SolarCity Announces Fourth Quarter and Fiscal Year 2013 Financial Results

SolarCity Corporation logo

SAN MATEO, Calif., March 18, 2014 (GLOBE NEWSWIRE) -- SolarCity (Nasdaq:SCTY), a leading provider of distributed clean energy, today announced financial results for the fourth quarter and fiscal year ended December 31, 2013.

Summary of 2013 Results

As reported in February, we generated significant growth in our core business in 2013 with MW Deployed up 78% Y/Y to 280 MW and operating lease revenue growth of 80% Y/Y for the full year. Moreover, we have continued to improve the capital efficiency and economics of the business with a material reduction in both operating expenses per MW Deployed and capital expenditures per MW Deployed. We generated positive Net Cash Flow in the fourth quarter of 2013, came very close to achieving break-even Net Cash Flow for the full year 2013, and we continue to expect positive Net Cash Flow for 2014 as well. Finally, we signed our 100,000th customer earlier this month and expect residential MW booked to surpass 100 MW in Q1 2014, putting us on a clear path to achieve our target of 475 MW – 525 MW Deployed in 2014.

Q4 2013 GAAP Operating Income Statement

As reported earlier, Operating Lease and Solar Energy Systems Incentives Revenue in the fourth quarter of 2013 was $22.4 million, up 79% from $12.5 million in the fourth quarter of 2012 (as updated), owing largely to a higher base of operating lease MW deployed. Total revenue for the fourth quarter increased 99% as compared to the year-ago period to $47.3 million.

Operating Lease and Solar Energy Systems Incentives Gross Margin was 48%. Excluding the introduction of a new, dedicated operations and maintenance [O&M] department that was not incorporated into guidance, Operating Lease Gross Margin was 55%, in line with our expectations. Consolidated Gross Profit Margin was 21%, owing largely to a higher mix of lower margin solar energy system sales.

Total Operating Expenses were $65.2 million for the fourth quarter of 2013, rising 78% from $36.6 million in the fourth quarter of 2012. Excluding the impact of incremental and one-time expenses resulting from recent M&A that were not incorporated into guidance, operating expenses were $58 million, above our guidance range of $50 million to $55 million owing largely to accelerated investment in sales headcount and infrastructure.

Loss from Operations in the fourth quarter of 2013 was $55.3 million as compared to $32.3 million in the fourth quarter of 2012.

GAAP net income attributable to stockholders per diluted share was $0.28, owing largely to an M&A-related tax benefit and higher net losses attributable to noncontrolling interests and redeemable noncontrolling interests.

See below for a reconciliation of GAAP to non-GAAP measures, which we believe are a better representation of our performance excluding the impact of M&A and other new items we had not incorporated into our guidance.

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 ($0.46).

See below for a reconciliation of GAAP EPS to non-GAAP EPS.

Q4 2013 GAAP Cash Flows

For the fourth quarter ended December 31, 2013, net cash provided by Operating Activities was $13.9 million, while net cash used in Investing Activities was $234.9 million and net cash provided by Financing Activities (before equity and convertible notes issuances) was $262.4 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 $41.4 million in the quarter ended December 31, 2013. As of December 31, 2013, Cash and cash equivalents totaled $577.1 million.

Condensed Statement of Cash Flows

$ in thousands Twelve Months Ended: Three Months Ended:
Net Cash Provided (Used) In: Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2013
Operating activities $39,794 $174,515 $56,958 $13,865
Investing activities ($428,520) ($729,899) ($143,523) ($234,912)
Financing activities (before equity/convertible note issuance) $323,129 $552,204 $104,548 $262,410
Net cash provided (used) before equity/convertible note issuance ($65,597) ($3,180) $17,983 $41,363
Net cash provided by equity/convertible note issuance $175,206 $420,180 $92,779 $402,731
Net increase (decrease) in cash and cash equivalents $109,609 $417,000 $110,762 $444,094

Completion of Overhead Reallocation and Remediation Efforts

We have finalized the overhead reallocation we had previously announced in a manner consistent with our expectations. The net impact was a reallocation of overhead expenses from Operating Leases to Solar Energy System Sales totaling $16.2 million for the first three quarters of 2013 and $20.4 million for the full year 2012. As noted previously, there was no impact to Net Cash Flow, Estimated Nominal Contracted Payments Remaining, or Retained Value.

