The Handbook of Security [Sample Pages 47-65 Study of Natl Scty vs Corporate Scty by Craig Stapley]
SolarCity Corporation (SCTY) Earnings Report: Q1 2016 ... · SolarCity Corporation (SCTY) Earnings...
Transcript of SolarCity Corporation (SCTY) Earnings Report: Q1 2016 ... · SolarCity Corporation (SCTY) Earnings...
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.12BPriceasofEventDate:17.0
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SolarCityCorporation(SCTY)EarningsReport:Q12016ConferenceCallTranscriptThefollowingSolarCityCorporationconferencecalltookplaceonMay9,2016,05:00PMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
AaronChew;SolarCity;InvestorRelationsLyndonRive;SolarCity;Co-Founder&CEOTanguySerra;SolarCity;PresidentandCFOPeterRive;SolarCity;Co-Founder&CTO
OtherPart icipants
PatrickJobin;CreditSuisse;AnalystKrishSankar;BoAMerrillLynch;AnalystPhilipShen;ROTHCapitalPartners;AnalystBrianLee;GoldmanSachs;AnalystColinRusch;Oppenheimer&Co.;AnalystJulienDumoulin-Smith;UBS;AnalystBenKallo;RobertW.Baird&Company,Inc.;AnalystVishalShah;DeutscheBank;AnalystGordonJohnson;AxiomCapitalManagement;AnalystMichaelMorosi;AvondalePartners;AnalystSvenEenmaa;StifelNicolaus;AnalystSophieKarp;GuggenheimPartners;AnalystEdwinMok;Needham&Company;AnalystPavelMolchanov;RaymondJames&Associates,Inc.;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
WelcometotheSolarCityfirst-quarter2016earningsconferencecall.
Today'scallisbeingrecorded.
IwouldnowliketoturntheconferenceovertoMr.AaronChew,VicePresidentofInvestorRelations.Pleasegoahead,sir.
AaronChew(InvestorRelations):
Thankyou.GoodafternoontoallthosejoiningustodayforSolarCity'sfirst-quarter2016earningsconferencecall.
LeadingthepresentationtodaywillbeadiscussionfromourChiefExecutiveOfficer,LyndonRive;ourPresidentandChiefFinancialOfficer,TanguySerra;andourChiefTechnologyOfficer,PeterRive,afterwhichpointintimewewillopenupthecalltoquestions.
Asareminder,today'sdiscussionwillcontainforward-lookingstatementsthatinvolveourviewsasof
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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todaybasedoninformationcurrentlyavailabletous.Forward-lookingstatementsshouldnotbeconsideredaguaranteeofthefutureperformanceorresults,andreflectinformationthatmaychangeovertime.
PleaserefertoSolarCity'squarterlyshareholderletterissuedtodayandtheslidesaccompanyingthispresentation,aswellasourperiodicreportsfiledwiththeSecuritiesandExchangeCommissionforadiscussionofforward-lookingstatements,andthefactorsandrisksthatcouldcauseouractualresultstodifferfromourforward-lookingstatements.
Wedonotundertakeanyobligationtopubliclyupdateorreviseanyforward-lookingstatement.
Inaddition,duringthecourseofthiscall,wewilluseanumberofspeciallydefinedtermsrelatingtoourbusinessmetricsandfinancialresults,includingnon-GAAPfinancialmetrics.
WerefertodefinitionsofthesetermsandrequiredreconciliationbetweenallGAAPandnon-GAAPfinancialmetricsincludedintheshareholderletterissuedtodayandtheslidesaccompanyingthispresentation,whichareavailableonourInvestorRelationswebsiteatinvestors.solarcity.com.
Withthatfinallybehindus,IwouldliketointroduceSolarCity'sChiefExecutiveOfficer,Mr.LyndonRive.
LyndonRive (Co-Founder&CEO):
Thanks,Aaron.
Forthequarter,weinstalled214megawatts.Thatisdramaticallyaboveourforecastof180megawattswaswhatweforecastedduringthelastearningcall.Tanguywillgiveanupdateonthebigimprovementthere.
LetmejumpintoQ1bookings.So,Q1bookingscameinalotlowerthanexpected.Wehadabunchofheadwindsthathitusallatthesametime,andIwouldliketowalkthemthrough.So,forNevada,wewereexpectingthatgrandfatheringwouldbeapprovedthebeginningofFebruary.
Atthetime,everybodywasinfavorofgrandfathering.TheGovernor'sofficewasinfavorofit.Thesolarindustry,thelegislators,consumers,andaswellastheutilities,wereinfavorofgrandfathering.Now,thatdidnothappen,andthatactuallyhadaspillovereffectintootherstates.Customerswereconcernedaboutiftheygosolar,wouldtheygetgrandfathering.
Now,thishasactuallybeenaddressed.Alotofstateshavemadeitclearthat[there's28]grandfathering.AndinQ2,wearenotseeingthisconcernmuchatall.
WealsohadabunchofpendingregulatoryitemsinCalifornia,MassachusettsandNewHampshire.TheseareallopenitemsinQ1thatnowhavebeenresolvedandactuallylookreallygoodforthesolarindustry.Wenowhavelong-termvisibilityinthosestates.And,infact,wehaveneverhadthistypeoflong-termclarityforsometime.So,thoughitwasrockyinQ1,wenowhavethatclarity.
WealsoincreasedpricinginJanuary.Andwiththeincreaseinpricing,itpulledinoursalescycle.So,typically,wehaveabouta15to20-daysalescycleforresidential.WithourcustomersknowingthatwearegoingtoincreaseinJanuary,theycameinandmadethedecisionearlier.Whatthatessentiallyallowed--whathappenedtous,then,isthatstartingtheyear,essentiallyflushedourpipelineandnowwehavetobuildanewpipeline.
Wealso,halfwaythroughthequarter,endedourMyPowerproduct.Wenowredesignedit.It'salotbetter,andalotmoresimpleproductforacustomertounderstand.Previously,itwaskindofahybridbetweenapowerpurchaseagreementandaloan.Nowitisafixedmonthlypayment.Customerslikeitalotmore.
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Wejustlaunchedit.Welauncheditlastweek.Andweareexpectingtoseeabigdemandforthat.
Wealsohavedifferentfinancingterms.Previously,itwasonly30-yearfinancing.Nowwehave20-yearand10-yearfinancing.Wearealsoseeingabigincreaseindemandforownership,andwewanttomakesureweaddressthatmarket.Sowearequiteoptimisticaboutourloanproductthatwejustlaunched.
Andthen,the30%taxcredit,thatgotextendedforfiveyears,whichisagreatwinfortheindustry.Buttheeffectofthatiscommercialcustomerswhoareundertimepressuretomakethedecisioninordertogetthesystemsinstalledin2016,theynowhavemoretimetomakethedecision,justgoingthroughthestandardprocurementprocess.So,weareseeingthebookingsincreaseagaininQ2,butwehadalullinQ1.
Becauseofalltheseheadwinds,volumewaslowandthatincreasedourcustomeracquisitioncosts.Thesehaveallbeenaddressed.Sothesearealltemporaryaffectedus.WearestartingtoseecustomeracquisitioncostscomedownquitedramaticallyinQ2.Butitwilltakeusabouttwoquarterstogetbacktonormalizedcustomeracquisitionlevels.
So,becauseoftheeffectofQ1bookings,weactuallynowneedtore-guideontheyear-endguidance.So,thepreviousguidancewas1,250megawatts.
Thenewguidanceisgoingtobe1,000to1,100megawatts.ThisisbecauseofQ1bookings.Andthen,aswellaswearetimingourcommercialinstallationsclosertointerconnectionfromtheutility.Wehaveseennowthatafterweinstallsystemsandtheinterconnectiontimelagmaybethreetosixmonthafterwards,soweareactuallytimingittomatchtheinterconnectiontimeframe.
Forthequarterfor2Qbeforecosting185megawattsinstalled.But,asmentioned,theseheadwinds,asIdiscussedthathitusinQ1,theyarepassednow.Wearelookingforwardtoseeingtheeffectofourconsumerloanproduct.The--thiswillalsoallowustoexpandintonewstates.TherearesomestatesthatdonotallowustoofferaleaseorPPA,andwiththisnewconsumerloanproduct,wewillbeabletoofferaleaseandPPAinthosestates.
Andthenintermsofregulationorpolicy,wenowhavebetterclaritythanwehavehad--(audiogap)rightontime.
ButIwillhanditovertoTanguy.
T anguySerra(PresidentandCFO):
Thanks,Lyndon.
Weinstalled214megawattsinQ1.Inthe214megawatts,thereisa14-megawattutilityscaleprojectthatcameininthelasttwodaysofthequarter,whichwewerereallyexpectingtocomeinthefirstfewdaysofApril.Crewsoutperformedandtheweathercooperated.
Butnevertheless,wecameinnicelyaboveourconservativeprojectionsonourresidentialinstallation,andcommercialcameinwhereweexpected.ThemegawattswedeployedinQ1hadavalueof$3.46perwatt,downslightlyfromthepriorquartersonthebackoflower[ESRIC]pricing,andanincreaseinthemixofcommercialdeployments.ThepieceIamthemostexcitedaboutforthisquarterishowmuchwemonetizethe$728millionoffinancingcomingininQ1.Thiswasamassiveaccomplishmentbyourcapitalmarketsteam,ledbyRadSmall.
