Q Earnings Conference Call November 5, Clean, more affordable energy

Transcription

1 Q Earnings Conference Call November 5, 2014 Clean, more affordable energy

2 Forward-Looking Statements This presentation 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 deployment of megawatts including estimated Q and full-year 2015 megawatt deployment; GAAP revenue, gross margin, operating expenses and non-gaap EPS for Q4 2014; estimated nominal contracted payments remaining; forecasted retained value of energy contracts; cost goals by 2017; the amount of megawatts that can be deployed based on committed available financing; expected future GAAP and non-gaap operating results; 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 only a portion of the orders needed to achieve our megawatt projections and therefore expect the megawatts we need to deploy to meet our projections to be sourced substantially from new deployments of solar systems not currently under contract. In order to meet our projections, we will need to 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, our ability to successfully integrate Silevo, Inc. s business, operations and personnel and achieve manufacturing economies of scale and associated cost reductions, our expectations regarding the Riverbend agreement and the development and construction of the Riverbend facility, including expected capital and operating expenses and the performance of our manufacturing operations; 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, the success of our product development efforts and customer preferences, risks that consumers who have executed energy contracts included in reported nominal contracted payments remaining and backlog may seek to cancel those contracts, assumptions as to retained value under energy contracts and contract renewal rates and terms, including applicable net present values, performance-based incentives, and other rebates, credits and expenses, SolarCity s limited operating history, particularly as a new public company, changes in strategic planning decisions by management or reallocation of internal resources, completion of preparation of financial statements and general market, political, economic and business conditions. You should read the section entitled Risk Factors in our most recent Quarterly Report on Form 10-Q and subsequent Current Reports on Form 8-K (including the Current Report filed on September 23, 2014), which have been filed with the Securities and Exchange Commission, which identify 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 page 2

3 SolarCity Corporation page 3 Q Review

4 Opening Up New Markets to Drive Further Growth Sales and Operations Throughput Hit New Highs in Q MW Booked up 154% Y/Y to 230 MW MW Deployed up 77% Y/Y to 137 MW (Residential +100% Y/Y) MyPower Broadens Offering To Customers Seeking To Own And Lower Costs Strengthening Our Technology and Cost Advantage New ZS Peak product broadens Zep advantages to commercial segment New ZS Beam provides unique solution for growing carport market 20 new operations centers expand capacity and reduce installation times Solar Bonds Launch Opens up solar investment opportunity to retail investors across the U.S. Expands our base of Solar Ambassador advocates across the country SolarCity Corporation page 4 Figures may not add due to rounding See Appendix slides for relevant definitions

5 Contracted Customer Payments Up $803M in 3Q to $4.1B MW Booked Up 154% Y/Y in Q to 230 MW $4.5 $4.0 Est. Nominal Contracted Payments Remaining ($b) $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.7 $0.8 $1.1 $1.2 $1.4 $1.7 $2.0 $2.5 $3.3 $4.1 $0.0 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 SolarCity Corporation page 5 Figures may not add due to rounding See Appendix slides for relevant definitions

6 Over 168,000 Customers Booked to Date One Million Customer Goal by Mid-2018 Requires a Compounded Growth Rate of 61% vs. Recent Historical Pace of 104% Since k Cumulative Customers (000s) k 70k 82k 93k 111k 141k 48k 25 29k 35k 0 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 SolarCity Corporation page 6 Figures may not add due to rounding See Appendix slides for relevant definitions

7 The Clear Leader in U.S. Residential Installations 40% 35% 36% 30% % of U.S. Residential Installations 1 25% 20% 15% 10% 11% 17% 26% Our residential MW installations 5% 6% 7% exceeded the next 50 competitors combined in Q % (the most recent data available) Q14 SolarCity Corporation page 7 See Appendix slides for footnotes and relevant definitions

8 Cumulative 894 MW Deployed at End of 3Q 2014 MW Deployed of 137 MW in 3Q 2014 MWs Deployed in Period Total MW Deployed: Up 77% Y/Y Residential: Up 100% Y/Y MWs Deployed in Period to 2015 Midpoint: 99% CAGR , Q13 3Q E* 2015E* Residential Commercial * Represents the Company s Estimates Q Guidance for MW Deployed Full year 2014 guidance now MW Full year 2015 guidance now 920 1,000 MW SolarCity Corporation page 8 Figures may not add due to rounding See Appendix slides for relevant definitions

