SPWR SunPower Corporation

SAN JOSE, Calif., Nov. 3, 2021 /PRNewswire/ -- SunPower Corp. (NASDAQ:SPWR), a leading solar technology and energy services provider, today announced financial results for its third quarter ended October 3, 2021.

Residential demand remains strong with record lead generation and 14,200 new customers, up 29% versus a year earlier. New homes market accelerated growth with 5,700 new customers in the quarter, more than double when compared to the previous year. 

"Our decision to increase our focus on the residential market was validated by strong sequential third quarter solar and storage demand and deployment, combined with continued margin expansion," said Peter Faricy, CEO of SunPower. "The time is now for homeowners to adopt solar energy and storage, with flexible financing options and favorable clean energy incentives currently under consideration by Congress that make it easier for consumers to help fight against the increasing impact of climate change. Along with our recent acquisition of Blue Raven Solar and new leadership hires, there is a bright future for the next phase of SunPower."

Making Solar Accessible to All
To meet the goals of a clean energy future in which nearly half of the U.S. is powered by solar, policymakers and corporations must work together to make solar accessible for all customers. With 108 MW of Residential bookings in the quarter, up 36% versus the prior year, the company's total residential install base has grown to nearly 390,000, not including 20,000 from the recent acquisition of Blue Raven Solar in October. SunPower's recent efforts to further expand the reach of solar include:

• Geographic expansion into underpenetrated areas including the Northwest and Mid-Atlantic regions with Blue Raven Solar.
• Continued leadership in the new homes market with two new agreements with homebuilders, including a multi-year exclusive agreement with Toll Brothers to provide solar, storage and services to new homes and communities.
• Under SunPower's ESG program, the company launched the SunPower 25X25 initiatives— spanning workforce diversity, solar access expansion and dealer diversity programs — to ensure the resilience and economic benefits of distributed solar and battery storage serve historically underserved communities.

Widespread Storage Adoption
Amidst increasing power outages and rising energy prices, consumers are increasingly seeking resiliency with battery storage. According to Wood Mackenzie, annual global storage deployments will nearly triple year-over-year. SunPower is meeting increased market demand for storage solutions through both the direct and dealer channels, with dealers ramping up on sales. The company is on track to achieve a $100 million energy storage bookings run rate by the end of 2021 with 27% of solar customers purchasing storage through SunPower's Direct sales channel.

SunPower was also awarded a $6.65 million grant by the U.S. Department of Energy to participate in its Connected Communities program, working with partners to build two new communities that will compare the benefits of community-level versus residential-level energy storage while providing grid services to the local utility. SunPower will oversee the project and provide energy services technology.

Financial Highlights

"SunPower concludes the third quarter with plans to focus intently on the fast growing and largely untapped U.S. residential market," said Manavendra Sial, chief financial officer at SunPower. "As we head into the fourth quarter and 2022, we are seeing exceptional performance in lead generation and new customer bookings for residential solar and storage. Commercial & Industrial Solutions (CIS) business also had strong bookings for the third quarter. Our cash position is strong, and there is potential to further reduce our cost of capital. The strength of our balance sheet will also enable us to look toward new product and digital investment, leading to continued growth and market share expansion."

SunPower reported, in line with the company's October 5^th update, an Adjusted EBITDA of $17.5 million for this quarter including $(8) million from the CIS segment and a net loss of $84.4 million primarily driven by the non-cash mark-to-market adjustment of the company's holdings of Enphase shares. The company is considering strategic options for CIS and will provide an update in the fourth quarter of 2021.

Other quarter highlights include:

• Recognized 121 MW, including 92 MW for residential. The pipeline for new homes systems is robust with visibility toward an incremental 58,000 homes (up to 230 MW), including multi-family housing.
• Residential gross margin was at $0.69/w for the third quarter, up 50% compared to prior year.

Third quarter non-GAAP results exclude net adjustments that, in the aggregate, increased GAAP loss by $94 million, resulting from $86 million related to a mark-to-market loss on equity investments, $5 million related to stock-based compensation expense, and $3 million related to other non-recurring items.

Financial Outlook
To provide additional clarity to investors, the company has provided separate guidance for CIS and Legacy business segments for the fourth quarter of 2021.

