SunPower Reports Third Quarter 2019 Results

Record Shipments, Continued Strength Across Global Distributed Generation Markets

SAN JOSE, Calif., Oct. 30, 2019 /PRNewswire/ -- SunPower Corp. (NASDAQ:SPWR) today announced financial results for its third quarter ended Sept. 29, 2019.

Third Quarter Company Highlights

  • Continued strength in U.S. and international distributed generation (DG) markets
  • Generated positive cash at the business unit level for the quarter

SunPower Energy Services (SPES)

  • Record residential and new homes bookings - strong traction in California ahead of 2020 new home solar mandate
  • Formally launched Equinox Storage solution for the residential market

SunPower Technologies (SPT)

  • Record shipments into international DG markets – more than 70 percent of volume
  • Tracking to a fourth quarter agreement on potential investment to expand Maxeon 5 production

 

($ Millions, except percentages and per-share data)

3rd Quarter 2019

2nd Quarter 2019

3rd Quarter 2018

GAAP revenue

$476.0

$436.3

$428.3

GAAP gross margin

10.1%

4.5%

2.3%

GAAP net income (loss)

$(15.0)

$121.5

$(89.8)

GAAP net income (loss) per diluted share

$(0.11)

$0.75

$(0.64)

Non-GAAP revenue1

$491.7

$481.9

$443.4

Non-GAAP gross margin1

15.9%

10.5%

4.7%

Non-GAAP net income (loss)1

$10.6

$(31.1)

$(40.9)

Non-GAAP net income (loss) per diluted share1

$0.07

$(0.22)

$(0.29)

Adjusted EBITDA1

$42.0

$8.0

$6.7

MW Deployed

586

622

346

 

1Information about SunPower's use of non-GAAP financial information, including a reconciliation to U.S. GAAP, is provided under "Use of Non-GAAP Financial Measures" below.

Third Quarter 2019 Results
"Our third quarter results reflect continuing execution of our strategic plan," said Tom Werner, SunPower CEO and chairman of the board. "We met our financial outlook for the quarter and demonstrated ongoing progress against our key growth initiatives including the further ramp of our Maxeon 5 technology scale-up, adding to our storage and services offerings, and expanding our digital platforms.

SunPower Energy Services (SPES)
"We executed well in our North American residential business with revenue growth of more than 12 percent year-over-year and record bookings during the quarter as we benefitted from the strength of our channel model. Also, building on the success of our commercial Helix Storage solution, we officially launched our residential Equinox Storage product in the third quarter. Our Equinox platform is the industry's only fully integrated solar and storage solution designed, engineered and warranted by one company. In new homes, we continued to expand our commanding position in the market ahead of California's 2020 new home solar mandate as we posted another record bookings and shipments quarter with a backlog now exceeding 40,000 homes.

"In Commercial, we maintained our market share lead as year-over-year deployments rose. Our channel and origination teams are executing well as our backlog continues to grow. However, project deployment execution has been disappointing and we are undertaking a number of initiatives in our direct business that we believe will drive stronger financial performance starting in the fourth quarter. Finally, demand for our Helix Storage solution remains high as our pipeline exceeds 145 megawatts (MW) with attach rates of 35 percent.

SunPower Technologies (SPT)
"SPT posted another strong quarter driven primarily by ongoing growth in our global DG supply business, especially in Europe, Korea and Australia. We also continued to build solid power plant supply agreement backlog into 2020. The ramp of our industry leading Maxeon 5 cell and panel technology continues as we commenced production on our second production line this quarter. Also, we have made progress toward finalizing a potential investment to accelerate Maxeon 5 production and expect to be in a position to announce this agreement in the fourth quarter. Finally, we are pleased to see strong escalating demand for our Performance Series (P-Series) product as we expect to ship a combined volume of over 1.3 gigawatts (GW) of P-Series panels in 2019 from our joint venture and our Oregon manufacturing facility," Werner concluded.

Consolidated Financials
"We were pleased with our third quarter financial performance," said Manavendra Sial, SunPower chief financial officer. "In relation to the balance sheet, we increased our liquidity, generating positive cash at the business unit level while further reducing our legacy liabilities. Finally, we were pleased to announce our second partnership with Hannon Armstrong that enables a highly capital efficient and flexible structure to finance our 200 MW of safe harbor inventory."

Third quarter fiscal year 2019 non-GAAP results exclude net adjustments that, in the aggregate, increased non-GAAP earnings by $25.7 million, including $23.9 million related to the cost of above-market polysilicon, $7.0 million related to stock-based compensation expense, $6.1 million related to business reorganization costs, $5.1 million related to loss on sale and impairment of residential lease assets, $4.3 million restructuring expense, $2.2 million related to business process improvement costs, $1.8 million related to amortization of intangible assets, $1.2 million related to construction revenue on solar services contracts, $1.0 million transaction-related costs, and $0.9 million related to tax effect, partially offset by $27.6 million related to mark-to-market gain on equity investment and $0.2 million related to legacy sale-leaseback transactions.

Financial Outlook
The company's fourth quarter 2019 GAAP and non-GAAP guidance is as follows: on a GAAP basis, revenue of $520 million to $720 million, gross margin of 11 percent to 12 percent and net loss of $28 million to $8 million. On a non-GAAP basis, the company expects revenue of $520 million to $720 million, gross margin of 16 percent to 19 percent, Adjusted EBITDA of $74 million to $94 million and MW deployed in the range of 445 MW to 645 MW.

The company's fiscal year 2019 GAAP and non-GAAP guidance is as follows: on a GAAP basis, revenue of $1.8 billion to $2.0 billion and a net loss of $20 million to $0 million. On a non-GAAP basis, revenue of $1.9 billion to $2.1 billion and operational expenses of less than $270 million. Gigawatts deployed is expected to be in the range of 2.1 GW to 2.3 GW in addition to the company's safe harbor program and capital expenditures of approximately $65 million. The company's fourth quarter and fiscal year 2019 guidance includes approximately $20 million in gross margin attributable to certain legacy power plant projects. 

The company is maintaining its fiscal year 2019 Adjusted EBITDA guidance to the range of $100 million to $120 million.

The company will host a conference call for investors this afternoon to discuss its third quarter 2019 performance at 1:30 p.m. Pacific Time. The call will be webcast and can be accessed from SunPower's website at http://investors.sunpower.com/events.cfm.

This press release contains both GAAP and non-GAAP financial information. Non-GAAP figures are reconciled to the closest GAAP equivalent categories in the financial attachment of this press release. Please note that the company has posted supplemental information and slides related to its third quarter 2019 performance on the Events and Presentations section of SunPower's Investor Relations page at http://investors.sunpower.com/events.cfm.

About SunPower
As one of the world's most innovative and sustainable energy companies, SunPower Corporation (NASDAQ: SPWR) provides a diverse group of customers with complete solar solutions and services. Residential customers, businesses, governments, schools and utilities around the globe rely on SunPower's more than 30 years of proven experience. From the first flip of the switch, SunPower delivers maximum value and superb performance throughout the long life of every solar system. Headquartered in Silicon Valley, SunPower has dedicated, customer-focused employees in Africa, Asia, Australia, Europe, North and South America. For more information about how SunPower is changing the way our world is powered, visit www.sunpower.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: (a) our plans and expectations regarding potential investment to expand Maxeon 5 production, including timing, certainty and impact; (b) our expectations and plans regarding market traction, growth, demand, and volume; (c) our plans and expectations for our products and planned products, including anticipated markets and demand, cost impacts, and impacts on our financial performance and our ability to meet our targets and goals; (d) our plans and expectations for initiatives to improve execution and performance in our commercial business, including timing and anticipated impact on financial performance; (e) our plans and expectations regarding manufacturing expansion, and production goals and ramps, including the timing of our ramp of Maxeon 5 and P-Series production expansion; (f) our plans and expectations for our safe harbor program and our joint venture with Hannon Armstrong; (g) the expected sale of certain legacy power plant projects, including timing and impact on financial statements; (h) our positioning for future success and profitability and long-term competitiveness, and our ability to achieve our financial and strategic goals; (i) our fourth quarter fiscal 2019 guidance, including GAAP revenue, gross margin, and net loss, as well as non-GAAP revenue, gross margin, Adjusted EBITDA, and MW deployed, and related assumptions; and (j) fiscal year 2019 guidance, including, GAAP and non-GAAP revenue, net loss, non-GAAP operational expenses, non-GAAP GW deployed, non- GAAP capital expenditures, and Adjusted EBITDA, and related assumptions.

