SunPower is not out of the woods yet on financial pains associated with its restructuring and updated business plan, but the company logged a profitable Q4 — its second profitable quarter last year — and an overall positive 2019.
The gains offer a tailwind as SunPower works to spin out its foreign manufacturing business, which will become a separate company called Maxeon Solar Technologies, and cope with ongoing challenges in its division focused on solar systems for commercial customers.
“We entered 2019 with the goal of fundamentally transforming our business while improving financial performance,” said CEO Tom Werner on a Wednesday earnings call. By the end of the year, SunPower indeed looked quite different — solely focused on delivering distributed solar-plus-storage — and it ended in the black, with Q4 2019 net income at $5.4 million and full-year 2019 income at $22.2 million.
Those profits are not going to continue into the new year, the company says, with Q1 2020 net losses forecast at up to $85 million, and losses of up to $195 million for the whole of 2020.
Taking into account ongoing restructuring efforts at its commercial direct business, SunPower forecast 2020 adjusted EBITDA guidance in the range of $125 million to $175 million.
“If we could just get commercial to breakeven, we’re going to have a...profitable new SunPower that continues to be profitable,” Werner told GTM after the earnings calls.
2020 revenue is expected to come in between $2.1 billion and $2.3 billion on 2.5 to 2.75 gigawatts of realized projects.
SunPower shares were set to fall by 8 percent on Thursday morning to around $10. The shares had been on a rapid rise since last November, when the company announced the spinoff plan for Maxeon.
Commercial stumbles
Though SunPower was awarded over $500 million in commercial projects in 2019 and registered 75 percent year-over-year volume growth in distributed generation, indicating strength in project origination, the company struggled to bring commercial projects to the finish line.
“[In] the fourth quarter, we had excellent bookings and awards. […] What’s not working [well] is perfecting the projects and executing on them,” said Werner on the earnings call. “We had an unusual number of projects that were delayed by virtue of permits and interconnection issues.”
That ate up money. But Werner said the company has made changes in the last month to reduce its exposure to those delays, including restructuring contracts to reduce liability, moving more projects to external engineering, procurement and construction partners and integrating its own development and execution teams.
Werner believes those moves will be enough to get its commercial segment back on track in Q2 of this year.
“I have strong reasons to believe it will be fixed,” he said, adding that overall commercial demand is increasing.
“The market, by the way, ironically is very favorable toward commercial. There’s a big appetite to buy commercial projects. So there are some positive aspects in commercial, that being buyer appetite and storage,” Werner told GTM.
The company’s commercial storage pipeline now exceeds 175 megawatts, and attachment rates for its Helix system have reached 35 percent and 60 percent in California. In Q4, the company booked its largest-ever storage project, a 20-megawatt-hour system to complement a solar installation at a Chevron oilfield.
Residential roars
Despite weakness in the execution of commercial projects, Werner said SunPower’s dealer network of more than 500 vendors “was really hitting on all cylinders in Q4.” That meant a significant boost for the company's residential business, where SunPower achieved record quarterly bookings of 137 megawatts — 27 megawatts above the Q4 2018 level — and added 12,000 residential customers.
That, along with SunPower’s upstream business, helped soften the impact of the less-than-stellar performance on the commercial side.
“That shows you how great the other two businesses performed,” Werner said.
Because of the inherent seasonality of residential bookings, that business won’t be able to make up for the commercial business' shortcomings in early 2020. The imbalance should be short-lived, according to Werner.
“The residential business is going to be profitable this quarter, but it is seasonal so it can’t offset what we’re projecting to be another weak quarter in commercial,” said Werner. “We do expect commercial to get better in Q2.”
SunPower anticipates moving its Equinox residential storage system beyond beta and toward wider sales in Q2. Because of the company's increasing confidence in the solidity of customer demand, the company expects to reach attach rates north of 20 percent by Q4.
Maxeon split is moving forward
SunPower announced in November that it would split off its panel manufacturing business, with SunPower’s former head of technologies Jeff Waters helming the new company, known as Maxeon.
The two entities are still working toward their official split, expected to close in the second quarter of 2020. The timeline will be partially determined by antitrust approvals in various countries of operation. They’re also working to raise debt to match the infusion of $298 million in equity capital offered by China's Tianjin Zhonghuan Semiconductor, which will go to Maxeon as it sets off as an independent company.
Maxeon’s shipments were up across the globe in 2019; it generates the majority of its revenue outside the U.S. Looking ahead, the group notes a major focus on the Asia-Pacific region, which saw a 151 percent increase in shipments year-over-year.
As part of the split, SunPower announced layoffs impacting about 3 percent of its workforce. Werner said impacted employees would work through Q3 2020. Some will move on to Maxeon.