Fourth quarter GAAP revenue guidance for SunPower, excluding CIS and Legacy business, is $330 to $380 million and Adjusted EBITDA guidance is $28 to $46 million. Separately for CIS and Legacy business, fourth quarter revenue guidance is $31 to $41 million and Adjusted EBITDA guidance is $(10) to $(5) million due to project schedules and supply chain impacts, similar to that experienced in the third quarter. Fourth quarter GAAP net income guidance, which includes all segments, is $(5) to $15 million.

For the Full Year 2021, revenue and Adjusted EBITDA guidance for SunPower, including CIS and Legacy business, is below the prior guidance of $1,410 to $1,490 and $110 to $130 million, respectively, primarily due to CIS project schedule delays impacting both revenue and Adjusted EBITDA and lower revenues from Light Commercial. 

SunPower's residential business continues to be strong, and the company expects 345 to 375 MW recognized for the full year 2021, with 55,000 to 60,000 new residential customers and expects to exit 2021 at >$0.70/w gross margin run rate, consistent with prior guidance.

Given strong residential demand, the company's color on Full Year 2022 Adjusted EBITDA growth for SunPower excluding CIS and Legacy business remains consistent with the October 5^th update, including plans for incremental investment in operating expense.

The company will host a conference call for investors this afternoon to discuss its third quarter 2021 performance at 1:30 p.m. Pacific Time. The call will be webcast and can be accessed from SunPower's Investor Relations along with supplemental financial information 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.  

About SunPower
Headquartered in California's Silicon Valley, SunPower (NASDAQ:SPWR) is a leading Distributed Generation Storage and Energy Services provider in North America. SunPower offers the only solar + storage solution designed and warranted by one company that gives customers control over electricity consumption and resiliency during power outages while providing cost savings to homeowners, businesses, governments, schools and utilities. For more information, 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) expectations regarding achievement of our 2021 goals and our future performance based on bookings, backlog, and pipelines in our sales channels and for our products; (b) our expectations for the policy and regulatory environment, including legislation and prospects for final passage and contents, and the impacts thereof on our business and financial results; (c) our plans and expectations for our products and solutions, including anticipated demand and our ability to meet it, and our ability to meet our targets and goals; (d) our expectations for the impacts of the acquisition of Blue Raven Solar on our business and financial results, our competitive positioning, and positioning for future success following the acquisition; (e) our strategic plans and areas of investment, both current and future, and expectations for the results thereof; (f) our expectations regarding the impact of our 25X25 initiative to help ensure historically underserved communities benefit from solar and storage; (g) our plans and expectations regarding strategic partnerships and initiatives, including our agreement with Toll Brothers and our grant from the Department of Energy, and the anticipated impacts thereof on our business and financial results, as well as our ability to develop cost-effective products and solutions and drive wider adoption; (h) the anticipated future success of our growth initiatives, including our ability to expand into new markets and increase adoption of our financial products, including impacts on our business and financial results; and (i) our fourth quarter financial guidance, including GAAP revenue and Adjusted EBITDA excluding the CIS and Legacy business, GAAP revenue and Adjusted EBITDA for the CIS and Legacy business, and GAAP net income, and related assumptions; (j) our fiscal 2021 guidance, including GAAP revenue and Adjusted EBITDA, as well as expectations for residential MW recognized, new residential customers, and residential gross margin, and related assumptions; and (l) our expectations for fiscal 2022, including Adjusted EBITDA growth and plans for incremental investment, 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) potential disruptions to our operations and supply chain that may result from epidemics or natural disasters, including impacts of the Covid-19 pandemic, and other factors; (2) competition in the solar and general energy industry and downward pressure on selling prices and wholesale energy pricing; (3) regulatory changes and the availability of economic incentives promoting use of solar energy; (4) risks related to the introduction of new or enhanced products, including potential technical challenges, lead times, and our ability to match supply with demand while maintaining quality, sales, and support standards; (5) changes in public policy, including the imposition and applicability of tariffs; (6) our dependence on sole- or limited-source supply relationships, including our exclusive supply relationship with Maxeon Solar Technologies; (7) 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; (8) our liquidity, indebtedness, and ability to obtain additional financing for our projects and customers; 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.

