SunPower Corporation today announced financial results for the 2007 second quarter ended July 1, 2007.
On a GAAP basis, SunPower reported revenue for the second quarter of $173.8 million, gross margin of 17.1 percent, an operating loss of $13.2 million and a net loss of $5.3 million resulting in a loss of $0.07 per share. These figures include operating expenses for impairment of acquired intangible assets of $14.1 million related to brand unification, amortization of purchase accounting intangible assets of $7.6 million and non-cash, stock-based compensation of $13.2 million.
On a non-GAAP basis, which excludes non-cash purchase accounting revenue adjustments, revenue for the second quarter was $174.1 million, a 22 percent increase from the prior quarter’s revenue of $143.2 million.
The Systems business segment accounted for $104.3 million of the second quarter revenue, while the Components business segment accounted for $69.7 million. For purposes of this segmentation, the Systems segment generally represents products and services sold directly to the system owner, while the Components segment includes products sold to installers and resellers. Revenue associated with SunPower solar panels sold through the Systems segment is recorded in the Systems segment.
On a non-GAAP basis, adjusted to exclude non-cash charges for amortization and impairment of intangible assets, purchase accounting revenue adjustment, stock-based compensation and the related tax effects, SunPower realized a combined gross margin of 23.0 percent in the second quarter of 2007, compared with gross margin of 29.0 percent in the first quarter of 2007.
Also, in the second quarter of 2007, the Systems segment achieved a gross margin of 19.7 percent while the Components segment reported a gross margin of 27.8 percent. Gross margin in the first quarter of 2007 included a non-recurring benefit of $1.1 million as well as a favorable geographic and products and services mix in our Systems segment.
On a non-GAAP basis, excluding the items noted above, SunPower achieved a combined second quarter net income of $19.8 million, or $0.25 diluted earnings per share. This compares with the prior quarter’s non-GAAP net income of $23.3 million, or $0.29 diluted earnings per share.
“SunPower again achieved outstanding quarterly results,” said Tom Werner, SunPower’s CEO. “In the second quarter both our Components and our Systems business segments performed well, now unified under the SunPower brand. Our robust revenue performance reflects another quarter of increasing manufacturing volume coupled with strong demand for our industry-leading components and systems. Increasing sequential quarterly average selling prices (ASPs) for our solar cells and solar panels reflect the value of our high-efficiency solar technology.”
“We expect global silicon supply to increase during the next year as new capacity comes on line,” said Werner. “We congratulate our partner, M.Setek, on the success of their first polysilicon manufacturing plant which began production in the second quarter of this year. As our long-term silicon supply contracts go into effect over the next year, we expect SunPower’s silicon costs on average to improve compared to current short-term pricing.
“We continue to seek opportunities to expand our silicon supply portfolio,” said Werner. “Yesterday we announced a major new silicon supply agreement with Hemlock Semiconductor Corporation. This agreement is a threshold step in moving along SunPower’s manufacturing expansion roadmap. We expect Hemlock’s silicon will support our planned third solar cell fabrication facility, or cell Fab 3 which we expect to be capable of producing 500 megawatts or more of high-efficiency solar cells annually, with production beginning on the first line in that facility in late 2009. We expect to manufacture more than 2 gigawatts of solar cells with the polysilicon Hemlock will deliver to us from 2010 through 2019. In combination with our other agreements with silicon suppliers we expect to have sufficient silicon supply to produce 110 megawatts of solar cells in 2007, 250 megawatts or more in 2008, and 400 megawatts or more in 2009.”
“Our cell Fab 1 now has an installed production capacity of 108 megawatts and our cell Fab 2 will be inaugurated later this month as we begin production on schedule and on budget in the third quarter,” said Werner. “Fab 2 will exclusively manufacture Gen 2 solar cells, already being mass-produced in Fab 1 with median efficiencies above 22 percent. High-efficiency solar cell technology coupled with 165 micron wafer thickness allowed us to achieve a polysilicon utilization rate of less than seven grams of polysilicon per watt of factory output during the second quarter. We anticipate that superior polysilicon utilization will offer us powerful cost leverage.”
“The progress in our solar panel manufacturing factory has spurred us to begin construction of a larger 300 megawatt, 10-line panel manufacturing factory,” said Werner. “The first lines are scheduled to begin production in the fourth quarter of 2007. This facility is located adjacent to cell Fab 1 in the Philippines and will initially house the three solar panel manufacturing lines we have on order. We expect to eventually move our first solar panel line to this facility.”
“Our Systems segment also had an excellent quarter,” said Werner. “We have recently announced a number of major agreements and milestones that demonstrate the breadth and scope of our Systems business.”
— Nevada: Construction started on an approximately 15 megawatt central- station solar electric power plant located at Nellis Air Force Base outside of Las Vegas, Nevada
— Spain: Supply of 61 megawatts of solar power plant equipment and services announced using SunPower Tracker solar systems technology
— California: SunPower Access power purchase contracts signed with Macy’s and financing completed with Morgan Stanley for Wal-Mart systems — a combined total of more than 12 megawatts
— Homebuilders: Grupe Homes and Lennar Corp. reported that new solar homes using SunPower SunTile(R) sell approximately twice as fast as non-solar homes
— US: Large-scale solar systems announced in New Jersey, Colorado, and Hawaii, extending SunPower’s lead as the largest solar systems provider in the U.S.
— Korea: Construction completed on the 2.2 megawatt Mungyeong SP Solar Mountain solar system
— Technology: Introduced next generation SunPower Tracker system utilizing a tilted one-axis design to produce up to 30 percent more energy than fixed-tilt systems of the same rated capacity
“We also expect production from our three new solar cell manufacturing lines in the second half of 2007 to contribute to our continued growth,” said Werner. “Taking into account the use of SunPower solar panels by our Systems segment, we expect to generate the following non-GAAP results in the third quarter of 2007: revenue of $205 million to $215 million; gross margin of 20 percent to 22 percent; and diluted net income per of share of $0.25 to $0.29. For the full year 2007, we expect the company to generate revenue of $730 million to $750 million and diluted net income per share of $1.13 to $1.20.
“As a result of robust bookings, we expect our Systems segment to be a larger percentage of total company revenue in the third quarter of 2007,” said Werner. “Due to this factor as well the effect of ramping two lines during the quarter, we expect a slightly lower average gross margin for the company. However, we expect total company gross margin to continue expanding again, commencing with the fourth quarter of 2007.”
“Our Systems segment is expected to generate the following non-GAAP results in the third quarter: revenue of $130 million to $135 million with expected gross margin of 18 percent to 20 percent, while we expect our Components segment to generate revenue between $75 million to $80 million with expected gross margin of 24 percent to 26 percent.”
“In 2008 we expect to achieve non-GAAP revenue of approximately $1.0 billion to $1.2 billion and diluted net income per share of approximately $1.80 to $2.00 as we bring on five more solar cell manufacturing lines and respond to the expanding solar market across three continents,” said Werner. “Taking advantage of our vertical integration efficiencies, we believe we will achieve our stated business model financial goals of 30 percent gross margin, 10 percent operating expenses and 20 percent operating margin on a non-GAAP basis by the end of 2008 or early 2009.”
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