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Vivint Solar’s Q2 Operating Loss Deepens as It Invests in New Sales Channels

Vivint Solar’s Q2 Operating Loss Deepens as It Invests in New Sales Channels


The rooftop solar industry is grappling with how to keep customer acqusition costs down, and the number-two player is not immune.

Vivint Solar, the second largest U.S. residential solar installer after Sunrun, grew its Q2 deployments by 19 percent to 56 megawatts, but reported a deeper operating loss.

Vivint said it’s investing in new and expanded sales channels now to reap “significant volume” in the second half of the year. The company is aiming to grow its overall 2019 installations by 15 percent or more.

CEO David Bywater said the company does not “expect the momentum to slow down” on installations, forecasting 62 to 65 megawatts in the third quarter.

The results come on the heels of a credit facility agreement announced Tuesday, which reduces interest on $325 million of Vivint’s debt, expandable to $400 million. The company said the agreement allows it to access debt funding at a lower cost.

Vivint’s stock price fell by 14 percent to around $7.95 in after hours trading Thursday following the earnings announcement.

Among the notable metrics from the Q2 report:

  • Vivint recorded $90.8 million in revenue, up 12 percent year-over-year.
  • But its operating loss more than doubled, to $36.9 million.
  • Non-GAAP net loss per share expanded 40 percent from $0.53 in Q2 2018 to $0.74 in Q2 2019.
  • Net value per watt came in at $0.88. The company said that number would be higher were it not for one-time expenses associated with financing activities in Q2.

Quantifying the company’s performance in quarterly reporting can be complicated, because Vivint relies on lease and power purchase agreement sales for over 80 percent of its business. That means cash is moving out the door to finance installations, but revenue filters back in over the course of a 20-year customer agreement.

Last year, the company secured a “multi-party forward flow transaction,” which allows it to sell systems without laying out a big chunk of change, potentially alleviating pressure on its cash balance. While Wood Mackenzie Power & Renewables analyst Allison Mond wrote in an April research note that the change “positioned [Vivint] to invest in growth,” profitability again slipped through Vivint’s grasp in Q2.

Vivint’s structure is similar to competitors like number one national installer Sunrun, which reported Q2 results on Wednesday. By comparison, Sunrun installed 103 megawatts in Q2 and reported net present value at $1.11 per watt.

On a Thursday earnings call, Vivint noted that the trend of rising customer acquisition costs continues. Vivint has traditionally relied heavily on direct-to-home sales, but the company said customer acquisition expenses will likely continue to increase as it dives deeper into new sales channels to reach more consumers.

In Q1 the company announced retail partnerships with Home Depot, BJ’s Wholesale and Costco. In Q2, Vivint added Sam’s Club to that list of partners. The company is also investing in selling through homebuilders.

Though those channels haven’t reaped significant rewards yet, the company expects more significant sales volumes to arrive in the second half of 2019.

Investing in new sales strategies is the opposite of Tesla’s recent moves. Tesla has slashed its sales channels to drive down customer acquisition costs, an important factor in the company’s solar installations hitting a low in Q2.

Customer acquisition costs are a tenacious problem for residential solar installers, but Bywater said that Vivint believes “other [sales] routes with lower costs are emerging.”

Rather than ditch sales channels, Vivint hopes to make a significant return on its investments.

Sunrun also has partnerships with big box stores like Costco and Home Depot. It’s unclear whether that strategy, or the one Tesla is working, will provide the greater long-term business advantage.

Source : greentechmedia
Anand Gupta Editor - EQ Int'l Media Network


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