©2021 SunPower Corporation. All rights reserved. SUNPOWER and the SUNPOWER logo are trademarks or registered trademarks of SunPower Corporation in the U.S.

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 gross margin includes adjustments relating to gain/loss on sale and impairment of residential lease assets, litigation, stock-based compensation, and amortization of intangible assets, 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 mark to market gain on equity investments, gain on business divestitures, impairment of property, plant, and equipment, transaction-related costs, non-cash interest expense, restructuring charges (credits), gain on convertible debt repurchased, tax effect of these non-GAAP adjustments, each of which is described below. In addition to the above adjustments, 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 TotalEnergies SE, 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 TotalEnergies SE.

• Mark-to-market loss (gain) in equity investments: We recognize 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 U.S. 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 TotalEnergies SE. 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 those investments. We believe that excluding these adjustments on equity investments is consistent with our internal reporting process as part of its status as a consolidated subsidiary of TotalEnergies SE. and better reflects our ongoing results.

Other Non-GAAP Adjustments

• Results of operations of Legacy business to be exited: Following the announcement of closure of our Hillsboro, Oregon facility in the first fiscal quarter of 2021, we prospectively exclude its results of operations from Non-GAAP results given that revenue will cease starting first fiscal quarter of 2021 and all subsequent activities are focused on the wind down of operations. We believe that it is appropriate to exclude these from our non-GAAP results as it is not reflective of ongoing operating results.
• Loss/Gain on sale and impairment of residential lease assets: In fiscal 2018 and 2019, in an effort to sell all the residential lease assets owned by us, we sold membership units representing a 49% membership interest in majority of its residential lease business and retained a 51% membership interest. We record an impairment charge based on the expected fair value for a portion of residential lease assets portfolio that was retained. Any charges or credits on these remaining unsold residential lease assets impairment, as well as its corresponding depreciation savings, are excluded from our non-GAAP results as they are not reflective of ongoing operating results.
• Stock-based compensation: Stock-based compensation relates primarily to our equity incentive awards. Stock-based compensation is a non-cash expense that is dependent on market forces that are difficult to predict. We believe 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: We incur amortization of intangible assets as a result of acquisitions, which includes patents, purchased technology, project pipeline assets, and in-process research and development. We believe that it is appropriate to exclude these amortization charges from the company's non-GAAP financial measures, as they are not reflective of ongoing operating results.
• Litigation: We may be involved in various instances of litigation, claims and proceedings that result in payments or recoveries. We exclude gains or losses associated with such events because the gains or losses do not reflect our underlying financial results in the period incurred. We also exclude all expenses pertaining to litigation relating to businesses that discontinued as a result of spin-off of Maxeon Solar, for which we are indemnifying them. We believe that it is appropriate to exclude such charges from our non-GAAP results as they are 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. We believe that it is appropriate to exclude these costs from our segment results as they would not have otherwise been incurred as part of the business operations and therefore is not reflective of ongoing operating results.
• Gain/Loss on business divestitures, net: In the second quarter of fiscal 2021, we sold a portion of our residential lease business and certain commercial projects. We recognized a gain and a loss relating to these business divestitures, respectively. We believe that it is appropriate to exclude such gain and loss from the company's non-GAAP financial measures as it is not reflective of ongoing operating results.
• Executive transition costs: We incur non-recurring charges related to the hiring and transition of new executive officers. During the second quarter of fiscal 2021, we appointed a new chief executive officer and chief legal officer, and are investing resources in those executive transitions, and in developing new members of management as we complete our restructuring transformation. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.
• Business reorganization costs: In connection with the spin-off of Maxeon into an independent, publicly traded company, we incurred and expect to continue to incur, non-recurring charges on third-party legal and consulting expenses, primarily to enable in separation of shared information technology systems and applications. We believe that it is appropriate to exclude these from our non-GAAP results as it is not reflective of ongoing operating results.
• Restructuring charges (credits): We incur 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. 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. We believe that it is appropriate to exclude these from our non-GAAP results as it is not reflective of ongoing operating results.
• 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. Our non-GAAP tax amount is based on estimated cash tax expense and reserves. We forecast our 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 our 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, or tax impact of non-recurring items.
• Adjusted EBITDA adjustments: When calculating Adjusted EBITDA, in addition to adjustments described above, we exclude 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.