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Q4 2011 Earnings Call
February 16, 2012 4:30 pm ET
Robert Okunski - Senior Director of Investor Relations
Dennis V. Arriola - Chief Financial Officer and Executive Vice President
Howard J. Wenger - President of Regions
Scott Reynolds - Deutsche Bank AG, Research Division
Sanjay Shrestha - Lazard Capital Markets LLC, Research Division
Jesse Pichel - Jefferies & Company, Inc., Research Division
Kelly A. Dougherty - Macquarie Research
Joseph Osha - BofA Merrill Lynch, Research Division
Brian K. Lee - Goldman Sachs Group Inc., Research Division
Timothy M. Arcuri - Citigroup Inc, Research Division
Previous Statements by SPWR
» SunPower's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» SunPower's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» SunPower's CEO Discusses Q1 2011 Results - Earnings Call Transcript
Thank you, Ed. I'd like to welcome everyone to our Fourth Quarter 2011 Earnings Conference Call. On the call today, we will start off with an operating review from Tom Werner, our CEO; followed by Dennis Arriola, our CFO, who will review our fourth quarter and 2011 financial results. Tom will then discuss our strategy for 2012, as well as our guidance for the year. We will then open up the call for questions. As a reminder, a replay of this call will be available later today on the Investor Relations page of our website.
During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in our 2010 10-K, our quarterly reports on Form 10-Q, as well as today's press release. Please see those documents for additional information regarding those factors that may impact these forward-looking statements.
To enhance this call, we have also posted a set of PowerPoint slides, which we will reference on this call, on the Events and Presentations page of our Investor Relations website. In the same location, we have posted a supplemental data sheet detailing some of our historical metrics.
On Slide 2 of our PowerPoint presentation, you will find our Safe Harbor. Our prepared remarks will run approximately 25 minutes, and then we will take questions.
With that, I'd like to turn the call over to Tom Werner, CEO of SunPower, who will begin on Slide 3. Tom?
Dennis V. Arriola
Thanks, Tom, and please turn to Slide 5. As Tom mentioned, our financial and operating performance in the quarter was solid despite the challenging market environment. We took bold actions in the quarter to improve product and service delivery to our customers by reorganizing our company into focused regional groups. We also made difficult but necessary cuts to our operating expense structure that should reduce our overall SG&A costs by 10% year-over-year, without sacrificing any of our research and development spending.
Our non-GAAP revenue for 2011 was nearly $2.5 billion, up 12% over 2010. Non-GAAP revenue in the fourth quarter 2011 includes approximately $186 million from the commencement of construction of NRG's California Valley Solar Ranch project.
Our GAAP financial results will be recognized -- will begin recognizing revenue from the CVSR project beginning in the first quarter of 2012. And our GAAP and non-GAAP revenue for the year will be nearly identical on a full year basis.
In 2011, we produced 922 megawatts of cells compared to 584 megawatts in 2010. And we recognized 766 megawatts in revenue, up 40% from 546 megawatts in 2010. We purposely reduced megawatt production in the fourth quarter compared to Q3 2011 in order to manage our inventory levels.
In the fourth quarter, non-GAAP revenue was $749 million, up 6% over Q3 2011. Our fourth quarter 2010 results included revenue from the sale of 66 megawatts of projects in Italy.
The United States was by far our strongest market in the quarter, both in terms of revenue and megawatts, followed by Germany and Italy. Our non-GAAP gross margin for the quarter improved to 12.4% from 11.4% in the third quarter, despite the unabsorbed cost related to our fab capacity optimization in the quarter.
Let me now turn to our business segments. In our Utility and Power Plant business, or UPP, non-GAAP revenues were up 16% over the third quarter to $377 million and reflected the commencement of construction for the CVSR project. Non-GAAP gross margin for UPP also improved in the quarter to 17.2% from 12.6% in the third quarter of 2011.
In our Residential and Commercial segment, or R&C, revenues in the fourth quarter were $372 million, down slightly from $381 million in the third quarter as our results were impacted by weaker demand in Europe and lower ASPs. Those factors, in addition to startup costs related to our new residential leasing offering, resulted in a lower gross margin in the quarter compared to the third quarter.
Let me spend a moment on our residential leasing program. We spent a substantial amount of time and resources in 2011 developing our new leasing program. And while it took us a little longer than we wanted to launch this product, we now feel that we have a conservatively structured program that is competitively priced and offers our customers SunPower's world-leading technology.
From a revenue recognition standpoint, the majority of our leases will recognize revenue over the lifetime of a lease. The reception of the leasing program by our dealers and customers so far has been very strong, and we expect to further grow this product offering in 2012.