At$3.12perwattdeployedinassetfinancing,itisalittlebitabovewhereweexpecttobeonarunratebasis,givenwetookourassetswithnobackleverage,downto76megawattsfrom257megawattsinQ4.Financingforusreallyislikeworkingcapital,andthe76megawattsrepresentsaboutamonthofassets
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thatareintheToBeFinancedbucket.
Furthermore,aboveandbeyondtheabsolutedollaramount,Ilikewherewearestrategicallyonfinancing.Wehavemonetizedeverypieceofthevalueofawatt,withtaxequity,residentialandcommercialassetdebt,aswellas[extra]financing.Wetappedthebankmarketsandthesecuritizationmarkets.
WealsodidacashequitytransactionatthebeginningofQ2,andIwilltalkmoreaboutthatlater.Buttosummarize,wemonetized$3.12perwattdeployed,or$728million.And,asperusual,thereisamemothattiesourauditplanstatementexplainingthisnumberindetailedmethodology.
Ourbillcostscontinuetobebest-in-class,under$2awatt,theteamledbyEricRothenberg,whoisdoingaphenomenaljob.BothourresidentialandcommercialbillcostswereflatinQ1inspiteoflowervolume,whichimpliesourvariablecostscontinuetocomedown,andweareontrackwithourlong-terminstallgoals.
LyndontalkedalittlebitaboutoursalesinQ1andpartofthefixedcostswerebookedthroughyieldingahigherthanwewouldlikecustomeracquisitioncostsof$0.97perwatt.Overheadismarginallyuponanabsolutedollarbasiswithsomeinvestmentsinpolicyandlegal.Butwefeelgoodaboutwhereweareheadingthere.
Lastly,quickhousekeepingnote,wetweakedthemethodologyforcapitalunitcosts.Weaddedinthecancelcostsaspertheindustrystandard,butwetookoutthecostassociatedwithmanagingtheportfolio,whichwearenowreportingseparately.Andthere'safullcostmemoexplainingthedetailsasperusualonourwebsite.
SoasImentioned,we'vebeendoingalotofworkonourfinancereportinginprovidingclaritytoourbusiness.[Regarding]showingourrecurringcashflowsfromthegenerationofourportfolio.Wegenerated$67millionofbillings,paidfor$14millionofmaintenancecosts,andasImentioned,thosecostswerepreviouslytheunitcosts,unitbillcosts,wearetakingthemoutandputtingtheminherenow.
Andwepaid$21million[tax]distributions,about$37(inaudible),andwepaid$14millionofinterestontheassetfinancing,whichleavesinQ1$18millionofrecurringcashflowtoSolarCity.
NotethatinQ1thatthecashflowfromtheportfoliowas$27million.Thatincludedone-off$10millionpaymentfromMyPowercustomerspayingdownprincipalaftertheirtaxcredit.We'vegonebackandcheckedonthishistoricallyandprovidingamemoonthewebsitetyingbacktoourfinancials.
Whenyouputitalltogether,withthe$768millionofcashwereceivedfromfinancing,the[$780million]wespenttobuildtheassets,payfortheoverheadandtheworkingcapital.Ourdevelopmentcompaniesroughlybreakeven.Butwhenyouaddinthe$28millionofcashreceivedfromtheportfolio,oursolarbusiness,oursolardevelopmentbusiness,generated$10millionofcashinQ1,evenafterpayingforalltheR&D(inaudible)ourinvestmentinGridsoftwarethatwehaveatSolarCity.
Cashflowpositiveforthesolarbusiness--forthecoresolarbusiness.Furthermore,weinvested$42millioninourcellandmodulebusiness,whichcontinuedsuccess.AndPetewilltalkmoreaboutthat.Butoverall,Iamhappytohaveproventhatoursolarresidentialandcommercialbusinesscanbecashflowpositiveandgeneratevaluecontractedin[menial]cashflowsaboveandbeyondthecash.
Asyoumighthaveseen,weexecutedcashequitytradeoversomeofourassets.It'sagreattrade.Wehadasuperhighqualityinstitutionalinvestordiligenceourassetsandourprocesses,andwedidafirstofitskindtradefor$227million.Thereisalargeclassofinvestorsthatarelookingforunleveredyield,andthesecurednewpricehasnoreferenceforLIBORandis[non-recoursetoOC.
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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Ifitisaclearflooronthevalueofourresidentialasset,atleast$3.25perwattofcashupfrontandwestillownsomeresidual,andweownthe20to30-yearresidualcustomerrelationship.Iamhappytohaveprovenoutthisalternativesourceoffunding.
Thethingthatmatterstousiskeepingthecustomerrelationship,andweoffergridservicesfromthoseassets.Weliketheideaofleveraginginourrecurringcashflowsandredeployingthatcapitaltodevcotocontinueloweringoncostsandgrowing.Thisquarter,wealsoaredisclosingour[ESHER]book.
Thisiscashflowfromourassetsontopoftherecurringcashflow[retained]value.Wegenerateroughly282,000SRECsinEastCoaststates,whichwecanmonetize.Andassumingonaverage$100permegawatthour,wegenerateanother$30millionperyearofcash,andthenumberisgrowingaswecontinuedeployingassets.
ThechartintheearningsdeckprovidesexplicitlycontractedSRECswithinvestmentgradeofftakersthatwehaveandtheimpliedcashflowsfromthosecontracts.Retainedvaluecontinuestogrowonanunleveredbasis,andgiventhefinanceoftheassetsandreducingthemegawattsunfinancedasdiscussedatthebeginning,thenetretainedvalueincreasedfrom[$1,963,000,000to$1,994,000,000].
Ourbalancesheetcontinuestobehealthy,andwearecontinuouslymovingassetsfromthe--indevelopmentfromourrevolverintoouraggregationfacilitiesandthentoourlong-termoptions,beitsecuritizations,timesdebtorcashequity.Openingnewfinancingsourcesoftakeoutwasanimportantstrategicstepforus.
Itisimportanttounderstandthatallofourdebtpiecesarespecificassetsyieldingeitherrecurringcashlessorwhetheritisaclearfinancingtakeoutorvehiclesthataretiedtothem,andthatareenginesthatcandeployhundredsofmegawattshaslimiteddebt.
Withthat,letmepassitovertoPetetotalkabitmoreaboutthenewproducts.
PeterRive (Co-Founder&CTO):
Hi,everybody.PeterRive,ChiefTechnologyOfficer.Sothepastcoupleofmonths,somegreatprogresshasbeenmadetowardsthefuturevisionforhowrooftopsolarcanbecompensatedandintegratedintoutilityoperations.Specifically,agroupofutilitiesandsolarcompaniesjointlyproposedalong-termsolutionthatsupportsnetmeteringbeinginplaceuntil2020,removesuncertaintyforcustomersongrandfathering,andrecognizesthevaluethatsolarprovidesthedistributionsystem.
Thepost-2020frameworkisbasicallytovaluetheseexportedenergyattheenergypriceplusthevaluetothedistributionsystemplustheenvironmentalbenefits.Thisapproachshouldworkforusandisinlinewithourgoaltoincludestoragewithmostofoursolarsystemsaroundthattimeframe.
Additionally,abigpartofthediscussionswearehavingwithregulatorsandutilitiessurroundadditionalbusinessmodelopportunitiescreatedbycustomer-sitedenergyresources.Andtothatend,weareexcitedaboutsomeproductreleasesthataddressutilityinfrastructureneeds,whichismorethana$50billionayearmarket.
Wenowprovideproductsandservicesforfirmgenerationaswellasthetransmissionanddistributionsystem,nowseeinga3Xgrowthrateinthisarea.Wehaveover100megawatthoursofstorageundercontract,andplantocompleteoneoftheplanet'slargestfirmanddispatchablesolarsystemsinHawaiithisyear.Wearealsoengagedinseveralpilotswithsomeofthelargestinvestor-ownedutilitiestoprovethebenefitsofourcontrolsystemswithinthedistributionsystem.
Gridfunctionsthathavetraditionallybeenperformedthroughequipmentliketransformersandcapacitorbankscannowbeperformedbysolarinverters,providinguswithopportunitiestoextendourincome
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streamsbeyondthesaleofenergy.
Andwiththatupdate,Ithinkthatwearemovingtoquestionsandanswers,Ibelieve?
AaronChew(InvestorRelations):
Operator,wewillopenuptoQ&A,please.
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
PatrickJobin,CreditSuisse.
PatrickJobin (Analyst-CreditSuisse):
Thanksfortakingthequestions.Firstquestionjustaboutthecashequityfinancing,whatisyouroutlookforthatmarketorsourceofcapitalforremainderoftheyear?Andthenthanksforthisdisclosure.Wearekindofbackingintojustoveran8%unleveredIRR.Isthataboutright?AndthenIhaveafewfollow-ups.Thanks.
T anguySerra(PresidentandCFO):
Hi,Patrick.Thanks,it'sTanguy.Solook,wethis--thethingthatiscleartoushavingdonetheworkhereisthatthismarketisreal,exists,andthereismarketparticipantsthattheyarevery,veryactiveinit.Theytypicallyhavehadexposuretotheresidentialandsolarassetsbutinvestedinanumberofdifferentinfrastructureclasses.
