August 7, 2014 - SolarCity today announced financial results for the second fiscal quarter ended June 30, 2014.
In the second quarter of 2014, SolarCity continued to build out a stronger and broader platform to significantly expand the adoption of distributed, clean energy. We experienced unprecedented demand in the quarter with triple-digit year-over-year growth in all our key operating metrics. Our development efforts continued to gather momentum with 107 MW Deployed and 218 MW Booked in the quarter. We passed the 140,000-customer mark in June 2014—with more than 30,000 customers added in the second quarter alone—an increase of 218% over the year ago quarter.
Our expanding base of leased solar assets is expected to support a meaningful level of operating lease revenue for the next 20 years. We ended the second quarter of 2014 with cumulative MW Deployed of 756 MW and $3.3 billion of Estimated Nominal Contracted Payments Remaining. Our deployed solar power systems are now capable of producing over 1,000 GWh annually, and our aggregate portfolio produced more than 3.5 GWh per day several times before the end of the second quarter. We are firmly on track to achieve our goal of 500 MW-550 MW Deployed in 2014 and 900 MW – 1,000 MW in 2015. At the midpoint of guidance, we estimate we would exit next year with more than 2 GW of cumulative deployments 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.
Q2 2014 Operating Highlights
We made substantial progress in the build out of our platform to deliver cleaner and cheaper distributed energy in the second quarter of 2014. Key operating and development highlights of the quarter include:
- MW Deployed of 107 MW, up 102% year-over year (with residential MW Deployed up 111% year-over-year to 90 MW). Total cumulative MWs Deployed reached 756 MW as of June 30, 2014.
- MW Booked totaled 218 MW, up 216% as compared to Q2 2013.
- Cumulative Energy Contracts increased to 128,933, up 114% since the end of the second quarter of 2013 (and 28% since the end of the first quarter 2014).
- Cumulative Customers grew to 141,034, up 102% since the end of the second quarter of 2013 (and 27% since the end of the first quarter 2014).
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 present a meaningful representation of our new sales activity and business outlook:
- Estimated Nominal Contracted Payments Remaining increased by $811 million in Q2 2014 to $3,312 million at June 30, 2014, up 135% year-over-year and 32% since the end of the first quarter of 2014.
- Retained Value forecast increased to $1,804 million, or $1.72/W, at June 30, 2014.
Q2 2014 GAAP Operating Income Statement
For the second quarter of 2014, Operating Leases and Solar Energy Systems Incentives Revenue was $43.2 million, up 110% from $20.6 million in the second quarter of 2013, owing largely to an increase in cumulative operating lease MW Deployed. Total revenue for the second quarter increased 62% as compared to the year-ago period to $61.3 million.
Operating Leases and Solar Energy Systems Incentives Gross Margin was 52%. Non-cash amortization of intangibles of $2 million impacted Operating Leases and Solar Energy Systems Incentives Gross Margin by 5%. Consolidated Gross Profit Margin was 37%.
Total Operating Expenses were $97.2 million for the second quarter of 2014, rising 123% from $43.6 million in the second quarter of 2013. Expressed as a ratio of MW booked, operating expenses declined year-over-year and sequentially to $0.45/W. Non-cash amortization of intangibles and stock compensation expense accounted for $18.3 million of reported operating expenses.
Loss from Operations in the second quarter of 2014 was $74.3 million as compared to $35.5 million in the second quarter of 2013.
GAAP net loss attributable to stockholders per diluted share was ($0.52).
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 ($0.96) in the second quarter of 2014.
See below for a reconciliation of GAAP EPS to non-GAAP EPS.
Q2 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:
- Capital Investment in Solar Energy Systems, Leased and to Be Leased, of $262.9 million in Q2 2014
- Undeployed Tax Equity Financing Capacity of 155 MW as of July 31, 2014
For the second quarter ended June 30, 2014, net cash used in Operating Activities was ($36.5 million), while net cash used in Investing Activities was ($276.8 million) and net cash provided by Financing Activities (before equity and convertible notes issuances) was $195.7 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 ($117.6 million) in the quarter ended June 30, 2014. As of June 30, 2014, Cash and cash equivalents totaled $405.3 million.
Guidance for Q3 2014 and the Full Years 2014 and 2015
Looking ahead, we expect MW deployed of between 135 MW – 150 MW in Q3 2014, up 83% year-over-year at the midpoint.
For Q3 2014, we also expect:
- GAAP Operating Lease and Solar Energy Systems Incentive Revenue: $50 million - $55 million
- GAAP Solar Energy Systems Sale Revenue: $4 million - $8 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: $115 million - $125 million (including $3 million in amortization of intangibles)
- Non-GAAP EPS (before Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests): ($1.10) – ($1.20)
We continue to expect MW Deployed of 500 MW – 550 MW in 2014 and 900 MW – 1,000 MW in 2015