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During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in our 2010 10-K, our quarterly reports on Form 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 also posted a set of PowerPoint slides, which we will reference on 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. 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? Tom Werner Thanks Bob and thank you for joining us today. Before Dennis covers the financials, I would like to take a few minutes to review our Q4 2011 operational results. 2011 was a transitional year for the industry. Excess capacity sharply compressed ASPs while policy changes in a number of European markets affected the timing and scope of demand. Once again, we proved that our world-leading high efficiency solar panels and solar systems continue to be the preferred solution, as we maintain our pricing premium. We flexed our diversified downstream channels, as we adjusted our delivery plans within quarters between business segments and geographic markets to respond a changing market condition. We are on track with our accelerated cost reduction roadmap which puts us in a competitive position versus panels on an efficiency adjusted basis. And we completed our company restructuring, Tenesol acquisition, and advanced our Total strategic initiatives. These milestones will improve our access to market, strengthen our balance sheet, and increase operating cost efficiency.
Turning to slide 4. In the fourth quarter of 2011, we had solid non-GAAP operating results on revenue, gross margin, EPS, and free cash flow. Our utility and power plant business outperformed with a significant start of major construction activities at California Valley Solar Ranch, as well as a 54-megawatt supply agreement with NRG for delivery between 2011 and 2012.We also had excellent success with new initiatives in our residential business with strong demand for our leased product as well as adding high profile partners like Nissan and Orchard Supply Hardware through our Alliance program which already includes Force. Our accelerated cost reduction programs are on track, the most important of which is our manufacturing step reduction program which will reduce cell production cost by 15% by the end of 2012. In the fourth quarter, we successfully operated one line using the step reduced process, and have begun replicating this technology on more lines. We expect to have 40% of our production lines completed by year end. We are also executing on our previously announced reorganization which is a key contributor to reducing our 2012 operating cost by approximately 10% from Q4 2011. We completed our Tenesol acquisition and I will discuss this further in a few minutes. Tenesol will significantly expand our market reach in our product portfolio and affirms the support and value our partnership with Total. Overall, for the year, we achieved record revenue and production for 2011 while successfully launching key new products, substantially accelerating our cost reduction roadmap in improving our balance sheet. Year-on-year, our shipments grew 40% driven by our UPP and North American Commercial business segments, both of which were focused on US market. We made substantial progress in UPP, which I will detail shortly. We also expanded our residential channel by more than 20% for the year and remain the leader in installed US residential, commercial and public sector markets.
On the technology front, we began production of our Maxeon Gen 3 solar cells, which demonstrated efficiencies of up to 24%. We also announced our first contract for our C7 tracker, our concentrating tracker system at Arizona State University under a PPA with SRP in Arizona Utility. We expect that the C7 tracker will allow SunPower to achieve up to 20% lower power plant LCOE compared with other PV technologies, and over time, to compete with incentives and high solar energy locations against conventional forms of electricity generation.Read the rest of this transcript for free on seekingalpha.com