SoIthinkthismarket,asIdiscussed,isreasonablybig.Sinceweannouncedthis,we'vehadanumberofinbounds.But,atthisstage,wearenotwillingtomakeanycommitmentsfortheresttheyear.Butit'sa--it'sclearlyanassetclassthathasinterestfromsomeofthelargest,mostsophisticatedinstitutionalinvestorsontheplanet.
Andthenthespecifictermsofthisspecificagreementdon'tallowustodisclosethediscountrate,butwehavedisclosed,Ibelieve,enoughinformationforyoutodoyourwork.Andit's--yournumberisprobablyright.
PatrickJobin (Analyst-CreditSuisse):
Okay,andthenmysecondquestion,Iguessit'satwo-partquestion,relatestothecoststructure.Justwhenwethinkaboutputtingfewervolumesthroughthesystemherein2016,giventhebookingschallengesinQ1,howshouldwethinkaboutcadenceoftotalcoststructurethroughtheendoftheyear,whereyouthinkyoucanendtheyear?
Andthentherelatedquestion,Iguess,relatestomix.HowsizablewouldtheC&Imixbeinthevolumeguidancenow?Andwhat,ifany,volumesareyouincludingwiththeutilities,scale,solarandstorage?Thanks.
T anguySerra(PresidentandCFO):
Sothe--PetementionedthereisaprojectinKauaithathetookscalethatwewouldbebuildingout.Thatoneisclearlyintheguidance.Therestofthemixisroughlythesamemixashistorically,callit80/20,residential/commercial.Wecontinueonthatmix.Doesthatansweryourquestion?
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LyndonRive (Co-Founder&CEO):
Andthenthecostquestion,theequipmentcostswehaveclear--
T anguySerra(PresidentandCFO):
Wevariable-izesignificantlytheinstallcoststructure,sothatnumberisgoingtocontinuetocomedownonalike-for-likebasis.So,residentialassetsaregoingtocontinuegettingbuiltforless.Therearesomeprocurementsbenefitsthataregoingtoripplethrough.Costofpanelsaregoingtoquicklytodeclineaswellascostconverters.Sothosenumbersaregoingtokeepcomingdown.
Andthen,Lyndonhadsomecommentsaroundthecostofacquisition--.
LyndonRive (Co-Founder&CEO):
Yes,thecostofacquisitionwillcomedownquitedramaticallyinQ2.Butitwillprobablytakeabouttwoquartersorsobeforewegettonormalizedacquisitionlevelsthatwehaveseeninthepast.
PeterRive (Co-Founder&CTO):
Andalso,Ithinktheywere--ontheutility-scalequestion,likewearecarvingoutaprettyspecialnichehere,andadifferentiatedtypeofgeneratorwhenyoucombinesolarandbattery.Soit'snotlikeatypicalutilityscalesolareconomics.
LikewithKauaiasanexample,itisabout$0.14akilowatthourPPA,anditisaverydifferenttypeofPPAandthatitiscombinedwithabatteryintheenergyisavailableatnight.ButthesameisalsotruewiththeprojectthatwearefinishinginstallingrightnowinConnecticut.It'sacombinationofapowerpurchaseagreementwithacapacityagreement.
Sothemajorityoftheutilityscalebusinessthatwearepursuingisthiskindofhybridbetweensolareconomicsandbatteryeconomics.Butit'snotlikewearesigningup$0.03,$0.04akilowatthourutilityscaleprojectsoranythinglikethat.
PatrickJobin (Analyst-CreditSuisse):
Thankyou.
Operator :
KrishSankar,BankofAmericaMerrillLynch.
KrishSankar (Analyst-BoAMerrillLynch):
Thanksfortakingmyquestion.Ihadafewofthem.Firstone,Lyndon,ahigh-levelquestion.IfIlookatitoverthenextlastcoupleofyears,ithasbeenalotofmovingparts.Youguyswantedtoretainassetsnow.Thefocusisshiftingalittlebit.Wearewillingtosellmaybeforpricediscounting,whateveritis,youchangefocusfromgrowthtocostreduction.Somybigpicture,firstquestioniswhatexactlyisthebusinessmodelofSolarCity?AndIhadacoupleoffollow-ups.
LyndonRive (Co-Founder&CEO):
SothebusinessmodelofSolarCityistoprovideenergyatalowercostthanyoucangetittodayfromfossilfuel.Andthenlong-term,ourgoalistotransformenergyinfrastructuretoarenewableenergyinfrastructure.Indoingthis,therearemanydifferentproductsthatcustomerswant.Somecustomerspreferapowerpurchaseagreement,somecustomerspreferleases,andwehaveseenagrowingdemandforcustomerswantingtoowntheequipment.Andthatiswherewehavesolarloans.
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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Buttoansweryourquestion--Ithinktherewasanotherquestiononvolumeandcostoptimization.Yes,wehavereducedvolumeandwearefocusingoncostoptimizationforthisyear.
KrishSankar (Analyst-BoAMerrillLynch):
Allright.Didyouguysquantifywhatexactlywouldbethecostexitingcalendar2016?
LyndonRive (Co-Founder&CEO):
No,wehaven'tgivenaforecastfor2016.Wehavegivenaforecastfortheendof2017of[225].
KrishSankar (Analyst-BoAMerrillLynch):
Butthatisstillontarget?
LyndonRive (Co-Founder&CEO):
Yes,westillfeelgoodaboutthat.
KrishSankar (Analyst-BoAMerrillLynch):
Allright,andthenanotherfollow-upis,itlookslikeyouneed60%ofyourinstallisweightedinthesecondhalfoftheyeartomeetthe[32]gigawatttarget.SoIamcuriouswhatgivesyoutheconfidenceyoucanhitthat,andwhatarethekeyfactorsthatwillbethekeydriversforyoutohitthe[32]gigawattsthisyear?
LyndonRive (Co-Founder&CEO):
Yes.Sowefeelveryconfidentaboutourgigawatts.Nowthekeythingthereisbasedonthestatepolicies,the[WC]rightnow,isthatweactuallyhavetremendousclarityinallourprimarystates.So,ifsomethinghappenstooneoftheprimarystates,feelgoodaboutthegigawatts.Thegettingto[1.1],thatalsothenweneedtoseeimprovementinconversionratefromtheloanproduct,andIamoptimisticabouttheloanproduct.ButIfeelveryconfidentaboutthe1gigawattsanddependingonhowtheloanproductgoes,willgetuspotentiallyto1.1gigawattsorover.
KrishSankar (Analyst-BoAMerrillLynch):
Gotit,thankyou.
Operator :
PhilipShen,ROTHCapitalPartners.
PhilipShen (Analyst-ROTHCapitalPartners):
Thankyoufortakingmyquestions.Justasaquickfollow-uponMyPower,canyoutalkabout--canyoujustgiveusabiggeroverviewoftheproduct?Specifically,doyouhaveapartneronthesolarloanproduct?Doyouhaveasourceofcapitalthatyouhavealreadydesignatedandidentifiedforthatproductspecifically?Andthengettingbacktomix,canyouhelpusunderstandontheannualguidancehowmuchmightbeMyPower?
T anguySerra(PresidentandCFO):
Sure.Sothe--sointermsofthepartner,foressentiallytherelaunchofMyPowerweareactuallynotgoingtobecallingitMyPower.Itisjustalittleconfusinginthename.It'sgoingtobeasolarloan.It'sa
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littlemorestraightforward.Butessentially,itisMyPower2.0.
Theproducts,thefixedmonthlypaymenttothecustomer,the--outofthegateswearegoingtobepartneringwithmultiplefinancialpartnerstoprovideit,toactuallyreviewitasacashsale.Wewillbesellingitandthensomebodyelsewillbefinancingit.Sothatisthecurrentplanfortheloanproduct.
Intermsofmix,itishardtoforecast.Historically,ouroutofthegates,MyPowerwasrun20%range.Thenitstartedwindingdowntoaround12%,15%,dependingonthestate.ButIamoptimisticaboutit.Wehaveseenatrendtowardsconsumerswantingtoownit,andifyoucanprovidefinancingcosts,itmakesitveryaffordable.Wethinktheownershipmodelwilltakesomeshareofourbusiness.
PhilipShen (Analyst-ROTHCapitalPartners):
Lyndon,canyoushareanyofthenamesofthefinancialpartnersbychance?
LyndonRive (Co-Founder&CEO):
Notatthisstage.
PhilipShen (Analyst-ROTHCapitalPartners):
Okay,onemoreifImay,andIwilljumpbackinthequeue.Withthecashequitydealinplace,canyoutalktousabouthowyouviewABSversuscashequity,howyoumighttogglebetweenthetwo?Whatmightweseenext?ShouldweexpecttoseeacashequitydealnextoranABSaheadofthat,sincethedebtmarketsareincrementallyimprovingsinceearlythisyear?
Andthenadditionally,canyoutalkusthroughpotentiallytheeventualtaximplicationsofthecashequitydeal?So,giventhefactthatmuchofthedepreciationispassedontotaxequityinvestors,whatarethepotentialtaximplicationsfromthecashequityfinancing?Thanks.
T anguySerra(PresidentandCFO):
Thanks,Philip,it'sTanguy.Sofirstquestiononsecuritizationversuscashequity,thewayourbusinessworksisindevelopedassetsandpipelineisfinancedbytherevolver.Wethentakethatoutwiththetaxequityandtheaggregatefacility.Andthen,wehavegottimeandwhatwereallywanttodoisoptimizearoundthat.Sothere'sanumberofmarketsthatcantakeoutandputpermanentcapitalintheseassets.
