“The restructuring of the company is paying off,” SunPower CEO Tom Werner told GTM.
SunPower returned to profitability and exceeded its revenue guidance in the second quarter, pointing to signs that its strategic overhaul is bearing fruit. Shares surged 20 percent in after-hours trading, to around $14.
Though the company is still working to improve its financial position, CEO Tom Werner said the Q2 results represent “clear evidence of the success of our strategic transformation.”
That transformation began about a year ago, with SunPower reimagining its business around a long-range vision centered on distributed generation and storage-plus-services. The company excised its utility-scale development division and re-oriented its business around three core areas: its manufacturing arm, known as SunPower Technologies, and the two branches of its Energy Services division, commercial and residential distributed generation.
SunPower’s acquisition of SolarWorld Americas in 2018 provided it with a U.S. manufacturing base. Its subsequent exclusion from tariffs have eased some of its headwinds, allowing the company to focus on its business transition unencumbered by trade constraints.
On a GAAP basis, the U.S. solar installer posted a Q2 net profit of $121.5 million on revenues of $463.3 million, a huge turnaround from its $447.1 million loss during the same quarter last year.
However, it expects to slide back into a loss in the third quarter. Whether the company can remain profitable over the longer term is another question.
Distributed generation shipments were up 58 percent quarter-over-quarter, and SunPower noted that production of its Next Generation Technology solar panels continues to ramp after a late-2018 start.
The company said it will hit 10 percent annual growth across all three business units in 2019 and is looking to 20 percent growth in the long term.
Based on its performance, the company adjusted its EBITDA guidance for the year to between $100 and $120 million, following its raised guidance in the first quarter of 2019.
Bringing in storage and services
Moving forward, SunPower has laid out a vision that incorporates energy services and storage in its residential and commercial businesses to stack revenue. By integrating storage and digital services into its business model, SunPower hopes it can become more than a solar company to its customers.
It’s an idea shared by many in the energy industry, as the lines between developers, service providers and utilities become murkier. Werner has said SunPower’s plans put the company in competition with the likes of Shell and National Grid, who are peddling a similar vision. But he’s also suggested that SunPower’s positioning within solar should offer an edge.
“We believe services will become a significant driver of long-term profit growth,” said Werner on the Wednesday earnings call. “We can increase customer stickiness with expanded margins.”
The company said its storage pipeline has grown to more than 135 megawatts for commercial and industrial customers. In June SunPower inked a large solar-plus-storage deal with Whole Foods for eight stores connected to 2.6 megawatts of solar and 483-kilowatts of storage.
Werner said the company is now hitting 35 percent attachment rates for storage with commercial customers.
“That is both revenue-enhancing and margin-enhancing,” the CEO said in a post-call interview with Greentech Media. “In some of those systems in C&I we’ve started to offer services. That’s not a big revenue driver [now], but in the long term it’s a profit driver.”
SunPower’s residential storage offering, Equinox, is still slated for release in the second half of the year.
Cash on hand
SunPower’s cash and cash equivalents dropped from $185 million in Q1 2019 to $167 million in Q2, but the company is still working to bring in more money in the near-term. It will continue its strategy of offloading commercial and residential leases after certain points in the development cycle. In March, it sold more than 200 megawatts of commercial projects to a subsidiary of Goldman Sachs Renewable Power.
“What we’ve done in both residential and commercial, when we get a project perfected, … we can sell that project,” said Werner. “We accomplish two things: one, we get the cash earlier, two, we simplify our [profit and loss statement].”
Those one-time sales should work alongside the company’s ongoing revenues from storage and services as those businesses grow.
Last year SunPower also offloaded its stake in yieldco 8point3 Energy Partners and sold its microinverter business to Enphase.
Werner told GTM that SunPower expects to finish the sale of the Oregon factory it acquired through its purchase of SolarWorld in the upcoming quarter. SunPower will continue manufacturing at that facility by leasing back the space it needs.
On Wednesday, SunPower also filed paperwork with the Securities and Exchange Commission noting the sale of 1 million Enphase shares between July 11 and July 30. Werner called it a “cash generating and diversifying” move. SunPower now owns 6.5 million shares of Enphase, a company it’s partnered with on its inverter-integrated module, and Werner said the company does not expect to sell further shares this year.
Ultimately, while SunPower is still clawing out of financial hardship, Werner said “it’s a good time to be in solar” because of strong demand in key markets and the value proposition tied to storage and service additions on distributed solar.
“The restructuring of the company is paying off,” Werner said in the interview.
“As we look multi-year to the growth and profitability of SunPower, we have the focus on DG, our new [Next Generation Technology product] and storage and services, which become meaningful and very meaningful the following year.”
Source: greentechmedia