These forward-looking statements are based on our current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (1) challenges in executing transactions key to our strategic plans, including regulatory and other challenges that may arise; (2) the success of our ongoing research and development efforts and our ability to commercialize new products and services, including products and services developed through strategic partnerships; (3) competition in the solar and general energy industry and downward pressure on selling prices and wholesale energy pricing; (4) our liquidity, substantial indebtedness, and ability to obtain additional financing for our projects and customers; (5) changes in public policy, including the imposition and applicability of tariffs; (6) regulatory changes and the availability of economic incentives promoting use of solar energy; (7) fluctuations in our operating results; (8) appropriately sizing our manufacturing capacity and containing manufacturing and logistics difficulties that could arise; and (9) challenges managing our acquisitions, joint ventures and partnerships, including our ability to successfully manage acquired assets and supplier relationships.  A detailed discussion of these factors and other risks that affect our business is included in filings we make with the Securities and Exchange Commission (SEC) from time to time, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors."  Copies of these filings are available online from the SEC or on the SEC Filings section of our Investor Relations website at investors.sunpower.com. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events.

©2019 SunPower Corporation. All rights reserved. SUNPOWER, the SUNPOWER logo, EQUINOX and HELIX are trademarks or registered trademarks of SunPower Corporation in the U.S. and other countries as well.

SUNPOWER CORPORATION

 CONSOLIDATED BALANCE SHEETS 

 (In thousands) 

 (Unaudited) 

       
 

Sep. 29,

 

Dec. 30,

 

2019

 

2018

Assets

     

Current assets:

     

Cash and cash equivalents

$            188,983

 

$            309,407

Restricted cash and cash equivalents, current portion

10,097

 

41,762

Restricted short-term marketable securities

6,033

 

-

Accounts receivable, net

205,667

 

175,605

Contract assets

78,868

 

58,994

Inventories

388,508

 

308,146

Advances to suppliers, current portion

75,366

 

37,878

Project assets - plants and land, current portion

20,260

 

10,796

Prepaid expenses and other current assets

132,643

 

131,183

Total current assets

1,106,425

 

1,073,771

       

Restricted cash and cash equivalents, net of current portion

11,655

 

12,594

Restricted long-term marketable securities

-

 

5,955

Property, plant and equipment, net

335,375

 

839,871

Operating lease right-of-use assets

46,283

 

-

Solar power systems leased and to be leased, net

55,444

 

92,557

Advances to suppliers, net of current portion

62,914

 

133,694

Long-term financing receivables, net - held for sale

-

 

19,592

Other intangible assets, net

9,504

 

12,582

Other long-term assets

262,072

 

162,033

Total assets

$         1,889,672

 

$         2,352,649

       

Liabilities and Equity

     

Current liabilities:

     

Accounts payable

$            440,267

 

$            325,550

Accrued liabilities

194,367

 

235,252

Operating lease liabilities, current portion

8,644

 

-

Contract liabilities, current portion

118,644

 

104,130

Short-term debt

80,297

 

40,074

Total current liabilities

842,219

 

705,006

       

Long-term debt

48,460

 

40,528

Convertible debt

819,783

 

818,356

Operating lease liabilities, net of current portion

44,807

 

-

Contract liabilities, net of current portion

67,930

 

99,509

Other long-term liabilities

226,729

 

839,136

Total liabilities

2,049,928

 

2,502,535

       

Equity:

     

Preferred stock

-

 

-

Common stock

143

 

141

Additional paid-in capital

2,483,815

 

2,463,370

Accumulated deficit

(2,455,119)

 

(2,480,988)

Accumulated other comprehensive loss

(3,791)

 

(4,150)

Treasury stock, at cost

(191,725)

 

(187,069)

Total stockholders' deficit

(166,677)

 

(208,696)

Noncontrolling interests in subsidiaries

6,421

 

58,810

Total deficit

(160,256)

 

(149,886)

Total liabilities and equity

$         1,889,672

 

$         2,352,649

 

SUNPOWER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

                     
   

THREE MONTHS ENDED

 

NINE MONTHS ENDED

   

Sep. 29,

 

Jun. 30,

 

Sep. 30,

 

Sep. 29,

 

Sep. 30,

   

2019

 

2019

 

2018

 

2019

 

2018

                     

Revenue:

                   

   SunPower Energy Services

 

$           277,688

 

$           211,726

 

$           263,576

 

$           667,635

 

$           780,187

   SunPower Technologies

 

333,896

 

314,971

 

289,630

 

879,671

 

791,754

Intersegment eliminations

 

(135,626)

 

(90,416)

 

(124,943)

 

(286,842)

 

(302,693)

Total revenue

 

475,958

 

436,281

 

428,263

 

1,260,464

 

1,269,248

Cost of revenue:

                   

   SunPower Energy Services

 

248,417

 

189,262

 

217,196

 

608,757

 

644,109

   SunPower Technologies 

 

315,293

 

317,717

 

307,527

 

915,878

 

1,200,037

Intersegment eliminations

 

(136,003)

 

(90,498)

 

(106,337)

 

(294,937)

 

(285,388)

Total cost of revenue

 

427,707

 

416,481

 

418,386

 

1,229,698

 

1,558,758

Gross profit (loss)

 

48,251

 

19,800

 

9,877

 

30,766

 

(289,510)

Operating expenses:

                   

Research and development

 

16,101

 

18,159

 

15,898

 

49,253

 

66,225

Sales, general and administrative

 

64,734

 

61,978

 

76,069

 

189,569

 

206,272

Restructuring charges 

 

4,283

 

2,453

 

3,923

 

6,071

 

18,604

Loss on sale and impairment of residential lease assets

 

10,756

 

8,301

 

53,537

 

28,283

 

170,898

Gain on business divestiture

 

-

 

(137,286)

 

(59,347)

 

(143,400)

 

(59,347)

Total operating expenses (income)

 

95,874

 

(46,395)

 

90,080

 

129,776

 

402,652

Operating income (loss)

 

(47,623)

 

66,195

 

(80,203)

 

(99,010)

 

(692,162)

Other income (expense), net:

                   

Interest income

 

1,025

 

566

 

1,087

 

2,443

 

2,280

Interest expense

 

(10,649)

 

(16,424)

 

(25,972)

 

(43,864)

 

(77,796)

Other, net

 

45,184

 

67,768

 

(3,643)

 

146,025

 

48,775

Other income (expense), net

 

35,560

 

51,910

 

(28,528)

 

104,604

 

(26,741)

Income (loss) before income taxes and equity in losses of unconsolidated investees 

 

(12,063)

 

118,105

 

(108,731)

 

5,594

 

(718,903)

Provision for income taxes

 

(5,378)

 

(6,068)

 

(3,680)

 

(17,243)

 

(9,389)

Equity in losses of unconsolidated investees

 

(1,767)

 

(1,963)

 

(1,500)

 

(2,050)

 

(17,059)

Net income (loss)

 

(19,208)

 

110,074

 

(113,911)

 

(13,699)

 

(745,351)

    Net loss attributable to noncontrolling interests and redeemable noncontrolling interests

 

4,191

 

11,385

 

24,085

 

30,417

 

92,434

Net income (loss) attributable to stockholders

 

$           (15,017)

 

$           121,459

 

$           (89,826)

 

$             16,718

 

$         (652,917)

                     
                     

Basic net income (loss) per share attributable to stockholders

 

$               (0.11)

 

$                  0.85

 

$               (0.64)

 

$                  0.12

 

$                (4.64)

Diluted net income (loss) per share attributable to stockholders

 

$               (0.11)

 

$                  0.75

 

$               (0.64)

 

$                  0.12

 

$                (4.64)

                     

Basic weighted-average shares

 

142,553

 

142,471

 

141,027

 

142,248

 

140,722

Diluted weighted-average shares

 

142,553

 

166,837

 

141,027

 

144,736

 

140,722

 

SUNPOWER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

                     
   

THREE MONTHS ENDED

 

NINE MONTHS ENDED

   

Sep. 29,

 

Jun. 30,

 

Sep. 30,

 

Sep. 29,

 

Sep. 30,

   

2019

 

2019

 

2018

 

2019

 

2018

                     

Cash flows from operating activities:

                   

Net income (loss)

 

$           (19,208)

 

$           110,074

 

$         (113,911)

 

$           (13,699)

 

$         (745,351)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

                   

