SolarCity
Aug 7, 2013

SolarCity Announces Second Quarter 2013 Financial Results

Residential Megawatts (MWs) Deployed Grew 144% Year-Over-Year, Estimated Nominal Contracted Payments Up to $1.4 Billion, and Positive Net Cash Flow of $19 Million Before Options/Warrant Exercise

SAN MATEO, Calif., Aug. 7, 2013 (GLOBE NEWSWIRE) -- SolarCity (Nasdaq:SCTY), a leading provider of clean energy, today announced financial results for the second quarter ended June 30, 2013.

"SolarCity delivered solid growth in its operating lease business in the second quarter, with cumulative customers, cumulative energy contracts, and estimated nominal contracted payments all close to doubling from the end of Q2 2012, while the momentum continued with a record month in residential bookings and deployments in July," said Lyndon Rive, CEO. "Plus, Residential MWs deployed rose 144% Y/Y to drive total MW deployments to the highest quarterly rate yet at 53 MW," continued Mr. Rive. "With positive net cash flow of $19.4 million (before options/warrant exercise) and estimated nominal contracted payments remaining rising to $1.4 billion, we are building a solid platform for steady, visible cash flow in the decades ahead."

Q2 2013 Operating Highlights

In the second quarter of 2013, SolarCity continued to make progress in building out its platform for delivering cleaner and cheaper distributed energy. Key operating and development highlights in the quarter include:

Estimated Nominal Contracted Payments and Retained Value

Due to the long-term nature of its operating lease contracts—of up to 20 years—and the related GAAP accounting for such contracts, the Company views the following operating metrics as a better representation of its new sales activity and business outlook:

Investing and Financing Activities

With each new Energy Contract, SolarCity creates a recurring, predictable cash flow stream. Its financial strategy is to maximize retained value for shareholders by covering Investing Activities with cash generated from Operating and Financing Activities.

Its Investing Activities are primarily comprised of the capital investment in distributed generation solar energy systems under long-term Energy Contracts with customers, while its Financing Activities represent the funding of its solar energy systems investments through its investor partners and lenders. Key highlights of SolarCity's Investing and Financing Activities include:

Q2 2013 GAAP Cash Flows

For the second quarter ended June 30, 2013, net cash provided by Operating Activities was $74.0 million, while net cash used in Investing Activities was $159.6 million and net cash provided by Financing Activities (before the exercise of stock options and common stock warrants) was $105.0 million.

Defined as Operating Cash Flows plus Financing Cash Flows net of Investing Cash Flows (excluding equity issuance) net cash flow of $19.4 million was generated in the quarter ended June 30, 2013. Cash and cash equivalents totaled $159.6 million as of June 30, 2013.

Condensed Statement of Cash Flows
$ in thousands Three Months Ended:
Net Cash Provided (Used) In: June 30, 2012 March 31, 2013 June 30, 2013
       
Operating activities $38,421 $8,898 $74,039
Investing activities ($93,691) ($140,576) ($159,571)
Financing activities (before stock options/warrants exercise) $25,571 $98,378 $104,978
       
Net cash provided (used) before stock options/warrants exercise ($29,699) ($33,300) $19,446
Net cash provided by exercise of stock options/warrants $810 $514 $12,866
       
Net increase (decrease) in cash and cash equivalents ($28,889) ($32,786) $32,312

Q2 2013 GAAP Operating Income Statement

For the second quarter of 2013, Operating Lease revenue was $20.6 million, rising 79% from $11.5 million in the second quarter of 2012. Total revenue decreased (19%) year-over-year to $37.9 million due to a decline in Solar Energy Systems Sales revenue. The Company expects Solar Energy Systems sales revenue to fluctuate more widely than Operating Lease revenue from period to period given timing of revenue recognition.

Gross Profit was $15.5 million, growing 41% year-over-year from $11.0 million in the second quarter of 2012 and yielding Gross Profit Margin of 41%. Operating Lease gross margin was 65%.

