Vivint Solar bounces back in Q2 results

It’s been a rough year for Vivint Solar. After many months of delays as SunEdison slowly imploded, Vivint Solar announced the annulment of the merger agreement with the developer in March. The company has since been struggling to recover from the impacts of the failed deal, and as a further complication replaced former CEO Greg Butterfield with David Bywater in May.

Today Vivint released its results for the second quarter of 2016, reporting 61 MW installed, its best result for three quarters but still 8% below the second quarter of 2015, before the SunEdison merger was announced. The company also booked 74 MW of deals, which is roughly flat with last year.

As a third-party solar company which typically owns the assets which it installs, Vivint’s financial results cannot be compared to manufacturers or installers which rely on a cash sales model and do not hold assets.

Vivint more than doubled revenues on a year-over-year basis to $35 million, but reported a $37 million loss from operations. This is progress, as the company’s loss from operations was $72 million a year ago. Overall Vivint Solar reported a loss of $52 million, its best result in some time.

The company is also reporting progress in its cost of deployment. Vivint brought down costs to a record $2.94 per watt during the quarter, from $3.00 per watt a year ago.

For companies like Vivint, another significant metric is retained value from the assets it has deployed. The company reached $1.1 billion in gross retained value during the quarter, and at the end of the quarter was at $628 million in net value, after debt on the projects is accounted for.

Another consideration for companies like Vivint is cash to deploy these systems. The company was down to just under $70 million in cash at the end of the quarter, less than half what it had a year prior. At the end of the quarter Vivint had $36 million in undrawn capacity in its aggregation facility, $125 million in a term debt facility and 32 MW of capacity remaining its tax equity funds.

Financing relief came late last week when Vivint reported a $313 million term loan, which it plans to use to refinance its tax equity funds.

Vivint is undergoing some tweaks to its business model. The company has traditionally relied on leases and power purchase agreements (PPAs), but like other third-party solar companies is increasing the portion of systems that it is selling directly, by providing loans. Vivint rolled out its loan product in Utah last November, and is now offering loans in six states including California and Arizona.

On its second quarter conference call, CEO David Bywater reported that the roll-out of the company’s loan product has been “very successful”, and states that loans are “growing in importance as the cost of solar falls”.

Overall, the company brought in $4.8 million through loans during the quarter, as opposed to $30 million in lease and PPA revenue. These sales are also taking some pressure off the company to raise financing as they bring in revenue much more quickly.

And unlike companies like SolarCity which have shown a willingness to continue to sacrifice short-term profitability for growth, Vivint Solar says that it is being more selective about the systems that it deploys, and is additionally raising prices in some markets to maximize profitability.

Vivint notes that these two changes will likely decrease its level of deployments, and says that it will reduce its 2016 forecast as a result.

Additionally, Vivint says that it is exploring deployment of solar not in isolation, but as part of a larger energy production and management offering to homeowners. CEO Bywater says that the company “will continue to evaluate and pursue strategic partnerships related to storage”, and will additionally work more closely with Vivint Smart Home.

The Vivint Smart Home collaboration includes an integrated sales and marketing agreement between the two companies, as well as joint lead generation between the two companies. Smart Home currently has over one million customers and is growing rapidly, and this fits into Vivint’s overall model, which is based on a combination of door-to-door sales and referrals in defined geographic areas.

Finally, Vivint is still going after SunEdison for damages from the failed merger. While a bankruptcy stay has prevented the company’s suit from going forward in Delaware, Vivint filed a motion in July to release the stay, and says that it is “actively involved” in SunEdison’s bankruptcy.

Vivint declined to give a exact forecast on the capacity it expects to install during Q3, noting that it expects it to be relatively flat with the 61 MW it deployed during Q2.