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SolarCity Announces Second Quarter 2013 Financial Results

Stocks in this article: SCTY

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, including the effect of electric utility industry regulations, net metering and related policies, the availability and amount of rebates, tax credits and other financial incentives, the availability and amount of financing from fund investors, the retail price of utility-generated electricity or the availability of alternative energy sources, risks associated with SolarCity's rapid growth, consumer default rates, higher-than-anticipated operations, maintenance, insurance, administrative, and inverter costs, assumptions related to available financing, risks that consumers who have executed energy contracts included in reported nominal contracted payments remaining, retained value, and MW booked, may seek to cancel those contracts, assumptions as to retained value under energy contracts and contract renewal rates and terms, including applicable net present values, performance-based incentives, and other rebates, credits and expenses, SolarCity's limited operating history, particularly as a new public company, changes in strategic planning decisions by management or reallocation of internal resources, and general market, political, economic and business conditions. You should read the section entitled "Risk Factors" in our Quarterly Report on Form 10-Q, which has been filed with the Securities and Exchange Commission and identifies certain of these and additional risks and uncertainties. We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

SolarCity Corporation
Condensed Consolidated Balance Sheets
(In Thousands) December 31, June 30,
  2012 2013
  (audited) (unaudited)
Current assets:     
Cash and cash equivalents   $ 160,080  $ 159,606
Restricted cash   7,516  6,031
Accounts receivable, net  25,145  23,988
Rebates receivable   17,501  20,235
Inventories   87,903  68,735
Deferred income tax asset  5,770  5,377
Prepaid expenses and other current assets   11,502  25,831
Total current assets   315,417  309,803
Restricted cash   2,810  1,984
Solar energy systems – net   1,002,184  1,278,880
Property, plant and equipment – net   18,635  19,862
Other assets  22,796  27,675
Total assets   $ 1,361,842  $ 1,638,204
Liabilities and equity     
Current liabilities:     
Accounts payable   $ 62,986  $ 77,705
Distributions payable to noncontrolling interests  12,028  26,935
Current portion of deferred U.S. Treasury grants income  11,376  14,809
Accrued and other current liabilities   52,334  43,743
Customer deposits   8,753  7,818
Current portion of deferred revenue   31,516  37,949
Current portion of long-term debt   20,613  8,702
Current portion of lease pass-through financing obligation  13,622  27,939
Current portion of sale leaseback financing obligation  389  403
Total current liabilities   213,617  246,003
Deferred revenue, net of current portion   204,396  277,827
Long-term debt, net of current portion   83,533  115,213
Long-term deferred tax liability  5,790  5,400
Lease passthrough financing obligation, net of current portion  125,884  104,662
Sale leaseback financing obligation, net of current portion  14,755  14,550
Deferred U.S. Treasury grants income, net of current portion  286,884  393,268
Other liabilities  112,056  149,854
Total liabilities   1,046,915  1,306,777
Stockholders' equity:     
Common stock 7 7
Additional paid-in capital   325,705  348,081
Accumulated deficit   (111,392)  (166,271)
Total stockholders' equity   214,320  181,817
Noncontrolling interests in subsidiaries  100,607  149,610
Total equity   314,927  331,427
Total liabilities and equity   $ 1,361,842  $ 1,638,204
SolarCity Corporation
Condensed Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts) Three Months Ended
  June 30, 2012 June 30, 2013
  (unaudited) (unaudited)
Operating leases   $ 11,528  $ 20,608
Solar energy systems sales   35,046  17,341
Total revenue  46,574  37,949
Cost of revenue:     
Operating leases   3,710  7,223
Solar energy systems sales   31,899  15,247
Total cost of revenue  35,609  22,470
Gross profit  10,965  15,479
Operating expenses:     
Sales and marketing   15,700  21,344
General and administrative   10,788  21,176
Total operating expenses   26,488  42,520
Loss from operations   (15,523)  (27,041)
Interest expense, net  4,841  5,421
Other expense, net   1,455  162
Loss before income taxes  (21,819)  (32,624)
Income tax provision  (30)  (25)
Net loss  (21,849)  (32,649)
Net income (loss) attributable to noncontrolling interests  3,984  (8,764)
Net loss attributable to stockholders  $ (25,833)  $ (23,885)
Net loss per share attributable to common stockholders:    
Basic  $ (2.37)  $ (0.31)
Diluted  $ (2.37)  $ (0.31)
Weighted average shares used to compute net loss per share attributable to common stockholders:  
Basic  10,897,198  76,529,698
Diluted  10,897,198  76,529,698
SolarCity Corporation
Condensed Consolidated Statements of Cash Flows
  Six months ended
(In Thousands) June 30, June 30,
  2012 2013
Operating activities:    
Net loss  $ (48,911)  $ (60,804)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Loss on disposal of property, plant and equipment  10  –
Depreciation and amortization net of amortization of deferred U.S. Treasury grant income  9,021  15,989
Interest on lease pass-thorough financing obligation  4,939  6,869
Stock-based compensation  4,713  8,996
Revaluation of convertible redeemable preferred stock warrants  9,557  –
Revaluation of preferred stock forward contract  350  –
Deferred income taxes  6  3
Reduction in lease pass-through financing obligation  (7,290)  (14,239)
Changes in operating assets and liabilities:    
Restricted cash  (381)  (1,591)
Accounts receivable  (16,396)  1,157
Rebates receivable  652  (2,734)
Inventories  2,153  19,168
Prepaid expenses and other current assets  (2,941)  (12,717)
Other assets  (5,132)  (2,190)
Accounts payable  (68,075)  14,719
Accrued and other liabilities  21,744  31,382
Customer deposits  (5,025)  (935)
Deferred revenue  62,542  79,864
Net cash provided by (used in) operating activities  (38,464)  82,937