Depreciation and amortization

 

15,298

 

22,534

 

24,743

 

62,022

 

103,144

Stock-based compensation

 

6,991

 

6,270

 

6,390

 

18,927

 

20,087

Non-cash interest expense

 

2,542

 

2,510

 

3,871

 

7,468

 

12,133

Non-cash restructuring charges

 

3,528

 

2,346

 

-

 

5,874

 

-

Dividend from equity method investee

 

-

 

-

 

-

 

-

 

3,947

Equity in losses of unconsolidated investees

 

1,767

 

1,963

 

1,501

 

2,050

 

17,059

Mark-to-market (gain) loss on equity investment with readily determinable fair value

 

(28,538)

 

(67,500)

 

6,225

 

(129,038)

 

6,225

Gain on business divestiture

 

-

 

(137,286)

 

(59,347)

 

(143,400)

 

(59,347)

Gain on sale of investments without readily determinable fair value

 

(17,275)

 

-

 

(543)

 

(17,275)

 

(50,568)

Deferred income taxes

 

(1,545)

 

(4)

 

1,575

 

500

 

3,006

Impairment of property, plant and equipment

 

-

 

777

 

-

 

777

 

369,168

Loss on sale and impairment of residential lease assets

 

10,755

 

16,728

 

53,537

 

36,709

 

170,898

Gain on sale of assets

 

(21,383)

 

-

 

-

 

(21,383)

 

-

Other, net

 

-

 

-

 

(3,294)

 

-

 

(5,737)

Changes in operating assets and liabilities:

 

10,995

 

(39,473)

 

(82,481)

 

(75,694)

 

(361,740)

Accounts receivable

 

2,921

 

(60,827)

 

(15,057)

 

(45,710)

 

(19,090)

Contract assets

 

(25,516)

 

5,697

 

(2,639)

 

(18,107)

 

(38,014)

Inventories

 

(45,989)

 

(20,386)

 

(27,942)

 

(108,093)

 

(103,791)

Project assets

 

(3,040)

 

(6,974)

 

(20,226)

 

(9,238)

 

(9,140)

Prepaid expenses and other assets

 

16,967

 

(27,212)

 

5,616

 

1,482

 

39,924

Operating lease right-of-use assets

 

14,999

 

(11,383)

 

-

 

6,219

 

-

Long-term financing receivables, net - held for sale

 

481

 

657

 

(42,775)

 

(473)

 

(151,931)

Advances to suppliers

 

8,518

 

11,719

 

14,059

 

33,292

 

29,181

Accounts payable and other accrued liabilities

 

52,810

 

40,018

 

10,387

 

64,009

 

(69,056)

Contract liabilities

 

4,709

 

17,996

 

(3,904)

 

8,127

 

(39,823)

Operating lease liabilities

 

(15,865)

 

11,222

 

-

 

(7,202)

 

-

Net cash used in operating activities

 

(36,073)

 

(81,061)

 

(161,734)

 

(266,162)

 

(517,076)

Cash flows from investing activities:

                   

Purchases of property, plant and equipment

 

(16,896)

 

(11,656)

 

(12,346)

 

(35,100)

 

(37,708)

Cash paid for solar power systems, leased, net

 

-

 

-

 

(16,971)

 

-

 

(55,659)

Cash paid for solar power systems

 

(8,503)

 

(15,723)

 

(904)

 

(51,826)

 

(4,340)

Dividend from equity method investee

 

-

 

-

 

-

 

-

 

12,952

Proceeds from sale of investments

 

42,957

 

-

 

-

 

42,957

 

417,766

Proceeds from sale of assets

 

39,742

 

228

 

-

 

39,970

 

-

Proceeds from business divestiture, net of cash sold

 

-

 

30,814

 

13,257

 

40,491

 

13,257

Cash outflow from the sale of residential lease portfolio

 

(16,397)

 

-

 

-

 

(16,397)

 

-

Cash paid for investments in unconsolidated investees

 

(2,400)

 

(10,000)

 

-

 

(12,400)

 

(14,061)

Net cash provided by (used in) investing activities

 

38,503

 

(6,337)

 

(16,964)

 

7,695

 

332,207

Cash flows from financing activities:

                   

Proceeds from bank loans and other debt

 

87,823

 

75,687

 

51,018

 

231,489

 

167,477

Repayment of 0.75% debentures due 2018, bank loans and other debt

 

(84,035)

 

(66,688)

 

(56,702)

 

(209,095)

 

(476,229)

Proceeds from issuance of non-recourse residential financing, net of issuance costs

 

6,528

 

43,476

 

120,099

 

72,259

 

187,208

Repayment of non-recourse residential financing

 

(1,803)

 

(1,156)

 

(5,032)

 

(2,959)

 

(14,931)

Contributions from noncontrolling interests and redeemable noncontrolling interests attributable to residential projects

 

1,842

 

8,590

 

34,388

 

31,413

 

107,678

Distributions to noncontrolling interests and redeemable noncontrolling interests attributable to residential projects

 

-

 

(316)

 

(6,594)

 

(316)

 

(19,176)

Proceeds from issuance of non-recourse power plant and commercial financing, net of issuance costs

 

-

 

-

 

27,980

 

-

 

50,266

Repayment of non-recourse power plant and commercial financing

 

-

 

-

 

(221)

 

-

 

(4,899)

Payment for prior business combination

 

-

 

(9,000)

 

-

 

(9,000)

 

-

Settlement of contingent consideration arrangement

 

-

 

-

 

-

 

(2,448)

 

-

Purchases of stock for tax withholding obligations on vested restricted stock

 

(292)

 

(493)

 

(349)

 

(4,657)

 

(5,249)

Net cash provided by (used in) financing activities

 

10,063

 

50,100

 

164,587

 

106,686

 

(7,855)

Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents

 

(1,510)

 

147

 

1,896

 

(1,247)

 

772

Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

 

10,983

 

(37,151)

 

(12,215)

 

(153,028)

 

(191,952)

Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period

 

199,752

 

236,903

 

364,600

 

363,763

 

544,337

Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period

 

$           210,735

 

$           199,752

 

$           352,385

 

$           210,735

 

$           352,385

                     

Non-cash transactions:

                   

Costs of solar power systems, leased, sourced from existing inventory

 

$                       -

 

$                       -

 

$                8,769

 

$                       -

 

$             30,409

Costs of solar power systems, leased, funded by liabilities

 

$                       -

 

$                       -

 

$                4,903

 

$                       -

 

$                4,903

Costs of solar power systems sourced from existing inventory

 

$                8,033

 

$                4,767

 

$                       -

 

$             29,206

 

$                       -

Costs of solar power systems funded by liabilities

 

$                3,604

 

$                4,529

 

$                       -

 

$                3,604

 

$                       -

Costs of solar power systems under sale-leaseback financing arrangements, sourced from project assets 

 

$                       -

 

$                       -

 

$             14,628

 

$                       -

 

$             30,208

Property, plant and equipment acquisitions funded by liabilities

 

$             11,911

 

$             22,560

 

$             11,453

 

$             11,911

 

$             11,453

Contractual obligations satisfied with inventory

 

$                       -

 

$                       -

 

$                8,035

 

$                       -

 

$             48,916

Accounts receivable due to business divestiture

 

$                       -

 

$                       -

 

$             10,000

 

$                       -

 

$             10,000

Acquisition of noncontrolling interests funded by Mezzanine Loan proceeds

 

$                       -

 

$                       -

 

$             12,400

 

$                       -

 

$             12,400

Accounts reivable due to disposal of shares in joint venture

 

$                       -

 

$                       -

 

$                4,635

 

$                       -

 

$                4,635

Stock consideration received due to business divestiture

 

$                       -

 

$                       -

 

$             42,600

 

$                       -

 

$             42,600

Assumption of debt by buyer upon sale of equity interest

 

$                       -

 

$                       -

 

$                       -

 

$                       -

 

$             27,321

Assumption of debt by buyer in connection with sale of residential lease assets

 

$             69,076

 

$                       -

 

$                       -

 

$             69,076

 

$                       -

Receivables in connection with sale of residential lease portfolio

 

$                8,043

 

$                       -

 

$                       -

 

$                8,043

 

$                       -

Right-of-use assets obtained in exchange for lease obligations

 

$                8,939

 

$             13,280

 

$                       -

 

$           103,744

 

$                       -

Derecognition of financing obligations upon business divestiture

 

$                       -

 

$           590,884

 

$                       -

 

