SunPower (SPWR) Tops Q2 EPS by 17c, Revenues Beat

SunPower (NASDAQ: SPWR) reported Q2 EPS of ($0.22), $0.17 better than the analyst estimate of ($0.39). Revenue for the quarter came in at $352.9 million versus the consensus estimate of $310.05 million.

Second Quarter 2020 Results"We were pleased with our second quarter performance as strong execution enabled us to exceed our guidance, generate close to $30 million in positive cash flow and launch new products despite the Covid-19 virus disruption," said Tom Werner, SunPower CEO and chairman of the board. "Overall, we saw improving trends in our global DG business throughout the quarter with particular strength in our U.S. channels business where the investments in our digital initiatives enabled us to successfully transition to an on-line model. We also took a number of important steps to complete the spin-off of Maxeon Solar Technologies as their 20-F was declared effective with an expected record date of Aug. 17, 2020 and distribution date of Aug. 26, 2020. Finally, we continued our leadership in innovation as we launched a number of new products including our SunVault residential storage solution, our OneRoof product for new homes as well as Maxeon's launch of its new bifacial, shingled panel for the global power plant market. Looking forward, our fundamentals remain strong and are well-positioned for success given our differentiated model, new products and strong balance sheet."

SunPower Energy Services (SPES)"Our channels business executed very well in a difficult environment as we saw better than expected demand improvement as we went through the quarter. This was reflected in our financial performance as Adjusted EBITDA rose year over year with our Channels business generating $33 million in positive cash flow in the second quarter. Additionally, gross margins doubled compared to last year, primarily the result of a lower loan and lease cost of capital, increased sales in our new homes business, as well as the successful execution of our cost reduction initiatives. Our second quarter performance also reflected success in our rapid shift to our residential online sales model as we saw further customer and dealer adoption of our Design Studio and mySunPower applications, both of which improve the efficiency of the sales process while offering a superior customer experience. We were also pleased to launch our SunVault residential storage solution during the quarter and are currently rolling out this product nationally this quarter. Demand for this proprietary all-in-one storage solution is very strong with initial attach rates in above our 2020 goal of 20%. In new homes, we believe our new, innovative OneRoof product will further cement our leadership position in this segment. This product, designed in partnership with KB Home, provides a fully-integrated, attractive, durable and cost-effective solution specifically designed for this market. Builder demand for this product is also high as we have already booked 19 communities across six builders within two weeks of its initial launch. With more than 50,000 systems installed and more than 45,000 home in backlog, we are well-positioned to add to our more than 50 percent market share in new homes."

"Performance in our Commercial Direct business improved during the quarter as we posted positive Adjusted EBITDA while maintaining our leading market share. Install volume increased more than 50% year over year and we remain confident that we will achieve sustainable profitability in this business in the second half of this year. Our origination teams again performed well as approximately 100% of our 2020 forecast is currently in backlog and were pleased to recently announce our 12.8MW award from the Washington Metropolitan Area Transit Authority. Additionally, Helix storage demand remains high as our pipeline exceeds 625 megawatt hours (MWh) with attach rates of approximately 50% for the balance of the year."

SunPower Technologies (SPT) "Our SPT business posted a solid quarter as we exceeded our shipment guidance by more than 15% with all factories back to normal operations. Similar to the U.S. DG market, we saw DG demand improve as we went through the quarter with particular strength in our European and Australian markets. DG shipments totaled 67% of volume in the second quarter and we expect further recovery in the second half of the year. We also achieved a number of important milestones related to the spin-off of our Maxeon Solar Technologies business unit during the quarter including its 20-F filing which was recently declared effective with an expected share distribution date of August 26, 2020. Finally, Maxeon continued to position itself as a technology leader with the anticipated fourth quarter launch of its Perfomance-5 bifacial, up to 625W, shingled product for the global power plant market, as well as announcing their partnership with Enphase Energy to bring high-efficiency AC module technology and smart energy solutions to the international DG market."

Consolidated Financials"Our second quarter performance reflected the resilience of our business and strong execution as we quickly responded to the Covid-19 disruption," said Manavendra Sial, SunPower chief financial officer. "Our rapid response, along with the proactive implementation of a number of initiatives, enabled us to achieve positive cash generation for the quarter with $500 million in liquidity identified for Sun Power post spin. Additionally, we were pleased to see Maxeon complete its successful $200 million convertible green bond offering and closure of $125 million in banking facilities. As a result, both companies will be well capitalized post transaction. Finally, we added to our financing flexibility in the Commercial Direct space as we closed a new, innovative financing facility that allows for more efficient working capital utilization while improving our economics."

Second quarter of fiscal year 2020 non-GAAP results exclude net adjustments that, in the aggregate, increased non-GAAP loss by $56.6 million, including $71.1 million related to gain on mark-to-market gain on equity investments, and $10.5 million related to gain on business divestiture. This was partially offset by $9.6 million related to the cost of above-market polysilicon, $5.9 million related to stock-based compensation expense, $4.1 million related to business reorganization costs and restructuring charges, $2.4 million transaction-related costs, $1.8 million related to amortization of intangible assets, and $1.2 million related to other non-recurring items and tax effects.

Financial OutlookThe company's third quarter 2020 GAAP and non-GAAP guidance is as follows: on a GAAP and non-GAAP basis, revenue of $360 million to $400 million, GAAP gross margin of 0 percent to 5 percent and net loss of $110 million to $95 million.

The company's third quarter 2020 Non-GAAP gross margin and Adjusted EBITDA guidance, on a combined basis, now includes an approximate $40 million impact for the entire quarter in its SPT segment as a result of its out of market polysilicon contract. Additionally, upon completion of the Maxeon spin-off, expected on August 26, 2020, the obligation under the polysilicon contract will be retained by Maxeon and will expire in fiscal 2022.

As a result, the company expects third quarter 2020 non-GAAP gross margin of 0 percent to 6 percent and Adjusted EBITDA guidance in the range of negative $35 million to negative $20 million with SPT in the range of negative $38 to $28 million and SPES in the range of positive $8 to $14 million.

The company also expects megawatts recognized to be in the range of 500 MW to 560 MW as well as positive cash generation for SunPower in the third quarter.

For the fourth quarter and after the company's expected spin-off of Maxeon, both companies expect a continued improvement in the global solar demand environment through the end of the year, with particular strength in the DG segment.

For earnings history and earnings-related data on SunPower (SPWR) click here.

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