SunPower Corporation (SPWRA)
Q2 2010 Earnings Call Transcript
August 10, 2010 4:30 pm ET
Bob Okunski – Senior Director, IR
Tom Werner – CEO
Dennis Arriola – EVP and CFO
Jim Pape – President, Residential & Commercial
Howard Wenger – President, Utility & Power Plants
Satya Kumar – Credit Suisse
Jesse Pichel – Jefferies
Rob Stone – Cowen & Company
Vishal Shah – Barclays Capital
Michael Horwitz – Robert Baird
Kelly Dougherty – Macquarie
Sanjay Shrestha – Lazard Capital
Hari Chandra – Deutsche Bank
Burt Chao – Simmons & Company
Stephen Chin – UBS
Previous Statements by SPWRA
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» SunPower Corporation Q2 2009 Earnings Call Transcript
Good afternoon, and welcome to SunPower Corporation’s second quarter 2010 earnings conference call. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.
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, Barbara. I’d like to welcome everyone to our second quarter 2010 earnings conference call. On the call today we will start off with a second 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 and provide some color on 2011 before we open 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, 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 hosted a supplemental data sheet updated this quarter to reflect our past three ramp schedules and new business segment structure is distributed this quarter as well.
On slide two of our PowerPoint presentation you’ll find our safe harbor statement. Our prepared remarks will run approximately 30 minutes which will allow plenty of time for questions. 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. We are pleased with the progress we made last quarter, as well as our visibility into the second half of this year and through 2011. On this call I will cover each of these topics as well as our cost structure, guidance, and long-term strategies. First, let’s look at the second quarter highlights on slide three.
Our results reflect very strong execution as we exceeded our plan for the second quarter. Non-GAAP revenues for the quarter were up 31% year-over-year, and up 13% from Q1. We think this growth reflects growing market share in our most important markets and segments.
Non-GAAP gross margins for the quarter was 26.3%, up approximately 400 basis points sequentially, while we tripled our non-GAAP EPS to $0.15 per share. We remain on track to achieve our 2010 plan as we continue to benefit from strong demand in all geographies and market segments. We were sold out in Q2, and are fully allocated for the balance of 2010. We’re also seeing strong bookings going into 2011.
Moving on to slide four, we are providing a snapshot of the key drivers we see for our business over the next 18 months. First, based on what we’re seeing in our business today, we are confident in our second half 2010 forecast. We are forecasting that 65% of our 2010 revenue will be delivered in the second half. This financial profile primarily reflects revenue recognition of our Italian power plants which remain on track for both construction and financing.
To that end, our team in Europe signed a definitive agreement selling Montalto 28 megawatts solar park. We’ll look at our 2010 and 2011 solar plant construction plan in more detail in a moment. Second, we are encouraged by the increasing level of visibility into 2011. Our pipeline remained strong with Q1 Utility and Power Plants or UPP bookings at the best level in two years. In our Residential and Commercial business we are fully allocated for the rest of the year.
Third, our panel cost structure. This is a major area of focus for us. We took important steps this quarter, but we know we need to do more. So we’re accelerating our efforts. We expect our panel cost in Q4 2010, when adjusted for our high efficiency panels on lower balance of system costs to be $1.36 per watt when compared to conventional 14% crystalline panels.
For Q4 2011, we expect that efficiency adjusted cost to drop to $1.08 per watt and we expect our Oasis project will further reduce balance of system cost significantly, starting in the first quarter of next year. So those are the drivers we want to focus on during this call.
Let’s start with why we are confident in the near-term as we review our UPP sales in 2010 and 2011. I’ll start with slide five. We expect more than 30% of our sales in the second half of 2010 to be Italian power plants.
This table shows our UPP pipeline in Italy over the next 18 months in various stages of development. We expect to recognize revenue on more than 100 megawatts of Italian power plants this year.
A key factor in hitting our Q4 target is our ability to finance and sell three large projects, Montalto 20, 8 and 44 as shown on this slide.