SunPower Reports Third Quarter 2022 Results

  • Added a record 23,000 customers in the third quarter, a 63% increase YoY
  • Accelerated revenue growth 67% YoY
  • Reported Net Income attributable to stockholders of $139M, Adjusted EBITDA of $33M which more than doubled Q2 results
  • Announced collaboration with General Motors to develop home energy system; General Motors named SunPower as exclusive solar provider

RICHMOND, Calif., Nov. 8, 2022 /PRNewswire/ -- SunPower Corp. SPWR, a leading solar technology and energy services provider, today announced financial results for the third quarter, ending October 2, 2022.

"In the third quarter we continued to break records for customer growth and revenue, putting us on track toward the high end of our 2022 guidance for these metrics. Our strategy is working: with our focus on providing a world-class customer experience and industry-leading products, coupled with the right financing options, we are driving strong market share gains and a significant backlog that we believe will benefit us well into 2023," said Peter Faricy, CEO of SunPower. "We also introduced new products and strategic alliances that keep SunPower at the forefront as consumer demand for better, cleaner, more reliable energy continues to grow."

THIRD QUARTER BUSINESS HIGHLIGHTS

World-class customer experience

  • Highest rated solar company: In the third quarter of 2022, SunPower held its position as the number one1 rated solar company in the U.S. CNET also named SunPower the best solar company overall in its list of best solar companies in 2022.

Best, most affordable products

  • Expanded SunVault® portfolio: In September, SunPower announced two new battery storage configurations offering increased energy density and maximized space within the battery box. Additionally this quarter, Good Housekeeping awarded SunVault a spot on its list of top home renovation products in the Biggest Energy Savers category.

Growth

  • Powering homes of the future with General Motors: In October, SunPower announced a collaboration with General Motors GM to develop a new home energy system that will enable General Motors' compatible electric vehicles (EVs) to provide backup energy to an equipped home with bi-directional charging. GM also named SunPower as a preferred EV charger installation provider and its exclusive solar provider.
  • Investing in high-potential dealers: SunPower announced it made minority investments in Renova Energy and EmPower Solar in September. As the latest entrants in its Dealer Accelerator Program, SunPower will provide capital financing and business strategy support to accelerate their growth and meet the increasing homeowner demand for solar nationwide. Dealers in the program exclusively sell industry-leading SunPower® solar systems, offer SunVault battery storage and leverage SunPower Financial™ offerings.
  • Continuing to lead in new homes: SunPower's new homes business achieved a record number of installed homes in the third quarter. The Company also continues to expand its new homes business across the country: in the third quarter, the Company solidified a four-year, nationwide exclusive agreement with Dream Finders Homes DFH to be its exclusive provider of solar and storage solutions. This expands upon SunPower's deal with Dream Finders Homes last quarter to build five solar-standard communities in Colorado.

Digital innovation

  • Launched new digital tools to enhance customer experience: SunPower launched a new real-time data visualization tool that enables dealers to identify device production and communication issues and panel performance trends more quickly and accurately. Doing so supports SunPower's aim to continue to improve its category-leading customer responsiveness and ensure customer's systems are performing as desired.

World-class financial solutions

  • Financial bookings increasing rapidly: SunPower Financial achieved 49% bookings attach rate in September, achieving its 2022 run-rate goal a quarter early. Net bookings of SunPower Financial products in the third quarter grew 94% YoY.
  • Strong demand for lease and Power Purchase Agreements (PPA): The company's lease and PPA net bookings have grown more than 120% YoY, following the passage of the Inflation Reduction Act.

1 Based on public solar providers in the U.S. Includes average of BBB, Yelp, ConsumerAffairs, BestCompany, Google, SolarReviews and EnergySage reviews scores as of 10/1/22

Financial Highlights

($ Millions, except percentages, residential
customers, and per-share data)

3rd Quarter 2022

2nd Quarter 2022

3rd Quarter 2021

GAAP revenue from continuing operations

$475.7

$417.8

$283.3

GAAP gross margin from continuing operations

22.2 %

19.5 %

22.0 %

GAAP net income (loss) from continuing operations

$139.4

$(42.5)

$(72.7)

GAAP net income (loss) from continuing operations
per diluted share

$0.74

$(0.24)

$(0.42)

Non-GAAP revenue from continuing operations1

$469.8

$414.1

$281.6

Non-GAAP gross margin from continuing operations1

22.8 %

21.3 %

22.4 %

Non-GAAP net income (loss) from continuing
operations1

$23.6

$5.2

$20.4

Non-GAAP net income (loss) from continuing
operations per diluted share1

$0.13

$0.03

$0.12

Adjusted EBITDA1

$32.6

$15.2

$26.3

Residential customers

486,700

463,600

390,200

Cash2

$396.5

$206.4

$260.5


The sale of our C&I Solutions business met the criteria for classification as "discontinued operations" in accordance with the guidance in ASC 205-20, Discontinued Operations, beginning the first quarter of fiscal 2022. For all periods presented, the financial results of C&I Solutions are excluded in the table above.


