SolarCity (SCTY) Posts Much-Smaller-Than-Expected Q2 Loss on Higher Revenues

SolarCity (NASDAQ: SCTY) reported Q2 EPS of ($0.23), $1.34 better than the analyst estimate of ($1.57). Revenue for the quarter came in at $102.8 million versus the consensus estimate of $90.16 million.

GAAP Operating Lease and Solar Energy Systems Incentive Revenue was $78.3 million, up 81% Y/Y, largely on the increase in cumulative MW Deployed under an Energy Contract. Solar Energy System Sales and Components Revenue was $24.5 million, including $8 million in MyPower solar loan revenue, which is recognized as customer monthly payments, as well as periodic rate reduction payments are received over the life of the 30-year contract.

Q3 2015 Outlook and Guidance for 2015 MW Installed

Following the ramp in bookings and installation capacity in Q2 2015, we exited the quarter at a monthly run rate that provides us with confidence in a significant step-up in our quarterly pace of installations. For Q3 2015, we expect to install a record 260 MW, representing growth of 89% year-over-year. For the full year 2015, we are updating our guidance to 920 – 1,000 MW Installed (vs. 920 – 1,000 MW Deployed previously). We consider a system (a) “installed” essentially when construction is completed by SolarCity and (b) “deployed” after Administrative Housing Judge [AHJ] inspection. Systems are typically inspected by numerous third parties one to several weeks after installation, and thus deployments tend to be lower than installations during periods of high growth. Because we are scaling our operations at a much faster pace than AHJs are scaling their inspection teams, inspection times are growing longer and we are experiencing greater difficulty in forecasting their timing. Nevertheless, our pace of installations is still coming in line with our original forecast at 920 – 1,000 MW, implying year-over-year growth of between 83% and 98%. Going forward, we plan on basing all of our MW forecasts on installations rather than deployments.

For Q3 2015 GAAP revenue guidance, we expect Operating Lease and Solar Energy Systems Incentive Revenue of $80 million – $86 million, up 59% Y/Y at the midpoint. Solar Energy System and Component Sale Revenue is expected to range between $26 million and $28 million. Operating Lease and Solar Energy Systems Incentive Gross Margin is expected to range between 46% - 50% (or 50% - 54% excluding the impact of approximately $4 million in amortization of intangibles). Driven largely by an increase in sales investment, we expect Operating Expenses of $210 million – $225 million (including between $22 million and $26 million in non-cash amortization of intangibles and stock compensation expense). In turn, Non-GAAP Loss Per Share (before Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests)* is expected to range between ($2.05) – ($2.15).

For earnings history and earnings-related data on SolarCity (SCTY) click here.

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