrangements.
In connection with these divestitures, the company recognized gain
within its income statement in the period in which the sale was
completed. The company believe that it is appropriate to exclude this
gain from its segment results as it is not reflective of ongoing
operating results.
-- Litigation: The company may be involved in various litigation, claims
and proceedings that result in payments or recoveries from such
proceedings. The company excludes any gains or losses on such litigation
recoveries or payments from the non-GAAP results as it is not reflective
of ongoing operating results.
-- Transaction-related costs: In connection with material non-recurring
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 results as it is 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 charges (credits): 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. 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. The
company believes that it is appropriate to exclude these from company's
non-GAAP results as it is not reflective of ongoing operating results.
-- Gain on convertible debt repurchased: In connection with the early
repurchase of a portion of our 0.875% Convertible debentures due June 1,
2021, we recognized a gain, represented by the difference between the
book value of the convertible debentures, net of the remaining
unamortized discount prior to repurchase and the reacquisition price of
the convertible notes upon repurchase. The company believes that it is
appropriate to exclude these from our non-GAAP results as it is not
reflective of ongoing operating results.
-- 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,
or tax impact of non-recurring items.
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 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 NINE MONTHS ENDED
Sep. 27,
Jun. 28,
Sep. 29,
Sep. 27,
Sep. 29,
2020 2020 2019 2020 2019
GAAP revenue $274,806 $217,667 $286,042 $783,019 $690,608
Adjustments based on IFRS:
Legacy utility and power plant projects (65) (207) (259)
Other adjustments:
Construction revenue on solar services contracts 15,790 5,392 124,909
Non-GAAP revenue $274,806 $217,667 $301,767 $788,204 $815,258
Adjustments to Gross Profit (Loss) / Margin:
THREE MONTHS ENDED NINE MONTHS ENDED
Sep. 27,
Jun. 28,
Sep. 29,
Sep. 27,
Sep. 29,
2020 2020 2019 2020 2019
GAAP gross profit (loss) $37,140 $25,652 $45,495 $91,976 $77,403
Adjustments based on IFRS:
Legacy utility and power plant projects (7) (34) 993
Legacy sale-leaseback transactions (181) 20 (4,688)
Other adjustments:
Construction revenue on solar service contracts 1,160 4,735 18,052
Gain on sale and impairment of residential lease assets (469) (458) (511) (1,375) (1,268)
Stock-based compensation expense 623 471 741 1,653 1,370
Amortization of intangible assets 1,189 1,783 1,783 4,757 5,352
Non-GAAP gross profit $38,483 $27,448 $48,480 $101,732 $97,214
GAAP gross margin (%) 13.5% 11.8% 15.9% 11.7% 11.2%
Non-GAAP gross margin (%) 14.0% 12.6% 16.1% 12.9% 11.9%
Adjustments to Net income (loss):
THREE MONTHS ENDED NINE MONTHS ENDED
Sep. 27,
Jun. 28,
Sep. 29,
Sep. 27,
Sep. 29,
2020 2020 2019 2020 2019
GAAP net income (loss) attributable to stockholders $109,450 $55,890 $18,644 $186,880 $159,459
Adjustments based on IFRS:
Legacy utility and power plant projects (7) (34) 993
Legacy sale-leaseback transactions (181) 20 5,755
Mark-to-market gain on equity investments (155,431) (71,060) (27,595) (274,362) (128,095)
Other adjustments:
Business process improvements costs
Construction revenue on solar services contracts 1,160 4,735 (8,978)
Gain on sale and impairment of residential lease assets (83) (317) 5,135 (1,122) 29,002
Litigation 395 880
Stock-based compensation expense 4,454 3,955 4,975 13,387 13,682
Amortization of intangible assets 1,189 1,784 1,783 4,759 5,352
Gain on business divestiture (10,529) (10,529) (143,400)
Transaction-related costs 1,382 976 1,863 3,571
Restructuring charges (97) 659 4,283 2,138 6,071
Gain on convertible debt repurchased (104) (3,060)
Tax effect 33,769 994 (118) 35,614 1,817