1Information about SunPower's use of non-GAAP financial information, including a reconciliation to U.S. GAAP, is provided under "Use of Non-GAAP Financial Measures" below.


2Includes cash and cash equivalents, excluding restricted cash

2022 Financial Outlook
SunPower affirmed prior 2022 guidance of $2,000-$2,400 Adjusted EBITDA per customer and 73,000-80,000 incremental customers, resulting in $90-$110 million Adjusted EBITDA for the year.

Earnings Conference Call Information
SunPower will discuss its third quarter 2022 financial results on Tuesday, November 8 at 8:30 a.m. Eastern Time. The conference call can be accessed live by registering at https://register.vevent.com/register/BI45f40baae7fb4eb19531e810dd5b7edb. The live audio webcast and supplemental financial information will be available on SunPower's investor website at http://investors.sunpower.com/events.cfm.

About SunPower 
SunPower SPWR is a leading solar technology and energy services provider in North America. SunPower offers the only solar + storage solution designed and warranted by one company that gives customers control over electricity consumption and resiliency during power outages. For more information, visit www.sunpower.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: (a) expectations regarding demand and our future performance based on backlog, bookings, projected consumer demand, and pipelines in our sales channels and for our products, and our ability to meet consumer demand; (b) our plans and expectations with respect to our strategic partnerships and initiatives, including our relationship with General Motors, our agreement with Dream Finders Homes, and our dealer accelerator program, and the anticipated business and financial impacts thereof; (c) our strategic plans and areas of investment and focus, both current and future, and expectations for the results thereof, including improved customer experience, increased installation capacity, and development of new products and services; (d) our expectations regarding projected demand and growth in 2022 and beyond, our positioning for future success, and our ability to capture demand and deliver long-term value to our shareholders; (e) our expectations for industry trends and factors, and the impact thereof on our business and strategic plans; and (f) our guidance for fiscal year 2022, including Adjusted EBITDA per customer, incremental customers, and Adjusted EBITDA, and related assumptions.

These forward-looking statements are based on our current assumptions, expectations, and beliefs and involve substantial risks and uncertainties that may cause results, performance, or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (1) regulatory changes and the availability of economic incentives promoting use of solar energy; (2) potential disruptions to our operations and supply chain that may result from epidemics or natural disasters, including impacts of the COVID-19 pandemic, and other factors; (3) competition in the solar and general energy industry, supply chain constraints, interest rates, inflation, and pricing pressures; (4) changes in public policy, including the imposition and applicability of tariffs and duties; (5) our dependence on sole- or limited-source supply relationships, including for our solar panels and other components of our products; (6) risks related to the introduction of new or enhanced products, including potential technical challenges, lead times, and our ability to match supply with demand while maintaining quality, sales, and support standards; (7) the success of our ongoing research and development efforts and our ability to commercialize new products and services, including products and services developed through strategic partnerships; (8) our liquidity, indebtedness, and ability to obtain additional financing for our projects and customers; and (9) challenges managing our acquisitions, joint ventures, and partnerships, including our ability to successfully manage acquired assets and supplier relationships. A detailed discussion of these factors and other risks that affect our business is included in filings we make with the Securities and Exchange Commission (SEC) from time to time, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or on the SEC Filings section of our Investor Relations website at investors.sunpower.com. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events.

©2022 SunPower Corporation. All rights reserved. SUNPOWER, SUNPOWER FINANCIAL, SUNVAULT, and the SUNPOWER logo are trademarks or registered trademarks of SunPower Corporation in the U.S.

SUNPOWER CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



October 2, 2022


January 3, 2021

Assets




Current assets:




Cash and cash equivalents

$                    396,510


$                    123,735

Restricted cash and cash equivalents, current portion

13,204


691

Short-term investments

138,735


365,880

Accounts receivable, net

178,302


121,268

Contract assets

36,490


25,994

Inventories

228,253


214,432

Advances to suppliers

6,432


462

Prepaid expenses and other current assets

192,392


100,212

Current assets of discontinued operations


120,792

Total current assets

1,190,318


1,073,466





Restricted cash and cash equivalents, net of current portion

24,265


14,887

Property, plant and equipment, net

64,784


33,560

Operating lease right-of-use assets

38,295


31,654

Solar power systems leased, net

42,552


45,502

Goodwill

126,338


126,338

Other intangible assets, net

24,312


24,879

Other long-term assets

206,630


156,994

Long-term assets of discontinued operations


47,526

Total assets

$                 1,717,494


$                 1,554,806





Liabilities and Equity




Current liabilities:




Accounts payable

$                    194,133


$                    138,514

Accrued liabilities

142,714


101,980

Operating lease liabilities, current portion

11,179


10,753

Contract liabilities, current portion

135,497


62,285

Short-term debt

2,185


109,568

Convertible debt, current portion

424,609


     Current liabilities of discontinued operations


86,496

Total current liabilities

910,317


509,596





Long-term debt

72,567


380

Convertible debt, net of current portion


423,677

Operating lease liabilities, net of current portion

31,400


28,566

Contract liabilities, net of current portion

18,344


18,705

Other long-term liabilities

118,242


141,197

Long-term liabilities of discontinued operations


42,661

Total liabilities

1,150,870


1,164,782





Equity:




Common stock

174


173

Additional paid-in capital

2,845,845


2,714,500

Accumulated deficit

(2,073,788)


(2,122,212)

Accumulated other comprehensive income

11,097


11,168

Treasury stock, at cost

(225,703)


(215,240)

Total stockholders' equity

557,625


388,389

Noncontrolling interests in subsidiaries

8,999


1,635

Total equity

566,624


390,024

Total liabilities and equity

$                 1,717,494


$                 1,554,806

 

SUNPOWER CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)




THREE MONTHS ENDED


NINE MONTHS ENDED



October 2,
2022


July 3,
2022


October 3,
2021


October 2,
2022


October 3,
2021

Total revenues


$         475,711


$         417,772


$         283,312


$     1,243,760


$         784,199

Total cost of revenues


370,264


336,273


220,923


984,505


615,133

Gross profit


105,447


81,499


62,389


259,255


169,066

Operating expenses:











Research and development


6,784


7,405


2,615


19,199


11,497

Sales, general, and administrative


87,124


93,043


43,704


257,163


135,449

Restructuring (credits) charges


111


(494)


(230)


244


4,344

(Gain) loss on sale and impairment of
residential lease assets






(294)

(Income) expense from transition
services agreement, net


(1,059)


(494)


(468)


(1,287)


(5,211)

Total operating expenses


92,960


99,460


45,621


275,319


140,495

Operating income (loss)


12,487


(17,961)


16,768


(16,064)


28,571

Other income (expense), net:











Interest income


144


92


43


278


168

Interest expense


(4,216)


(5,964)


(5,171)


(15,224)


(18,828)

Other, net


135,368


(14,652)


(86,099)


122,160


(46,539)

Other income (expense), net


131,296


(20,524)


(91,227)


107,214


(65,199)

Income (loss) from continuing operations
before income taxes and equity in earnings
of unconsolidated investees


143,783


(38,485)


(74,459)


91,150


(36,628)

(Provision for) benefits from income taxes


(3,109)


(3,226)


2,015


5,308


3,547

Equity in earnings (losses) of
unconsolidated investees


1,958




1,958


Net income (loss) from continuing operations


142,632


(41,711)


(72,444)


98,416


(33,081)

(Loss) income from discontinued
operations before income taxes and
equity in losses of unconsolidated
investees1



(20,857)


(12,042)


(47,155)


(27,401)

Benefits from (provision for) income
taxes from discontinued operations



241


179


584


1,446

Net (loss) income from discontinued
operations, net of taxes



(20,616)


(11,863)


(46,571)


(25,955)

Net income (loss)


142,632


(62,327)


(84,307)


51,845


(59,036)

Net (income) loss from continuing
operations attributable to noncontrolling
interests


(3,225)


(785)


(263)


(3,671)


321

Net (income) loss from discontinued
operations attributable to noncontrolling
interests




194


250


1,161

Net (income) loss attributable to
noncontrolling interests


(3,225)


(785)


(69)


(3,421)


1,482

Net income (loss) from continuing
operations attributable to stockholders


139,407


(42,496)


(72,707)


94,745


(32,760)

Net (loss) income from discontinued
operations attributable to stockholders



(20,616)


(11,669)


(46,321)


(24,794)

Net income (loss) attributable to stockholders


$         139,407


$         (63,112)


$         (84,376)


$           48,424


$         (57,554)












Net income (loss) per share attributable to
stockholders - basic:











Continuing operations


$               0.80


$              (0.01)


$              (0.42)


$               0.55


$              (0.19)

Discontinued operations


$                  —


$              (0.15)


$              (0.07)


$              (0.27)


$              (0.14)

Net income (loss) per share – basic


$               0.80


$              (0.16)


$              (0.49)


$               0.28


$              (0.33)












