q4 2013 gaap earnings conference call march 18, 2014doc.xueqiu.com/144d71db8d1893fe91826c19.pdf ·...

Delivering Better Energy

Q4 2013 GAAP Earnings Conference CallMarch 18, 2014

SolarCity Corporation | page 2

Forward-Looking StatementsThis 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 booking and deployment of megawatts including estimated Q1 2014 megawatt booking and deployment and full-year 2014 megawatt deployment; forecasted cash flow in 2014; expected future GAAP and non-GAAP operating and financial results; our control environment, including our disclosure controls and procedures and our internal controls over financial reporting, and our related remediation efforts; 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 less than half of the orders needed to achieve our 2014 megawatt projections. In order to meet our projections, we will need to substantially 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, 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, risks that consumers who have executed energy contracts included in reported MW Booked may seek to cancel those contracts, SolarCity’s limited operating history, particularly as a new public company, changes in strategic planning decisions by management or reallocation of internal resources, our ability and the ability of our third-party lease administrator to complete remediation efforts within expected time periods, and general market, political, economic and business conditions. You should read the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission, which 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, except as otherwise required by law.


2013 Results


Financial Reporting Completed and Outlook Confirmed

Financial Statements Updated and Published •Overhead allocation and other items incorporated for prior years

•Balance Sheet fundamentally unchanged

•Cash balance and Net Cash Flow remains unchanged

•Net cash flow was positive for Q4 2014 and close to break-even for the year

First Year of SOX Compliance Completed •Results and remediation to be outlined later in this presentation

2014 Outlook Remains Strong •Residential MW Booked expected to exceed 100 MW in 1Q14

See slides 15 for relevant definitions


Operating Lease Revenue Grew 79% Y/Y in Q4 2013


Q4 2013 Details:

Operating Lease Gross Margin

• New dedicated O&M department

Development Expenses

• Growth driven largely by M&A impact and investment in sales headcount / infrastructure

• Total operating expenses per MW Deployed down 17% vs. 4Q12

$ in thousands 12 months ended Dec. 31

3 months ended Dec. 31

Revenue: 2012 2013 Q4 2012 Q4 2013

Operating leases $46,098 $82,856 $12,514 $22,363

Solar energy system sales $80,810 $80,981 $11,241 $24,937

Total revenues $126,908 $163,837 $23,755 $47,300

Cost of revenue:

Operating leases $14,596 $32,745 $5,461 $11,580

Solar energy system sales $84,856 $91,723 $14,017 $25,874

Total cost of revenues $99,452 $124,468 $19,478 $37,454

Gross profit (loss) $27,456 $39,369 $4,277 $9,846

Operating Expenses:

Sales and Marketing $69,392 $97,426 $19,416 $33,893

General and Administrative $49,075 $91,321 $17,171 $31,258

Total Operating Expenses $118,467 $188,747 $36,587 $65,151

Loss from operations ($91, 011) ($149, 738) ($32,310) ($55,305)


Strong Cash Balance and Cash Flow Positive in Q4 2013

$ in thousands Annual Quarterly

Net cash provided by (used in): 2012 2013 Q4 2012 Q4 2013

Operating activities $39,794 $174,515 $56,958 $13,865

Investing activities ($428,520) ($729,899) ($143,523) ($234,912)

Financing activities (before equity issuances) $323,129 $552,204 $104,548 $262,410

Net cash provided (used) before equity issuances ($65,597) ($3,180) $17,983 $41,363

Net cash provided by equity issuances $175,206 $420,180 $92,779 $402,731

Net increase in cash and cash equivalents $109,609 $417,000 $110,762 $444,094

Exited 2013 with a strong balance sheet enabling investment in future growth

and Net Cash Flow expected to be positive in 2014

Exited 2013 with a Cash balance of $577 million and Net Cash Flow for the full year 2013 close to break-even



M&A and O&M Update to GAAP Income Statement in 2014+

Gross Margin and Amortization of Intangibles •Non-cash expenses arising from recent M&A

• Incremental $3m per quarter of Operating Lease COGS

Operating Expenses and Amortization of Intangibles •Non-cash expenses arising from recent M&A

• Incremental $3m per quarter in Sales & Marketing expenses ($2m in 4Q13)

Dedicated O&M Department •Newly dedicated O&M department to be booked in operating lease COGS

•Affected 4Q13 gross margin by ~5 percentage points

•Expected to impact gross margin by 5 – 10 percentage points per quarter in 2014



Achieved SOX Compliance within First Year

Section 404 (a): management review of internal controls completed

Section 404 (b): auditor review of internal controls completed •Higher market valuation triggered acceleration in deadline to six months

A Total of 291 Controls and Reports Evaluated and Audited •Certain weaknesses identified

Remediation expected to completed by end of Q2 2014



Weaknesses to Be Remediated by End of Q2 2014

Process Description Remediation Summary

Financial Close Processes and Procedures

Overhead allocation, redeemable interest classification, stock

compensation, and others

• Increased investment in personnel and training

• Additional review and 3 reconciliation methods for overheard allocation

• Investment in automation of systems

Vendor IT Systems

Inadequate segregation of duties • Vendor will remediate by end of Q2 2014



Guidance for Q1 2014

MWs Deployed: 78 MW – 82 MWRevenue:

•Operating Lease and Solar Energy Systems Incentive Revenue: $27m - $29m

•Solar Energy System Sale Revenue: $23m - $27m

Operating Lease and Solar Energy Systems Incentive Gross Margin: 40% - 50%

• Includes impact of amortization of intangibles and new O&M Dept.

Operating Expenses: $70m - $75m • Includes impact of amortization of intangibles

Non-GAAP EPS: ($0.70) – ($0.80) •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



Bookings Off to a Strong Start in 2014

With Residential MW Booked Expected to Be in Excess of 100 MW in Q1 2014 Based on Current Pace, Guidance for 2014 MW Deployed Reaffirmed at 475 – 525

2010 2011 2012 2013 2014E*

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* Represents the Company’s Estimates



Questions & Answers


Appendix A – Updated GAAP Income Statement

Adjustments: 1: Overhead Allocation2: Classification of Redeemable Noncontrolling Interests3: Stock-Based CompensationOth.: All other items that were not previously recorded

1 Adjustment for this line item are apportioned between both (1) overhead allocation) and (2) classification of redeemable noncontrolling interests


Appendix B – Updated GAAP Balance Sheet

Adjustments: 1: Overhead Allocation2: Classification of Redeemable Noncontrolling Interests3: Stock-Based CompensationOth.: All other items that were not previously recorded


Appendix C – Definitions

“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 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.

“Net Cash Flow” is calculated as (1) Net Cash Provided by Operating Activities, less (2) Net Cash Used in Investing Activities, plus (3) Net Cash Provided by Financing Activities, but excluding (4) Net Cash Provided by Equity (including Convertible Notes) Issuance.


Thank You

solarcity.com

q4 2013 gaap earnings conference call march 18, 2014doc.xueqiu.com/144d71db8d1893fe91826c19.pdf ·...

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