SunPower Corporation (SPWRA)
Q3 2010 Earnings Call Transcript
November 11, 2010 4:30 pm ET
Bob Okunski – Senior Director, IR
Tom Werner – President and CEO
Dennis Arriola – CFO, SVP, Principal Financial and Accounting Officer
Howard Wenger – President, Utility and Power Plants
Jim Pape – President, Residential and Commercial
Vishal Shah – Barclays Capital
Kelly Dougherty – Macquarie
Satya Kumar – Credit Suisse
Sanjay Shrestha – Lazard Capital Markets
Rob Stone – Cowen & Company
Jesse Pichel – Jefferies
Smittipon Srethapramote – Morgan Stanley
Ben Kallo – Robert W. Baird
Stephen Chin – UBS
Previous Statements by SPWRA
» SunPower Corporation Q2 2010 Earnings Call Transcript
» SunPower Corporation Q1 2010 Earnings Call Transcript
» SunPower Corporation Q3 2009 Earnings Conference Call
Good afternoon, and welcome to SunPower Corporation’s third quarter 2010 earnings conference call. I would now like to turn the call over to Mr. Bob Okunski, Senior Director of Investor Relations at SunPower Corporation. Sir, you may begin.
Thank you, Ed. I’d like to welcome everyone to our third quarter 2010 earnings conference call. On the call today, we will start off with a third quarter overview from Tom Werner, SunPower’s CEO; followed by Dennis Arriola, our CFO, who will go into greater financial details on the quarter. Tom will then discuss our outlook for 2010, before opening up the call for questions.
We’ve allotted 60 minutes for today’s call, and a replay will be available later today on the Investor Relations page of our Web site.
During today’s call we will make forward-looking statements subject to various risks and uncertainties that are described in our 2009 10-K, second quarter 2010 10-Q, as well as today’s press release. Please see those documents for additional information regarding those factors that may impact these forward-looking statements.
To enhance this call we have posted a set of PowerPoint slides, which we will reference during this call on the events and presentations page of our Investor Relations Web site. In the same location, we have posted a supplemental data sheet detailing some of our historical metrics. On slide #2 of our PowerPoint presentation you’ll find our Safe Harbor statement.
Our prepared remarks will run approximately 30 minutes, which will allow time for questions.
Finally, I want to remind everyone that we would be holding our 2010 Analyst Day next week, on November 18, in New York City, starting at 10 am eastern time. The event will be webcast on our Investor Relations page of our Web site.
With that, I’d like to turn the call over to Tom Werner, CEO of SunPower, who will begin on slide three. Tom?
Thanks, Bob, and thank you for joining us today. In this call, we will cover our Q3 results and outlook for 2010, our cost reduction progress and we will preview the drivers for our 2011 guidance, which we will offer at our Analyst Day next week.
Please turn to slide #3, our third quarter results significantly beat our forecast due to strong execution from our manufacturing, construction and sales teams. Revenues were up 41% and non-GAAP EPS was up 78% quarter-on-quarter. Our cost decline, in line with plan in both the fab and in the field.
For 2011, our revenue and gross margin visibility has increased as we added to our backlog to both of our business segments. Demand is greater than the supply. We are entering 2011 with record backlog levels.
Specifically in Fabs 1 and 2 in the Philippines, we had record performance in cell production, overall equipment effectiveness, average solar cell conversion efficiency and yields.
In Fab 3 in Malaysia, our first production run of Generation 2 solar cells exceeded 22% conversion efficiencies beating our plan. In the field, we installed a record 70 megawatts of power plants in Q3 and met our balance of system or BOS cost targets.
In Europe, our finance team closed the sale of the first two phases of Montalto Solar Park, totaling 28 megawatts.
Turning to slide #4, we are confident in our Q4 forecast. Our Residential and Commercial or R&C segment is sold out for the quarter. In our Utility and Power Plants or UPP segment, we are on track to complete the construction, financing and sale of two additional Italian power plants.
Let’s turn to our business segments, both of which provide volume and price visibility for 2011. Our commercial sales team signs contracts for several quarters into the future while our UPP business signs multi-year contracts.
In the North American commercial business, we are approximately 70% booked for 2011, and have built the pipeline to record levels. Similarly, in North American UPP, we are approximately 95% booked for 2011, and in our EMEA UPP channel, we have identified projects for our entire 2011 panel allocation.
We expect to increase our Italian power plant construction volume in 2011 versus 2010 and plan to begin building the California Valley Solar Ranch, our 250 megawatt central station power plant in San Luis Obispo County.
On the cost side, we are on track to achieve our Q4 2011 plan of $1.08 per watt efficiency adjusted panel cost relative to conventional crystalline silicon technology.
Please turn to slide #5 to review our vertical integration strategy. SunPower’s upstream manufacturing operations serve our two downstream channels, UPP and R&C. We manufacture the highest efficiency panels in the world up to 50% more efficient than conventional technology and two to four times more efficient than thin film.
We believe this differentiated position is sustainable over the long-term and we will scale our manufacturing operations consistent with this advantage. We also plan to scale our upstream capabilities through joint ventures, partnerships and in-house growth to minimize cash outlays, while continuing to reduce cost. Our two downstream segments provide channels to market our unique panel technology.