SothesecuritizationmarketIhavealwaysliked.Weclearnorthof$3awattinthesecuritizationcontext,andasignificantportionofthebackend.Sowelikethatmarketalot.Again,thekeyhereisclearingourcosts.Onceweclearourcosts,thenitisaliquiditydecisionasopposedtoapenultimatedecision.
Thecashequitymarketis--webelieveinpricebest-in-class,firstofitsclass--kindsecurity.Thatisamarketthatisgoingtocontinuetobeavailable.Moreplayersareenteringthisparticularmarket.And,overtime,wethinkthecostofthatisgoingtobecomingdown.
Andthenthereisthebankdebtmarket.Idon'tthinkyoushoulddiscountthebankdebtmarket.Thebankdebtmarketisattractiveandthere'sanumberofbanksthatarelookingforreallyelongatedpaperat--withsuperhigh-qualityassetsinUSdollars.AndthethingIwouldsayaboveandbeyondanythingelseisthatthequalityofourreporting,thequalityofourdata,thequalityofourprocess,theauditabilityofeverythingfromourpeopleinChinathatarelookingatoursupplier'sfactories,downtoourO&Mbusinessandthewayweacceptassetsorfleetistrulyphenomenal.
Andsoweareabletoaccessbothcapitalthatotherplayersmightnotbe.So,Ifeltaboutallthosedifferentsectors.
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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Idon'twanttopredictwhatwearegoingtodonext.Ithinkthebeautyofhavinganumberofchoicesisthatwearenotoverlyreliantonanygivenmarket.AndIthinkthat'sreallyimportantaswethinkaboutcapitalstructurehere.So,onthetax(technicaldifficulty)--doesthat--sodoesthatmakesense,Phil?Doyouneedanyotherclarificationsthere?
PhilipShen (Analyst-ROTHCapitalPartners):
No,thatmakessense.Andifyoucantalkaboutthetaximpact,especiallyonthepretaxMPV,thatwouldbefantastic,thanks.
T anguySerra(PresidentandCFO):
Sure.Sothe--Idon'twanttospendtootechnicalhere,buttheinvestmentisstructuredasacombinationofdebtandapieceofpreferred.Andso,asaconsequence,itisfinancingandthe--thereisnotaximplicationforusupfront.
PhilipShen (Analyst-ROTHCapitalPartners):
Okay,thanks,TanguyandLyndon.Iwilljumpbackinthequeue.
T anguySerra(PresidentandCFO):
Thanks,Phil.
Operator :
BrianLee,GoldmanSachs.
BrianLee (Analyst-GoldmanSachs):
Thanksfortakingthequestions.Ihadtwoofthem.Maybetheeasyonetostartoff.Ithinkintherecentpast,youguyshadtalkedabout,Ithink,about$2.8billionto$3billionofcapitalintotalneedingtohittheoperationalplanfor2016.Nowwiththenewtargetinplace,canyouupdateusastowhatthatnumberwouldbe?
Andthenasafollow-uptothat,howmuchyouhavealreadysecured,maybeaquickrundownontaxequitytodate,DES,andanyotherformsofcapitalyouwouldcounttowardsthatto2016fundingtarget?AndthenIhadathirdquestion.
T anguySerra(PresidentandCFO):
Sure.Hey,Brian,it'sTanguy.Sotheroundnumbers,right?Aboutagigawattofvolumeandroughlyonaverage[$2.7billion,$2.8billion]coststructure,andabout$2.8billiontotal,sothat'stheroughbreakdownoftheassetsofthecapitalthatweneedforrefinancingpurposes.Overthelastfourmonths,wehaveraised$1.1billionandowearewellontracktobeabletoraisethatcapital.
TheonethingthatwiththecashequityIthinkisinterestingtonoteisthat,asaconsequenceofthecashequity,weactuallypaiddownsomeofouraggregationfacilities,freeingupmorecapacityfromthere.Sothat'sthebeautyofbeinginamodelwhereyouarerecyclingcapital,whichisyou'reabletousecapitalmorethanonce.Andsowiththat,rightnowwehavegot$714millionofavailableprojectfinancingcapacity,whichincludesjustunder$500millionoftaxequity,asyoucanseeonpage9.
BrianLee (Analyst-GoldmanSachs):
Okay,thankyou.That'shelpful.Thesecondquestionwasjustaroundthe--Iguessmaybethephilosophyaroundgrowthhere.Thisisthethirdyearinarowyouhaveloweredthevolumetarget.Idon'tthink
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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therehasbeenoncewheretherewasafinancingissueatplay,atleastperyourguys'commentaryastowhatmighthavedriventheneedtoadjustvolumetargetsoverthepastcoupleofyears.
Sogivenhowimportantthatpartoftheequationistoyouguysfundingthebusiness,wonderingIguessatahighlevelwhatthethoughtprocessisaroundmaybecompletelyslowingdowncustomeraddstothepointwheremaybethecumulativecashfromtheinstalledbasestartstooffsetsomeofthegrowthOpEx,andyoucanself-fundtosomedegree.Andsobasicallytargetingabsolutevolumesnottogroweachyear,whichdoesn'ttranslatewellrightnow.--itappears,basedonthemarket'sreaction.
But,justmaybestartfocusingonnetcustomeradds,eveniflowereachyear,thetargetedbettercashflowandprofitabilityprofile.So,justbecurioustohearyourthoughtsontransitioningtosomethinglikethat?
LyndonRive (Co-Founder&CEO):
Sure.Letmejustaddressthe[refi]costsforthisyear.Sotheoriginalplanwas1,250megawatts.Theadjustmentforthatisnothingatalltodowithanythingrelatingtofinancing.ItispurelyjustbecauseoftheessentiallymultipleheadwindsthathitusinQ1.
Ifitwasn'tforthat,wewouldprobably--theguidancewouldstayasisorprettyclosetowhereitisrightnow.The--everythingjusthappeningallinonequarterwasjusttoomuchtorecoverfromandstillkeepontrackfortherestoftheyear.WehavealreadyseenbigimprovementsinQ2,anditshouldgeteverythingbacktonormalizedlevelsagaininQ3.
Intermsofgrowth,weareveryexcitedaboutalotoftheinnovationthatwearedoinghere.Andalthoughweareseeingabout20%growththisyear,Idon'twanttoforecastfor2017,butoncethebusinessstartsgeneratingcash,thegoalwouldbetogobackintogrowthmodeagain.
Operator :
ColinRusch,Oppenheimer.
ColinRusch (Analyst-Oppenheimer&Co.):
Canyoutalkalittlebitaboutthecosttrajectorytodate,justintermsofyourconstructioncosts?Obviouslynotcomingdownquiteasmuchaswewouldhaveexpected.Canyoutalkalittlebitaboutwhat'sgoingoninternallywiththat?Andhowweshouldseethatmoveforward?AndIknowyouhavetalkedaboutitalittlebit,butjustspecificallywhatareasyouaregoingtogetthecostoutof?
T anguySerra(PresidentandCFO):
ThanksColin,Tanguy.Absolutely.Sojusttobeclear,theQ1costsontheinstallpanelareacombination--
ColinRusch (Analyst-Oppenheimer&Co.):
Yes,yes.Iamjusttalkingabouttheconstructioncosts.Iamfullyawareoftheamortizationoverthenumberofmegawatts.
T anguySerra(PresidentandCFO):
Agreed.So,theQ1costswas$1.98inQ1;(technicaldifficulty)[$1.92]in4Q.So(technicaldifficulty)makesureweareclearonisthatthisisablendofresidentialcostsandcommercialcosts.Ourresidentialcostsarelowerthanourcommercialbuildcosts.Andbothresidentialandcommercialwereflattodownonalike-for-likebasisbetween4QandQ1,butthemixaffectofdeployedassetsin1Qskewedupthecostper
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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wattofresidential--oftheblend,sorry.
Butthethingtonoteisthatbothresidentialandcommercialareseparatelyonadownwardtrajectory.Sothat--nothinghaschangedthere.ThathasbeentrueaslongasI'vebeenhere,Ithinkhistoricallyforever.
PeterRive (Co-Founder&CTO):
Yes,andacoupleofthingsonwhatweareseeingthatwillhelpreducecostsaswehaveseentheISPofmodulepricesdecline.Weareseeingthesamehappeningwithinverters.Andthenthereisacoupleofprettybigbreakthroughsinthemountainharborontheresidentialsideaswellasonthecommercialsidethatwillfurtherdrivedowncostsandgiveusalotofconfidenceforourlong-termcosttargets.
ColinRusch (Analyst-Oppenheimer&Co.):
Okay,great.Andthenasyoulookatthevarietyofthewaysthatyoucanmonetizetheseassets,howmuchlead-timedoyouneedfordecision-makingpurposesfromlookingatwhat'sgoingoninthemarkettodecidingwhichrouteyouaregoingtogo,andtothepointthatyoumonetizeandactuallypricethesethings?Andhowmuchflexibilitydoyouhaveintermsofswitchingfromonestrategytoanotherwithagivenportfolio?