Investing activities:    
Payments for the cost of solar energy systems, leased and to be leased  (174,552)  (296,254)
Purchase of property and equipment  (5,970)  (3,893)
Net cash used in investing activities  (180,522)  (300,147)
Financing activities:    
Investment fund financings and bank borrowings:    
Borrowings under long-term debt  60,532  34,464
Repayments of long-term debt  (18,127)  (18,616)
Borrowings under bank line of credit  19,418  –
Repayments of sale-leaseback financing obligation  (178)  (191)
Proceeds from lease pass-through financing obligation  123,593  20,592
Repayment of capital lease obligations  (15,582)  (1,212)
Proceeds from investment by noncontrolling interests in subsidiaries  21,795  146,071
Distributions paid to noncontrolling interest in a subsidiary  (91,298)  (76,236)
Proceeds from U.S. Treasury grants  48,076  98,484
Net cash provided by financing activities before equity issuances  148,229  203,356
Equity issuances:     
Proceeds from exercise of stock options  1,197  5,346
Proceeds from the exercise of convertible redeemable preferred stock  80,868  –
Proceeds from exercise of common stock warrants  –  8,034
Net cash provided by equity issuances   82,065  13,380
Net cash provided by financing activities  230,294  216,736
Net increase in cash and cash equivalents  11,308  (474)
Cash and cash equivalents, beginning of period  50,471  160,080
Cash and cash equivalents, end of period  $ 61,779  $ 159,606
Reconciliation from GAAP EPS to Non-GAAP EPS:      
  GAAP Net Loss GAAP Net Loss Non-GAAP Net Loss
  Attributable to Attributable to Before Noncontrolling 
in thousands except per share Stockholders Noncontrolling Interests Interests
Net loss ($23,885) ($8,764) ($32,649)
/ Weighted Average Common Shares Outstanding 76,530 76,530 76,530
= Net Loss Per Share ($0.31) ($0.11) ($0.43)
Operating Activity Metrics:
  Q2 2012 Q1 2013 Q2 2013 Cumulative
MW Deployed 31 46 53 387
New Customers 5,200 8,773 8,559 64,411
New Energy Contracts Outstanding 4,760 7,363 8,087 54,650
Estimated Nominal Contracted Payments Remaining -- $m       $1,409
"MW" or "megawatts" represents the DC nameplate megawatt production capacity.
"Backlog" represents the aggregate megawatt capacity of solar energy systems not yet deployed as of the date specified pursuant to Energy Contracts and contracts for solar energy system direct sales executed as of such date.
"Customers" includes all residential, commercial and government buildings where we have installed or contracted to install a solar energy system, or performed or contracted to perform an energy efficiency evaluation or other energy efficiency services.
"Energy Contracts" includes all residential, commercial and government leases and power purchase agreements pursuant to which consumers use or will use energy generated by a solar energy system that we have installed or contracted to install. For landlord-tenant structures in which we contract with the landlord or development company, we include each residence as an individual contract. For commercial customers with multiple locations, each location is deemed a contract if we maintain a separate contract for that location.
"MW Booked" represents the aggregate megawatt production capacity of solar energy systems pursuant to customer contracts signed during the applicable period net of cancellations during the applicable period. This metric includes solar energy systems booked under Energy Contracts as well as solar energy system direct sales.
"MW Deployed" represents the megawatt production capacity of solar energy systems that have had all required building department inspections completed during the applicable period. This metric includes solar energy systems deployed under Energy Contracts as well as solar energy system direct sales.
"Nominal Contracted Payments Remaining" equals the sum of cash payments obligated to be paid to us under our Energy Contracts over the remaining term of such contracts. This metric includes Energy Contracts for solar energy systems already deployed and in Backlog. As an example, if a customer is 2 years into her 20 year contract, then 18 years of contract payments remain. As an additional example, if a customer chose to pre-pay her Energy Contract, then it is included in Nominal Contracted Payments Remaining only while it is in Backlog as the pre-payment has not been received. Payments for direct sales are not included. 
"Retained Value" forecast represents the sum of both "Retained Value under Energy Contract" and "Retained Value Renewal." Retained Value Under Energy Contract represents the forecasted net present value of Nominal Contracted Payments Remaining and estimated performance-based incentives allocated to us, net of amounts we are obligated to distribute to our fund investors, upfront rebates, depreciation, renewable energy certificates, solar renewable energy certificates and estimated operations and maintenance, insurance, administrative and inverter replacement costs. This metric includes Energy Contracts for solar energy systems deployed and in Backlog. Retained Value of Renewal represents the forecasted net present value of the payments SolarCity would receive upon Energy Contract renewal through a total term of 30 years, assuming all Energy Contracts are renewed at a rate equal to 90% of the contractual rate in effect at expiration of the initial term. This metric is net of estimated operations and maintenance, insurance, administrative and inverter replacement costs and includes Energy Contracts for solar energy systems deployed and in Backlog. Our calculation of retained value assumes a discount rate of 6%.
"Retained Value per Watt" is computed by dividing cumulative retained value as of such date by a sum of total MWs deployed under Energy Contracts as of such date plus MWs booked under Energy Contracts as of such date but not yet deployed.
"Undeployed Tax Equity Financing Capacity" represents a forecast of the amount of MW that can be deployed based on committed available tax equity financing for Energy Contracts.
CONTACT: Investor Contact
         Aaron Chew

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