April 17, 2008

San Jose, CA, USA: SunPower Reports First-Quarter 2008 Results

SunPower Corporation today announced financial results for the first quarter 2008, which ended March 30, 2008.

Revenue for the 2008 first quarter was $273.7 million, up 22% from prior-quarter revenue of $224.3 million and up 92% from year-ago first-quarter revenue of $142.3 million. The Components and Systems segments accounted for 35% and 65% of first-quarter revenue, respectively.

On a GAAP basis, SunPower reported gross margin of 19.5%, total operating income of $14.8 million and diluted net income per share of $0.15. These figures include non-cash operating expenses for amortization of purchase accounting intangible assets of $4.3 million and non-cash, stock-based compensation of $14.5 million. Additionally, for the three months ended March 30, 2008, GAAP cost of revenue includes $2.2 million of one-time asset impairment charges relating to the discontinuation of our imaging detector product line and $3.3 million for write-offs of certain solar manufacturing equipment which became obsolete due to new processes.

On a non-GAAP basis, adjusted to exclude non-cash charges for amortization of intangible assets, stock-based compensation, asset impairments and equipment write-offs, SunPower reported total gross margin of 24.0%, operating income of $39.1 million and diluted net income per share of $0.39. This compares with prior-quarter non-GAAP gross margin of 25.3%, total operating income of $32.4 million and $0.39 diluted net income per share. The first quarter's non-GAAP gross margin was influenced by a higher mix of revenue from our Systems segment which posted a gross margin of 23.3% for that quarter and our Component segment's 200 basis points sequential improvement over the 2007 fourth quarter gross margin to 25.4%. Our Component segment's gross margin benefitted from higher volume and modestly higher average selling prices. The increase in Components gross margin was tempered by stable silicon costs, rather than expected slightly declining silicon costs, as we secured incremental silicon supply to improve factory linearity in the first and second quarters of 2008. Looking forward to the second quarter, we expect our first meaningful reduction in average silicon cost which will contribute to our estimated 510 to 610 basis point improvement in our Component segment's gross margin.

"Our first quarter performance reflects the value our customers attribute to SunPower's high-performance solar solutions," said Tom Werner, SunPower's CEO. "SunPower's market leadership will continue to be driven through our focus on brand, technology, cost and people. We are building a strong brand based on sound fundamentals: the world's highest performance solar technology, deployed aggressively across the leading global markets using scalable, responsive channel platforms."

"During the first quarter of 2008, SunPower demonstrated the strength of its channel diversification. Our dealer network continued to expand, not only in the United States, but also in three key European markets as well: Germany, Italy and Spain. We now have more than 200 dealers serving residential and commercial rooftop markets globally with a rapidly increasing presence in Europe. In Asia, we expanded our customer footprint with our first volume shipments into Japan and shipment of components to Samsung in Korea. Our vertical integration strategy provides us with the visibility and flexibility to serve a variety of end-markets, responding quickly to both new market opportunities as well as risks."

"SunPower is positioned to meet the needs of the market with industry-leading solar technology across the entire customer spectrum -- from large-scale systems designed for utilities and large commercial clients to homeowners. Our proprietary technology delivers the highest output per unit area of any commercially available solar system and we intend to leverage this technology by aggressively expanding our solar cell production by more than 150% in 2008 compared to 2007. This scale, combined with lower silicon costs, higher efficiencies, thinner wafers and on-going quality and cost improvements in our factories, will drive unit cost reduction."

"SunPower has pursued a portfolio strategy for silicon procurement, using a combination of short, intermediate and long-term supply agreements and a variety of incumbent suppliers as well as new entrants. We have not assumed technology risk for new polysilicon refining techniques. Our solar cell and panel manufacturing expansion plans are predicated on risk-adjusted, contracted silicon. We believe that 100% of our projected solar cell production is secured with contracted silicon through 2010."

"We expect SunPower's silicon supply costs to decline by approximately 10% during 2008 compared to 2007," continued Werner. "This cost improvement will amplify our silicon utilization benefits achieved through higher cell efficiency and thinner wafers. We are on track to achieve our planned improvements in our cost structure, and therefore we expect to reach our target financial model of 30% gross margin, 10% operating expenses and 20% operating margin, on a non-GAAP basis, no later than the first quarter of 2009. We are also on track to realize our mission of reducing installed systems cost by 50% by 2012."

"Based on the strong demand trends we saw in the first quarter of 2008, we are raising our guidance for the fiscal year 2008 and expect the following non-GAAP results: Total revenue of $1.3 billion to $1.375 billion, diluted net income per share of $2.10 to $2.20. We are also reconfirming our 2009 forecast for total revenue to increase at least 40% from 2008 levels. Consistent with our practice of offering guidance for the current quarter, we expect second quarter of 2008 non-GAAP total revenue of $330 million to $350 million, company non-GAAP gross margin of 23% to 24% and non-GAAP diluted net income per share of $0.48 to $0.52, reflecting a higher non-GAAP average tax rate of 24% to 25% in 2008 as compared to the tax rate in 2007 which ended at 11.0%."

"On a business segment basis, we expect the following non-GAAP results for the second quarter 2008: Components segment revenue of $95 million to $100 million, driven by a planned increase in allocation of SunPower panels to the Systems segment, and gross margin of 30.5% to 31.5%; Systems segment revenue of $235 million to $250 million and gross margin of 20% to 21%," said Werner. "We expect the Components segment to benefit from the continued manufacturing ramp of our next-generation technology and lower silicon cost and the Systems segment to benefit from an increase in allocation of SunPower panels to the segment during the quarter."

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