July 17, 2008

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

SunPower Corporation today announced financial results for the second quarter 2008, which ended June 29, 2008.

Revenue for the 2008 second quarter was $382.8 million, up 40% from prior- quarter revenue of $273.7 million and up 120% from year-ago second-quarter revenue of $173.8 million. The Components and Systems segments accounted for 29% and 71% of second quarter revenue, respectively.

On a GAAP basis, for the 2008 second quarter, SunPower reported gross margin of 24.3%, total operating income of $45.0 million and diluted net income per share of $0.34. These figures include non-cash operating expenses for amortization of purchase accounting intangible assets of $4.0 million and non-cash, stock-based compensation of $18.6 million.

On a non-GAAP basis, adjusted to exclude non-cash charges for amortization of intangible assets and stock-based compensation, SunPower reported total gross margin of 26.4%, operating income of $67.6 million and diluted net income per share of $0.61. This compares with prior-quarter non-GAAP gross margin of 24.0%, total operating income of $39.1 million and $0.39 diluted net income per share. Overall gross margin rose sequentially benefitting from a 630 basis point improvement in the Components segment. Components gross margin rose to 31.7% due to lower silicon costs, higher volume and stable to slightly higher average selling prices. Additionally, the systems segment posted a gross margin of 24.2% reflecting a higher percentage of SunPower panels and cost reduction in field construction. Looking forward to the third and fourth quarter, the company expects continued improvement in company gross margin.

"In 2008, SunPower has achieved the geographic and market segment diversity that provides us with tremendous flexibility to respond to new opportunities and minimize risk, such as the uncertainty our industry currently faces in the U.S. and Spanish markets," said Tom Werner, SunPower's CEO. "We have built the infrastructure to deliver our high-efficiency solar technology to customers on four continents from residential rooftops to large- scale utility systems. With our Gen 2 cell lines ramping and further expansion of our manufacturing capabilities, we are beginning to tap unserved demand for our high-efficiency solar systems in Korea, Japan, Australia, Germany, Italy, and neighboring areas in Europe. The overall global business environment remains very favorable as we continue to execute on our long-term strategy focused on brand, technology, cost and people. We are well- positioned for success entering the second half of the year."

"In the second quarter, SunPower benefitted from strong customer demand across multiple geographies including our Systems business segment. In addition to our power plant installations in Spain, we saw the dedication of a 1.4 megawatt project in Korea as well as the announcement of our framework agreement with Enfinity Management SPRL to supply 25 megawatts of projects in Italy by the end of 2009. Demonstrating SunPower's ability to offer solar at utility-scale, we announced an agreement with Florida Power & Light (FPL) for the largest photovoltaic power plant in the United States. Our agreements with FPL include both a 25 megawatt plant in DeSoto County, Fla., as well as a 10 megawatt plant at the Kennedy Space Center. Our power plant customers value SunPower's delivery of the highest-efficiency solar panels, high-energy collection systems technology, a decade of large-scale systems deployment experience, and a low levelized cost of energy (LCOE)."

"SunPower continued to extend its technology lead during the quarter as we announced our world-record, 23.4 percent efficiency, prototype Generation 3 solar cell. This technology, expected to be in production in approximately two years, is a key element in our roadmap to reduce total systems costs to compete with wholesale and retail electric rates by 2012. Also, in order to meet expected future demand and scale economies to reach our cost reduction goals, SunPower announced plans to build its third solar cell manufacturing facility in Malaysia which, when completed, will have a nameplate capacity in excess of 1 gigawatt."

"Our cost reduction plans are on target for silicon procurement as well. We saw our silicon unit costs materially decline in the second quarter as we started to realize the benefit of our portfolio approach to silicon supply," continued Werner. "With all of our silicon suppliers delivering according to contract, we expect our silicon supply costs to continue to decline and remain fully contracted for our silicon needs through 2010. Per plan, SunPower also benefitted from reductions in cell manufacturing and module costs, improved materials sourcing and more efficient project management including the deployment of our next-generation SunPower® T20 Tracker at our power plant projects in Spain."

"With the decline in our silicon costs, further improvements in our manufacturing efficiency and continued progress in reducing downstream installation costs, we remain on track to achieve 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% from 2006 to 2012."

"Based on the strong demand trends in both existing and emerging markets and continued progress on our 50 percent reduction in installed system costs, we are raising our guidance for the fiscal year 2008 and expect the following non-GAAP results: Total revenue of $1.39 billion to $1.44 billion and diluted net income per share of $2.26 to $2.36. We also expect our 2009 total revenue to be in of the range of $2.0 billion to $2.1 billion, production capacity of 450+ megawatts and non-GAAP diluted net income per share of at least $3.50. Consistent with our practice of offering guidance for the current quarter, we expect third quarter 2008 non-GAAP total revenue of $340 million to $355 million, company non-GAAP gross margin of 26.5% to 27.5% and non-GAAP diluted net income per share of $0.53 to $0.57."

"On a business segment basis, we expect the following non-GAAP results for the third quarter 2008: Components segment revenue of $155 million to $160 million, and gross margin of 33.5% to 34.5%; Systems segment revenue of $185 million to $195 million and gross margin of 21.5% to 22%. 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 reflect a combination of changes in project and regional mix."

"For the fourth quarter of 2008, we expect non-GAAP total revenue of $395 million to $425 million, reflecting an anticipated increase in both our Components and Systems segment revenue, company non-GAAP gross margin of 29% to 30%, in line with the company's long-term model, and non-GAAP diluted net income per share of $0.73 to $0.80. For the fourth quarter 2008, we expect Components segment revenue of $200 million to $210 million, and gross margin of 35% to 36% and Systems segment revenue of $195 million to $215 million and gross margin of 23% to 23.5%," concluded Werner.

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