Q2 2012 Earnings Call
August 08, 2012 4:30 pm ET
Robert Okunski - Senior Director of Investor Relations
Thomas H. Werner - Chairman, Chief Executive Officer and President
Charles D. Boynton - Chief Financial Officer and Executive Vice President
Howard J. Wenger - President of Regions
Satya Kumar - Crédit Suisse AG, Research Division
Jesse Pichel - Jefferies & Company, Inc., Research Division
Vishal Shah - Deutsche Bank AG, Research Division
Kelly A. Dougherty - Macquarie Research
Sanjay Shrestha - Lazard Capital Markets LLC, Research Division
Benjamin J. Kallo - Robert W. Baird & Co. Incorporated, Research Division
Christopher Blansett - JP Morgan Chase & Co, Research Division
Timothy Radcliff - Morgan Stanley, Research Division
Previous Statements by SPWR
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Good afternoon, and welcome to the SunPower Corporation's Second Quarter 2012 Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time.
I'd now like to turn the call over to your host, Mr. Bob Okunski, Senior Director of Investor Relations at SunPower Corporation. Sir, you may begin.
Thanks, Ed. I'd like to welcome everyone to our second quarter 2012 earnings conference call. On the call today, we will start off with an operating view by Tom Werner, our CEO; followed by Chuck Boynton, our CFO, who will review our second quarter 2012 financial results. Tom will then discuss our guidance for the year before opening up the call for questions. As a reminder, a replay of this call will be available later today on the Investor Relations page of our website.
During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in our 2011 10-K, quarterly reports on Form 10-Q, as well as on 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 also posted a set of PowerPoint slides, which we will reference during this call on the Events and Presentations page of our investor relations website. 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 will find our Safe Harbor statement. Our prepared remarks will run approximately 25 minutes and then we will take questions.
With that, I'd like to turn the call over to Tom Werner, CEO of SunPower, who will begin on Slide 3. Tom?
Thomas H. Werner
Thanks, Bob, and thank you for joining us today. On today's call, we will update you on our Q2 operational highlights and strategic position, review our second quarter financials and provide our outlook for the balance of the year. I'll start by commenting on the current PV industry context and why we believe that our strategy will allow SunPower to be a long-term winner.
We focus on 4 key strategies. Please turn to Slide 4. First, a unique, differentiated global go-to-market strategy. SunPower has strong downstream channels in both the rooftop and power plant segments in key global markets. This allows us to capture downstream value during the current period of abundant upstream product supply.
Second, technology leadership in both panels and systems. SunPower has consistently demonstrated that our product differentiation around superior performance and reliability allows us to earn a meaningful price premium, while offering a compelling levelized cost of energy.
Third, an innovation-driven, cost-reduction roadmap. By reducing the complexity of our high-efficiency panel manufacturing process, we can combine unique process cost reduction with broader industry supply chain advantage, such as lower wafer prices. We are also driving similar efforts on balance of system costs.
Finally, maintaining a strong balance sheet and adequate liquidity. Access to capital has become a clear strategic factor, both for large power plant projects and residential leasing programs. Increasingly, lenders and customers want to ensure that they are dealing with a financially stable counterparty. Our strategy is well suited to the current industry environment, and we believe that the benefits of these strategy will become more evident as PV industry consolidation proceeds.
Now let me provide some specific Q2 operational highlights. Please turn to Slide 5. Q2 was a solid quarter. We reported gross margin and bottom line performance above our forecast and successfully reduced our operating expenses per our plan. We also beat our cost-per-watt reduction targets for the second quarter, while prudently managing our balance sheet and working capital needs.
In the Americas, we continue to benefit from our extremely strong power plant project pipeline, as well as from our leadership position in the residential dealer segment and commercial market. The CVSR project remains on track to meet our September milestone. We have installed more than 30% of our total panels at CVSR through the end of July. This project provides us with important volume, revenue and margin visibility into 2013.
We are also in the process of financing the first 2 Southern California Edison Antelope Valley solar projects totaling 600 megawatts, and we expect to start construction next year. Initial interest in financing this project has been very strong, and we believe we will have financing in place in time to meet this accelerating construction schedule.
During Q2, we completed and installed the 25-megawatt Modesto Irrigation District project. Additionally, we continue to gain traction with our C7 concentrator product and recently signed a 6-megawatt agreement with a major U.S. utility. Project completion is scheduled for the first half of next year. More on C7 later.
In our North American commercial business, we completed a 10-megawatt system for Campbell Soup and starting construction of a 2-megawatt system for Bloomberg. In residential, we saw a strong growth driven by a combination of organic expansion and share gains due to the rapid adoption of our leasing program. For example, we doubled the number of lease signings in Q2 versus Q1 and recently established a financing facility with Citi and Credit Suisse for up to $325 million of lease capacity that will fund the continued growth of this business.