$           590,884

 

$                       -

Holdback related to business divestiture

 

$                       -

 

$                2,425

 

$                       -

 

$                2,425

 

$                       -

Holdback related to sale of assets

 

$             18,300

 

$                       -

 

$                       -

 

$             18,300

 

$                       -

Aged supplier financing balances reclassified from AP to short-term debt

 

$             22,852

 

$                       -

 

$                       -

 

$             22,852

 

$                       -

Use of Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the company uses non-GAAP measures that are adjusted for certain items from the most directly comparable GAAP measures. The specific non-GAAP measures listed below are: revenue; gross margin; net loss; net loss per diluted share; and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"). Management believes that each of these non-GAAP measures are useful to investors, enabling them to better assess changes in each of these key elements of the company's results of operations across different reporting periods on a consistent basis, independent of certain items as described below. Thus, each of these non-GAAP financial measures provide investors with another method to assess the company's operating results in a manner that is focused on its ongoing, core operating performance, absent the effects of these items. Management uses these non-GAAP measures internally to assess the business, its financial performance, current and historical results, as well as for strategic decision-making and forecasting future results. Many of the analysts covering the company also use these non-GAAP measures in their analysis. Given management's use of these non-GAAP measures, the company believes these measures are important to investors in understanding the company's operating results as seen through the eyes of management. These non-GAAP measures are not prepared in accordance with GAAP or intended to be a replacement for GAAP financial data; and therefore, should be reviewed together with the GAAP measures and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies.

Non-GAAP revenue includes adjustments relating to 8point3, legacy utility and power plant projects, legacy sale-leaseback transactions and construction services for residential customer contracts, each of which is described below. In addition to the above adjustments, non-GAAP gross margin includes adjustments relating to impairment and sale of residential lease assets, impairment of property, plant, and equipment, cost of above-market polysilicon, stock-based compensation, amortization of intangible assets, and depreciation of idle equipment, each of which is described below. In addition to the above adjustments, non-GAAP net loss and non-GAAP net loss per diluted share are adjusted for adjustments relating to gain on business divestiture, transaction-related costs, business reorganization costs, non-cash interest expense, restructuring expense, the tax effect of these non-GAAP adjustments, and other items, each of which is described below. In addition to the above adjustments as non-GAAP net loss, Adjusted EBITDA includes adjustments relating to cash interest expense (net of interest income), provision for income taxes, and depreciation.

Non-GAAP Adjustments Based on International Financial Reporting Standards ("IFRS")

The company's non-GAAP results include adjustments under IFRS that are consistent with the adjustments made in connection with the company's internal reporting process as part of its status as a consolidated subsidiary of Total S.A., our controlling shareholder and a foreign public registrant that reports under IFRS. Differences between GAAP and IFRS reflected in the company's non-GAAP results are further described below. In these situations, management believes that IFRS enables investors to better evaluate the company's performance, and assists in aligning the perspectives of the management with those of Total S.A.

  • 8point3: The company includes adjustments related to the sales of projects contributed to 8point3 Group, an equity method investee ("8point3") based on the difference between the fair market value of the consideration received and the net carrying value of the projects contributed, of which, a portion is deferred in proportion to the company's retained equity stake in 8point3. The deferred profit is subsequently recognized over time. Under GAAP, these sales are recognized under either real estate, lease, or consolidation accounting guidance depending upon the nature of the individual asset contributed, with outcomes ranging from no, partial, or full profit recognition. IFRS profit, less deferrals associated with retained equity, is recognized for sales related to the residential lease portfolio. Revenue for other projects sold is deferred until those projects reach commercial operation. On June 19, 2018, the company sold its equity interest in the 8point3 Group.
  • Legacy utility and power plant projects: The company included adjustments related to the revenue recognition of certain utility and power plant projects based on percentage-of-completion accounting and, when relevant, the allocation of revenue and margin to our project development efforts at the time of initial project sale. Under IFRS, such projects are accounted for when the customer obtains control of the promised goods or services which generally results in earlier recognition of revenue and profit than U.S. GAAP. Over the life of each project, cumulative revenue and gross margin will eventually be equivalent under both GAAP and IFRS; however, revenue and gross margin will generally be recognized earlier under IFRS.
  • Legacy sale-leaseback transactions: The company included adjustments related to the revenue recognition on certain legacy sale-leaseback transactions entered into before December 31, 2018, based on the net proceeds received from the buyer-lessor. Under U.S. GAAP, these transactions were accounted for under the financing method in accordance with the applicable accounting guidance. Under such guidance, no revenue or profit is recognized at the inception of the transaction, and the net proceeds from the buyer-lessor are recorded as a financing liability. Imputed interest is recorded on the liability equal to our incremental borrowing rate adjusted solely to prevent negative amortization. Under IFRS, such revenue and profit is recognized at the time of sale to the buyer-lessor if certain criteria are met. Upon adoption of IFRS 16, Leases, on December 31, 2018, IFRS is aligned with GAAP.
  • Mark-to-market (gain) loss in equity investments: The company recognizes adjustments related to the fair value of equity investments with readily determinable fair value based on the changes in the stock price of these equity investments at every reporting period. Under GAAP, mark-to-market gains and losses due to changes in stock prices for these securities are recorded in earnings while under IFRS, an election can be made to recognize such gains and losses in other comprehensive income. Such an election was made by Total S.A. Further, we elected the Fair Value Option ("FVO") for some of our equity method investments, and we adjust the carrying value of those investments based on their fair market value calculated periodically. Such option is not available under IFRS, and equity method accounting is required for such investments. Management believes that excluding these adjustments on equity investments is consistent with our internal reporting process as part of its status as a consolidated subsidiary of Total S.A. and better reflects our ongoing results.

