SunPower’s Q1 losses exceed guidance as asset sales and more restructuring starts

US-headquartered high-efficiency PV module producer SunPower Corp reported a larger than guided first quarter 2018 loss, posting its eleventh sequential quarterly deficit and a program of asset sales. 

SunPower reported a GAAP net loss of US$116 million in the first quarter of 2018, significantly lower than the US$572 million loss reported in the fourth quarter of 2017.

The GAAP net loss was higher than the previously guided loss for quarter of being in the range of US$110 million to US$90 million. 

SunPower had cash and cash equivalents at the end of the quarter of US$260.6 million, down from US$435.1 million at the end of the previous quarter.

Profitability remains elusive, as SunPower also guided an expected GAAP net loss to be in the range of US$125 million to US$100 million in the second quarter of 2018.

In response, SunPower announced that it would be selling its 2GW (approx.) portfolio of PV power plant projects in Mexico after selling a 126MW development project (Guajiro) in the first quarter. The company also sold several smaller completed projects in the US and its Boulder Solar project.

Management noted in its earnings conference call that the sale of large Mexican project portfolio would occur in the second and third quarters of 2018. However, management did not expect any meaningful financial gain from the asset sale.

In response to an analysts question on the P&L of the asset sales, exiting CFO, Charles Boynton said, “I would model it at roughly neutral for the U.S. We took an impairment charge in the U.S. We expect to sell that portfolio. It's about a 2-gigawatt portfolio of various land positions, interconnections. We likely will sell that in the second and third quarter. And we would expect to not have a P&L gain or charge. We took a charge in Q1. There is another portfolio in Mexico and elsewhere around the world that we could have substantial gains in the future, but those are not in the near-term horizon.”

Atlas Renewable Energy, owned by UK-based private investment firm Actis acquired the Guajiro project, which is expected to be completed in the second quarter of 2019.

The Boulder Solar project was originally offered to its JV yieldco, 8point3 for purchase in 2017. SunPower is currently in the process of selling its stake in the yieldco. 

However, management noted in the call that its convertible debt due on June 1, coupled to being cautious over the timing of the sale of 8point3, had lined up a bridging loan facility for US$300 million to ensure payment compliance. 

Also in response to ongoing profitability issues, SunPower announced plans to completely exit the PV power plant project development sector, after down-scaling the operations during recent restructuring efforts, taking a US$25 million impairment charge in the quarter. 

SunPower did not highlight what the impact would be on its headcount reduction but the company had reported in its 2017 annual report that it had 937 employees out of a total of 7,306 full-time employees worldwide, involved in construction projects.

Another response announced by SunPower was the planned sale of its residential PV leases that includes a portfolio of over 400MW. SunPower noted that a sale of the leases would occur over several quarters. 

Financials

SunPower reported first quarter 2018 GAAP revenue of US$391.9 million, exceeding guidance of US$280 million to US$330 million, primarily due to PV power plant project asset sales.

GAAP gross margin was 2.6% in the first quarter, compared to negative 2.1% in the previous quarter and negative 13.9% in the first quarter of 2017.  

The company reported revenue from its residential segment of US$169.4 million, down from US$174.3 million in the previous quarter. However, sales were up from US$134.7 million reported in the prior year period. 

Residential installs topped 80MW in the quarter, and a record for US installations, according to the company. Residential revenue was also driven by Japan and Europe, according to the company. 

Tom Werner, SunPower CEO and chairman of the board said, "In our distributed generation business (DG), we continued to gain share in both our residential and commercial end markets as we saw strong demand throughout the quarter.”

Commercial segment sales were US$131.8 million on installs of 100MW, compared to US$318.2 million in the previous quarter and 203MW of installations.

In its Power Plant segment, sales in the first quarter of 2018 were US$97.7 million, compared to US$331.5 million in the previous quarter. Installs were 101MW in the quarter, compared to 238MW in the previous quarter.

Guidance

SunPower guided second quarter GAAP revenue to be in the range of US$360 million to US$410 million, while gross margins were expected to be in the range of 2.5% to 4.5%, providing a net GAAP loss guidance of US$125 million to US$100 million.

Managment had noted in the call that it intend to increase its focus and market position in the US DG segment as well as in key international markets (Japan, Europe) with installations (MW) expected to grow by 20% in 2018. 

The company also highlighted that its US$2.5 billion US commercial project pipeline was already booked or already awarded. 

However, full-year revenue guidance remained unchanged at US$1.6 billion to US$2.0 billion on unchanged total deployments of 1.5GW to 1.9GW in 2018. SunPower had reported 2017 annual revenue of $1.872 billion.