Net income (loss) per share attributable to
stockholders - diluted:











Continuing operations


$               0.74


$              (0.01)


$              (0.42)


$               0.54


$              (0.19)

Discontinued operations


$                  —


$              (0.15)


$              (0.07)


$              (0.24)


$              (0.14)

Net income (loss) per share – diluted


$               0.74


$              (0.16)


$              (0.49)


$               0.30


$              (0.33)












Weighted-average shares:











Basic


174,118


173,376


172,885


173,815


172,242

Diluted


192,497


173,376


172,885


191,589


172,242

 

SUNPOWER CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




THREE MONTHS ENDED


NINE MONTHS ENDED



October 2,
2022


July 3,
2022


October 3,
2021


October 2,
2022


October 3,
2021

Cash flows from operating activities:











Net income (loss)


$         142,632


$         (62,327)


$         (84,307)


$           51,845


$         (59,036)

Adjustments to reconcile net income
(loss) to net cash used in operating activities:











Depreciation and amortization


8,048


12,383


1,681


25,096


7,498

Stock-based compensation


6,557


7,072


4,726


19,056


19,776

Non-cash interest expense


997


833


940


2,556


4,095

Equity in (earnings) losses of
unconsolidated investees


(1,958)




(1,958)


(Gain) loss on equity investments


(134,905)


15,255


86,254


(120,965)


47,238

(Gain) loss on sale of investments






(1,162)

(Gain) loss on business divestitures, net






(224)

Unrealized (gain) loss on derivatives


(2,304)




(2,304)


Dividend from equity method investees


133




133


Deferred income taxes


(1,410)


2,554


(2,472)


(12,606)


(4,109)

Other, net


(821)


104


(120)


128


(6,335)

Changes in operating assets and liabilities:











Accounts receivable


(28,315)


(25,585)


(1,541)


(66,254)


(4,450)

Contract assets


(5,007)


13,852


4,189


2,326


28,687

Inventories


(5,728)


18,022


(5,583)


(22,787)


(3,758)

Project assets



(2,597)


(3,488)


295


2,817

Prepaid expenses and other assets


(42,366)


(83,296)


(11,512)


(212,164)


(10,915)

Operating lease right-of-use assets


2,992


3,017


2,344


8,424


8,709

Advances to suppliers


(4,216)


150


2,597


(6,288)


(687)

Accounts payable and other
accrued liabilities


31,326


5,074


(14,016)


77,844


(56,245)

Contract liabilities


32,390


44,207


5,047


98,663


(3,507)

Operating lease liabilities


(3,334)


(4,545)


(3,868)


(10,906)


(10,457)

Net cash (used in)provided
by operating activities


(5,289)


(55,827)


(19,129)


(169,866)


(42,065)

Cash flows from investing activities:











Purchases of property, plant and equipment


(15,375)


(12,947)


(1,623)


(36,958)


(3,934)

Investments in software development costs


(1,500)


(1,204)


(2,468)


(4,225)


(2,468)

Proceeds from sale of property, plant
and equipment






900

Cash paid for solar power systems






(635)

Cash received from sale of investments






1,200

Proceeds from business divestitures,
net of de-consolidated cash






10,516

Cash received from C&I Solutions
sale, net of deconsolidated cash



146,303



146,303


Cash paid for equity investments


(14,500)


(9,420)



(30,920)


Proceeds from sale of equity investment


290,278



177,780


440,108


177,780

Proceeds from return of capital from
equity investments






2,276

Cash paid for investments in
unconsolidated investees


(2,424)


(3,164)



(5,742)


Dividend from equity method investees


137




137


Net cash provided by (used
in) investing activities


256,616


119,568


173,689


508,703


185,635

Cash flows from financing activities:











Proceeds from bank loans and other debt


24,453


78,818


28,273


124,729


123,669

Repayment of bank loans and other debt


(68,959)


(74,100)


(52,813)


(167,003)


(156,386)

Repayment of non-recourse
residential and commercial financing debt






(9,798)

Repayment of convertible debt






(62,757)

Payments for financing leases


(617)


(118)



(735)


Issuance of common stock to executive






2,998

Purchases of stock for tax
withholding obligations on vested
restricted stock


(874)


(2,256)


(809)


(10,462)


(7,262)

Net cash (used in)provided
by financing activities


(45,997)


2,344


(25,349)


(53,471)


(109,536)

Effect of exchange rate changes on
cash, cash equivalents, and restricted cash






Net increase (decrease) in cash, cash
equivalents, and restricted cash


205,330


66,085


129,211


285,366


34,034

Cash, cash equivalents and restricted cash,
beginning of period


228,649


162,564


151,627


148,613


246,804

Cash, cash equivalents, and restricted
cash, end of period


$         433,979


$         228,649


$         280,838


$         433,979


$         280,838












Reconciliation of cash, cash equivalents,
and restricted cash to the condensed
consolidated balance sheets, including
discontinued operations:











Cash and cash equivalents


$         396,510


$         142,250


$         268,574


$         396,510


$         268,574

Restricted cash and cash equivalents,
current portion


13,204


681


7,438


13,204


7,438

Restricted cash and cash equivalents,
net of current portion


24,265


12,857


4,826


24,265


4,826

Cash, cash equivalents, and restricted
cash from discontinued operations



6,776




Total cash, cash equivalents,
and restricted cash


$         433,979


$         162,564


$         280,838


$         433,979


$         280,838












Supplemental disclosure of cash flow information:











Property, plant and equipment
acquisitions funded by liabilities
(including financing leases)


$             4,495


$             3,713


$             1,356


$             9,130


$             2,530

Right-of-use assets obtained in
exchange of lease obligations


12,479


649


4,429


14,005


15,957

Working capital adjustment related to
C&I Solutions sale


740


6,265



7,005


Accrued legal expenditures on equity
method investment


5


163



168


Accrued debt issuance costs


919




919


Deconsolidation of right-of-use assets
and lease obligations






3,340

Debt repaid in sale of commercial projects






5,585

Cash paid for interest


9,137


1,312


10,168


20,323


23,734

Cash paid for income taxes


2,687


2,250


83


5,187


20,316

Use of Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the company uses non-GAAP measures that are adjusted for certain items from the most directly comparable GAAP measures. The specific non-GAAP measures listed below are: revenue; gross margin; net loss; net loss per diluted share; and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"). Management believes that each of these non-GAAP measures are useful to investors, enabling them to better assess changes in each of these key elements of the company's results of operations across different reporting periods on a consistent basis, independent of certain items as described below. Thus, each of these non-GAAP financial measures provide investors with another method to assess the company's operating results in a manner that is focused on its ongoing, core operating performance, absent the effects of these items. Management uses these non-GAAP measures internally to assess the business, its financial performance, current and historical results, as well as for strategic decision-making and forecasting future results. Many of the analysts covering the company also use these non-GAAP measures in their analysis. Given management's use of these non-GAAP measures, the company believes these measures are important to investors in understanding the company's operating results as seen through the eyes of management. These non-GAAP measures are not prepared in accordance with GAAP or intended to be a replacement for GAAP financial data; and therefore, should be reviewed together with the GAAP measures and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies.

Non-GAAP revenue includes adjustments relating to results of operations of legacy business exited/to be exited. Non-GAAP gross margin includes adjustments relating to gain/loss on sale and impairment of residential lease assets, litigation, stock-based compensation, and amortization of intangible assets, each of which is described below. In addition to the above adjustments, non-GAAP net loss and non-GAAP net loss per diluted share are adjusted for adjustments relating to mark to market gain on equity investments, gain on business divestitures, impairment of property, plant, and equipment, transaction-related costs, non-cash interest expense, restructuring charges (credits), gain on convertible debt repurchased and tax effect of these non-GAAP adjustments, each of which is described below. In addition to the above adjustments, Adjusted EBITDA includes adjustments relating to cash interest expense (net of interest income), provision for income taxes, and depreciation.

Non-GAAP Adjustments Based on International Financial Reporting Standards ("IFRS")

The company's non-GAAP results include adjustments under IFRS that are consistent with the adjustments made in connection with the company's internal reporting process as part of its status as a consolidated subsidiary of TotalEnergies SE, our controlling shareholder and a foreign public registrant that reports under IFRS. Differences between GAAP and IFRS reflected in the company's non-GAAP results are further described below. In these situations, management believes that IFRS enables investors to better evaluate the company's performance, and assists in aligning the perspectives of the management with those of TotalEnergies SE.

  • Mark-to-market loss (gain) in equity investments: We recognize adjustments related to the fair value of equity investments with readily determinable fair value based on the changes in the stock price of these equity investments at every reporting period. Under U.S. GAAP, mark-to-market gains and losses due to changes in stock prices for these securities are recorded in earnings while under IFRS, an election can be made to recognize such gains and losses in other comprehensive income. Such an election was made by TotalEnergies SE. Further, we elected the Fair Value Option ("FVO") for some of our equity method investments, and we adjust the carrying value of those investments based on their fair market value calculated periodically. Such option is not available under IFRS, and equity method accounting is required for those investments. We believe that excluding these adjustments on equity investments is consistent with our internal reporting process as part of its status as a consolidated subsidiary of TotalEnergies SE. and better reflects our ongoing results.