Other Non-GAAP Adjustments

  • Business process improvement costs: During prior quarter ended June 30, 2019, the company initiated a project to improve its manufacturing and related processes to improve gross margin in coming years and engaged third party experts to consult on business process improvements. Management believes it is appropriate to exclude these consulting expenses from our Non-GAAP financial measures as they are non-recurring in nature, and are not reflective of the company's ongoing operating results
  • Loss (gain) on sale and impairment of residential lease assets: In the fourth quarter of fiscal 2017, the company made the decision to sell or refinance its interest in the residential lease portfolio and as a result of this triggering event, determined it was necessary to evaluate the potential for impairment in its ability to recover the carrying amount of the residential lease portfolio. In accordance with such evaluation, the company recognized a non-cash impairment charge on its solar power systems leased and to be leased and an allowance for losses related financing receivables. In connection with the impairment loss, the carrying values of the company's solar power systems leased and to be leased were reduced which resulted in lower depreciation charges. In the fourth quarter of fiscal 2018, the company sold membership units representing a 49% membership interest in its residential lease business and retained a 51% membership interest. The loss on divestment and the remaining unsold residential lease assets impairment with its corresponding depreciation savings are excluded from the company's non-GAAP results as they are non-cash in nature and not reflective of ongoing operating results. Additionally, in the third quarter of fiscal 2019, in continuation with our intention to deconsolidate all the residential lease assets owned by us, we sold the remainder of residential lease assets still owned by us, that were not previously sold. Such activity is excluded from the company's non-GAAP financial measures as it is non-cash in nature and not reflective of ongoing non-GAAP results.
  • Impairment of property, plant, and equipment: In the second quarter of fiscal 2018, the company announced its proposed plan to change the corporate structure into the Upstream business unit and Downstream business unit, and long-term strategy to replace IBC technology to NGT. Accordingly, the company expects to upgrade the equipment associated with our manufacturing operations for the production of NGT over the next several years. In connection with these events, the company determined indicators of impairment existed and therefore performed an evaluation of the recoverability of the asset group. In accordance with such evaluation, the company recognized a non-cash impairment charge on its property, plant and equipment. Such asset impairment is excluded from the company's non-GAAP financial measures as it is non-cash in nature and not reflective of ongoing segment results.
  • Construction revenue on solar services contracts: Upon adoption of the new lease accounting guidance ("ASC 842") in the first quarter of fiscal 2019, revenue and cost of revenue on solar services contracts with residential customers are recognized ratably over the term of those contracts, once the projects are placed in service. For non-GAAP results, the company recognizes revenue and cost of revenue upfront based on the expected cash proceeds to align with the legacy lease accounting guidance. Management believes it is appropriate to recognize revenue and cost of revenue upfront based on total expected cash proceeds, as it better reflects the company's ongoing results as such method aligns revenue and costs incurred most accurately in the same period.
  • Cost of above-market polysilicon: The company has entered into multiple long-term, fixed-price supply agreements to purchase polysilicon for periods of up to 10 years. The prices in select legacy supply agreements, which incorporate a cash portion and a non-cash portion attributable to the amortization of prepayments made under the agreements, significantly exceed current market prices. Additionally, in order to reduce inventory and improve working capital, the company has periodically elected to sell polysilicon inventory in the marketplace at prices below the company's purchase price, thereby incurring a loss. Management believes that it is appropriate to exclude the impact of its above-market cost of polysilicon, including the effect of above-market polysilicon on product costs, losses incurred on sales of polysilicon to third parties, and inventory reserves and project asset impairments from the company's non-GAAP financial measures as they are not reflective of ongoing operating results and do not contribute to a meaningful evaluation of a company's past operating performance.
  • Stock-based compensation: Stock-based compensation relates primarily to the company's equity incentive awards. Stock-based compensation is a non-cash expense that is dependent on market forces that are difficult to predict. Management believes that this adjustment for stock-based compensation provides investors with a basis to measure the company's core performance, including compared with the performance of other companies, without the period-to-period variability created by stock-based compensation.
  • Amortization of intangible assets: The company incurs amortization of intangible assets as a result of acquisitions, which includes patents, purchased technology, project pipeline assets, and in-process research and development. Management believes that it is appropriate to exclude these amortization charges from the company's non-GAAP financial measures as they arise from prior acquisitions, are not reflective of ongoing operating results, and do not contribute to a meaningful evaluation of a company's past operating performance.
  • Depreciation of idle equipment: In the fourth quarter of 2017, the company changed the deployment plan for its next generation of solar cell technology, and revised its depreciation estimates to reflect the use of certain assets over its shortened useful life. Such asset depreciation is excluded from the company's non-GAAP financial measures as it is non-cash in nature and not reflective of ongoing operating results. Excluding this data provides investors with a basis to compare the company's performance against the performance of other companies without such charges.
  • Gain on business divestiture: In the second quarter of fiscal 2019, the company entered into a transaction pursuant to which it sold membership interest in certain of its subsidiaries that own leasehold interests in projects subject to sale-leaseback financing arrangements. In connection with this sale, the company recognized a gain relating to this business divestiture. In the third quarter of fiscal 2018, the company entered into a transaction pursuant to which the company sold certain assets and intellectual property related to the production of microinverters for purchase consideration comprised of both cash and stock. In connection with this sale, the company recognized a gain relating to this business divestiture. Management believes that it is appropriate to exclude both of these gains from the company's non-GAAP results as it is not reflective of ongoing operating results.
  • Transaction-related costs: In connection with material transactions such as acquisition or divestiture of a business, the company incurred transaction costs including legal and accounting fees. Management believes that it is appropriate to exclude these costs from the company's non-GAAP financial measures as they would not have otherwise been incurred as part of its business operations and are therefore not reflective of ongoing operating results.
  • Business reorganization costs: In connection with the reorganization of our business into an upstream and downstream business unit structure, the company incurred and expects to continue incurring expenses in the upcoming quarters associated with reorganization of corporate functions and responsibilities to the business units, updating accounting policies and processes and implementing systems. The company also incurred and expects to incur costs in financing its Next Generation Technology ("NGT") business. The company believes that it is appropriate to exclude these from our segment results as they would not have otherwise been incurred as part of its business operations and are therefore not reflective of ongoing operating results.
  • Non-cash interest expense: The company incurs non-cash interest expense related to the amortization of items such as original issuance discounts on its debt. The company excludes non-cash interest expense because the expense does not reflect its financial results in the period incurred. Management believes that this adjustment for non-cash interest expense provides investors with a basis to evaluate the company's performance, including compared with the performance of other companies, without non-cash interest expense.
  • Restructuring expenses: The company incurs restructuring expenses related to reorganization plans aimed towards realigning resources consistent with the company's global strategy and improving its overall operating efficiency and cost structure. Restructuring charges are excluded from non-GAAP financial measures because they are not considered core operating activities and such costs have historically occurred infrequently. Although the company has engaged in restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges from the company's non-GAAP financial measures as they are not reflective of ongoing operating results or contribute to a meaningful evaluation of a company's past operating performance.
  • Tax effect: This amount is used to present each of the adjustments described above on an after-tax basis in connection with the presentation of non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. The company's non-GAAP tax amount is based on estimated cash tax expense and reserves. The company forecasts its annual cash tax liability and allocates the tax to each quarter in a manner generally consistent with its GAAP methodology. This approach is designed to enhance investors' ability to understand the impact of the company's tax expense on its current operations, provide improved modeling accuracy, and substantially reduce fluctuations caused by GAAP to non-GAAP adjustments, which may not reflect actual cash tax expense.
  • Adjusted EBITDA adjustments: When calculating Adjusted EBITDA, in addition to adjustments described above, the company excludes the impact of the following items during the period:
  • Cash interest expense, net of interest income
  • Provision for income taxes
  • Depreciation

For more information about these non-GAAP financial measures, please see the tables captioned "Reconciliations of GAAP Measures to Non-GAAP Measures" set forth at the end of this release, which should be read together with the preceding financial statements prepared in accordance with GAAP.

SUNPOWER CORPORATION

 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

 

(In thousands, except percentages and per share data)

 

(Unaudited)

 
                       

Adjustments to Revenue:

                     
   

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 
   

Sep. 29,

 

Jun. 30,

 

Sep. 30,

 

Sep. 29,

 

Sep. 30,

 
   

2019

 

2019

 

2018

 

2019

 

2018

 

GAAP revenue

 

$          475,958

 

$          436,281

 

$          428,263

 

$       1,260,464

 

$       1,269,248

 

Adjustments based on IFRS:

                     

8point3

 

-

 

-

 

-

 

-

 

(8,588)

 

Legacy utility and power plant projects

 

(65)

 

(23)

 

(361)

 

(259)

 

(3,454)

 

Legacy sale-leaseback transactions

 

-

 

-

 

15,529

 

-

 

32,327

 

Other adjustments:

                     

Construction revenue on solar services contracts

 

15,790

 

45,614

 

-

 

124,909

 

-

 

Non-GAAP revenue

 

$          491,683

 

$           481,872

 

$          443,431

 

$       1,385,114

 

$       1,289,533

 
                       

Adjustments to Gross Profit (Loss) / Margin:

                     
   

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 
   

Sep. 29,

 

Jun. 30,

 

Sep. 30,

 

Sep. 29,

 

Sep. 30,

 
   

2019

 

2019

 

2018

 

2019

 

2018

 

GAAP gross profit (loss)

 

$             48,251

 

$             19,800

 

$              9,877

 

$            30,766

 

$        (289,510)

 

Adjustments based on IFRS:

                     

8point3

 

-

 

-

 

-

 

-

 

(8,337)

 

Legacy utility and power plant projects

 

(7)

 

884

 

162

 

993

 

(675)

 

Legacy sale-leaseback transactions

 

(181)

 

(3,684)

 

(2,492)

 

(4,688)

 

(5,890)

 

Other adjustments:

                     

Business process improvement costs

 

2,279

 

-

 

-

 

2,279

 

-

 

Loss on sale and impairment of residential lease assets

 

(511)

 

(632)

 

(4,679)

 

(1,268)

 

(12,683)

 

Construction revenue on solar service contracts

 

1,160

 

5,506

 

-

 

18,052

 

-

 

Impairment of property, plant and equipment

 

-

 

-

 

-

 

-

 

355,106

 

Cost of above-market polysilicon

 

23,878

 

25,950

 

14,628

 

99,256

 

49,997

 

Stock-based compensation expense

 

1,522

 

1,133

 

1,239

 

2,823

 

3,760

 

Amortization of intangible assets

 

1,783

 

1,783

 

2,142

 

5,352

 

7,077

 

Depreciation of idle equipment 

 

-

 

-

 

-

 

-

 

721

 

Non-GAAP gross profit

 

$             78,174

 

$             50,740

 

$            20,877

 

$           153,565

 

$            99,566

 
                       

GAAP gross margin (%)

 

10.1%

 

4.5%

 

2.3%

 

2.4%

 

-22.8%

 

Non-GAAP gross margin (%)

 

15.9%

 

10.5%

 

4.7%

 

11.1%

 

7.7%

 
                       

Adjustments to Net income (loss):