We identified the allocation error as part of our own internal controls process and reported it to our auditors. To prevent this issue from occurring in the future, we have implemented or are in the process of implementing a range of new controls and procedures, including:

  • Increased investment in accounting personnel, training, and infrastructure
  • Automation of procedures and software systems
  • Additional layer of review along with three reconciliation methods for overhead allocation
  • Additional reconciliation and monitoring activities for processes involving outside providers

We expect our remediation efforts to be completed by June 30, 2014.

Guidance for Q1 2014 and Update to 2014 Outlook

For Q1 2014, we continue to expect MW deployed of between 78 MW – 82 MW, up 74% year-over-year at the midpoint and consistent with our targets for the year.

For 2014, we reaffirm guidance for MW deployed of between 475 MW and 525 MW. We also continue to expect to generate positive cash flow for the full year 2014.

For Q1 2014, we also expect:

  • GAAP Operating Lease and Solar Energy Systems Incentive Revenue: $27 million - $29 million
  • GAAP Solar Energy Systems Sale Revenue: $23 million - $27 million
  • GAAP Operating Lease and Solar Energy Systems Incentive Gross Margin: 40%-50% (including impact of amortization of intangibles from recent M&A and new O&M department)
  • GAAP Operating Expenses: $70 million - $75 million (including $3 million in amortization of intangibles)
  • Non-GAAP EPS (before Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests): ($0.70) – ($0.80)

Earnings Conference Call

We will hold a conference call today to discuss our fourth quarter results and outlook for 2014 at 5:00 pm Eastern. A live webcast of the call may be accessed over the Internet at the "Events and Presentations" link of the Investor Relations section of our website at http://investors.solarcity.com/events.cfm.

Participants should follow the instructions provided on the website to download and install the necessary audio applications in advance of the call. In addition, the earnings presentation slides will be available on our Investor Relations site by 5:00 pm Eastern Standard Time. The conference call can be accessed live over the phone by dialing 1-877-407-0784, or for international callers, 1-201-689-8560. A replay will be available two hours after the call and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode for the live call and the replay is 13578478. The replay will be available until March 25, 2014.

About SolarCity

SolarCity® (Nasdaq:SCTY) provides clean energy. We are disrupting the century-old energy industry by providing renewable electricity directly to homeowners, businesses and government organizations for less than they spend on utility bills. SolarCity gives customers control of their energy costs to protect them from rising rates. We offer solar power, energy efficiency and electric vehicle services, and make clean energy easy by taking care of everything from design and permitting to monitoring and maintenance. We currently serves 14 states and signs a new customer every three minutes. Visit us online at www.solarcity.com and follow us on Facebook & Twitter.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding SolarCity's customer and market growth opportunities; financial strategies for cash generation and increasing shareholder value; the booking and deployment of megawatts including estimated Q1 2014 megawatt booking and deployment and full-year 2014 megawatt deployment; forecasted cash flow in 2014; expected future GAAP and non-GAAP operating and financial results; our control environment, including our disclosure controls and procedures and our internal controls over financial reporting, and our related remediation efforts; and assumptions relating to the foregoing.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. Forward-looking statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. As of the date hereof, we have bookings and financing for less than half of the orders needed to achieve our 2014 megawatt projections. In order to meet our projections, we will need to substantially expand our workforce, increase our installation efficiency and exceed our existing bookings rate relative to what we have achieved to date. Additional key risks and uncertainties include the level of demand for our solar energy systems, the availability of a sufficient, timely, and cost-effective supply of solar panels and balance of system components, the effects of future tariffs and other trade barriers, changes in federal tax treatment, the effect of electric utility industry regulations, net metering and related policies, the availability and amount of rebates, tax credits and other financial incentives, the availability and amount of financing from fund investors, the retail price of utility-generated electricity or the availability of alternative energy sources, risks associated with SolarCity's rapid growth, risks that consumers who have executed energy contracts included in reported MW Booked may seek to cancel those contracts, SolarCity's limited operating history, particularly as a new public company, changes in strategic planning decisions by management or reallocation of internal resources, our ability and the ability of our third-party lease administrator to complete remediation efforts within expected time periods and general market, political, economic and business conditions. You should read the section entitled "Risk Factors" in our most recent Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission, which identifies certain of these and additional risks and uncertainties. We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as otherwise required by law.