9 Expanding Technology and Cost Advantage New ZS Products Significantly Decrease the Cost to Install Commercial Solar ZS Peak for Commercial Systems Reduces installation time by 50% Up to % higher installed capacity per roof East-West orientation extends peak production ZS Beam for Carports Easier and quicker installation Installation from below, automatic ground connection improve safety Single plane provides superior aesthetics SolarCity Corporation page 9 See Appendix slides for relevant defi nitions

10 Breaking Ground in Buffalo Silevo Acquisition and NY Agreement Closed in September 2014 Design and construction of 1 GW Riverbend factory underway Site grading complete and foundation pre-drilling has begun Building targeted for completion by Q with equipment to be installed in 2016 SolarCity Corporation page 10 See Appendix slides for relevant defi nitions

11 Costs Continue to Decline on Scale Benefits The Three Major Cost Components to Run the Business Are Installation, Sales, and G&A Reconciliation to our GAAP Financial Statements Available on the Investor Relations Section of Our Website 2 $3.00 $2.50 $2.00 $3.03 $0.26 $0.48 G&A Sales $2.90 $0.21 $0.50 G&A MW Deployed $0.21 / W Fixed overhead expenses covering payroll, facilities, etc. across administrative, finance, legal, IT, and other corporate functions Does not include R&D investment Excludes non-cash stock compensation expense Sales MW Booked = = $0.50 / W $ per Watt $1.50 $1.00 $2.29 Installation $2.19 Fixed sales overhead (payroll) Variable sales commissions and partner referral fees Additional marketing and lead generation costs Excludes non-cash stock compensation expense $0.50 Installation Cost Leased MW Deployed = $2.19 / W $0.00 Q Q Capitalized variable (and applied overhead) costs to install leased solar systems vs. MW Deployed including stock compensation expense SolarCity Corporation page 11 See Appendix slides for relevant definitions Figures may not add due to rounding

12 Scale and Efficiencies Driving Costs to New Lows Goal for Total Cost of $2.50/W and Installation Cost of $1.90/W by 2017 Well Within Reach Our Total Cost per Watt Has Declined at a Compounded Annual Rate of (16%) Since the End of 2012 $4.0 $3.93 $3.89 $3.5 $0.35 $0.31 $3.61 Average Total Cost per Watt $3.0 $2.5 $2.0 $1.5 $1.0 $0.42 $3.16 $0.59 $2.99 $0.34 $0.46 $2.81 $3.15 $0.22 $0.41 $2.52 $3.22 $0.23 $0.44 $2.55 $3.28 $0.29 $0.53 $2.46 $3.03 $0.26 $0.48 $2.29 $2.90 $0.21 $0.50 $2.19 $2.50 $0.60 Total SG&A $0.5 $1.90 $0.0 Q Q Q Q Q Q Q Q Goal SolarCity Corporation page 12 Figures may not add due to rounding Installation Sales G&A See Appendix slides for relevant definitions

13 Enabling Solar at Lower Cost than Fossil Fuels by 2017 Cost Reductions to Help Offset an NPV Impact of ~$1.25/W from the Decline in the ITC to 10% ~$3.50 ~$2.50 ~$1.00 $/Watt Customer Payments: ~$3.00 Tax Benefits: ~$0.50 PV of Residential Lease/PPA Total Cost Goal by 2017 Implied Potential NPV in 2017 * Discount rate of 6% SolarCity Corporation page 13 See Appendix slides for footnotes and relevant definitions

14 Retained Value Forecast at $2.2 Billion Unlevered DCF Forecast of Net Cash Payable to Us from all MW Booked as an Energy Contract After tax equity commitments, annual O&M/insurance/admin expenses, and inverter replacement Forecast at Sept. 30, 2014 Retained Value based on discounted forecast of remaining net cash to SCTY ($m) * $2,180 Retained Value under Energy Contract ($m) * $1,539 Retained Value Renewal ($m) * $640 Retained Value $/watt $1.72/watt * Discount rate of 6% SolarCity Corporation page 14 Figures may not add due to rounding See Appendix slides for relevant definitions

15 Financial Housekeeping 3Q 2014 Financial Statement Highlights Convertible debt issuance Silevo closing and impacts to balance sheet GAAP profitability due to one-time tax benefit from the Silevo acquisition and impact of noncontrolling interests Solar Bonds introduced with no impact to 3Q results MyPower introduced with minimal impact to 3Q results New shareholder letter format Focused on providing additional information to analyze the company SolarCity Corporation page 15