T anguySerra(PresidentandCFO):
Well,so,thekeyhereishavingtaxequityfundsthatarefullydeployedwithalltheassetsbilling.Onceyouhavegota--becausethatcreatesavery,veryneatseriesofassetswithinthecashflowsthatareverydiscreetandeminentlyfinanceable.So,justforthesakeofargument,typicallyyouwouldraisethetaxequityinagivenquarter,deployit,andinstallitinthenext,andthenhaveeverybody--allthecustomersintheunderlyingassetsreachpermissiontooperateintobeingabletobebillinginthefourthquarter.
Sothat'sthetimeline.Sotheassetsgofromtherevolverandthenultimatelytotheaggregationfacility.Andthenatthatpoint,executingwhetheritisonabankdebttransaction,asecuritizationorcashequitytrade,inweeks,not--sortof--callittwomonths,60days,90days,togetatradedonealongthoselines.Dependingonmarketconditions,thesecuritizationmightgofaster.Thiscashequitytradewedid,wediditinthatsortoftimeframe,andthiswasamarketthatdidnotexist,wherewehadtowritethedocsfromscratch.Sothatgivesyouasenseofthespeedatwhichwecanexecutehere.
ColinRusch (Analyst-Oppenheimer&Co.):
Okay,great.Iwilltaketherestoftheoff-line.Thanksalot,guys.
Operator :
JulienDumoulin-Smith,UBS.
JulienDumoulin-Smith (Analyst-UBS):
Sojustfollowingupalittlebitonthatcashflowbreakevencommentaryinbringingthebusinessbackinlinethere,whendoyouthinkyou'llgettheresuchthatyouwillbeginfocusingongrowthagain?Ijustwanttokindofreframethestory.
Andthensecondly,youtalkaboutnormalizingyourcoststructure.Iwouldjustbecurious--youareindeedreiteratingyourcosttargetsfor2017,correct?IjustwanttomakesureIhavethiscorrectthatyouwillgettothatlevelatthatpointintime?
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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LyndonRive (Co-Founder&CEO):
Wewon'tgetto2017costdollarsinthenexttwoquarters,sothatisnottheaddcounts--the--
JulienDumoulin-Smith (Analyst-UBS):
Right,butyouareontargetfor2017,in2017?
LyndonRive (Co-Founder&CEO):
Yes,yes.Westillfeelverygoodaboutourontargetfor[225]attheendof2017.Sowestillfeelgoodaboutthegoal.So,butintermsofyourgrowthquestion,weareworkinghardtowardsbeingcashflowpositiveinQ4.Andatthatpointintime,wearegoingtobelookingat,asyouknow,themarketconditions,thecashgenerationofthebusiness,andthendecideifwewanttogobackintogrowthmode.
JulienDumoulin-Smith (Analyst-UBS):
Andcanyoudefinethecashflowtargetalittlebitmore,justwhatthatmeans?
LyndonRive (Co-Founder&CEO):
Cashiscominginthebusinessismorethanthecashgoingoutofthebusiness.
PeterRive (Co-Founder&CTO):
Thedifferenceincashpositionbetweentwoperiodsbeinghigher.
LyndonRive (Co-Founder&CEO):
Yes,andnotcountinganydilutedequityrate.
T anguySerra(PresidentandCFO):
Julien,justonecomment,justtobeclear,inQ1--soweactuallyachievedthattargetonjustthesolarbusiness.Weactuallycleared$10millionandsomeretainedvalue.Onacashbasis,wecleared$10million.Andtheninvested$42millionintooursouthernmodulebusiness,wherewearebuildingabest-in-classasset.Sothatfeelsprettygood.
JulienDumoulin-Smith (Analyst-UBS):
Gotit.Sojusttobeclear,though,aboutlikehittingthedevcocash,youhititforthisquarteroutsideofthe--obviouslythecellmodule?
PeterRive (Co-Founder&CTO):
That'sright.
T anguySerra(PresidentandCFO):
Andsothegoalhereisthat,toLyn'spoint,tomakethecellularmodulebaronslide12gototheothersideofthechartthatsaysunequivocalthatwearegeneratingcashevenafterhavingpaid(technicaldifficulty).
JulienDumoulin-Smith (Analyst-UBS):
Okay.Fairenough,guys.Thankyou.
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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Operator :
BenKallo,Baird.
BenKallo (Analyst-RobertW.Baird&Company,Inc.):
Hey,Lyndon,Peter,AaronandTanguy,thankyoufortakingmyquestion.Krish'satmotherMerrill,Ithinkhisquestionwasverygood.WhatisSolarCity,ifwetakeastepback?AndIthinkthemarketthinksthattheresidentialbusinessintheUSisnotagoodbusiness.Andsocanyoujustexplainwhyitisagoodreturnoninvestedcapitalrightnowforyouguys?
There'salotofmathbeingdonearoundsomeoftheseassetsalesandpeopleworryaboutcapital.Andjusttalkusthroughwhatyou'rethinking,whatthebusinesslookslikeinfiveyears.Andifthereturnoninvestedcapitalisdifferentthanthemarketthatyouarelosingmoneyonthesedealswithcashequity.Thankyou,that'sit.
LyndonRive (Co-Founder&CEO):
Yes.Letmeaddressthatheadon,becausethisisoneIreallydon'tagreewith.So,let'sjusttakeastepback.Soherearetheeconomics,right?Ona--andwehavebeenextremelytransparentonwhereallthenumberscomefrom,allsidesofourGAAPfinancials,they'reallonthefinancials.Sothereisnodebateaboutthesenumbers.
So,wecanbuildtheseassets--2015webuilttheseassetsforabout$2.70perwatt.Sothatisabout[$1.90]ofconstructioncosts,someCOA,andthensomeoverhead.Butwearebuildingthemfor[$2.70]awatt.
AsLyndonsaid,inQ1,oursalescouldbehigher-than-expected,butoverallourbuildingswereout[$2.70]awatt.Now,inthat[$2.70]awatt,asPetesaid,thecostofpanels,thecostofinverters,isclearlygoingtocontinuecomingdown.Soitisacostperwattthatisdeclining.Thereisclearlythreeyearsofregulatoryrunwayhere,asestablished,asPeterandLyndontalkedabout.Sowhatthatgivesusisthatthetoplineeconomicsarenotgoingtochangetoomuchoverthenextthreeyears.
Whenyoucombineallthatwithanexquisitecashtrade,withaleading(inaudible)investor,weareclearingatleast$3.25awattforaportfoliothatissomewhat--reasonablyrepresentative,butarguablywithalittlebitlessCaliforniathanourcurrentmix,weareclearingatleast$3.25.Sotheworst-casescenarioweareclearing$3.25,less[$2.70],andyouareclearing$0.50awattontheresiasset.
Nowthatisamarginconcept.Thereturncapitalconceptiswhatisdoesittaketogrow?Andthisisakeypoint,whichiswhenwegrow,weaddwarehouses,weaddtrucks,wehadqualifiedinstallers.Butthereisnocapitalcostsassociatedwithgrowingthat.Andasyou'veseen,wehavedisclosedourspecificCapExforoursolarbusiness,oursolardevelopmentbusiness,whichisinthesingle-digitmillionsofdollarsaquarter.
Sotheideathattheresidentialbusinessdoesnotclearsuperattractivereturncapital,isjustwrong.Andhappytospendmoretimeonthat--
BenKallo (Analyst-RobertW.Baird&Company,Inc.):
Areyoutakingshare?
T anguySerra(PresidentandCFO):
I'msorry?
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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BenKallo (Analyst-RobertW.Baird&Company,Inc.):
Areyoutakingshare?(multiplespeakers)Marketshare.Howisthatchanging?Andwhy?
T anguySerra(PresidentandCFO):
So,asapercentageofinstalls,theQ1numbersarenotoutyettothebestofmyknowledge.IsawVividcameoutbeforethiscall,Ihaven'tgone--timetogothroughthenumbers.Butitfeelslikewearedoingprettygoodinthemarket,yes.
PeterRive (Co-Founder&CTO):
IthinklikeinQ4,itwentupfromQ3.IhavenotseentheQ1numbersyet,butitisprobablygoingtobelikeinthekindofmid-30s,Iwouldguess,andsomewhereinthere.Idon'tthinkthatthereisareductioninourshareofinstallationsoranything.
LyndonRive (Co-Founder&CEO):
Yes,anditwaswiththenewloanproductandIthinkitshouldaccelerate.
T anguySerra(PresidentandCFO):
Doesthatansweryourquestion?Itisreallyimportanttomethatweallagreethatthisreturnoncapitalconceptismeasuringthedifferenceinmarginovertheabilitytogrow.Onthatbasis,weareabsolutelyagreatbusiness.
BenKallo (Analyst-RobertW.Baird&Company,Inc.):
Andso,whatisthedifferencebetweenyouandnumbertwo,three,andactuallynumber10?Andhowhasthemarketchangedwithsizeandscale?Becauseifyouguys--ifcapitalisconstrained,thendoesn'teveryoneelsehavethatissueandthenneedstobeabletotakeshare?OramIwrong?
T anguySerra(PresidentandCFO):
So,capitalisnotaconstraint.Let'sreallyaddressthat.Ithasnotbeenaconstraint.Itisnotourcurrentconstraint,andit'snotcapital.Thisishighqualityassetsandpeoplewanttofinancethisasset.
