SunEdison Stock Rises on Q2 2014 Results

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SunEdison, Inc. (NYSE: SUNE) last week announced financial results for Q2 2014.

“The second quarter was a transformational period for SunEdison. Our teams superbly executed multiple complex financing initiatives while keeping our core business on track,” said Ahmad Chatila, Chief Executive Officer, in a statement. “Among the milestones achieved were the successful completion of the SunEdison Semiconductor IPO and the placement of convertible senior notes, both of which give us additional flexibility to accelerate growth. In addition, just after quarter-end we successfully completed the TerraForm Power IPO which we expect to be a key driver for lower cost of capital. With these accomplishments and our growing project pipeline, we believe we are increasingly well positioned to succeed in this rapidly growing and dynamic market.”

Thanks to better-than-expected earnings, SunEdison’s stock has gone up more than 14% since the results were announced.

For more details, see the full press release.

Cash Flow

Operating cash used in the 2014 second quarter was $78.6 million and was primarily the result of changes in working capital and continued investment to grow the business.

Free cash flow was $80.2 million and was largely influenced by solar energy project financing and solar project construction activities, acquisitions, and capital expenditures.

Capital expenditures were $74.9 million in the 2014 second quarter, of which $22.3 million was incurred in the Semiconductor Materials segment and $32.1 million was related to capital investments in SMP Ltd., a joint venture with Samsung Fine Chemicals which SunEdison owns and operates.

The company ended the 2014 second quarter with cash and cash equivalents of $954.7 million and cash committed for construction projects of $176.1 million, for a total of $1,130.8 million.

Earnings per Share

Second quarter 2014 GAAP earnings per share was ($0.16) and non-GAAP earnings per share was $0.12. Second quarter 2014 GAAP included a benefit of $145.7 million, or $0.54 per share net of tax.

Solar Energy: GAAP

Solar Energy segment GAAP revenue was higher year-over-year, driven by higher solar project volume and higher sales of solar materials. Solar Energy segment GAAP revenue for the 2014 second quarter and 2013 second quarter included $16.6 million and $11.7 million, respectively, of previously deferred solar project revenue. GAAP revenue was higher sequentially, driven by higher solar project sales volume and higher energy sales. In the 2014 second quarter, Solar Energy recognized GAAP revenue from solar projects totaling 90 MW, up from 78 MW in the 2014 first quarter and 14 MW in the 2013 second quarter. During the 2014 second quarter, 164 MW of additional projects were constructed and held on the balance sheet.

Operating loss was higher year-over-year and sequentially due primarily to lower solar energy system gross margin and higher operating expenses.

Solar Energy: Non-GAAP

Solar Energy segment non-GAAP revenue was higher year-over-year and lower sequentially. Year-over-year non-GAAP revenue increased due to higher solar project and solar materials sales. Sequentially, non-GAAP revenue was lower primarily as a result of lower solar project sales, only partially offset by higher energy sales. Non-GAAP revenue resulted from 54 MW of solar projects sold in the 2014 second quarter, compared to non-GAAP revenue from 76 MW in the 2014 first quarter and 51 MW in the 2013 second quarter. Of the 54 MW of non-GAAP revenue in the 2014 second quarter, 49 MW were direct sales and 5 MW were sale-leaseback transactions.

Solar Energy segment non-GAAP operating loss increased year-over-year and sequentially. Relative to the 2014 first quarter, operating loss increased.

Solar Project Pipeline, Backlog & Construction

The Solar Energy segment ended the 2014 second quarter with a project pipeline of 4.3 GW, up 684 MW compared to the prior quarter and up 1,387 MW from the year ago period. Backlog at June 30, 2014 was 1.1 GW, up 99 MW from the prior quarter. There can be no assurance that all pipeline or backlog projects will convert to revenue, because in the ordinary course of development business some fall-out is typical and certain projects will not be built.

As of June 30, 2014, 475 MW of the pipeline was under construction, compared to 463 MW as of March 31, 2014 and 200 MW as of June 30, 2013. Of the projects under construction, SunEdison expects to retain a majority on the balance sheet.

Outlook

The company provided the following key metrics for the 2014 third quarter and revised metrics for full-year 2014. Assuming no significant worldwide economic issues in these periods, the company expects the following:

For the third quarter 2014:

  • Solar energy systems total non-GAAP sales volume in the range of 70 MW to 80 MW
  • Solar energy systems MW retained on the balance sheet between 200 MW and 230 MW
  • Solar energy systems MW completed between 270 MW and 310 MW
  • Fully developed solar energy systems average project pricing between $2.60/watt and $3.00/watt

For the full year 2014:

  • Solar energy systems total non-GAAP sales volume in the range of 290 MW to 320 MW
  • Solar energy systems MW retained on the balance sheet between 710 MW and 830 MW
  • Solar energy systems MW completed between 1,000 MW and 1,150 MW
  • Fully developed solar energy systems average project pricing between $2.50/watt and $3.00/watt