16 GAAP Statement of Operations $ in thousands Consolidated Revenue: Q Q Operating leases and solar energy system incentives $24,796 $52, % growth Y/Y Solar energy system and components sales $23,804 $6,165 Total revenues $48,600 $58,343 Cost of revenue: Operating leases and solar energy system incentives $8,619 $25,728 Solar energy system and components sales $26,128 $6,640 Total cost of revenues $34,747 $32,368 Gross profit $13,853 $25,975 Operating Expenses: Sales and Marketing $24,310 $56,472 General and Administrative $21,062 $39,608 Research & Development $364 $4,235 Gross margin of 51% O&M and customer account management of ~$0.01/W Included $2M in non-cash amortization of intangibles Higher portion of sales costs were capitalized (vs. expensed) than forecast Non-Cash amortization of intangibles of $3M and stock comp of $4M One-time insurance benefi t of $6M Includes Non-cash stock comp of $11M Total Operating Expenses $45,736 $100,315 Loss from operations ($31,883) ($74,340) SolarCity Corporation page 16 See Appendix slides for relevant defi nitions

17 Cash and Investments Balance of Over $733M $ in thousands Nine Mos. Ended: Three Mos. Ended: Net cash provided by (used in): Sept., 30, 2014 Operating activities ($82,332) ($22,538) Investing activities ($858,402) ($389,046) Financing activities (before equity and convertible note issuances) $611,559 $262,637 Net cash used before equity and convertible note issuances ($329,175) ($148,947) Net cash provided by equity/convertible note issuances $448,611 $440,202 Net increase in cash and cash equivalents $119,436 $291,255 Positive working capital of $37M Deferred Revenue +$25M Installation Cost of $2.19/W Capitalized Sales Cost of $0.27/W Net $196M securitization proceeds Tax Equity fi nancing of $223M Net Repayment of $137M LT Debt Includes $431M in net proceeds from convertible debt issuance Greenshoe on convert of $66M less debt issuance costs will be refl ected in Q Cash and investments at Sept. 30, 2014 $733,459 Undeployed tax equity financing capacity at 150 MW as of Nov. 3, 2014 SolarCity Corporation page 17 See Appendix slides for relevant defi nitions

18 Solar Bonds a First-of-Its Kind Financial Product Nation s first registered solar bond offering* Open to all investors 3 Available online direct from SolarCity, with no fees Attractive rates relative to comparable savings, CDs, treasuries, municipal bonds 4 Direct online sales platform enables attractive investor earnings with capital costs comparable to/better than ABS Expands SolarCity marketing presence to all 50 states Diversifies available working capital sources * SolarCity has filed a registration statement (including a prospectus) with the Securities and Exchange Commission ( SEC ) for offerings to which information in this presentation relates. Before you invest, you should read the prospectus in that registration statement and other documents SolarCity has filed with the SEC for more complete information about SolarCity and the offerings. You may obtain these documents for free by visiting EDGAR on the SEC web site at Alternatively, you may obtain the prospectus relating to the Solar Bonds, and the pricing supplement relating to a particular series of Solar Bonds, at solarbonds.solarcity.com. SolarCity Corporation page 18 See Appendix slides for relevant definitions

19 MyPower Introduces Innovative Solar Loan to Market System Sale to Customer at Price per Watt of: $ $5.60 Total Cost including Installation and SG&A: $2.90 Finance Loan at an Introductory Interest Rate of: % * System prices and interest rate as of Q Expands our addressable market to homeowners who prefer to own but still seek upfront savings with no investment Offers customers lower monthly payments vs. their utility bills unlike most loan products on market Represents our first product not financed by tax equity SolarCity Corporation page 19 See Appendix slides for footnotes and relevant definitions

20 Guidance for Q and Full-Year 2014 and 2015 Q4 2014: MWs Deployed: 179 MW 194 MW Revenue: Operating Lease and Solar Energy Systems Incentive Revenue: $47M - $52M Solar Energy System and Component Sales Revenue: $20M - $24M 2014: MW Deployed: 505 MW 520 MW 2015: MW Deployed: 920 MW 1,000 MW Operating Lease and Solar Energy Systems Incentive Gross Margin: 35% - 40% Includes $5M of amortization of intangibles Operating Expenses: $118M - $128M Includes $22M-$28M of amortization of intangibles and stock compensation expenses Non-GAAP EPS: ($1.25) ($1.35) Defined as: (1) Net Income (Loss) before (2) Net Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests per (3) weighted average common share outstanding No guidance on GAAP EPS owing to difficulties in forecasting HLBV SolarCity Corporation page 20 See Appendix slides for relevant definitions