Non-GAAP net loss attributable to stockholders $(6,458) $(17,242) $9,055 $(38,832) $(54,771)
Adjustments to Net income (loss) per diluted share:
THREE MONTHS ENDED NINE MONTHS ENDED
Sep. 27,
Jun. 28,
Sep. 29,
Sep. 27,
Sep. 29,
2020 2020 2019 2020 2019
Net income (loss) per diluted share
Numerator:
GAAP net income available to stockholders $109,450 $55,890 $18,644 $186,880 $159,459
Add: Interest expense on 4.00% debenture due 2023, net of tax 3,358 3,358 691 10,066 10,073
Add: Interest expense on 0.875% debenture due 2021, net of tax 467 535 1,507 2,074
GAAP net income available to common stockholders 113,275 59,783 19,335 198,453 $171,606
Non-GAAP net income (loss) available to common stockholders $(6,458) $(17,242) $9,055 $(38,832) $(54,771)
Denominator:
GAAP weighted-average shares 170,113 170,003 142,553 169,646 142,248
Effect of dilutive securities:
Restricted stock units 3,560 1,765 4,827 3,354 2,488
0.875% debentures due 2021 7,785 6,350 8,203 10,056 8,203
4.00% debentures due 2023 17,068 13,922 17,068 13,922
GAAP dilutive weighted-average common shares: 198,526 192,040 155,583 200,124 166,861
Non-GAAP weighted-average shares 170,113 170,003 142,553 169,646 142,248
Effect of dilutive securities: 4,827
Non-GAAP dilutive weighted-average shares(1) 170,113 170,003 147,380 169,646 142,248
GAAP net income (loss) per diluted share $0.57 $0.31 $0.12 $0.99 $1.03
Non-GAAP net income (loss) per diluted share $(0.04) $(0.10) $0.06 $(0.23) $(0.39)
(1)In accordance with the if-converted method, net income (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 income (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 income (loss) per diluted share.
Adjusted EBITDA:
THREE MONTHS ENDED NINE MONTHS ENDED
Sep. 27,
Jun. 28,
Sep. 29,
Sep. 27,
Sep. 29,
2020 2020 2019 2020 2019
GAAP net income (loss) attributable to stockholders $109,450 $55,890 $18,644 $186,880 $159,459
Adjustments based on IFRS:
Legacy utility and power plant projects (7) (34) 993
Legacy sale-leaseback transactions (181) 20 5,755
Mark-to-market gain on equity investment (155,431) (71,060) (27,595) (274,362) (128,095)
Other adjustments:
Construction revenue on solar services contracts 1,160 4,735 (8,978)
(Gain) loss on sale and impairment of residential lease assets (83) (317) 5,135 (1,122) 29,002
Litigation 395 880
Stock-based compensation expense 4,454 3,955 4,975 13,387 13,682
Amortization of intangible assets 1,189 1,784 1,783 4,759 5,352
Gain on business divestiture (10,529) (10,529) (143,400)
Transaction-related costs 1,382 976 1,863 3,571
Restructuring charges (credits) (97) 1,259 4,283 2,738 6,071
Gain on convertible debt repurchased (104) (3,060)
Cash interest expense, net of interest income 6,918 8,317 7,635 24,102 25,691
Provision for income taxes 36,725 1,106 2,928 38,716 10,074
Depreciation 5,156 3,933 5,373 12,589 22,916
Adjusted EBITDA $8,572 $(4,280) $25,109 $1,562 $2,093
Q4 2020 and FY 2020 GUIDANCE
(in thousands) Q4 2020
FY 2020
Revenue (GAAP and
Non-GAAP)
$330,000-$370,000
$1,120,000-$1,160,000
Net income (GAAP)
$11,000-$21,000
$190,000-$200,000
Adjusted EBITDA1
$26,000-$36,000
$30,000-$40,000
1. Estimated Adjusted EBITDA amount above for Q4 2020 includes net
adjustments that decrease net income by approximately $5 million related
to stock-based compensation expense, $1 million in transaction-related
costs, $4 million related to depreciation expense, $10 million related to
interest expense, and $1 million related to income taxes. Estimated
Adjusted EBITDA amount above for fiscal 2020 includes net adjustments
that decrease (increase) net income by approximately $(274) million
related to mark-to-market gain on equity investments, $(11) million
related to gain on business divestiture, $17 million related to
stock-based compensation expense, $34 million related to interest
expense, $18 million related to depreciation expense, $40 million
related to income taxes, $5 million related to construction revenue on
solar service contracts, $5 million amortization of intangible assets, $3
million related to transaction-related costs, and $2 million related to
restructuring charges.
