Key Takeaways From SunPower’s Q1 Earnings
SunPower (NASDAQ:SPWR), the second largest U.S. solar panel manufacturer, published a wider-than-expected first quarter loss, as it focused on building projects that it holds on its balance sheet – limiting its revenue recognition – and also witnessed lower gross margins for power plant sales. Below we review the performance of the company’s power plant and distributed solar business and take a look at what lies ahead. [1]
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Utility Scale Business
SunPower’s power plant revenues declined by about 3% year-over-year on a Non-GAAP basis as the company focused on building up its assets for sale. Gross margins also declined sharply to about 6%, down from 22% a year ago, amid lower profits from the 60 MW Hooper project which the company sold to its joint venture yieldco 8point3 Energy Partners. The firm recognized a bulk of the profits and margins for the project in Q4 2015, on account of the closing of tax equity. [2] That said, things were relatively strong on the business development front. The company won about 500 MW of project contracts in Mexico in the country’s first electricity auction following its energy reforms. The firm expects to build six power plants in multiple regions across Mexico with gross margins of 20%+ and projected delivery dates of 2018 and 2019. The company also began construction of a new 100 MW solar project in Chile, in collaboration with its parent company Total.
Distributed Solar Power
Things were better on the distributed generation side, with both the residential and commercial businesses witnessing year-over-year revenue growth and margins expansion. While the residential business benefited from strong shipments and deployments in the U.S. residential market (up 50% year-on-year), the commercial business benefited from strong demand for the recently launched Helix integrated solution. SunPower has been increasingly focusing on standardized solar solutions, integrating panels, mounts and micro inverters into a single package, allowing for quicker installations, lower costs and better energy yields. SunPower extended its integrated approach to the residential business as well, launching its Equinox solution for the residential market during the quarter. The company noted that Equinox now accounts for over 40% of the new bookings for its residential unit.
Manufacturing Ramp
SunPower’s factories ran at full capacity over the last quarter, with the firm building up inventory for its H2 2016 project completions. The company intends to boost capacity to 1,850 MW by the end of this year, up from 1,400 MW last year by ramping up capacity of its Fab 4 plant (from 30 MW to 350 MW) and also by expanding the production of its just launched P-Series modules (60 to 80 MW of capacity by year-end). These modules offer higher conversion efficiencies compared to multi-crystalline panels, at prices which are lower than SunPower’s monocrystalline offering.
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Notes:- SunPower Q1 2016 Supplementary Metrics [↩]
- SunPower (SPWR) Tom H. Werner on Q1 2016 Results – Earnings Call Transcript, Seeking Alpha, May 2016 [↩]