21 Our Goal of One Million Customers by Mid-2018 Implies: Cumulative solar MW Deployed of ~6 GW or more Annual revenue of ~$1 Billion contracted for decades Nominal Contracted Payments Remaining of approximately ~$20 Billion Cost structure optimized to enable solar with low or no subsidies And a massive addressable market that still remains wide open SolarCity Corporation page 21 See Appendix slides for footnotes and relevant definitions

22 Questions & Answers SolarCity Corporation page 22

23 Appendix A Footnotes 1 GTM Research U.S. PV Leadership Board for Q You must be a U.S citizen or U.S. national, at least 18 years old, not a resident of the state of Florida unless purchasing through a broker-dealer, and meet other requirements as applicable 4 Based on similar maturities, as applicable SolarCity Corporation page 23

24 Appendix B Definitions (1/2) Backlog represents the aggregate megawatt capacity of solar energy systems not yet deployed as of the date specified pursuant to Energy Contracts and contracts for solar energy system direct sales executed as of such date. 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. Energy Contracts includes all residential, commercial and government leases and power purchase agreements and consumer loan agreements pursuant to which consumers use or will use energy generated by a solar energy system that we have installed or contracted to install. For landlord-tenant structures in which we contract with the landlord or development company, we include each residence as an individual contract. For commercial customers with multiple locations, each location is deemed a contract if we maintain a separate contract for that location. MW or megawatts represents the DC nameplate megawatt production capacity. MW Booked represents the aggregate megawatt production capacity of solar energy systems pursuant to customer contracts signed (with no contingencies remaining) during the applicable period net of cancellations during the applicable period. This metric includes solar energy systems booked under Energy Contracts as well as for 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 for solar energy system direct sales. SolarCity Corporation page 24

25 Appendix B Definitions (2/2) Nominal Contracted Payments Remaining represents our estimate of the sum of cash payments that are customers are obligated to pay us under our Energy Contracts over the remaining term of such contracts. This metric includes Energy Contracts for solar energy systems already deployed and in Backlog. As an example, if a customer is 2 years into her 20 year contract, then 18 years of contract payments remain. As an additional example, if a customer chose to pre-pay her Energy Contract, then it is included in estimated Nominal Contracted Payments Remaining only while it is in Backlog as the pre-payment has not been received. Payments for direct sales are not included. Retained Value forecast represents the sum of both Retained Value under Energy Contract and Retained Value Renewal. Retained Value under Energy Contract represents our estimate of the forecasted net present value at a discount rate of 6% of Nominal Contracted Payments Remaining and estimated performance-based incentives allocated to us, net of amounts we are obligated to distribute to our fund investors, upfront rebates, depreciation, renewable energy certificates, solar renewable energy certificates and estimated operations and maintenance, insurance, administrative and inverter replacement costs, based on contractually agreed amounts as well as historic expenses. This metric includes Energy Contracts for solar energy systems deployed and in Backlog. Retained Value Renewal represents our estimate of the forecasted net present value at a discount rate of 6% of the payments we would receive upon renewal of all Energy Contracts (excluding consumer loan agreements, which have a 30 year term) through a total term of 30 years at a rate equal to 90% of the contractual rate in effect at expiration of the initial term, net of estimated operations and maintenance, insurance, administrative and inverter replacement costs, based on contractually agreed amounts as well as historic expenses. This metric includes Energy Contracts (excluding consumer loan agreements) for solar energy systems deployed and in Backlog. We assume renewal due to both (1) a higher life expectancy of the equipment used in our solar energy systems (typically 30 years or more) vs. a contract term (typically 20 years) and (2) our assumption utility retail rates continue to increase at their historic pace and our expectation that the price of our energy contracts will continue to represent an economic incentive for our customers to renew their contracts. Retained Value per Watt is computed by dividing cumulative retained value as of such date by the sum of total MWs deployed under Energy Contracts as of such date plus MWs booked under Energy Contracts as of such date but not yet deployed. Undeployed Tax Equity Financing Capacity represents a forecast of the amount of MW that can be deployed based on committed available tax equity financing for Energy Contracts. SolarCity Corporation page 25

26 Thank You Clean, more affordable energy