Other Non-GAAP Adjustments

  • Results of operations of businesses exited/to be exited: We exclude the results of operations of our legacy businesses that we have exited, or to be exited, from our Non-GAAP results. These legacy businesses include our light commercial business that we exited starting in the first fiscal quarter of 2022 to reinforce the Company's strategic direction to focus solely on the residential solar market, Hillsboro, Oregon facility that ceased manufacturing and revenue generation in the first quarter of 2021, as well as, results of our legacy power plant and legacy O&M businesses. We are not doing new activities for these businesses, and the remaining activities comprise of fulfillment of existing outstanding orders, true-up of estimated milestones payments, settlement of certain warranty obligations on projects and other wind-down activities. As such, these are excluded from our non-GAAP results as they are not reflective of our ongoing operating results.
  • Loss/Gain on sale and impairment of residential lease assets: In fiscal 2018 and 2019, in an effort to sell all the residential lease assets owned by us, we sold membership units representing a 49% membership interest in majority of our residential lease business and retained a 51% membership interest. We recorded impairment charges based on the expected fair value for a portion of residential lease assets portfolio that was retained. Depreciation savings from the unsold residential lease assets resulting from their exclusion from non-GAAP results historically, are excluded from our non-GAAP results as they are not reflective of ongoing operating results.
  • Stock-based compensation: Stock-based compensation relates primarily to our equity incentive awards. Stock-based compensation is a non-cash expense that is dependent on market forces that are difficult to predict. We believe that this adjustment for stock-based compensation provides investors with a basis to measure the company's core performance, including compared with the performance of other companies, without the period-to-period variability created by stock-based compensation.
  • Litigation: We may be involved in various instances of litigation, claims and proceedings that result in payments or recoveries. We exclude gains or losses associated with such events because the gains or losses do not reflect our underlying financial results in the period incurred. We also exclude expenses pertaining to litigation relating to businesses that discontinued as a result of spin-off of Maxeon Solar, for which we are indemnifying them. We believe that it is appropriate to exclude such charges from our non-GAAP results as they are not reflective of ongoing operating results.
  • Transaction-related costs: In connection with material transactions such as acquisition or divestiture of a business, the company incurred transaction costs including legal and accounting fees. We believe that it is appropriate to exclude these costs from our non-GAAP results as they would not have otherwise been incurred as part of the business operations and therefore is not reflective of ongoing operating results.
  • Amortization of intangible assets and software: We incur amortization of intangible assets as a result of acquisitions, primarily from the Blue Raven acquisition, which includes brand, non-compete arrangements, and purchased technology. In addition, we also incur amortization of our capitalized internal-use software costs once the software has been placed into service, until the end of the useful life of the software. We believe that it is appropriate to exclude these amortization charges from our non-GAAP results as they are non-recurring in nature, and are therefore not reflective of ongoing operating results.
  • Gain/Loss on business divestitures, net: In the second quarter of fiscal 2021, we sold a portion of our residential lease business and certain commercial projects. We recognized a gain and a loss relating to these business divestitures, respectively. We believe that it is appropriate to exclude such gain and loss from the company's non-GAAP financial measures as it is not reflective of ongoing operating results.
  • Executive transition costs: We incur non-recurring charges related to the hiring and transition of new executive officers. During fiscal 2021, we appointed a new chief executive officer, as well as other chief executives, and we are investing resources in those executive transitions, and in developing new members of management as we complete our transformation. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.
  • Acquisition-related costs: We incurred certain costs in connection with the acquisition of Blue Raven, that are either paid as part of the transaction or will be paid in the coming year, but are considered post-acquisition compensation under the applicable GAAP framework due to the nature of such items. A majority of the expense incurred in fourth quarter of fiscal 2021 represents cash paid to certain employees of Blue Raven for settlement of their pre-existing share-based payment plan, in excess of the respective fair value. For fiscal 2022, other post-combination expenses include change in fair value of contingent consideration as well as deferred post-combination employment expense payable to certain Blue Raven employees and sellers. We believe that it is appropriate to exclude these from our non-GAAP results as they are directly related to the acquisition transaction and non-recurring in nature, and are therefore not reflective of ongoing operating results.
  • Business reorganization costs: In connection with the spin-off of Maxeon into an independent, publicly traded company, we incurred non-recurring charges on third-party legal and consulting expenses, primarily to enable in separation of shared information technology systems and applications. In addition, we incurred certain non-recurring costs upon amendment, settlement or termination of historical agreements with Maxeon to fully enable separate independent operations of the two Companies that is focused on our respective core business. We believe that it is appropriate to exclude these from our non-GAAP results as it is not reflective of ongoing operating results.
  • Restructuring charges (credits): We incur restructuring expenses related to reorganization plans aimed towards realigning resources consistent with the company's global strategy and improving its overall operating efficiency and cost structure. Although the Company has engaged in restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. We believe that it is appropriate to exclude these from our non-GAAP results as it is not reflective of ongoing operating results.
  • Equity income from unconsolidated investees: We account for our minority investments in dealers included in the Dealer Accelerator Program using the equity method of accounting and recognize our proportionate share of the reported earnings or losses of the investees through net income. We do not control or manage the investees' business operations and operating and financial policies. Therefore, we believe that it is appropriate to exclude these from our non-GAAP results as it is not reflective of ongoing operating results.
  • Tax effect: This amount is used to present each of the adjustments described above on an after-tax basis in connection with the presentation of non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. Our non-GAAP tax amount is based on estimated cash tax expense and reserves. We forecast our annual cash tax liability and allocates the tax to each quarter in a manner generally consistent with its GAAP methodology. This approach is designed to enhance investors' ability to understand the impact of our tax expense on its current operations, provide improved modeling accuracy, and substantially reduce fluctuations caused by GAAP to non-GAAP adjustments, which may not reflect actual cash tax expense, or tax impact of non-recurring items.
  • Adjusted EBITDA adjustments: When calculating Adjusted EBITDA, in addition to adjustments described above, we exclude the impact of the following items during the period:
  • Cash interest expense, net of interest income
  • Provision for income taxes
  • Depreciation

