A few weeks ago at Intersolar North America in San Francisco, the CEO of Satcon (NASDAQ CM:SATC), Steve Rhoades, told me, "It's a good time to be an inverter company."
The company's recent second quarter earnings announcement vouches for that small bit of braggadocio. Satcon posted record revenues and margins and saw its year-to-date bookings increase 1100 percent (!) over the same period last year.
“Second quarter sales of $27.6 million represented the largest quarter in Satcon’s history, reaching revenues over two and a half times greater than what we reported in the same period a year ago,” said Rhoades. “We also grew gross margin to 21 percent, a significant improvement over last quarter’s 14 percent, fueled by the transfer of our primary manufacturing to our lower cost facility in Shenzhen, China, which we completed during the second quarter.”
Bookings for the first half of 2010 totaled $123 million -- 506 megawatts of orders for Satcon’s products, with 39 percent of that demand coming from North America, 25 percent from Europe and 36 percent from Asia Pacific.
That works out to $0.243 per watt for large-scale inverters.
As of June 30, 2010, the company's backlog was $82 million -- 43 percent from Asia, 42 percent from North America with 15 percent from Europe. Backlog as of August 3, 2010 totaled $111 million, of which about 90 percent is currently expected to ship this calendar year.
Rhoades said, “[G]lobal demand has driven our recent move to raise our global manufacturing to over 1 gigawatt, and move toward over 1.75 gigawatts of global capacity in 2011.”
Recent customer wins include:
- 20 megawatts in orders for the firm’s one-megawatt medium voltage solution from Q-Cells for large-scale solar plants in Ontario contracted under the Renewable Energy Standard Offer Program.
- Chosen by Southern California Edison to supply at least 75 percent of the utility’s Solar Photovoltaic Program, a 250-megawatt solar rooftop initiative.
- Five megawatts of Satcon Prism provided to PG&E to power the largest solar farm to date on the utility’s network for Cal-RENEW 1 in Mendota, California.
Rhoades predicted third quarter revenues in the $43 million to $47 million range, with gross margins improving to 30 percent in the second half of the year. He said, “We see momentum continuing into our fourth quarter of 2010, and expect that our fourth quarter revenues will increase over those that we generate in our third quarter."
Despite all this good news, Satcon did show a net loss of $12.6 million for 2010 so far.
According to investment analysts at Stifel:
- "...we saw Satcon’s current backlog climb to over $110 million and gross margins eclipse 20 percent in 2Q10. We believe these are the two key variables investors will focus on. We see a strong 2H10 for Satcon given exposure to key hyper growth markets such as China, Ontario and domestic commercial and utility installations. We see gross margins exiting the year now in the low 30 percent level."
- "We believe the two key catalysts needed to see multiple expansion from here continue to be gross margin expansion and growing visibility as evidenced by improving backlog trends. We believe that as we exit 2010, solar equity investors will use 2011 visibility as one of the most important variables in deciding where to put their money to work. Satcon has captured visibility in Ontario, China, and the United States for 2011. We see the company pick up further momentum in Europe as well, as evidenced by their July 14, 2010 18 megawatt win in France with Enfinity."
With the solar market growing briskly, inverters are sharing the love. Greentech Media Reseach has estimated the 2009 inverter market at more than $2.5 billion. A ten-billion-dollar market is not too many years away, with inverters accounting for six percent to seven percent of solar industry revenues.
While solar panels have experienced extreme price pressure and rapidly falling ASPs, this trend has not impacted the inverter field. Power electronics and metals are a more mature industry and likely will not experience the same plummeting prices. Inverter prices and value could actually increase as the inverter becomes more "grid-aware" and absorbs some other system functions.
An interesting note from Intersolar: Rhodes did mention inverters integrated with a small amount (e.g., two minutes' worth) of lead-acid battery storage capacity.