Total Operating Expenses were $42.5 million, rising from $26.5 million in the second quarter of 2012, largely owing to higher employee compensation expenses and professional services fees. Loss from Operations was $27.0 million as compared to $15.5 million in the year-ago period. GAAP loss per share was ($0.31).

Non-GAAP Earnings per Share [EPS] Before Noncontrolling Interests

Beginning with this second quarter 2013 earnings report and subsequently on a go-forward basis, the Company will be highlighting non-GAAP earnings per share based on Earnings Before Net Income (Loss) Attributable to Noncontrolling Interests per Share.

Under GAAP accounting, the Company reports net income (loss) attributable to noncontrolling interests to reflect the Company's joint venture fund investors' allocable share in the results of the Company's joint venture financing funds. Income (loss) attributable to 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, the Company will also report non-GAAP EPS based on earnings before net income (loss) attributable to noncontrolling interests per share, which it views as a better measure of its operating performance.

While GAAP EPS is based upon net income (loss) attributable to common stockholders, non-GAAP EPS is based upon net income (loss) with the only difference between GAAP EPS and non-GAAP EPS being net income (loss) attributable to non-controlling interests.

Under this definition, the Company reported second quarter 2013 non-GAAP earnings before noncontrolling interests per share of ($0.43). See below for a reconciliation of GAAP EPS to non-GAAP EPS.

Guidance for Q3 2013 and Update to 2013 Outlook

For Q3 2013, the Company expects to deploy between 70 MW and 77 MW.

For Q3 2013, the Company also expects:

The Company will not be providing GAAP EPS guidance.

For 2013, the Company reaffirms its guidance for MWs deployed of 270 MW, which it raised from 250 MW in June 2013. In addition, the Company continues to expect to turn consistently net cash flow positive on a go-forward basis by Q4 2013.

Earnings Conference Call

The Company will hold a conference call today to discuss its second quarter results and its outlook for the remainder of 2013 at 5:00 pm Eastern. A live webcast of the call may be accessed over the Internet from the Company's Investor Relations website at http://investors.solarcity.com.

Participants should follow the instructions provided on the website to download and install the necessary audio applications. In addition, an earnings related presentation will be available on the Company's Investor Relations site at 5:00 pm Eastern. 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 418284. The replay will be available until August 14, 2013.

About SolarCity

SolarCity® (Nasdaq:SCTY) provides clean energy. The company has disrupted 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. The company offers solar power, energy efficiency and electric vehicle services, and makes clean energy easy by taking care of everything from design and permitting to monitoring and maintenance. SolarCity currently serves 14 states and signs a new customer every five minutes. Visit the company online at www.solarcity.com and follow the company on Facebook & Twitter.

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 timing and amount of deployment of megawatts (including megawatts currently in backlog), the retained value under energy contracts and of contract renewals, the amount of megawatts that can be deployed based on committed available financing, forecasted cash flow in 2013, expected future GAAP and non-GAAP income statement results, additional financial and operational forecasts to be discussed during the conference call referenced in this release, 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, including 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, consumer default rates, higher-than-anticipated operations, maintenance, insurance, administrative, and inverter costs, assumptions related to available financing, risks that consumers who have executed energy contracts included in reported nominal contracted payments remaining, retained value, and MW booked, 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, and general market, political, economic and business conditions. You should read the section entitled "Risk Factors" in our Quarterly Report on Form 10-Q, which has been filed with the Securities and Exchange Commission and 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.