For more information about these non-GAAP financial measures, please see the tables captioned "Reconciliations of GAAP Measures to Non-GAAP Measures" set forth at the end of this release, which should be read together with the preceding financial statements prepared in accordance with GAAP.

SUNPOWER CORPORATION

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except percentages and per share data)

(Unaudited)


Adjustments to Revenue: 




THREE MONTHS ENDED


NINE MONTHS ENDED



October 2,
2022


July 3,
2022


October 3,
2021


October 2,
2022


October 3,
2021

GAAP revenue


$         475,711


417,772


$         283,312


$     1,243,760


$         784,198

Other adjustments:











Results of operations of businesses
exited/to be exited


(5,894)


(3,674)


(1,677)


(23,776)


(10,506)

Non-GAAP revenue


$         469,817


414,098


$         281,635


$     1,219,984


$         773,692


Adjustments to Gross Profit Margin:  



THREE MONTHS ENDED


NINE MONTHS ENDED



October 2, 2022


July 3,
2022


October 3, 2021


October 2, 2022


October 3, 2021

GAAP gross profit from continuing operations


$     105,447


$       81,499


$       62,389


$     259,255


$     169,065

Other adjustments:











Results of operations of businesses
exited/to be exited


659


5,348


291


5,747


3,594

Executive transition costs


60


85



523


(Gain) loss on sale and impairment of
residential lease assets


(276)


(278)


(249)


(833)


(1,262)

Stock-based compensation expense


1,135


1,398


677


3,432


1,841

Business reorganization costs



11



11


Transaction-related costs



56



56


Non-GAAP gross profit


$    107,025


$       88,119


$       63,108


$    268,191


$    173,238












GAAP gross margin (%)


22.2 %


19.5 %


22.0 %


20.8 %


21.6 %

Non-GAAP gross margin (%)


22.8 %


21.3 %


22.4 %


22.0 %


22.4 %


Adjustments to Net Income (Loss): 



THREE MONTHS ENDED


NINE MONTHS ENDED



October 2,
2022


July 3,
2022


October 3,
2021


October 2,
2022


October 3,
2021

GAAP net income (loss) from continuing
operations attributable to stockholders


$         139,407


$         (42,496)


$         (72,707)


$           94,745


$         (32,760)

Adjustments based on IFRS:











Mark-to-market (gain) loss on equity investments


(137,233)


15,255


86,254


(123,293)


47,238

Other adjustments:











Results of operations of businesses
exited/to be exited


3,388


7,503


938


13,824


9,022

(Gain) loss on sale and impairment of
residential lease assets


(276)


(278)


(249)


(833)


(6,219)

Litigation


488


3,166


1,623


3,831


10,203

Stock-based compensation expense


6,550


7,054


3,993


18,933


17,535

Amortization of intangible assets and software


2,786


2,786



7,550


(Gain) loss on business divestitures, net






(5,290)

Transaction-related costs


144


259


(24)


1,367


94

Executive transition costs


1,685


3,685


827


6,839


1,329

Business reorganization costs


5


4,521


1,045


4,526


2,900

Restructuring (credits) charges



(639)


(154)


(453)


612

Acquisition-related costs


3,338


2,310



11,456


Tax effect


3,507


2,025


(1,120)


(6,654)


(1,950)