SolarCity Corporation
Condensed Consolidated Balance Sheets
December 31, December 31,
$ in Thousands 2012 2013
(Restated)
Assets
Current assets:
Cash and cash equivalents $ 160,080 $ 577,080
Restricted cash 7,516 19,182
Accounts receivable, net 24,629 23,011
Rebates receivable 17,501 20,131
Inventories 87,087 111,394
Deferred income tax asset 5,623 9,845
Prepaid expenses and other current assets 11,502 27,020
Total current assets 313,938 787,663
Restricted cash 2,810 301
Solar energy systems, leased and to be leased – net 984,121 1,682,521
Property and equipment – net 18,635 22,407
Goodwill and intangible assets – net 626 278,169
Other assets 22,170 38,473
Total assets $ 1,342,300 $ 2,809,534
Liabilities and equity
Current liabilities:
Accounts payable $ 62,986 $ 121,556
Distributions payable to noncontrolling interests and redeemable noncontrolling interests 12,028 20,390
Current portion of deferred U.S. Treasury grants income 11,376 15,340
Accrued and other current liabilities 53,233 72,157
Customer deposits 7,909 8,828
Current portion of deferred revenue 31,822 59,899
Current portion of long-term debt 20,613 7,422
Current portion of solar asset-backed notes 3,155
Current portion of lease pass-through financing obligation 13,622 29,041
Current portion of sale leaseback financing obligation 389 418
Total current liabilities 213,978 338,206
Deferred revenue, net of current portion 204,396 410,161
Long-term debt, net of current portion 83,533 238,612
Convertible senior notes 230,000
Solar asset-backed notes, net of current portion 49,780
Long-term deferred tax liability 5,643 9,238
Lease passthrough financing obligation, net of current portion 125,884 64,167
Sale leaseback financing obligation, net of current portion 14,755 14,338
Deferred U.S. Treasury grants income, net of current portion 286,884 412,469
Other liabilities 114,006 193,439
Total liabilities 1,049,079 1,960,410
Redeemable Noncontrolling interests in subsidiaries 12,827 44,709
Stockholders' equity:
Common stock 7 10
Additional paid-in capital 330,130 819,914
Accumulated deficit (146,536) (202,326)
Total stockholders' equity 183,601 617,598
Noncontrolling interests in subsidiaries 96,793 186,817
Total equity 280,394 804,415
Total liabilities and equity $ 1,342,300 $ 2,809,534
SolarCity Corporation
Condensed Consolidated Statements of Operations
Three Months Ended: Twelve Months Ended:
in Thousands except per Share Data December 30, 2012 December 31, 2013 December 30, 2012 December 31, 2013
(unaudited) (unaudited)
Revenue:
Operating leases and solar energy systems incentives $ 12,514 $ 22,363 $ 46,098 $ 82,856
Solar energy system sales 11,241 24,937 80,810 80,981
Total revenue 23,755 47,300 126,908 163,837
Cost of revenue:
Operating leases and solar energy systems incentives 5,461 11,580 14,596 32,745
Solar energy system sales 14,017 25,874 84,856 91,723
Total cost of revenue 19,478 37,454 99,452 124,468
Gross profit 4,277 9,846 27,456 39,369
Operating expenses:
Sales and marketing 19,416 33,893 69,392 97,426
General and administrative 17,171 31,258 49,075 91,321
Total operating expenses 36,587 65,151 118,467 188,747
Loss from operations (32,310) (55,305) (91,011) (149,378)
Interest expense, net 5,220 8,217 20,142 25,738
Other expense, net (15,376) 1,016 2,519 1,441
Loss before income taxes (22,154) (64,538) (113,672) (176,557)
Income tax provision 53 24,742 (54) 24,799
Net loss (22,101) (39,796) (113,726) (151,758)
Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests (14,057) (66,489) (14,391) (95,968)
Net income (loss) attributable to stockholders $ (8,044) $ 26,693 $ (99,335) $ (55,790)
Net income (loss) attributable to common stockholders
Basic $ (18,135) $ 26,693 $ (109,426) $ (55,790)
Diluted $ (32,951) $ 26,693 $ (109,703) $ (55,790)
Net (loss) income per share attributable to common stockholders
Basic ($0.75) $0.31 ($7.68) ($0.70)
Diluted ($1.30) $0.28 ($7.69) ($0.70)
Weighted average shares used to compute net (loss) income per share attributable to common stockholders
Basic 24,284 87,359 14,240 79,782
Diluted 25,311 95,157 14,268 79,782
SolarCity Corporation
Condensed Consolidated Statements of Cash Flows
Year Ended
December 31,
Year Ended
December 31,
$ in Thousands 2012 2013
(Restated)
Operating activities:
Net loss $ (113,726) $ (151,758)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on disposal of property, plant and equipment 17 60
Depreciation and amortization net of amortization of deferred U.S. Treasury grant income 20,809 41,448
Interest on lease pass-through financing obligation 12,001 13,438
Stock-based compensation 8,677 21,262
Revaluation of convertible redeemable preferred stock warrants 1,898
Revaluation of preferred stock forward contract 350
Loss on extinguishment of long-term debt 306
Deferred income taxes 13 (25,424)
Reduction in lease pass-through financing obligation (16,159) (35,675)
Changes in operating assets and liabilities:
Restricted cash (864) (13,059)
Accounts receivable (13,978) 2,911
Rebates receivable (3,817) (2,630)
Inventories 55,734 (19,954)
Prepaid expenses and other current assets 7,914 (19,276)
Other assets (4,939) (6,882)
Accounts payable (99,600) 50,750
Accrued and other liabilities 70,133 84,444
Customer deposits (6,024) 919
Deferred revenue 121,355 233,635
Net cash provided by operating activities 39,794 174,515
Investing activities:
Payments for the cost of solar energy systems, leased and to be leased (420,153) (716,947)
Purchase of property and equipment (8,367) (9,126)
Acquisition of business, net of cash acquired (3,826)
Net cash used in investing activities (428,520) (729,899)
Financing activities:
Investment fund financings and bank borrowings:
Borrowings under long-term debt 152,804 203,228
Repayments of long-term debt (77,299) (65,328)
Proceeds from issuance of solar asset-backed notes 51,334
Repayments of borrowings under solar asset-backed notes (1,461)
Payment of deferred purchase consideration (3,382)
Repayments of sale-leaseback financing obligation (361) (388)
Proceeds from lease pass-through financing obligation 145,846 57,780
Repayment of lease pass-through financing obligation (41,148)
Repayment of capital lease obligations (28,442) (1,594)
Proceeds from investment by noncontrolling interests in subsidiaries 161,426 362,692
Distributions paid to noncontrolling interest in a subsidiary (144,493) (137,005)
Proceeds from U.S. Treasury grants 113,648 127,476
Net cash provided by financing activities before equity issuances 323,129 552,204
Equity and convertible notes issuances:
Proceeds of issuance of common stock 92,386 174,083
Proceeds from issuance of convertible notes 222,518
Proceeds from exercise of stock options 1,724 15,545
Proceeds from the exercise of convertible redeemable preferred stock warrants 228
Proceeds from issuance of convertible redeemable preferred stock 80,868
Proceeds from exercise of common stock warrants 8,034
Net cash provided by equity issuances 175,206 420,180
Net cash provided by financing activities 498,335 972,384
Net increase in cash and cash equivalents 109,609 417,000
Cash and cash equivalents, beginning of period 50,471 160,080
Cash and cash equivalents, end of period $ 160,080 $ 577,080
Reconciliation from GAAP EPS to Non-GAAP EPS:
in Thousands except per share data