PeterRive (Co-Founder&CTO):
I'vegotmassiverespectforourcompetitors.ButtheonethingIwouldsayisthatourkeycleardifferentiatorsarecoststructure.Ourcoststructureisbetterthaneverybodyelse's,andweareultimatelysellingwiththecommodityelectrics.Weareclearlyinabetterplacethere.
TheotherbigdifferentiatorIthinkisalltheinvestmentthatwe'remakingunderPete'sleadershiponthegridservices,theagreementthathascomeupwithbetweenusandsomeofourpeers,oneoftheEasternstates,inthestateofNewYork,Ithinkit'sablueprintforhowtheindustryisgoingtogofromforward.
So,we'vegotcleartechnologicalleadership.WeownourMountainHarborinvestingaroundthe,aclearavailabilityofcapital,andweareultimatelybuildingwhatisourbestinclasspowerplantsforthelowestcost.Thatfeelslikeprettystrongdifferentiators.
LyndonRive (Co-Founder&CEO):
Yes,andTanguymentionedthis,butourdebtproductitselfonlaunchinghardwareallowsustostillfosterlessdisruptionforthecustomerwith--butatthesametime,itjustlooksbetterthananyothersystemoutthere,so,historically,it'sjustabetterlookingsystemthananyofourcompetitors.
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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BenKallo (Analyst-RobertW.Baird&Company,Inc.):
So,I--Lyndon,Ithinkweshouldfocusonthatmoregoingforwardthantaxequityflipsanddepreciation,accelerateddepreciationoverfiveyears.Iamnottellingyouhowtorunyourbusiness,butWallStreetthinksit'swaytoocomplicatedandweneedtogetbacktobrasstacksofwhatyouguysdo,andthatisjustmytwocentsthere.
LyndonRive (Co-Founder&CEO):
Hey,thatisgreatfeedback.Ithinkwewillmaybehavealittlemorein-depthproductreviewthenexttime.Ithinkthat'sgreatfeedback.Weareinvestingalothereandwehavemassivedifferentiation.
BenKallo (Analyst-RobertW.Baird&Company,Inc.):
Thankyou,guys.
Operator :
VishalShah,DeutscheBank.
VishalShah (Analyst-DeutscheBank):
Thanksfortakingmyquestion.Youmentionedyourcustomeracquisitioncostswillcomebackinthenexttwoquarters.WheredoyouthinkcostswillbeinQ3,Q4timeframe?Andthenisthesecondhalfmixgoingtobemoreskewedtowardscommercial,giventhatyouaresortofpushingsomeoftheinstallationstoclosertothoseinterconnectiontimeframes?Anddoesthatimpactyourprojectvalueoreconomicsinthesecondhalf?
T anguySerra(PresidentandCFO):
Sointermsofcustomeracquisitioncosts,Iexpectittocomeroughly20%-ishdownthisnextquarterandthenthefollowingquarterbacktonormalizedacquisitionlevels.Intermsofcommercialmix,roughlyitisgoingtobeabout20%.SoIdon'texpecttoomuchchangeinthetotalvalueofmegawattsdeploy.
VishalShah (Analyst-DeutscheBank):
Okay,great.AndthencanyoujusttalkaboutwhetheryouareraisingPPAratesinothermarketsoutsideofCalifornia,andhowthatisimpactingjustthecustomerbehavior?Itlooksliketheworldfinancingenvironment,whileitisgood,itisslightly,intermsofcosts,itisworsethanwhatyouwerepreviouslyexpecting.Sodoesthattranslateintohigherratesinindustryoverall?
T anguySerra(PresidentandCFO):
Yes,IwouldsaythebiggestimpactinapricingincreasewastheflushingofthepipelineandacceleratingcustomersfromJanuarytoDecember.So,startingtheyearwithessentiallynopipelinewasthebiggestimpactintermsofthepricingincrease.Weincreasedslightly,soit'sabout[$0.005]to$0.01perkilowatthourdependingonthemarket,soit'sasmallincrease.Butthatdoesmakeadifferenceinadollarsperwattbasis.
Wedon'tseethisasareasonforlosingbusiness,atleastwedon'tseeyet.Andweactuallyseealotofourcompetitorsactuallyneedingtoincreasetheirpricingtoo--infact,wehaveactuallystartedtoincreaseourcommercialpricingaswell.
VishalShah (Analyst-DeutscheBank):
Okay,great,thankyou.
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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Operator :
GordonJohnson,AxiomCapitalManagement.
GordonJohnson (Analyst-AxiomCapitalManagement):
Thanksfortakingmyquestion.SoIguessfirstwithrespecttothecashequitydeal,Iguesswithrespecttothecashequityportion,the$345million,isthatcashthatisavailabletoinvestimmediatelyingrowthanddebtrepayment?
Andtheninadditionandwithrespecttothatdeal,willyouguyscontinuetorecognizerevenueandotherfinancialsontheprojects--ortheprojectcashflowsthatweresoldtoJohnHancock?ThenIhaveafollow-up.
T anguySerra(PresidentandCFO):
Yes,andnotquitesureIamfollowingthenumber.So,thecashequitytradethatweannouncedwas$227millionofcashin.Withthat,werepaidinparttheaggregationfacilitiesandso--of$151million,andtherestwascashthatweclearedfortheCompany.Andsothatiscashsittingonourbalancesheetrightnow.
GordonJohnson (Analyst-AxiomCapitalManagement):
Right,butisthatcash--sorry,isthatcashassociatedwiththetaxequity--isthatcashthatyouhaveavailableinyourcofferstoimmediatelyextendtoapplytogrowthanddebtrepayment?Oristhatcashalreadyaccountedfor?Isaportionofthatcashalreadyaccountedfor?
T anguySerra(PresidentandCFO):
Thecashisfungible,sowhenweexecuteatrade,cashcamein.Werepaidapart--$151millionofaggregationfacilitiesandtherestwascashthatwasabsolutelyavailableonourcashbalanceonadailycashbalance,yes.
GordonJohnson (Analyst-AxiomCapitalManagement):
Okay,andthenareyouguysgoingtorecognizetherevenuesandotherfinancialsassociatedwiththeprojects--theprojectcashflowsyousold?Willyoustillrecognizethoserevenuesinyourincomestatement,eventhoughthecashassociatedwiththoserevenuesisbeingpaidtoJohnHancock?
T anguySerra(PresidentandCFO):
So,justtobeclear,thetradeisthatthereis--JohnHancocktakesabout95%ofthecashflows,butweretainaportionofthem.Andsoyes,absolutely,wewillcontinuerecurringthatthatway.
GordonJohnson (Analyst-AxiomCapitalManagement):
Okay,soyouwillrecognize100%ofrevenues.Andthenwithrespecttoyourguidancetobecashflowpositivethisyear,Ijustwanttobeclearhere.Soyouaresayingyou'regoingtobecashflowpositiveincludingfinancing,sodebtraisesandpotentialequityraisesaswellasmodulemanufacturinginvestment.Soyouarenotseeingyouaregoingtobecashflowpositivefromanoperatingcashflowperspectiveorafreecashflowperspective.Youaresayingyouaregoingtobecashflowpositivefromtheperspectiveofincludingfinancingsyoumaydoaswellasexcludinganymodulemanufacturinginvestment.AmIthinkingaboutthatcorrectly?
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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LyndonRive (Co-Founder&CEO):
Wewillbecashflowpositive,butthatdoesnotinclude--thatincludesallthefinancingfortheassets--itincludesforthequarterforthecostofthemanufacturing.Butiftherewasadilutiveround,itwouldnotincludeanyofthat.Soitisonlyfocusedonallcashgeneratedfromfinancingtheassets.
GordonJohnson (Analyst-AxiomCapitalManagement):
Okay,okay.Andthenlastly,Inoticedlastquarter--ornotlastquarterbutthequarterbefore,youguidedyourQ4costto$245millionto$260million.Anditactuallycameinat$227million,theGAAPOpEx.SoisthehighercostthisquarterapotentialspilloverfromdelayedcostrecognitioninQ4?Andhowshouldwethinkaboutthattransitioningthrough,Iguess,therestoftheyear?Thanksforthequestions,guys.
LyndonRive (Co-Founder&CEO):
Ididn'tfollowthatlastquestion.$240million?What'sthequestion?
GordonJohnson (Analyst-AxiomCapitalManagement):
Yes.SotheGAAPOpExguidanceforQ4,operatingexpenseguidancewas$245millionto$260million.Thenumberactuallycameinat$227million.SowethoughtthatyourcostcouldbeslightlyhigherthisyearastherewassomedelayedcostrecognitionfromQ4toQ1--notthisyear,I'msorry.ThisQ1,thefirstquarterof2016,itlookslikeyourcostwashigher.Iwantedtoknowifthecostisgoingtoremainatthatlevelorweshouldseesomeworkdownofthatgoingforward?
T anguySerra(PresidentandCFO):
Sothe--inQ4,aswetalkedaboutlasttimearound,wearereducingthemarketingspendinQ4.Andso,asaconsequence,thosecostscamedownalittlebitonacashOpExbasis.Inthe--butthosecostsarenotlinkedtoQ1.SoinQ1,therunrateweareatrightnowisgoingtostayroughlywhereitiswithincreasedvolume,asLyndonmentioned.Soourunitcostswillcomedown.
GordonJohnson (Analyst-AxiomCapitalManagement):
Okay.Thanksagain,guys.