SolarCity Corporation
Condensed Consolidated Balance Sheets
     
(In Thousands) December 31, June 30,
  2012 2013
  (audited) (unaudited)
Assets     
Current assets:     
Cash and cash equivalents   $ 160,080  $ 159,606
Restricted cash   7,516  6,031
Accounts receivable, net  25,145  23,988
Rebates receivable   17,501  20,235
Inventories   87,903  68,735
Deferred income tax asset  5,770  5,377
Prepaid expenses and other current assets   11,502  25,831
Total current assets   315,417  309,803
     
Restricted cash   2,810  1,984
Solar energy systems — net   1,002,184  1,278,880
Property, plant and equipment — net   18,635  19,862
Other assets  22,796  27,675
Total assets   $ 1,361,842  $ 1,638,204
     
Liabilities and equity     
Current liabilities:     
Accounts payable   $ 62,986  $ 77,705
Distributions payable to noncontrolling interests  12,028  26,935
Current portion of deferred U.S. Treasury grants income  11,376  14,809
Accrued and other current liabilities   52,334  43,743
Customer deposits   8,753  7,818
Current portion of deferred revenue   31,516  37,949
Current portion of long-term debt   20,613  8,702
Current portion of lease pass-through financing obligation  13,622  27,939
Current portion of sale leaseback financing obligation  389  403
Total current liabilities   213,617  246,003
     
Deferred revenue, net of current portion   204,396  277,827
Long-term debt, net of current portion   83,533  115,213
Long-term deferred tax liability  5,790  5,400
Lease passthrough financing obligation, net of current portion  125,884  104,662
Sale leaseback financing obligation, net of current portion  14,755  14,550
Deferred U.S. Treasury grants income, net of current portion  286,884  393,268
Other liabilities  112,056  149,854
Total liabilities   1,046,915  1,306,777
     
Stockholders' equity:     
Common stock 7 7
Additional paid-in capital   325,705  348,081
Accumulated deficit   (111,392)  (166,271)
Total stockholders' equity   214,320  181,817
Noncontrolling interests in subsidiaries  100,607  149,610
Total equity   314,927  331,427
Total liabilities and equity   $ 1,361,842  $ 1,638,204
 
SolarCity Corporation
Condensed Consolidated Statements of Operations
     
(In Thousands, Except Share and Per Share Amounts) Three Months Ended
  June 30, 2012 June 30, 2013
  (unaudited) (unaudited)
Revenue:     
Operating leases   $ 11,528  $ 20,608
Solar energy systems sales   35,046  17,341
Total revenue  46,574  37,949
     
Cost of revenue:     
Operating leases   3,710  7,223
Solar energy systems sales   31,899  15,247
Total cost of revenue  35,609  22,470
     
Gross profit  10,965  15,479
     
Operating expenses:     
Sales and marketing   15,700  21,344
General and administrative   10,788  21,176
Total operating expenses   26,488  42,520
     
Loss from operations   (15,523)  (27,041)
     
Interest expense, net  4,841  5,421
Other expense, net   1,455  162
Loss before income taxes  (21,819)  (32,624)
Income tax provision  (30)  (25)
Net loss  (21,849)  (32,649)
Net income (loss) attributable to noncontrolling interests  3,984  (8,764)
Net loss attributable to stockholders  $ (25,833)  $ (23,885)
     
Net loss per share attributable to common stockholders:    
Basic  $ (2.37)  $ (0.31)
Diluted  $ (2.37)  $ (0.31)
     
Weighted average shares used to compute net loss per share attributable to common stockholders:  
Basic  10,897,198  76,529,698
Diluted  10,897,198  76,529,698
 