Equity income from unconsolidated investees


(158)




(158)


Non-GAAP net income (loss) attributable
to stockholders


$           23,631


$             5,151


$           20,426


$           31,680


$           42,714


Adjustments to Net Income (loss) per diluted share:



THREE MONTHS ENDED


NINE MONTHS ENDED



October 2,
2022


July 3,
2022


October 3,
2021


October 2,
2022


October 3,
2021

Net income (loss) per diluted share











Numerator:











GAAP net income (loss) available
to common stockholders1


$         139,407


$         (42,496)


$         (72,707)


$           94,745


$         (32,760)

Add: Interest expense on 4.00%
debenture due 2023, net of tax


3,026




9,078


GAAP net income (loss) available
to common stockholders1


$         142,433


$         (42,496)


$         (72,707)


$         103,823


$         (32,760)












Non-GAAP net income (loss)
available to common stockholders1


$           23,631


$             5,151


$           20,426


$           31,680


$           42,714












Denominator:











GAAP weighted-average shares


174,118


173,951


172,885


173,815


172,242

Effect of dilutive securities:











Restricted stock units


1,311




706


4.00% debentures due 2023


17,068




17,068


GAAP dilutive weighted-average
common shares:


192,497


173,951


172,885


191,589


172,242












Non-GAAP weighted-average shares


174,118


173,951


172,885


173,815


172,242

Effect of dilutive securities:











Restricted stock units


1,311


770


2,680


706


2,864

Non-GAAP dilutive weighted-
average common shares1


175,429


174,721


175,565


174,521


175,106












GAAP dilutive net (loss) income per
share - continuing operations


$               0.74


$              (0.24)


$              (0.42)


$               0.54


$              (0.19)

Non-GAAP dilutive net income (loss)
per share - continuing operations


$               0.13


$               0.03


$               0.12


$               0.18


$               0.24


1In accordance with the if-converted method, net (loss) income available to common stockholders excludes interest expense related to the 4.00% debentures if the debentures are considered converted in the calculation of net (loss) income per diluted share. If the conversion option for a debenture is not in the money for the relevant period, the potential conversion of the debenture under the if-converted method is excluded from the calculation of non-GAAP net income (loss) per diluted share.

 

Adjusted EBITDA:



THREE MONTHS ENDED


NINE MONTHS ENDED



October 2,
2022


July 3,
2022


October 3,
2021


October 2,
2022


October 3,
2021

GAAP net income (loss) from continuing
operations attributable to stockholders


$         139,407


$         (42,496)


$         (72,707)


$           94,745


$         (32,760)

Adjustments based on IFRS:











Mark-to-market (gain) loss on equity investments


(137,233)


15,255


86,254


(123,293)


47,238

Other adjustments:











Results of operations of businesses
exited/to be exited


3,388


7,503


938


13,824


9,022

(Gain) loss on sale and impairment of
residential lease assets


(276)


(278)


(249)


(833)


(6,219)

Litigation


488


3,166


1,623


3,831


10,203

Stock-based compensation expense


6,550


7,054


3,993


18,933


17,535

Amortization of intangible assets and software


2,786


2,786



7,550


(Gain) loss on business divestitures, net






(5,290)

Transaction-related costs


144


259


(24)


1,367


94

Executive transition costs


1,685


3,685


827


6,839


1,329

Business reorganization costs


5


4,521


1,045


4,526


2,900

Restructuring (credits) charges



(639)


(154)


(453)


612

Acquisition-related costs


3,338


2,310



11,456


Equity income from unconsolidated investees


(158)




(158)


Cash interest expense, net of interest income


4,108


5,829


5,044


14,815


18,493

Provision for (benefit from) income taxes


3,082


2,720


(2,021)


(5,874)


(3,585)

Depreciation


5,257


3,571


1,765


11,701


7,992

Adjusted EBITDA


$           32,571


$           15,246


$           26,334


$           58,976


$           67,564

 

FY 2022 GUIDANCE 

(in thousands)

FY 2022

Residential Customers

73,000 - 80,000

Residential Adjusted EBITDA/Customer1

$2,000 - $2,400

Adjusted EBITDA2

$90 million -$110 million

Net Income (GAAP)

$124 million -$144 million

  1. Excluding Product & Digital operating expenses for Residential only.
  2. Adjusted EBITDA guidance for FY 2022 includes net adjustments that decrease GAAP net income by approximately $34 million primarily relating to the following adjustments: stock-based compensation expense, results of operations of businesses exited/to be exited, mark-to-market (gain) loss on equity investments, net, acquisition-related costs, interest expense, depreciation and amortization, income taxes, and other non-recurring adjustments.

 

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SOURCE SunPower Corp.

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