T anguySerra(PresidentandCFO):
Thankyou.
Operator :
MichaelMorosi,AvondalePartners.
MichaelMorosi(Analyst-AvondalePartners):
Firstoff,ontheutilityservicessegment,longer-term,howmuchofafactordoyouthinkthiscouldplayintheoverallbusinessintermsofleveragingcostsoveralargerinstalledbase?Andalsofromamorestrategicstandpoint,asthebusinessbecomesmoreownershipagnostic,whetheritisloanproducts,presumablythatmeansthatthebusinessisincreasinglyagnosticwithrespecttowhetherutilitiesultimatelyowntheseassetsaswell.So,howdoesthissegmentkindofpositionSolarCityforthoselonger-termmarketdevelopments?
PeterRive (Co-Founder&CTO):
Yes.So,andIthinkthatifIlookatthenextdecade,Iwouldbesurprisedifweweren'tderiving,callit,
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
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15%to30%ofourrevenuesfromutilities.Ithinkthatyouendupinasituationwhereyouhaveanenergycontractwiththecustomerandyouknowhowotherassetsfinancethemmaychange,anditseemstogetalotofairplay.Butlikethepaymentstouscomeinpartfromutilityandinpartfromthecustomer.
Butthevaluepropositiontothecustomerisstillcheaper,cleanerandprobablymorereliableenergy.Soagain,Ijustseethat,inthelongrun,2020andbeyond,thewaythatthegridisbasicallydesigned,andmaintained,isfundamentallydifferent,andutilitiesdon'tnecessarilyhavetolookonlytocapitalexpensesinordertobeabletomeetthegridneedsbutitcanlooktothesecustomercitedresourcesforalotofthesebenefits.
LyndonRive (Co-Founder&CEO):
Imean,lookingatthattimeframe,tomethereisnodoubtthatallsystemsthatwewillbedeployingatthattimewillhavestoragecombinedwithsmartinverters.Andwhenyouhavethat,youcanprovideallthegoodservicesyouneedtotheutility,theideathatwewillbeinvestingintobigpowerplantsandatthattimehardlygotit.
Andwehaveanassetthatcangenerateenergyatthepacewhereitisneeded,andyouwillbeabletostoreit,andyouwillbeabletoprovideservicestothegrid.Thatisafarbetterwayofbuildingoutthegrid.Andleveragingexistingequipmentthatwewillbedeployinganyway.Sothisisjustoverandabovetheequipment--servicesoverabovetheequipmentwearedeployinganyway.
PeterRive (Co-Founder&CTO):
Intermsofutilityownershipofbehindthemetergeneration,Ijustthinkthatit's--andIthinkthisissharedwitheconomistsandmanyregulatorsthatextendingtheutilityasamonopolypositionshouldbeavoidedasmuchasitcanbe.Ithinkthatpeoplearemorelookingtowardswaystokindofinnovatewithintheutilitysector.
Andso,acoupleofinterestingideasarebeingadvancedintermsofbeingabletogivetheutilitiestheabilitytoearnincomeoffservicestheycanprocurefromaCompanylikeSolarCityratherthannecessarilyonlyearningincomeoffofcapitalexpensesorequipmentthattheyown.
LyndonRive (Co-Founder&CEO):
Yes,ifthatutilityoncetogetintothisbusiness,Iactually--Iamveryencouragedbyit.Iwantutilitiestogetintothisbusiness.Iftheywanttogetdirectlyintothesamebusiness,theyshould,justnotundertheregulateddivisionsPetementioned.ItshouldbeunderadifferentpartoftheCompanywhichdoesn'thavetheprotectionofalltheratepayers.
Theycangothroughthesameprocess,makethesameinvestmentdecisionsthatwehavetomake.ButIthinkinthelongrun,itwouldjustbemoresimplistictopartnerinthatarea.
MichaelMorosi(Analyst-AvondalePartners):
That'sgreat.Andthenwithrespecttotheassetmonetizations,oneofthebiggerquestionmarksaroundtheCompanyandthevaluethattheCompanycreatesishowtovaluetherenewalperiod.Publicequityinvestorshaveapparentlyalwaysveryheavilydiscountedit,oratleastinrecentquarters,theyhave.
TheABSmarketdoesnotattributemuchvaluetoitoranyvalue,yetthecashtheequitydealwithHancockdidn'treally--itwasa20-yearterm.Sowhatcanyoudotoproveoutthatrenewalvalueortomaybeevenchange--innovatearoundcontractstructuresandmaybeevenextendcontractterms,asthereismoreofatrackrecordwiththetechnologyinthefieldandpeoplegetmorecomfortablearoundthelonger-termproductionprofile?
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.12BPriceasofEventDate:17.0
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Isthereanyopportunitytokindofpartiallyproveoutthatrenewalperiodbyactuallymakingitnotarenewalperiod,andinstead,makingitalongercontractedperiod?
T anguySerra(PresidentandCFO):
Well,Ithinkthelongercontractedperiodforthecustomerwouldnotnecessarilybealittle(technicaldifficulty).Idon'tthinkthatwenecessarilywanttotrytoincreasethecontractterm.AndIdon't--Ican'timmediatelythinkofsomewaytoproveoutexactlywhatwillhappen20yearsfromnow.ButIthinkthatIcanjustextrapolateastowhatthevalueoftheenergywillbe.
Andthenalsojustthinkaboutwhatadditionaltechnologycanbedeployedalongsidethat,thatwouldbeparticularlyappealingtothecustomer?So,beingableto,20yearsfromnow,retrofitthesystemwiththetechnologythatcanallowthemtoparticipateinthiskindofgridserviceseconomy,orbeingabletoaddabatterytoaddadditionalreliability,aswellasadditionalincomestreams.
Ithinkwhatgivesmegreatcomfortinrenewalsistheabilitytosupplementtheproductthattheyhavewassomethingthatwillbeevenmoreappealingtothematthepoint,combinedwiththefactthatfundamentally,thevalueoftheenergyisexpectedtobequiteabitlowerthanwhattheyarepayingthefacility.
LyndonRive (Co-Founder&CEO):
Yes.Imean,theassetlifeforthisis35,40years.Thedirectwarrantyis25years.So,thereistremendousvaluepasttherenewalperiod.
PeterRive (Co-Founder&CTO):
Andalso,justthevalueoftherelationshipwiththeircustomer,Ithink,isalittlelesstangible,butitispresent,andnotjustthecustomer,buttherelationshipthatwehavewiththehome,seeingasthecustomermaysellit--willlikelyselltheirhomeduringthatperiod.So,andthatisnotastangible,butIthinkinmyopinion,anyway,isincrediblyvaluable.
MichaelMorosi(Analyst-AvondalePartners):
Allright,thanksalot,guys.
Operator :
SvenEenmaa,Stifel.
SvenEenmaa(Analyst-StifelNicolaus):
Thanksfortakingmyquestions.FirstIwantedtoaskintermsoftheHancocktypeofassetmonetizationtransactions,ifyouthinkofthemegawattsdeployingintheyears--duringtheyear,likehowbigpartofthemixyouwillexpecttofinancethosetypeoftransactionsgoingforward?
T anguySerra(PresidentandCFO):
Appreciatethequestion.Thanks.Sowe--Ithinkitreallywilldependonwherethefinancingmarketsare.Soinavibrantsecuritizationmarket,youmightwanttodomoreinthesecuritizationmarkets.Butthiscreatesanothersignificantopportunity.
Italsodependson--thisisawaytoclearmoreliquidityupfrontthanwewouldonasecuritization.Italsodependsonspecificliquidityacrossthebusinessatthatmomentintime.So,Idon'twanttogiveamixedforecastbasis.Iwouldexpectwewoulddoallofourassetsovertime,goeitherintobankdebt,
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.12BPriceasofEventDate:17.0
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securitization,orcashequity,andanice,healthymixofallthreeoverthecycle,butanygivenperiod,Idon'tknow.
SvenEenmaa(Analyst-StifelNicolaus):
Gotit.SecondquestionIwantedtoask,intermsofyoumentionedthecombinationofthecoststructureontheutilityprojectsyouaredoing,consistingoftraditionalutilityscaleplusstorage.Howshouldwethinkthatisimpactingyourkindofcostcurvehereasyougothroughtherestoftheyear?Imeanyourhigh-dollar-90'sinthecurrentquarter.Asthemixincreases,whatistheimplicationshere?
PeterRive (Co-Founder&CTO):
Ithinkthatinsubsequentquarters,wewillbeprovidingyouabetterframeworktounderstandthecostsandtheprofitassociatedwithsolarplusbatterysystems.SoitisunfortunateatthispointintimeIdon'tthinkwecanbreakitoutorgiveyouagoodindication.ButIthinkthat,generallyspeaking,wewillbeabletogiveyouagoodframeworktounderstandwhatthesolarcostsare,andthenseparately,whatisthecostofstorage.
SvenEenmaa(Analyst-StifelNicolaus):
ThelastquestionIwanttoask,intermsof--andIapologizeifyoumentioneditalready,butifIlookatyourfirst-quarterbookingsandsequentialkindof25%growthcommentaryhere,whatwillbethecatalysthereonbookingstodriveyouguysintothatgigawattlevelfor--or1.1gigawattfortheyeartobeabletomeetthattarget?
