May 7, 2014 - SolarCity today announced financial results for the first fiscal quarter ended March 31, 2014.
In the first quarter of 2014, SolarCity achieved the high-end of guidance for both megawatts (MW) deployed and Operating Lease and Solar Energy Systems Incentive Revenue, and set a new quarterly record with 136MW Booked. We added 17,664 customers—the largest quarterly gain in our history—to end Q1 2014 with over 110,000 customers and remain firmly on track to meet our one million customer target by mid-2018.
With growing confidence in the outlook for both demand and the scaling of our operations, bolstered by the launch of our service into our 15th state—Nevada—we are increasing our 2014 guidance to 500-550MW Deployed from previous guidance of 475-525MW, and establishing initial guidance for 2015MW Deployed of between 900MW and 1 gigawatt (GW). At the midpoint of guidance, we estimate we would exit next year with more than 2GW of cumulativeMW deployed and annualized electricity production of ~ 2.8 terawatt-hours (TWh). This would put us on a path to fulfill our goal to become one of the largest suppliers of electricity in the United States.
Q1 2014 Operating Highlights
We made substantial progress in the build out of our platform to deliver cleaner and cheaper distributed energy in the first quarter of 2014. Key operating and development highlights of the quarter include:
- MW Deployed of 82MW as residentialMWs Deployed grew 107% year-over-year to 67MW. Total cumulativeMWs Deployed reached 649MW as of March 31, 2014.
- MW Booked totaled 136MW, up 34% as compared to Q4 2013.
- Cumulative Energy Contracts increased to 100,609, up 97% since the end of the first quarter of 2013 (and 21% since the end of 2013).
- Cumulative Customers grew to 110,662, up 84% since the end of the first quarter of 2013 (and 19% since the end of 2013).
Estimated Nominal Contracted Payments and Retained Value
Due to the long-term nature of our operating lease contracts—typically 20-year terms—and the related GAAP accounting for such contracts, we rely upon the following operating metrics to manage our business and believe these metrics are a better representation of our new sales activity and business outlook:
- Estimated Nominal Contracted Payments Remaining increased to $2,501 million at March 31, 2014, up 97% year-over-year and 21% since the end of the 2013.
- Retained Value forecast increased to $1,291 million, equating to retained value per watt forecast of $1.56/W, at March 31, 2014.
Q1 2014 GAAP Operating Income Statement
For the first quarter of 2014, Operating Leases and Solar Energy Systems Incentives Revenue was $29.1 million, up 93% from $15.1 million in the first quarter of 2013, owing largely to an increase in cumulative operating leaseMW Deployed. Total revenue for the first quarter increased 112% as compared to the year-ago period to $63.5 million.
Operating Leases and Solar Energy Systems Incentives Gross Margin was 45%, within guidance of 40%-50%. Non-cash amortization of intangibles of $1 million impacted Operating Leases and Solar Energy Systems Incentives Gross Margin by ~3%. Consolidated Gross Profit Margin was 23%.
Total Operating Expenses were $81.8 million for the first quarter of 2014, rising 139% from $34.3 million in the first quarter of 2013. Expressed as a ratio ofMW booked, operating expenses declined year-over-year and sequentially to $0.60/W. Operating expenses in the first quarter of 2014 exceeded guidance of $70-75 million largely owing to an accelerated ramp in sales headcount throughout the quarter as well as higher than forecast stock compensation expense. Excluding non-cash amortization of intangibles and stock compensation expense, operating expenses were $66.9 million.
Loss from Operations in the first quarter of 2014 was $67.0 million as compared to $26.7 million in the first quarter of 2013.
GAAP net loss attributable to stockholders per diluted share was ($0.26).
Non-GAAP Earnings per Share [EPS] Before Noncontrolling Interests
While GAAP EPS is based upon net income (loss) attributable to common stockholders, we also report non-GAAP EPS based upon net income (loss). The only difference between GAAP EPS and non-GAAP EPS is the sole line item net income (loss) attributable to non-controlling interests and redeemable noncontrolling interests.
Under GAAP accounting, we report net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests to reflect our joint venture fund investors' allocable share in the results of these joint venture financing funds. Income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests is calculated based primarily on the hypothetical liquidation at book value, or HLBV method, which assumes that the joint venture funds are liquidated at the reporting date, even though liquidation may or may not ever occur. Additionally the returns that will be allocated to the investors over the expected terms of the funds may differ significantly from the amounts calculated under the HLBV method. Accordingly, we also report non-GAAP EPS based on earnings before net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests per share, which we view as a better measure of our operating performance.
According to this definition, non-GAAP earnings before noncontrolling interests and redeemable noncontrolling interests per share was ($0.82).
See below for a reconciliation of GAAP EPS to non-GAAP EPS.
Q1 2014 GAAP Cash Flows and Financing and Investing Details
With each new Energy Contract, SolarCity creates a recurring, predictable cash flow stream. Our financial strategy is to maximize retained value for shareholders by covering Investing Activities with cash generated from Operating and Financing Activities.
Investing Activities are primarily comprised of the capital investment in distributed generation solar energy systems under long-term Energy Contracts with customers, while Financing Activities represent the funding of solar energy systems investments through investor partners and lenders. Key highlights of SolarCity's Investing and Financing Activities include:
- Investments in Solar Energy Systems, Leased and to Be Leased, of $187.4 million in Q1 2014
- Undeployed Tax Equity Financing Capacity of 234MW as of May 7, 2014
For the first quarter ended March 31, 2014, net cash used in Operating Activities was $23.3 million, while net cash used in Investing Activities was $192.6 million and net cash provided by Financing Activities (before equity and convertible notes issuances) was $153.2 million.
Defined as Operating Cash Flows plus Financing Cash Flows net of Investing Cash Flows (excluding equity and convertible note issuances), net cash flow was ($62.7 million) in the quarter ended March 31, 2014. As of March 31, 2014, Cash and cash equivalents totaled $519.6 milion.
Guidance for Q2 2014 and the Full Years 2014 and 2015
Based on current trends in demand and operations, we have increased our confidence in our outlook for the year and in turn increase our 2014 guidance to 500MW - 550MW Deployed from prior guidance of between 475MW and 525MW Deployed. We continue to expect to generate positive cash flow for the full year 2014.
For 2015, we are establishing guidance of 900 - 1,000MW Deployed, representing growth of 81% year-over-year at the midpoint.
For Q2 2014, we expect MW deployed of between 105MW - 110MW, up 103% year-over-year at the midpoint of both 2014 and 2015 guidance.
For Q2 2014, we also expect:
- GAAP Operating Lease and Solar Energy Systems Incentive Revenue: $39 million - $43 million
- GAAP Solar Energy Systems Sale Revenue: $17 million - $21 million
- GAAP Operating Lease and Solar Energy Systems Incentive Gross Margin: 50%-55% (including the impact of $2 million in amortization of intangibles)
- GAAP Operating Expenses: $100 million - $110 million (including $3 million in amortization of intangibles)
- Non-GAAP EPS (before Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests): ($0.90) - ($1.00)