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 that year — and an overall positive 2019.
Those results offer tailwinds as the company continues to spin out its foreign manufacturing business, which will become a separate company called Maxeon Solar Technologies, and cope with challenges in its commercial division.
“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 was slated to look quite different — solely focused on delivering distributed solar-and-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.
SunPower projects those financial gains won’t last into the new year, with Q1 2020 net losses forecasted at $85 million to $70 million. But Werner said he expects the company to maintain profitability beyond the current quarter after it tightens up snags in its commercial business.
“If we could just get commercial to break-even, we’re going to have a meaningful profitable new SunPower that continues to be profitable,” Werner told GTM after the earnings calls.
The company offered 2020 guidance of GAAP revenue between $2.1 and $2.3 billion and between 2.5 and 2.75 gigawatts shipped.
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 on project origination, the company hit stumbling blocks on bringing commercial projects to the finish line.
“[In] the fourth quarter we had excellent bookings and awards … What’s not working great 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 towards 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, 20-megawatt hours to complement a solar installation at a Chevron oilfield.
SunPower’s dealer network of more than 500 “was really hitting on all cylinders in Q4,” said Werner. The business hit record residential quarterly bookings at 137 megawatts — 27 megawatts above Q4 2018 — and added 12,000 residential customers.
That, along with SunPower’s upstream business, helped soften the impact of less-than-stellar performance on the commercial side.
“That shows you how great the other two businesses performed,” Werner told GTM.
Because of the seasonality of residential bookings, that business won’t be able to entirely buoy the commercial business as SunPower continues to rehab it 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 towards wider sales in Q2. Because of increasing confidence in customer demand, the company expects to reach attach rates north of 20 percent by Q4.
Maxeon soon to be gone
SunPower announced in November that it would split off its panel manufacturing business, with SunPower’s former head of Technologies Jeff Waters helming the company.
The two entities are still working towards their official division, which they project will 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 noted a major focus on the APAC 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.
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