Distributed solar and storage company SunPower ended the first coronavirus-influenced quarter with a loss but expressed some optimism for a rebound while reporting Q1 earnings on Thursday.
After a rough April, SunPower said demand appears to be slowly growing back to pre-coronavirus levels. With shutdown orders lifting in some countries across the globe, the company’s solar manufacturing arm is also expecting a slow revival.
“We think we’ve made the appropriate adjustments and put ourselves in a strong position because we responded early to the COVID-19 crisis,” CEO Tom Werner told Greentech Media in an interview after the company's Thursday earnings call. “There's a balance of a difficult April and an improving May and June.”
Among top U.S. residential solar companies, SunPower made early changes to mitigate the pandemic’s effects — perhaps in part because the company has less financial wiggle room than its peers.
Before the disruption, SunPower was projecting a downturn in Q1 2020 and overall losses in 2020. Early in the year, the company was planning a restructuring that would eliminate up to 160 jobs as it spun off its manufacturing arm into a separate company, to be called Maxeon Solar Technologies. Then the coronavirus began ravaging the U.S.
In March, depressed demand and the economic downturn pushed the company to cut executive salaries. A month later SunPower halted manufacturing and moved employees to a four-day workweek. To boost sales, the company began offering the first six months of its solar contract for free — sacrificing profit for the potential of more signups.
Though the effects of the pandemic in the U.S. overlapped with only the end of the first quarter, those “proactive cost control initiatives” helped the Q1 performance, the company said on Thursday. SunPower logged a $1.4 million loss, compared to losses of $89.7 million during the same period last year. The 580 megawatts shipped in Q1 fell from Q4 2019 but exceeded the 448 megawatts shipped during Q1 2019.
With COVID-19 impacts still menacing the industry and an uncertain trajectory for the virus, Q2 is expected to look rockier. Though SunPower pulled its 2020 economic guidance in March and has not offered new annual forecasts, the company projected losses between $100 million and $120 million for the coming quarter. Executives attributed those figures to a hangover from the dip in demand in April.
Consultation inquiries and other demand indicators now appear to be growing close to pre-coronavirus levels, Werner told GTM. The company acknowledged “softness in the second quarter” and projected just 340 to 400 megawatts shipped, but it said its previous investments in digital design and sales tools have eased the transition to online-only sales.
SunPower's Maxeon spinoff set for Q2
Though the pandemic hasn’t left anyone in the residential solar business unscathed, the struggles come at a pivotal moment for SunPower. Over the last year, the company has worked to streamline its business and refocus on distributed solar, storage and services while excising its utility-scale and manufacturing operations.
Because Maxeon will remain part of the company until the split closes in Q2, SunPower has also had to absorb both upstream and downstream impacts of COVID-19. Its factories across the globe went idle last month.
The company said Thursday that production had resumed in Malaysia and Oregon, with openings expected this month at its factories in Mexico and the Philippines. Though Jeff Waters, who will head Maxeon after the split, acknowledged the company hasn’t yet “turned a corner” on pandemic-related challenges, he said that if the recovery continues in Q3, it should result in 2020 manufacturing at the level of 2019 volumes.
Other areas of the business also showed signs of resilience.
SunPower’s commercial business, which had been depressing profits last quarter, is expected to turn a profit in the second half of 2020. Attachment rates for its commercial battery storage product have hit 30 percent. And SunPower will begin selling its residential storage product in Q2.
Just prior to its earnings report, SunPower also announced that California-based Technology Credit Union would put $1 billion in financing into SunPower's solar loan program — a significant infusion of cash with the possibility of lean times ahead. SunPower Executive Vice President Norm Taffe said the company has enough money to draw on for “virtually unlimited capacity” additions in the future.