                     
   

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 
   

Sep. 29,

 

Jun. 30,

 

Sep. 30,

 

Sep. 29,

 

Sep. 30,

 
   

2019

 

2019

 

2018

 

2019

 

2018

 

GAAP net income (loss) attributable to stockholders

 

$           (15,017)

 

$           121,459

 

$           (89,826)

 

$             16,718

 

$         (652,917)

 

Adjustments based on IFRS:

                     

8point3

 

-

 

-

 

-

 

-

 

(8,485)

 

Legacy utility and power plant projects

 

(7)

 

884

 

162

 

993

 

(675)

 

Legacy sale-leaseback transactions

 

(181)

 

1,025

 

2,258

 

5,755

 

7,818

 

Mark-to-market (gain) loss on equity investments

 

(27,595)

 

(67,500)

 

6,225

 

(128,095)

 

6,225

 

Other adjustments:

                     

     Business process improvements

 

2,279

 

-

 

-

 

2,279

 

-

 

Loss on sale and impairment of residential lease assets

 

5,135

 

15,554

 

50,735

 

29,002

 

146,234

 

Construction revenue on solar services contracts

 

1,160

 

(6,398)

 

-

 

(8,978)

 

-

 

Impairment of property, plant and equipment

 

-

 

-

 

-

 

-

 

369,168

 

Cost of above-market polysilicon

 

23,878

 

25,950

 

14,628

 

99,256

 

49,997

 

Stock-based compensation expense

 

6,992

 

6,270

 

6,390

 

18,928

 

21,791

 

Amortization of intangible assets

 

1,783

 

1,783

 

2,142

 

5,352

 

7,077

 

Depreciation of idle equipment 

 

-

 

-

 

-

 

-

 

721

 

Gain on business divestiture

 

-

 

(137,286)

 

(59,347)

 

(143,400)

 

(59,347)

 

Transaction-related costs

 

976

 

1,173

 

20,869

 

3,571

 

20,869

 

Business reorganization costs

 

6,066

 

4,156

 

-

 

12,871

 

-

 

Non-cash interest expense

 

10

 

10

 

13

 

30

 

58

 

Restructuring charges

 

4,283

 

2,453

 

3,923

 

6,071

 

18,604

 

Tax effect

 

880

 

(669)

 

906

 

1,729

 

1,808

 

Non-GAAP net loss attributable to stockholders

 

$             10,642

 

$           (31,136)

 

$           (40,922)

 

$           (77,918)

 

$           (71,054)

 
                       
                       

Adjustments to Net income (loss) per diluted share:

                     
   

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 
   

Sep. 29,

 

Jun. 30,

 

Sep. 30,

 

Sep. 29,

 

Sep. 30,

 
   

2019

 

2019

 

2018

 

2019

 

2018

 

Net income (loss) per diluted share

                     

Numerator:

                     

GAAP net income (loss) available to common stockholders

 

$           (15,017)

 

$           121,459

 

$           (89,826)

 

$             16,718

 

$         (652,917)

 

     Add: Interest expense on 4.00% debenture due 2023, net of tax

 

-

 

3,358

 

-

 

-

 

-

 

     Add: Interest expense on 0.875%% debenture due 2021, net of tax

 

-

 

691

 

-

 

-

 

-

 

          GAAP net income (loss) available to common stockholders
 

 

$           (15,017)

 

$           125,508

 

$           (89,826)

 

$             16,718

 

$         (652,917)

 

Non-GAAP net income (loss) available to common stockholders

$             10,642

 

$           (31,136)

 

$           (40,922)

 

$           (77,918)

 

$           (71,054)

 
                       

Denominator:

                     

GAAP weighted-average shares

 

142,553

 

142,471

 

141,027

 

142,248

 

140,722

 

Effect of dilutive securities:

                     

Restricted stock units

 

-

 

2,241

 

-

 

2,488

 

-

 

0.875% debentures due 2021

 

-

 

13,922

 

-

 

-

 

-

 

4.00% debentures due 2023

 

-

 

8,203

 

-

 

-

 

-

 

GAAP dilutive weighted-average common shares:

 

142,553

 

166,837

 

141,027

 

144,736

 

140,722

 
                       

Non-GAAP weighted-average shares

 

142,533

 

142,471

 

141,027

 

142,248

 

140,722

 

Effect of dilutive securities:

                     

   Restricted stock units

 

4,826

 

-

 

-

 

-

 

-

 

Non-GAAP weighted-average shares1

 

147,379

 

142,471

 

141,027

 

142,248

 

140,722

 
                       

GAAP net income (loss) per diluted share

 

$               (0.11)

 

$                 0.75

 

$               (0.64)

 

$                 0.12

 

$               (4.64)

 

Non-GAAP net income (loss) per diluted share

 

$                 0.07

 

$               (0.22)

 

$               (0.29)

 

$               (0.55)

 

$               (0.50)

 
                       

1In accordance with the if-converted method, net income (loss) available to common stockholders excludes interest expense related to the 0.75%, 0.875%, and 4.0% debentures if the debentures are considered converted in the calculation of net income (loss) per diluted share.  If the conversion option for a debenture is not in the money for the relevant period, the potential conversion of the debenture under the if-converted method is excluded from the calculation of non-GAAP net income (loss) per diluted share.

 
                       

Adjusted EBITDA:

                     
   

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 
   

Sep. 29,

 

Jun. 30,

 

Sep. 30,

 

Sep. 29,

 

Sep. 30,

 
   

2019

 

2019

 

2018

 

2019

 

2018

 

GAAP net income (loss) attributable to stockholders

 

$           (15,017)

 

$           121,459

 

$           (89,826)

 

$             16,718

 

$         (652,917)

 

Adjustments based on IFRS:

                     

8point3

 

-

 

-

 

-

 

-

 

(8,485)

 

Legacy utility and power plant projects

 

(7)

 

884

 

162

 

993

 

(675)

 

Legacy sale-leaseback transactions

 

(181)

 

1,025

 

2,258

 

5,755

 

7,818

 

Mark-to-market (gain) loss on equity investments

 

(27,595)

 

(67,500)

 

6,225

 

(128,095)

 

6,225

 

Other adjustments:

                     

     Business process improvement costs

 

2,279

 

-

 

-

 

2,279

 

-

 

Loss on sale and impairment of residential lease assets

 

5,135

 

15,554

 

50,735

 

29,002

 

146,234

 

Construction revenue on solar services contracts

 

1,160

 

(6,398)

 

-

 

(8,978)

 

-

 

Impairment of property, plant and equipment

 

-

 

-

 

-

 

-

 

369,168

 

Cost of above-market polysilicon

 

23,878

 

25,950

 

14,628

 

99,256

 

49,997

 

Stock-based compensation expense

 

6,992

 

6,270

 

6,390

 

18,928

 

21,791

 

Amortization of intangible assets

 

1,783

 

1,783

 

2,142

 

5,352

 

7,077

 

Depreciation of idle equipment 

 

-

 

-

 

-

 

-

 

721

 

Gain on business divestiture

 

-

 

(137,286)

 

(59,347)

 

(143,400)

 

(59,347)

 

Transaction-related costs

 

976

 

1,173

 

20,869

 

3,571

 

20,869

 

Business reorganization costs

 

6,066

 

4,156

 

-

 

12,871

 

-

 

Non-cash interest expense

 

10

 

10

 

13

 

30

 

58

 

Restructuring charges

 

4,283

 

2,453

 

3,923

 

6,071

 

18,604

 

Cash interest expense, net of interest income

 

9,624

 

11,148

 

20,136

 

30,978

 

61,810

 

Provision for income taxes

 

5,378

 

6,068

 

3,680

 

17,243

 

9,389

 

Depreciation

 

17,205

 

21,286

 

24,754

 

57,672

 

99,313

 

Adjusted EBITDA

 

$             41,969

 

$               8,035

 

$              6,742

 

$             26,246

 

$             97,650

 
                       
                       

Q4 2019 and FY 2019 GUIDANCE

(in thousands except percentages)

Q4 2019

FY 2019

Revenue (GAAP)

$520,000-$720,000

$1,800,000-$2,000,000

Revenue (non-GAAP)1

$520,000-$720,000

$1,900,000-$2,100,000

Gross margin (GAAP)

11% - 12%

N/A

Gross margin (non-GAAP)2

16% - 19%

N/A

Net income (loss) (GAAP)

$(28,000)-$(8,000)