SUNPOWER CORPORATION
(In thousands, except percentages)
THREE MONTHS ENDED
September 27, 2020
---
Revenue
Gross profit / margin
Operating expenses
Residential, Light
Commercial and
Others
Intersegment Residential, Light
Commercial and
Others
Intersegment
Research and
Sales, general
Restructuring
(Gain)/loss on
Gain on business
Other income
Equity in
Provision for
Net income (loss)
Commercial Industrial Eliminations Commercial Industrial Eliminations development and charges sale and divestiture (expense), net earnings of income taxes attributable to
Solutions Solutions administrative impairment of unconsolidat stockholders
residential ed investees
lease assets
GAAP $197,710 $74,333 $10,056 $(7,293) $34,625 $3,931 $(3,168) $1,752
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$109,450
Adjustments based on IFRS:
Mark-to-market gain on equity investments (155,431) (155,431)
Other adjustments:
(Gain)/loss on sale and impairment of residential lease assets (469) 386 (83)
Litigation 395 395
Stock-based compensation expense 623 3,831 4,454
Amortization of intangible assets 1,189 1,189
Restructuring charges (97) (97)
Gain on convertible notes repurchased (104) (104)
Tax effect 33,769 33,769
Non-GAAP $197,710 $74,333 $10,056 $(7,293) $34,779 $5,120 $(3,168) $1,752 $(6,458)
June 28, 2020
---
Revenue
Gross profit / margin
Operating expenses
Residential, Light
Commercial and Industrial
Others
Intersegment Residential, Light
Commercial and
Others
Intersegment
Research and
Sales, general
Restructuring
(Gain)/loss on
Gain on business
Other income
Equity in
Provision for
Net income (loss)
Commercial Solutions Eliminations Commercial Industrial Eliminations development and charges sale and divestiture (expense), net earnings of income taxes attributable to
Solutions administrative impairment of unconsolidat stockholders
residential ed investees
lease assets
GAAP $160,169 $50,319 $12,822 $(5,643) $26,204 $8,924 $(6,283) $(3,194)
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ - $55,890
Adjustments based on IFRS:
Mark-to-market gain on equity investments (71,060) (71,060)
Other adjustments:
Gain on business divestiture (10,458) (71) (10,529)
(Gain)/loss on sale and impairment of residential lease assets (458) 141 (317)
Stock-based compensation expense 471 3,484 3,955
Amortization of intangible assets 1,784 1,784
Transaction-related costs 1,382 1,382
Restructuring charges 659 659
Tax effect 994 994
Non-GAAP $160,169 $50,319 $12,822 $(5,643) $26,217 $10,708 $(6,283) $(3,194) $(17,242)
September 29, 2019
---
Revenue
Gross profit / margin
Operating expenses
Residential, Light
Commercial and Industrial
Others
Intersegment Residential, Light
Commercial and
Others
Intersegment
Research and
Sales, general
Restructuring
Loss on sale
Gain on business
Other income
Equity in
Provision for
Net income
Commercial Solutions Eliminations Commercial Industrial Eliminations development and charges and impairment divestiture (expense), net earnings of income taxes (loss)
administrative of residential unconsolidat
Gain (Loss) attributable to stockholders
Solutions lease assets ed investees attributable to non-
controlling interests
GAAP $204,090 $63,589 $33,975 $(15,612) $27,407 $289 $16,860 $939
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ - $18,644
Adjustments based on IFRS:
Legacy utility and power plant projects (65) (7) (7)
Legacy sale-leaseback transactions (181) (181)
Mark-to-market gain on equity investments (28,548) 953 (27,595)
Other adjustments:
