Major PVEP (Photovoltaics Energy Provider) SunPower has lowered its megawatt (MW) deployment guidance for the full-year, impacting revenue, while further transitioning its business model.
Relying on GAAP financial metrics to ascertain SunPower’s business performance has become increasingly obscure and less relevant since the establishment of its JV yieldco, 8point3 with First Solar, while emphasis on non-GAAP and EBITDA metrics should over time provide a more balanced and accurate view of the company, specifically on a profitability basis. PV Tech has until now, primarily used GAAP financial figures to relay SunPower’s business performance.
Non-GAAP Q3 financials
SunPower reported third quarter 2015 non-GAAP revenue of US$441.4 million, up from US$376.7 million in the prior quarter but down from US$704.2 million in the third quarter of 2014, before the establishment of its JV yieldco.
The company reported US$54.2 million in EBITDA for the quarter, down from US$63.6 million in the prior quarter and US$85.5 million in the third quarter of 2014.
Non-GAAP revenue was at the top end of SunPower’s guidance as the company shifted emphasis to its commercial and residential segments in the US, providing higher margin business than PV module sales in overseas markets, notably Japan as the market increasingly becomes dominated by low-cost producers in Asia.
As a result, non-GAAP gross margin was 17.7% in the quarter and above previous guidance. Non-GAAP gross margin in the second quarter of 2015 was 17.6% and 16.7% in the third quarter of 2014.
Residential non-GAAP sales were US$162.3 million, up from US$152.2 million in the prior quarter and up from US$153.9 in the same period a year ago. Non-GAAP residential margin was 22.2%, down from 23.3% in the previous quarter but up from 18.6% in the third quarter of 2014.
SunPower noted that its residential lease bookings as well as MW installed both increased more than 50% year-over-year. North American cash and loan sales were said to have accounted for 61% of product shipments.
However, the significant sales increase came from the commercial sector with non-GAAP sales of US$145.9 million, compared to US$63 million the previous quarter. Non-GAAP gross margin soared to 21.4%, compared to only 6.4% in the previous quarter and 14.9% in the third quarter of 2014.
SunPower said it expected to drop-drown a number of PV projects to its JV yieldco in the fourth quarter, resulting in non-GAAP revenue guidance of US$1.25 billion to US$1.3 billion and non-GAAP gross margin of 28% to 29%. The company therefore expects EBITDA of US$300 million to US$325 million, highlighting the significant changes currently in play over its financial reporting.
The company also guided full-year non-GAAP revenue of US$2.50 billion to US$2.55 billion and gross margin of 23% to 24%.
This compares to previous guidance of non-GAAP revenue of US$2.40 billion to US$2.60 billion and gross margin of 21% to 23%.
The lower revenue figure was attributed to its holdco strategy and deferrals due to real estate accounting.
However, SunPower also noted that PV deployments for the year would be in the range of 1.15GW to 1.18GW, compared to the previous guidance of 1.25GW to 1.30GW. This was said to be due to the shift in deployment mix to provide higher margin business in the US leading up to the potential ITC expiration and reduction for residential and commercial markets, respectively.
“The solid execution of our downstream strategy enabled us to post strong financial results for the quarter, including generating US$54 million in EBITDA,” said Chuck Boynton, SunPower CFO. “In relation to working capital, we increased inventory in the third quarter in preparation to meet our significant 2016 backlog while adding assets to our holdco asset base. With solid industry fundamentals, a diversified end channel strategy, new product introductions and further commitment to our manufacturing cost reduction roadmaps, we are well positioned for profitable growth in 2016.”