Net Loss
per Share
Diluted
Weighted Avg.
Common Shares
Outstanding
GAAP Net Income Attributable to Stockholders $26,693 $0.28 95,157
- GAAP Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests ($66,489) ($0.76) 87,359
= Non-GAAP Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests ($39,796) ($0.46) 87,359
Reconciliation from GAAP Operating Expenses to Non-GAAP Operating Expenses:
$ in millions
GAAP Operating Expenses $65.2
- Incremental Expenses Resulting from Recent M&A $2.7
- One-Time Expenses Resulting from Recent M&A $4.5
= Non-GAAP Operating Expenses $58.0
Reconciliation from Operating Lease GAAP Gross Profit to Operating Lease Non-GAAP Gross Profit:
$ in millions
GAAP Operating Lease Gross Profit $10.8
+ Impact of New O&M Department $1.6
= Non-GAAP Operating Lease Gross Profit $12.4
Non-GAAP Operating Lease Gross Profit Margin 55%
"MW" or "megawatts" represents the DC nameplate megawatt production capacity
"Customers" includes all residential, commercial and government buildings where we have installed or contracted to install a solar energy system, or performed or contracted to perform an energy efficiency evaluation or other energy efficiency services.
"MW Booked" represents the aggregate megawatt production capacity of solar energy systems pursuant to customer contracts signed during the applicable period net of cancellations during the applicable period. This metric includes solar energy systems booked under Energy Contracts as well as solar energy system direct sales.
"MW Deployed" represents the megawatt production capacity of solar energy systems that have had all required building department inspections completed during the applicable period. This metric includes solar energy systems deployed under Energy Contracts as well as solar energy system direct sales.

CONTACT: Investor Contact Aaron Chew investors@solarcity.com

Source:SolarCity Corporation