Third quarter earnings season has begun in the solar industry, and SunPower (NASDAQ:SPWR) has kicked things off in the right direction. The company reported non-GAAP (used because it isn't affected by project timing) revenue of $441.4 million, EBITDA of $54.2 million, and net income of $20.5 million, or $0.13 per share. That easily tops the company's own guidance of $400 million to $450 million in revenue and $0 to $15 million in EBITDA.
SunPower's commitment to building a durable competitive advantage long-term is paying off with industry leading margins and profits. Better yet, because of the timing of project completions and sales the fourth quarter should be a blowout. Management is expecting $1.25 billion to $1.3 billion in revenue and $300 million to $325 million in EBITDA. For the full year, non-GAAP earnings are expected to be $2.00 per share plus or minus a nickel.
Still the most efficient in solar
One of the small salvos SunPower fired at SolarCity (NASDAQ:SCTY.DL) during the third quarter conference call was a comment about the company's modules. SolarCity recently said that its 22.04% efficient solar panel -- which is two years from mass production -- is the world's most efficient. Not only was that beaten by Panasonic's 22.5% efficient panel a week later, SunPower isn't giving up the lead in efficiency just yet.
SunPower said that third quarter production solar modules were as high as 22.5% efficient. This from a company that makes over 1 million solar cells everyday.
One of the lessons I've learned covering the solar industry for nearly a decade is that press releases are easy to send out, but making high efficiency products for competitive costs is hard. SunPower doesn't often issue press releases on its own efficiency, it just makes the best solar panels available in the world today. In fact, 22.5% efficiency is a full percentage point higher than the last release it had about X-Series at 21.5% efficiency.
SunPower may not make a lot of headlines, but it's still the best technology company in solar.
New products are starting to pay dividends
SunPower has always been about high efficiency, but as it's grown the company has had to translate that efficiency into more value. In utility scale solar that meant assembling the building blocks of Oasis, which is now the company's standard design on large projects.
Over the last few years, SunPower has also made improvements in other new products, and it looks like they're starting to pay off. It's now making a panel with a microinverter pre-installed, making it easier and cheaper to install residential solar panels. According to management, demand is exceeding supply already, and the company is increasing production of this product in the future.
In commercial solar the company introduced the Helix system this week to lower installation costs on rooftops and carports. The product makes it possible to install an entire solar system without using any tools, and it's plug and play for installers.
C7, meanwhile, is a concentrator product that's been launched in the utility market to allow more energy production from the same number of cells. This product is launching slowly, but with 40 MW recently completed for Apple in China we could see this start to pick up in the future.
What's important about these new products is that while they're launching, SunPower is increasing margins and growing EBITDA -- meaning they're paying off. As we move to more complete system sales and leases I expect that trend to continue long-term.
Still the tops in solar
As solar companies become energy companies more than panel manufacturers or system installers, it's important to offer the best technology and full solar solutions to customers. SunPower is one of the leaders in doing that, and it's showing the financial fruit of that development now.
On November 12 at Analyst Day we'll get 2016 guidance and maybe some new details about further capacity expansion, which would drive growth. If this company starts to grow it could prove to be a huge winner for investors. Shares trade at about 7 times the top end of EBITDA guidance for this year, which I think is a steal for one of the biggest disrupters in the energy industry today.