LyndonRive (Co-Founder&CEO):
SoIdon'tunderstandthequestion.Yousaywhatcausedusto--?
SvenEenmaa(Analyst-StifelNicolaus):
Whatwouldbethecatalysttoincreasebookingsgoingforward?
LyndonRive (Co-Founder&CEO):
Right.Sothesolarloanwouldbeagoodexampleofthis.
PeterRive (Co-Founder&CTO):
Sotheregulatoryissueshaveallbeenresolved,atleastmostofthemhave.That'sabigitem.Q1hadmanydecisionsthathavebeenmade.Californiamadeitsdecision,Massachusettsmadeitsdecision.NewHampshiremadeitsdecision.Sothatisallnowbeenaddressed.Thesolarloanproduct,thereisagrowingdemandforcustomerswhowanttoownnewequipment,sowethinkthatwillhaveanimpact.Seasonalitykicksin,sonowweareenteringintothesummer--andthenwearealsogoingtobeexpandingintonewstates,sothoseareotherareasthatwillhelpuswiththeadditionalbookings.
SvenEenmaa(Analyst-StifelNicolaus):
Gotit,thanksalot.
Operator :
SophieKarp,Guggenheim.
SophieKarp(Analyst-GuggenheimPartners):
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.12BPriceasofEventDate:17.0
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Thankyoufortakingmyquestion,guys.Ijustwantedtogetyourperspectiveonhowmuchleveragedoyouthinkisappropriatefortheseassets?Andyourfundingmixhasbothquiteabit,ismoredebt-financedinthisquarter,lesstaxequities.So,whatdoyoukindofseeasanormalizedlevelintermsofwhetherornotyouwanttochoosethatthecashflowordebttoEBITDAforthisassetswithinthePowercore?Thankyou.
T anguySerra(PresidentandCFO):
Yes,IthinkitismorepercentageofPV6--totakeithowthesecuritizationmarketslookatit,soyoulookatthepost-taxequitycashflows,youdiscountthatbackat6%,thatgivesyouadollarnumber.Andthenthesecuritizationmarket,we'llsayanywherebetween70%and80%ofthatnumberwouldbeavailableforasecuritizationprinciple.ThentherearesomeDSERrationsaroundthat,butthatiskindofthemetrictolookat.
SophieKarp(Analyst-GuggenheimPartners):
Thankyou.Andthenjustasafollow-uponthemix,IguessIjustwanttomakesureIunderstoodyoucorrectly.Ithinkyousaidthatgoingforwardyouexpecttohave80%residential,20%C&I.ButthisquarterinparticularlysawahigherpercentageoftheC&I.Isthatright?
T anguySerra(PresidentandCFO):
That'sright,yes.
SophieKarp(Analyst-GuggenheimPartners):
Okay.Thankyou.Iwillgobackinthequeue.
Operator :
EdwinMok,Needham&Company.
EdwinMok(Analyst-Needham&Company):
Thanksfortakingmyquestion.SoIjustwanttoquicklyrevisitkindofyourOpExoryourcashOpEx.Ithinkthisquarteryousaidbecauseofthelowbookingvolume,yourOpEx(inaudible)andexpecttocomebackinthesecondquarterasyourbookingacceleratesrate.JusthowdoyouthinkonoverallOpExfortheCompany?
Ithinkpreviouslyyouguystalkedaboutthatnumberlikelytocontinuegrowingonasequentialandyear-over-yearbasis.JustwanttokindofgetasensewheredoyouthinkOpExorcashOpExwouldbefortheCompany,let'ssaybytowardsthesecondhalfoftheyear?And--orarewekindofatthelevelthatyouthinkyou'realreadygoodenoughtorampupyourbookinglevelsandthereforecankeepitatthislevel?Anykindofguidanceonthat?
T anguySerra(PresidentandCFO):
Sowereallythinkaboutthecostonaunitbasis,andsothatiswhywedisclosethecostmemo,whichreallytiesallofourOpExnumberstoaper-unitbasis.SothepartsoftheOpExareincludinginoverheadandthecostofsales.Weexpecttheoverheadpieceonanabsolutedollarbasistoberoughlyflatandweexpectthesalesandmarketingpiecetoreflect,asLyndonsaid,adeclineinaper-unitbasisinQ2andQ3.
EdwinMok(Analyst-Needham&Company):
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.12BPriceasofEventDate:17.0
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Isee.Andbeyondthisyear,right,asyoulooklonger-term,doyouthink--let'ssayyoucontinuetogrowandyouincreaseyoursizeofyourinstallationsperyear,doyouseeaneedtogrowthat?Or--Iwouldn'tthinkthatasyoubuildoutyourregions,youcankindof--basically,startinthoseregionsandstillcan'tgetmoreleverageofyoursalesteam.Doyounotseethatorcanyougiveussomecoloronthat?
LyndonRive (Co-Founder&CEO):
Yes,soyoudefinitelyneedtocontinuetoinvestinsalesandmarketing.Wesawthatwhenwesloweddownourperformancemarketing,soalltheadvertisinginNovember/December,itgenerateslessleads.Soyoudoneedtocontinueinvestingintosalesandmarketing.
Wearelookingatdifferentsaleschannelstocontinuereducingouracquisitioncosts.Whenwelookatdifferentacquisitioncosts,someofthesaleschannelsisactuallyquitelow.Sowewillbescalingthoseoutmoreaggressively.So,butyouwillstillcontinueinvestmentinsalesandmarketing.Idon'tseethatchanging.EveninstateslikeCalifornia,westillonlyhave,callit3%,4%penetration.Soweneedtocontinuetoadvertise.
Operator :
PavelMolchanov,RaymondJames.
PavelMolchanov(Analyst-RaymondJames&Associates,Inc.):
Youmentionedatthebeginningthattheregulatoryclimateisthebestinyears,asyouputit,orinalongtime.Whataretheremainingquestionmarksin--atthestatelevelthatyouhaveyettogetclarityonandthatyouexpecttoberesolvedbytheendoftheyear?
LyndonRive (Co-Founder&CEO):
Sothe--I'dsaythebiggestopenitemrightnowisArizona.Idon'texpectwewillgetclaritytheendoftheyear;probablygetclarityQ1nextyear,maybealittlelaterthanQ1nextyear.ButArizonaIwouldsayisthebiggestunansweredstate.Butfortherestofthestates,claritylooksreallygood.
PeterRive (Co-Founder&CTO):
Ithinkthatliketraditionallywhenpeoplehavetalkedaboutclarity,andthewaywetalkedaboutit,ithasbeenastrongfocusonnetmetering.Butthere'salotofdistributedresourceplansthatarecurrentlybeingevaluatedinCalifornia,NewYorkandotherplaces,whereliketheutilitybusinessmodelandthewaythatutilitiescanbecompensatedischanging.
Sothere'salotofinterestingstuffhappeninginNewYorkandCaliforniathisyearthatwearewatchingveryclosely.InCalifornia,wehavegoodnetmeteringrunway,butthere'salotofstuffgoingonastohowutilitiesinCaliforniacanincludethebenefitsofthesecustomer-sitedresourcesinthedistributionsystem.So,there'salotofstuffhappeningtherethathopefullywillcreatetheenvironmentforustobeabletoseegreaterincomesfromoursolarsystems.
LyndonRive (Co-Founder&CEO):
Yes,andactuallyexpectedtogetclarityforNevadaintheFebruary-ishlegislation.Thelegislatorsdefinitelywanttodotherightthing.17,000peoplearetreatedreallyunfairlyandsonowthelegislatorswanttolookataddressingthat.AndIknowthatthestatewantstoseesolarcomeback.Thecommunitydefinitelywantsthistocomeback,sothat'sanotherareathatIthinkwherewewillseemoreclarityaroundtheFebruary/Marchtimeframe.
PavelMolchanov(Analyst-RaymondJames&Associates,Inc.):
CompanyName:SolarCityCorpCompanyTicker:SCT YSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12016EarningsCallMarketCapasofEventDate:2.12BPriceasofEventDate:17.0
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Andthenjustasmallkindoftechnicalquestion.Youintroducethenewlineitemontherevenuestatement,operatingleaseprepaymentsandupfrontincentives.Whatisthatgoingtocorrelatewith?Inotherwords,isthattiedtoyourcashsalesorthemegawattsinstalled?What'stheconnectionthere?
T anguySerra(PresidentandCFO):
Yes,thanks.Sowhatwe'lltrytodoisreallybreakdowninthefinancialsthe--thereistotalrevenuefromperiodicbillings.Sothattiestotheamountofmegawattsthatwehaveundermanagementandtheirradiance,andthedollarscominginassociatedwiththosePPAs,leasesandlongercontracts.Wethenhaverevenuefromoperatingleaseprepaymentsandoperatingincentives,sothiswouldbecorrelatedtotheone-offdollarscominginfromspecificone-offprograms.Andsothatwillcorrelatetomegawattsinstalledordeployed.Deployedwouldprobablybeabettermetric.
PavelMolchanov(Analyst-RaymondJames&Associates,Inc.):
Okay,appreciateit.
Operator :
Thankyou.Andladiesandgentlemen,thatdoesconcludetoday'sconference.Thankyouagainforyourparticipation.Youmaynowdisconnect.
LyndonRive (Co-Founder&CEO):
Thankyousomuch.Haveagoodday.
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