SolarCity reports strong Q4 results, resumes focus on growth

This afternoon SolarCity released results for the fourth quarter of 2015, showing progress in several key metrics. The company’s installation volume grew 54% to 272 MW, which brings the company to 1.9 GW deployed to date. 1.7 GW of this is under energy contracts.

SolarCity brought in US$115 million in revenue during Q4, a 61% increase year-over-year. $75 million of this was leases and incentives, and $40 million PV system sales revenue. Operating expenses were $227 million.

It is hardly unusual for expenses to exceed revenues on a quarterly basis given SolarCity’s business model and rapid growth. The company focuses more on the value it has created, and SolarCity’s estimate of its “PowerCo” portfolio pre-tax un-levered net present value minus debt at the end of the quarter is $2.0 billion.

221 MW of SolarCity’s Q4 deployments were residential solar, and over the course of 2015 SolarCity was responsible for 35% of the total residential solar volume installed in the United States.

The company also reduced its cost to install solar to a record low of $2.71 per watt, a 5% decline from a year ago. $0.81 of this was sales, general and administrative costs, making the "build cost" only $1.90 per watt.

“We clearly now have the lowest cost in the industry,” CEO Lyndon Rive stated on the company’s earnings call.

This can be contrasted to the gross 30-year value of $3.64 per watt that SolarCity estimates for its installations, creating a healthy profit margin. Additionally, the company is currently capturing 66% of the value deployed up-front, with asset financing covering $2.40 per watt.

SolarCity CEO Lyndon Rive gave mixed reviews for policy developments. Despite problems in Nevada with severe changes to net metering policies, Rive noted that ITC extension was a “huge win for the solar industry”, and also called California’s net metering 2.0 ruling an “excellent outcome”.

Due to the ITC extension, SolarCity appears to be again changing course. Rive noted that sales expenses would rise again in 2016 as the company continues to invest in growth. This is a reversal from the company’s position before ITC extension, when SolarCity planned to slow growth to focus on profitability. However, SolarCity still plans to be cash-positive by the fourth quarter of 2016.

SolarCity additionally provided an update on its manufacturing activities. During November the company began commercial operations at its pilot-scale PV cell and module factory in Fremont, California. Fab2 has the capacity to produce 100 MW of PV modules annually using Silevo heterojunction high-efficiency solar technology.

SolarCity says that it continues to purchase equipment for its “gigafactory” in Buffalo, New York, which also will produce Silevo modules. The company expects to complete construction during Q2.

Due to long lead times for certain equipment, SolarCity expects to still be receiving tools through the second quarter of 2017. This will delay the ramp until later in the year, but also means that capital outlays for some equipment will be pushed back to 2017.

For the first quarter of 2016 SolarCity expects to install only 180 MW, noting a combination of seasonal slowness, the loss of the Nevada market due to policy changes, and a shorter commercial and industrial cash conversion cycle.

However, SolarCity did not change its outlook to deploy 1.25 GW over the course of 2016, which means that much of the installations will be “back-loaded” towards later in the year.