(Gain)/loss on sale and impairment of residential lease assets (511) 10,756 (5,110) 5,135
Construction revenue on solar services contracts 15,790 1,160 1,160
Stock-based compensation expense 741 4,234 4,975
Amortization of intangible assets 1,783 1,783
Transaction-related costs 976 976
Restructuring charges 4,283 4,283
Tax effect (118) (118)
Non-GAAP $219,880 $63,524 $33,975 $(15,612) $28,609 $2,072 $16,860 $939 $9,055
NINE MONTHS ENDED
September 27, 2020
---
Revenue
Gross profit / margin
Operating expenses
Residential, Light
Commercial and Industrial
Others
Intersegment Residential, Light
Commercial and
Others
Intersegment
Research and
Sales, general
Restructuring
(Gain)/loss on
Gain on business
Other income
Equity in
Provision for
Net income (loss)
Commercial Solutions Eliminations Commercial Industrial Eliminations development and charges sale and divestiture (expense), net earnings of income taxes attributable to
Solutions administrative impairment of unconsolidat stockholders
residential ed investees
lease assets
GAAP $584,749 $175,471 $55,613 $(32,815) $89,470 $9,808 $(18,906) $11,604
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ - $186,880
Adjustments based on IFRS:
Legacy utility and power plant projects (207) (34) (34)
Legacy sale-leaseback transactions 20 20
Mark-to-market gain on equity investments (274,362) (274,362)
Other adjustments:
(Gain)/loss on sale and impairment of residential lease assets (1,375) 253 (1,122)
Construction revenue on solar services contracts 5,392 4,735 4,735
Litigation 880 880
Stock-based compensation expense 1,653 11,734 13,387
Amortization of intangible assets 4,759 4,759
Gain on business divestiture (10,458) (71) (10,529)
Business reorganization costs 1,863 1,863
Restructuring charges 2,138 2,138
Gain on convertible debt repurchased (3,060) (3,060)
Tax effect 35,614 35,614
Non-GAAP $590,141 $178,195 $55,613 $(32,815) $94,503 $14,533 $(18,906) $11,604 $(38,831)
September 29, 2019
---
Revenue
Gross profit / margin
Operating expenses
Residential, Light
Commercial and Industrial
Others
Intersegment Residential, Light
Commercial and
Others
Intersegment
Research and
Sales, general
Restructuring
(Gain)/loss on
Gain on business
Other income
Equity in
Provision for
Gain (Loss) Net income (loss) attributable to stockholders
Commercial Solutions Eliminations Commercial Industrial Eliminations development and charges sale and divestiture (expense), net earnings of income taxes attributable to non-
Solutions administrative impairment of unconsolidat controlling interests
residential ed investees
lease assets
GAAP $482,085 $156,032 $78,728 $(26,237) $49,969 $2,679 $5,751 $19,004
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ - $159,459
Adjustments based on IFRS:
Legacy utility and power plant projects (259) 993 993
Legacy sale-leaseback transactions (4,688) 10,443 5,755
Mark-to-market gain on equity investments (129,048) 953 (128,095)
Other adjustments:
(Gain)/loss on sale and impairment of residential lease assets (1,268) 36,710 (6,440) 29,002
Construction revenue on solar services contracts 124,909 18,052 (27,030) (8,978)
Stock-based compensation expense 1,370 12,312 13,682
Amortization of intangible assets 5,352 5,352
Business reorganization costs (143,250) (150) (143,400)
Transaction-related costs 3,571 3,571
Restructuring charges 6,071 6,071
Tax effect 1,817 1,817
Non-GAAP $606,994 $155,773 $78,728 $(26,237) $64,428 $8,031 $5,751 $19,004 $(54,771)
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SOURCE SunPower Corp.
