SolarCity Conference Call Highlights

SolarCity Corp SCTY reported its third quarter earnings on Wednesday. Shares of the company are up down 5 percent.

Below are some key highlights from its conference call.

• Q3 was a record quarter for the company.
• We booked 230 megawatts, which is 150% increase from Q3 last year.
• We also installed 137 megawatts, which is 77% increase from Q3 last year.
• Our residential installations increased by 100% though.
• The last three months has been amazing.

New Product Launches:

• We launched four new products.
• I'm super pleased with the entire team for all the hard work they did on launching these new products.
• The first product we launched is MyPower.
• MyPower broadens the offerings to our customers when you own systems, but it still receives the benefits obtained for power.
• The goal of MyPower is unique as it pays off the loan with the energy the system produces.
• The other product we launched, two new products on the mounting hardware side as ZS Peak and ZS Beam.
• ZS Peak allows us to provide more kilowatt hours per square foot and ZS Beam reduces our cost of installs for carports.
• And, finally, we're very happy to announce Solar Bonds.
• This is additional source of capital, but, more importantly, it'll allow every American to participate in the energy transformation.
• When we normally raise capital, only institutional investors can participate, but now everybody can participate in the benefits of deploying clean energy.

Performance Metrics:

• For the quarter, we added over $800 million of nominal contracts.
• And we now have $4.1 billion of contracted payments coming to SolarCity.
• Our customer count continues to grow. We have over 168,000 customers.
• And we're well on our way to achieve our million customer goal by mid-2018.
• To achieve this, we only need to grow at 61% a year.
• We've gone from 11% to 36% in less than three years.
• Our residential division is now larger than next 50 competitors combined.
• Q3 was a great quarter for SolarCity with 137 megawatts deployed, of which 18 megawatts of commercial installs and 119 megawatts of residential installs, up 100% year-on-year.
• We're doubling our install capacity every year already large numbers.
• We developed the sophisticated composition structures across the organization and infrastructure to grow our warehouse footprint and our fleet.
• I truly believe we have cracked the code on growing residential solar while lowering costs at the same time.
• We added six new warehouses in Q3 and will add another 14 in Q4, mainly on the East Coast in Arizona and in California to satisfy the demand for our products.
• We cover 95% of the population in our core state, within a 30 mile radius of our warehouses.
• We already cover 26% of the total population of the U.S.
• Our commercial megawatts came in below our internal forecast. One of the main reasons for this is that we have a series of commercial projects of about 10 megawatts with a developer with whom we're having issues.
• We're expecting 3 megawatts in Q3 and about 7 megawatts in Q4.
• We're on track to install 179 megawatts to 194 megawatts in Q4.
• Range is wide given the weather and the holiday season for inspections and the potential for commercial jobs stepping in Q1.
• This implies a full year number of 505 megawatts to 520 megawatts, which is still almost doubling year-on-year.
• Importantly, we expect to enter 2015 on track to deploy 920 megawatts to a 4-gigawatt in 2015.
• As I mentioned, in Q3, we saw 100% growth in residential installs, a growing of capacity and our infrastructure and a continued investment in R&D.
• Despite that, we have continued reducing unit cost significantly taking another $0.13 out of the cost structure and getting us under $2 a watt fully loaded cost.
• We've taken out $0.13 a watt on a unit basis in one quarter out of our cost structure - massive achievement.
• The vast majority of these costs are fundamental productivity improvements, for which I'm incredibly proud of the men and women at SolarCity.
• Our sales and our operations group work as one team.
• We IPO'd at cost structure of $3.93 a watt.
• We've taken our total cost down to $2.9 a watt.
• While doubling and installing 0.5 gigawatt
• Last quarter, we set ourselves a goal of $1.9 a watt install cost by 2017.

Financial Metrics:

• So, on the convert, we issued $500 million of convertible notes at a fixed rate of 1.625%.
• The conversion price is $83.53.
• And we also purchased a capped call, which is the first time it's been done here at SolarCity, in a separate transaction.
• That will end up raising our net as converted price upon expiration to $126.08, obviously, a very bullish sign of what we expect for the future.
• The operating lease revenue increased 110% year-on-year.
• Gross margin was 51% and that included $2 million of intangibles. If you exclude the intangibles, we had really an operating gross margin of about 55%.
• You'll see cash and you'll also see investments for the first time that total $733 million.
• We also invested $343 million into new solar system assets.

Guidance:

• For Q4 2014, we're expecting megawatts deployed of 179 to 194, driven mostly by residential.
• This will yield you 505 megawatts to 525 megawatts for the year.
• Operating lease and solar energy systems revenue of $47 million to $52 million.
• Remember, we get a little bit of Q4 weather seasonality that impacts that number and the same for the gross margin.
• I would see solar energy systems sales of $20 million to $24 million, driven mostly by commercial.
• The operating lease gross margin is, again, $35 million to $40 million.