$(20,000)-$0

Adjusted EBITDA3

$74,000-$94,000

$100,000-$120,000

  1. Estimated non-GAAP amounts above for fiscal 2019 include net adjustments that increase revenue by approximately $125 million, related to construction revenue on solar services contracts.
  2. Estimated non-GAAP amounts above for Q4 2019 include net adjustments that increase gross margin by approximately $40 million related to cost of above-market polysilicon, $2 million related to stock-based compensation expense, and $2 million related to amortization of intangible assets.
  3. Estimated Adjusted EBITDA amounts above for Q4 2019 include net adjustments that  decrease (increase) net income by approximately $40 million related to cost of above-market polysilicon, $15 million related to depreciation, $10 million related to interest expense, $10 million related to stock-based compensation expense, $9 million related to restructuring, $5 million related to income taxes, $11 million related to business reorganization costs, $2 million related to amortization of intangible assets. Estimated non-GAAP amounts above for fiscal 2019 include net adjustments that decrease (increase) net loss by approximately $139 million related to cost of above-market polysilicon, $73 million related to depreciation, $40 million related to interest expense, $29 million related to impairment of lease assets, $29 million related to stock-based compensation expense, $24 million related to business reorganization costs, $22 million related to income taxes, $15 million related to restructuring, $7 million related to amortization of intangible assets, $6 million on sale-leaseback, $4 million related to transaction-related costs, $3 million related to business process improvement costs, $(143) million related to the gain on business divestiture, $(128) million related to mark-to-market gain on equity investments, and $(9) million related to construction revenue on solar services contracts. 

 

   

SUNPOWER CORPORATION

   

(In thousands, except percentages)

   

THREE MONTHS ENDED

                                                                           
   

September 29, 2019

   

 Revenue 

 

 Gross profit / margin 

 

 Operating expenses 

                       
   

SunPower Energy
Services

 

SunPower
Technologies

 

Intersegment
eliminations

 

SunPower Energy Services

 

SunPower Technologies

 

Intersegment
eliminations

   

 Research and
development 

 

 Sales, general
and
administrative 

 

 Restructuring
charges 

 

 Loss on sale and
impairment of
residential lease
assets 

 

 Other income
(expense), net 

 

 Benefit from
income taxes 

 

 Equity in
earnings of
unconsolidated
investees 

 

 Loss attributable to
non-controlling
interests 

 

 Net income (loss)
attributable to
stockholders 

   

GAAP

 

$                     277,688

 

$                 333,896

 

$               (135,626)

 

$                    29,271

 

10.5%

 

$                    18,603

 

5.6%

 

$                          377

                                   

$                 (15,017)

   

Adjustments based on IFRS:

                                                                         

Legacy utility and power plant projects

 

-

 

(65)

 

-

 

(7)

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(7)

   

Legacy sale-leaseback transactions

 

-

 

-

 

-

 

(181)

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(181)

   

Mark-to-market gain on equity investments

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

(28,548)

 

-

 

953

 

-

 

(27,595)

   

Other adjustments:

                                                                         

Business process improvement costs

 

-

 

-

 

-

 

-

     

2,279

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,279

   

Loss on sale and impairment of residential lease assets

 

-

 

-

 

-

 

(511)

     

-

     

-

   

-

 

-

 

-

 

10,756

 

-

 

-

 

-

 

(5,110)

 

5,135

   

Construction revenue on solar services contracts

 

15,790

 

-

 

-

 

1,160

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,160

   

Cost of above-market polysilicon

 

-

 

-

 

-

 

-

     

29,633

     

(5,755)

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

23,878

   

Stock-based compensation expense

 

-

 

-

 

-

 

741

     

781

     

-

   

903

 

4,567

 

-

 

-

 

-

 

-

 

-

 

-

 

6,992

   

Amortization of intangible assets

 

-

 

-

 

-

 

-

     

1,783

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,783

   

Business reorganization costs

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

6,066

 

-

 

-

 

-

 

-

 

-

 

-

 

6,066

   

Transaction-related costs

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

976

 

-

 

-

 

-

 

-

 

-

 

-

 

976

   

Non-cash interest expense

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

10

 

-

 

-

 

-

 

-

 

-

 

-

 

10

   

Restructuring charges

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

4,283

 

-

 

-

 

-

 

-

 

-

 

4,283

   

Tax effect

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

880

 

-

 

-

 

880

   

Non-GAAP

 

$                     293,478

 

$                 333,831

 

$               (135,626)

 

$                    30,473

 

10.4%

 

$                    53,079

 

15.9%

 

$                    (5,378)

                                   

$                    10,642

   
                                                                           
                                                                           
   

June 30, 2019

   
   

 Revenue 

 

 Gross profit / margin 

 

 Operating expenses 

 

 Other income
(expense), net 

 

 Provision for
income taxes 

 

 Gain (Loss)
attributable to non-
controlling interests 

 

 Net income (loss)
attributable to
stockholders 

   
   

SunPower Energy
Services

 

SunPower
Technologies

 

Intersegment
eliminations

 

SunPower Energy Services

 

SunPower Technologies

 

Intersegment
eliminations

   

 Research and
development 

 

 Sales, general
and
administrative 

 

 Restructuring
charges 

 

 Loss on sale and
impairment of
residential lease
assets 

 

 Gain on business
divestiture 

           

GAAP

 

$                     211,726

 

$                 314,971

 

$                 (90,416)

 

$                    22,464

 

10.6%

 

$                    (2,746)

 

-0.9%

 

$                            82

                                   

$                 121,459

   

Adjustments based on IFRS:

                                                                         

Legacy utility and power plant projects

 

-

 

(23)

 

-

 

-

     

884

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

884

   

Legacy sale-leaseback transactions

 

-

 

-

 

-

 

(3,684)

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

4,709

 

-

 

-

 

1,025

   

Mark-to-market gain on equity investments

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

(67,500)

 

-

 

-

 

(67,500)

   

Other adjustments:

                                                                         

Gain (loss) on sale and impairment of residential lease assets

 

-

 

-

 

-

 

(632)

     

-

     

-

   

-

 

-

 

-

 

16,728

 

-

 

-

 

-

 

(542)

 

15,554

   

Construction revenue on solar services contracts

 

45,614

 

-

 

-

 

5,506

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(11,904)

 

(6,398)

   

Cost of above-market polysilicon

 

-

 

-

 

-

 

-

     

23,875

     

2,075

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

25,950

   

Stock-based compensation expense

 

-

 

-

 

-

 

460

     

673

     

-

   

879

 

4,258

 

-

 

-

 

-

 

-

 

-

 

-

 

6,270

   

Amortization of intangible assets

 

-

 

-

 

-

 

-

     

1,783

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,783

   

Gain on business divestiture

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

(137,286)

 

-

 

-

 

-

 

(137,286)

   

Business reorganization costs

 

-

 

-

 

-

 

-

     

-

     

-

   

777

 

3,379

 

-

 

-

 

-

 

-

 

-

 

-

 

4,156

   

Transaction-related costs

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

1,173

 

-

 

-

 

-

 

-

 

-

 

-

 

1,173

   

Non-cash interest expense

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

10

 

-

 

-

 

-

 

-

 

-

 

-

 

10

   

Restructuring charges

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

2,453

 

-

 

-

 

-

 

-

 

-

 

2,453

   

Tax effect

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

(669)

 

-

 

(669)

   

Non-GAAP

 

$                     257,340

 

$                 314,948

 

$                 (90,416)

 

$                    24,114

 

9.4%

 

$                    24,469

 

7.8%

 

$                      2,157

                                   

$                 (31,136)

   
                                                                           
                                                                           
   

September 30, 2018

   
   

 Revenue 

 

 Gross profit / margin 

 

 Operating expenses 

 

 Other income
(expense), net 

 

 Benefit from 
income taxes 

 

 Gain attributable to
non-controlling
interests 

 

 Net income (loss)
attributable to
stockholders 

   
   

SPES

 

SPT

 

Intersegment
revenue
eliminations

 

SPES

 

SPT

 

Intersegment
revenue
eliminations

   

 Research and
development 

 

 Sales, general
and
administrative 

 

 Restructuring
charges 

 

 Impairment of
residential lease
assets 

 

 Gain on business
divestitures 

           

GAAP

 

$                     263,576

 

$                 289,630

 

$               (124,943)

 

$                    46,380

 

17.6%

 

$                 (17,897)

 

-6.2%

 

$                 (18,606)

                                   

$                 (89,826)

