SunPower Q1 Earnings: Improved Margin and Optimism Despite GAAP Loss

Margins improve, strength in Japan residential and U.S. utility sector. Optimism for a strong year.

Eric Wesoff May 02, 2013

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

While most of the solar industry burns, SunPower (SPWR) seemed rather optimistic in its first-quarter revenue call this afternoon.

Tom Werner, the CEO of SunPower, called it a "solid quarter."

SunPower's earnings report had been leaked before the official release, and the better-than-expected results lifted the stock 17 percent.

The vertically integrated solar-cell efficiency leader had improved margins and revenue, along with decreasing GAAP losses. Werner looked for Q2 to be "a transition quarter" on the way to a stronger second half of the year. (I'm interpreting "transition quarter" to be less than positive.) The firm had GAAP losses of $54.7 million on revenue of $635 million while producing 208 megawatts in Q1.

Gross margin in North America was strong at 32.5 percent, while EMEA was not so strong at -32.2 percent. Asia-Pacific was at 18.2 percent gross margin. Werner said that the firm would return to profitability in the EU by the end of the year and noted record demand in Japan through SunPower's relationship with Sharp and Toshiba.

Highlights for the quarter include:

Construction started on the 579-megawatt AVSP project for MidAmerican Solar with completion set for 2016
More than 225 megawatts installed to-date on the 250-megawatt CVSR project owned by NRG, with completion set for end-2013
First megawatt-scale C7 Tracker deployment at Arizona's Salt River Project
SunPower won a recent 65-megawatt French tender
5-megawatt agreement with Verizon
16,200 customers with approximately 130 megawatts booked so far on SunPower's residential lease program
Generated $216 million in free cash flow

SunPower's CFO said the AVSP and CVSR projects would provide $3.5 billion in revenue and $1 billion in gross margin between 2013 and 2016.

SunPower's French connection, its relationship with Total, seems to be paying off, as indicated by its win of the French 65-megawatt tender and the confidence Werner had in being in good standing for the upcoming Saudi solar tender, which might see the C7 deployed at scale. Total has done business in the Saudi region for 90 years.

SunPower shipped a total of 936 megawatts in 2012 with revenue of $2,417.5 million compared to $2,374.4 million in 2011.