Cost Calculation Methodology

Transcription

1 Cost Calculation Methodology The purpose of this memo is to provide a methodology for investors to calculate SolarCity s costs on a dollar per watt basis from information found in our publicly filed financial statements and the notes to those financial statements. Provided herein are the associated number of MWs for each part of the calculation. Blended installation cost per watt Blended installation cost per watt is calculated based on the costs and Megawatts [MW] related to solar energy systems under our PPAs and Leases that were both deployed and tranched in the period ( solar energy systems leased and to be leased ), as well as solar energy systems under our MyPower consumer loan agreements that were deployed in the period. This excludes costs and MW related to solar energy system sales for cash, which are captured in solar energy system and component sale gross profit in our GAAP income statement, and solar energy systems under PPAs and Leases that were deployed but not yet tranched, or tranched but not yet deployed, in the period, as they remain on the balance sheet as work in progress (WIP) until both milestones have been achieved. It also excludes costs and MWs associated with solar energy systems that were cancelled before completion and other period charges expensed in operating lease and solar energy systems incentives cost of revenue in the income statement. Blended installation cost per watt = in Solar energy systems leased to customers + in Solar energy systems to be leased to customers + in MyPower agreements executed in period MW Leased and to be leased + MW MyPower agreements executed in the period The detailed derivation of blended installation cost per watt is as follows: 1) Calculate the change in solar energy systems leased to customers [from the note Selected Balance Sheet Components: Solar Energy System, Leased and To Be Leased - Net in our quarterly or annual filings] from the prior period to the current period 2) Calculate the change in solar energy systems to be leased to customers [from the note Selected Balance Sheet Components: Solar Energy System, Leased and To Be Leased - Net in our quarterly or annual filings] from the prior period to the current period 3) [From the note Summary of Significant Accounting Policies and Procedures: Revenue Recognition: Solar Energy System Sales in our quarterly or annual filings]: o For Q1 or annual calculation, take the value of MyPower agreements executed in the period o For Q2, Q3 or Q4 quarterly calculation, subtract MyPower agreements executed in the period [from the prior period note] from MyPower agreements executed in the period [from the current period note]

2 Clarification: the Balance beginning of the period for this note remains the prior year ending balance throughout each quarter in the current year. Thus, the MyPower agreements executed in the period reflect cumulative additions throughout the year and not the quarterly additions. 4) Sum the change in solar energy systems leased to customers, the change in solar energy systems to be leased to customers, and the MyPower agreements executed in period to calculate the total install costs of solar energy systems under PPAs, leases, and MyPower agreements. 5) Divide the total install costs of solar energy systems under PPAs, leases, and MyPower agreements for the applicable period by the sum of (a) the MW Leased and to be leased in the applicable period, and (b) the MW MyPower agreements executed in the period to calculate blended installation cost per watt.

3 Implied sales cost per watt Implied sales cost per watt is calculated based on the sales & marketing expenses incurred and the MWs Booked, as well as the initial direct costs capitalized and Operating lease MW deployed, in the period. It excludes certain non-cash items, such as stock compensation expense and amortization of intangibles. S&M operating expense - S&M stock-based compensation expense Implied - S&M amortization of intangibles in initial direct costs Sales cost per watt = + MW Booked Operating lease MW deployed The detailed derivation of implied sales cost per watt is as follows: 1. Subtract sales and marketing stock-based compensation expense [from the note Equity Award Plans in our quarterly or annual filings] and the change in accumulated amortization related to sales and marketing intangibles [from the note Goodwill and Intangible Assets in our quarterly or annual filings] from sales and marketing expenses [from the GAAP Statement of Operations] for the period to calculate sales and marketing cost (ex. non-cash items). 2. Divide sales and marketing cost (ex. non-cash items) by MW Booked in the applicable period to calculate sales and marketing cost per watt. 3. Calculate the change in initial direct costs related to solar energy systems leased to customers from the prior period to the current period [from the note Selected Balance Sheet Components from our quarterly or annual filings]. 4. Divide the change in initial direct costs related to solar energy systems leased to customers by operating lease MW Deployed in the applicable period to calculate initial direct cost per watt. 5. Add sales and marketing cost per watt to initial direct cost per watt to calculate implied sales cost per watt.

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5 G&A cost per watt G&A cost per watt is calculated based on the general & administrative expenses incurred and the total MW Deployed in the period. It excludes certain non-cash items, such as stock compensation expense. G&A cost per watt = G&A operating expense - G&A stock-based compensation expense MW Deployed The detailed derivation of G&A cost per watt is as follows: 1. Subtract general and administrative stock-based compensation expense [from the note Equity Award Plans in our quarterly or annual filings] from general and administrative expenses [from the GAAP Statement of Operations] for the applicable period to calculate general and administrative cost (ex. non-cash items). 2. Divide general and administrative cost (ex. non-cash items) by MW Deployed in the applicable period to calculate G&A cost per watt.

6 Implied total cost per watt Sum Blended installation cost per watt, Implied sales cost per watt, and G&A cost per watt to calculate Implied total cost per watt.

7 Appendix: MWs Table and Definitions Metrics (in MWs) Q Use MW booked 206 S&M Costs MW deployed 176 G&A and R&D Costs System sales MW deployed 6 MW MyPower agreements executed in the period 7 Blended Installation Cost Operating lease MW deployed 162 Initial Direct Costs (IDC) MW leased and to be leased 166 Blended Installation Costs MW booked means the aggregate megawatt production capacity of solar energy systems pursuant to customer contracts that were signed (with no contingencies remaining) during the applicable period net of contracts that were cancelled during the applicable period. This metric includes solar energy systems booked under Energy Contracts as well as Direct Sales. MW deployed means 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 as Direct sales, under MyPower contracts, and under Energy Contracts (Leases and PPAs). System sales MW deployed means the MW Deployed in the applicable period that were sold directly to customers for cash and in which SolarCity and its subsidiaries will not retain ownership. MW MyPower Executed in the Period means the MW Deployed in the applicable period that are subject to MyPower loan contracts. Operating Lease MW Deployed means the MW Deployed in the applicable period that are subject to Energy Contracts and in which SolarCity or its subsidiaries will retain ownership. MW Leased and to be Leased means the megawatt production capacity of solar energy systems under Energy Contracts that have been both deployed and transferred to the entity that will maintain ownership of the systems over the life of their Energy Contracts in the applicable period.