   

Adjustments based on IFRS:

                                                                         

Legacy utility and power plant projects

 

(114)

 

(247)

 

-

 

141

     

21

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

162

   

Legacy sale-leaseback transactions

 

15,529

 

-

 

-

 

(2,054)

     

(438)

     

-

   

-

 

-

 

-

 

-

 

-

 

4,750

 

-

 

-

 

2,258

   

Mark-to-market loss on equity investments

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

6,225

 

-

 

-

 

6,225

   

Other adjustments:

                                                                         

Impairment of residential lease assets

 

-

 

-

 

-

 

(4,679)

     

-

     

-

   

-

 

-

 

-

 

53,537

 

-

 

-

 

-

 

1,877

 

50,735

   

Cost of above-market polysilicon

 

-

 

-

 

-

 

(2,336)

     

16,964

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

14,628

   

Stock-based compensation expense

 

-

 

-

 

-

 

598

     

641

     

-

   

806

 

4,345

 

-

 

-

 

-

 

-

 

-

 

-

 

6,390

   

Amortization of intangible assets

 

-

 

-

 

-

 

972

     

1,170

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,142

   

Gain on business divestitures

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

(59,347)

 

-

 

-

 

-

 

(59,347)

   

Acquisition-related and other costs

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

20,869

 

-

 

-

 

-

 

-

 

-

 

-

 

20,869

   

Non-cash interest expense

 

-

 

-

 

-

 

-

     

-

     

-

   

1

 

12

 

-

 

-

 

-

 

-

 

-

 

-

 

13

   

Restructuring charges

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

3,923

 

-

 

-

 

-

 

-

 

-

 

3,923

   

Tax effect

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

906

 

-

 

906

   

Non-GAAP

 

$                     278,991

 

$                 289,383

 

$               (124,943)

 

$                    39,022

 

14.0%

 

$                          461

 

0.2%

 

$                 (18,606)

                                   

$                 (40,922)

   
                                                                           
                                                                           
   

NINE MONTHS ENDED

                                                                           
   

September 29, 2019

   

 Revenue 

 

 Gross profit / margin 

 

 Operating expenses 

 

 Other income
(expense), net 

 

 Benefit income
taxes 

 

 Equity in earnings of
unconsolidated
investees 

 

 Loss attributable
to non-controlling
interests 

 

 Net income (loss)
attributable to
stockholders 

   

SunPower Energy
Services

 

SunPower
Technologies

 

Intersegment
eliminations

 

SunPower Energy Services

 

SunPower Technologies

 

Intersegment
eliminations

   

 Research and
development 

 

 Sales, general
and
administrative 

 

 Restructuring
charges 

 

 Loss on sale and
impairment of
residential lease
assets 

 

 Gain on business
divestiture 

         

GAAP

 

$                     667,635

 

$                 879,671

 

$               (286,842)

 

$                    58,878

 

8.8%

 

$                 (36,207)

 

-4.1%

 

$                      8,095

                                       

$                     16,718

Adjustments based on IFRS:

                                                                         

Legacy utility and power plant projects

 

-

 

(259)

 

-

 

118

     

875

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

993

Legacy sale-leaseback transactions

 

-

 

-

 

-

 

(4,689)

     

1

     

-

   

-

 

-

 

-

 

-

 

-

 

10,443

 

-

 

-

 

-

 

5,755

Mark-to-market gain on equity investments

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

(129,048)

 

-

 

953

 

-

 

(128,095)

Other adjustments:

                                                                         

Business process improvement costs

 

-

 

-

 

-

 

-

     

2,279

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,279

Loss on sale and impairment of residential lease assets

 

-

 

-

 

-

 

(1,268)

     

-

     

-

   

-

 

-

 

-

 

36,710

 

-

 

-

 

-

 

-

 

(6,440)

 

29,002

Construction revenue on solar services contracts

 

124,909

 

-

 

-

 

18,052

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(27,030)

 

(8,978)

Cost of above-market polysilicon

 

-

 

-

 

-

 

-

     

102,936

     

(3,680)

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

99,256

Stock-based compensation expense

 

-

 

-

 

-

 

1,369

     

1,454

     

-

   

2,375

 

13,730

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

18,928

Amortization of intangible assets

 

-

 

-

 

-

 

-

     

5,352

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5,352

Business reorganization costs

 

-

 

-

 

-

 

-

     

-

     

-

   

777

 

12,094

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

12,871

Gain on business divestiture

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

(143,400)

 

-

 

-

 

-

 

-

 

(143,400)

Transaction-related costs

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

3,571

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

3,571

Non-cash interest expense

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

30

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

30

Restructuring charges

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

6,071

 

-

 

-

 

-

 

-

 

-

 

-

 

6,071

Tax effect

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

1,729

 

-

 

-

 

1,729

Non-GAAP

 

$                     792,544

 

$                 879,412

 

$               (286,842)

 

$                    72,460

 

9.1%

 

$                    76,690

 

8.7%

 

$                      4,415

                                       

$                   (77,918)

                                                                           
                                                                           
                                                                           
   

September 30, 2018

   

 Revenue 

 

 Gross profit / margin 

 

 Operating expenses 

 

 Other income
(expense), net 

 

 Benefit from
income taxes 

 

 Equity in losses of
unconsolidated
investees 

 

 Loss attributable
to non-controlling
interests 

 

 Net income (loss)
attributable to
stockholders 

   

SunPower Energy
Services

 

SunPower
Technologies

 

Intersegment
eliminations

 

SunPower Energy Services

 

SunPower Technologies

 

Intersegment
eliminations

   

 Research and
development 

 

 Sales, general
and
administrative 

 

 Restructuring
charges 

 

 Impairment of
residential lease
assets 

 

 Gain on business
divestiture 

         

GAAP

 

$                     780,187

 

$                 791,754

 

$               (302,693)

 

$                 136,078

 

17.4%

 

$               (408,283)

 

-51.6%

 

$                 (17,305)

                                       

$                (652,917)

Adjustments based on IFRS:

                                                                         

8point3

 

(2,400)

 

(6,188)

 

-

 

(2,149)

     

(6,188)

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(148)

 

-

 

(8,485)

Legacy utility and power plant projects

 

(588)

 

(2,866)

 

-

 

(315)

     

(360)

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(675)

Legacy sale-leaseback transactions

 

32,327

 

-

 

-

 

(5,452)

     

(438)

     

-

   

-

 

-

 

-

 

-

 

-

 

13,708

 

-

 

-

 

-

 

7,818

Mark-to-market loss on equity investments

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

6,225

 

-

 

-

 

-

 

6,225

Other adjustments:

                                                                         

Impairment of property, plant and equipment

 

-

 

-

 

-

 

33

     

355,074

     

-

   

12,832

 

1,229

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

369,168

Impairment of residential lease assets

 

-

 

-

 

-

 

(12,684)

     

-

     

-

   

-

 

-

 

-

 

170,898

 

-

 

-

 

-

 

-

 

(11,980)

 

146,234

Cost of above-market polysilicon

 

-

 

-

 

-

 

(5,850)

     

55,847

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

49,997

Stock-based compensation expense

 

-

 

-

 

-

 

1,760

     

2,000

     

-

   

4,589

 

13,442

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

21,791

Amortization of intangible assets

 

-

 

-

 

-

 

3,493

     

3,584

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

7,077

Depreciation of idle equipment 

 

-

 

-

 

-

 

289

     

432

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

721

Gain on business divestitures

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

(59,347)

 

-

 

-

 

-

 

-

 

(59,347)

Acquisition-related and other costs

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

20,869

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

20,869

Non-cash interest expense

 

-

 

-

 

-

 

-

     

-

     

-

   

7

 

51

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

58

Restructuring charges

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

18,604

 

-

 

-

 

-

 

-

 

-

 

-

 

18,604

Tax effect

 

-

 

-

 

-

 

-

     

-

     

-

   

-

 

-

 

-

 

-

 

-

 

-

 

1,808

 

-

 

-

 

1,808

Non-GAAP

 

$                     809,526

 

$                 782,700

 

$               (302,693)

 

$                 115,203

 

14.2%

 

$                      1,668

 

0.2%

 

$                 (17,305)

                                       

$                   (71,054)

 

SOURCE SunPower Corp.

For further information: Investors, Bob Okunski, 408-240-5447, Bob.Okunski@sunpower.com; Media, Natalie Wymer, 408-457-2348, Natalie.Wymer@sunpower.com