SolarCity Corporation
Condensed Consolidated Statements of Cash Flows
     
  Six months ended
(In Thousands) June 30, June 30,
  2012 2013
  (Unaudited)
Operating activities:    
Net loss  $ (48,911)  $ (60,804)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Loss on disposal of property, plant and equipment  10  —
Depreciation and amortization net of amortization of deferred U.S. Treasury grant income  9,021  15,989
Interest on lease pass-thorough financing obligation  4,939  6,869
Stock-based compensation  4,713  8,996
Revaluation of convertible redeemable preferred stock warrants  9,557  —
Revaluation of preferred stock forward contract  350  —
Deferred income taxes  6  3
Reduction in lease pass-through financing obligation  (7,290)  (14,239)
Changes in operating assets and liabilities:    
Restricted cash  (381)  (1,591)
Accounts receivable  (16,396)  1,157
Rebates receivable  652  (2,734)
Inventories  2,153  19,168
Prepaid expenses and other current assets  (2,941)  (12,717)
Other assets  (5,132)  (2,190)
Accounts payable  (68,075)  14,719
Accrued and other liabilities  21,744  31,382
Customer deposits  (5,025)  (935)
Deferred revenue  62,542  79,864
Net cash provided by (used in) operating activities  (38,464)  82,937
Investing activities:    
Payments for the cost of solar energy systems, leased and to be leased  (174,552)  (296,254)
Purchase of property and equipment  (5,970)  (3,893)
Net cash used in investing activities  (180,522)  (300,147)
     
Financing activities:    
Investment fund financings and bank borrowings:    
Borrowings under long-term debt  60,532  34,464
Repayments of long-term debt  (18,127)  (18,616)
Borrowings under bank line of credit  19,418  —
Repayments of sale-leaseback financing obligation  (178)  (191)
Proceeds from lease pass-through financing obligation  123,593  20,592
Repayment of capital lease obligations  (15,582)  (1,212)
Proceeds from investment by noncontrolling interests in subsidiaries  21,795  146,071
Distributions paid to noncontrolling interest in a subsidiary  (91,298)  (76,236)
Proceeds from U.S. Treasury grants  48,076  98,484
Net cash provided by financing activities before equity issuances  148,229  203,356
Equity issuances:     
Proceeds from exercise of stock options  1,197  5,346
Proceeds from the exercise of convertible redeemable preferred stock  80,868  —
Proceeds from exercise of common stock warrants  —  8,034
Net cash provided by equity issuances   82,065  13,380
Net cash provided by financing activities  230,294  216,736
     
Net increase in cash and cash equivalents  11,308  (474)
Cash and cash equivalents, beginning of period  50,471  160,080
Cash and cash equivalents, end of period  $ 61,779  $ 159,606
       
Reconciliation from GAAP EPS to Non-GAAP EPS:      
 
  GAAP Net Loss GAAP Net Loss Non-GAAP Net Loss
  Attributable to Attributable to Before Noncontrolling 
in thousands except per share Stockholders Noncontrolling Interests Interests
Net loss ($23,885) ($8,764) ($32,649)
       
/ Weighted Average Common Shares Outstanding 76,530 76,530 76,530
       
= Net Loss Per Share ($0.31) ($0.11) ($0.43)
 
 
Operating Activity Metrics:
  Q2 2012 Q1 2013 Q2 2013 Cumulative
MW Deployed 31 46 53 387
New Customers 5,200 8,773 8,559 64,411
New Energy Contracts Outstanding 4,760 7,363 8,087 54,650
Estimated Nominal Contracted Payments Remaining -- $m       $1,409
         
 
"MW" or "megawatts" represents the DC nameplate megawatt production capacity.
"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 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 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.
"Nominal Contracted Payments Remaining" equals the sum of cash payments obligated to be paid to 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 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 the forecasted net present value 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. This metric includes Energy Contracts for solar energy systems deployed and in Backlog. Retained Value of Renewal represents the forecasted net present value of the payments SolarCity would receive upon Energy Contract renewal through a total term of 30 years, assuming all Energy Contracts are renewed at a rate equal to 90% of the contractual rate in effect at expiration of the initial term. This metric is net of estimated operations and maintenance, insurance, administrative and inverter replacement costs and includes Energy Contracts for solar energy systems deployed and in Backlog. Our calculation of retained value assumes a discount rate of 6%.
"Retained Value per Watt" is computed by dividing cumulative retained value as of such date by a 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.
CONTACT: Investor Contact

         Aaron Chew

         investors@solarcity.com
Source: SolarCity Corporation

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