After installing its lowest quarterly volume of solar capacity in more than three years, residential installer Vivint Solar Inc. is betting on a new "dynamic pricing" approach and direct sales over the power purchase agreements and leases that have defined its business to date.
"Rather than growing megawatts over the past five quarters we have remained essentially flat, but have done so while improving our mix of business that comes from higher economic states and by substantially increasing the percentage of our [cash sales] business," CEO David Bywater told analysts on a March 7 conference call discussing the company's 2017 fourth-quarter and full-year earnings.
Vivint installed 44.6 MW in the fourth quarter of 2017, its lowest total since supplying 37 MW in the second quarter of 2014. Of that, 11.7 MW was direct system sales, its highest total to date. The company also is off to a slow start in 2018, projecting roughly 40 MW of installations in the first quarter.
Despite delivering lower volumes, Vivint increased its fourth-quarter revenues compared to a year ago, largely because of increasing cash sales. System and product sales accounted for $35.6 million in fourth-quarter revenues, making up more than half of its $66.8 million in revenues for the period. Cash sales accounted for just $16.5 million of its $41.8 million in revenues in the fourth quarter of 2016.
Tax reform, tariff impacts
Vivint plans to return to growth by "aggressively rolling out" its dynamic pricing model in place of its previous standard pricing approach for all of its products and services, Bywater said. Previously, Vivint marketed itself as a low-cost provider with fixed-price power purchase agreements, which company executives believe caused it to miss opportunities for higher-priced, higher-profit power purchase agreements in some states, especially California.
Analysts welcomed the shift. “We believe standard pricing has been a distinct disadvantage for [Vivint],” wrote Oppenheimer analysts in a March 8 note to clients.
But new import tariffs President Donald Trump imposed on solar cells and panels could limit its ability to expand, Bywater added. "There is no doubt that tariffs will restrict some ability to grow as fast as customer demands might depict," he said, noting that some markets where home solar has been poised to become economic "may now be more difficult to reach until we're able to bring overall cost down further."
Recent federal tax reform resulted in a one-time gain of $188 million in the 2017 fourth quarter as Vivint revalued deferred taxes based on its lower corporate tax rate. While the new tax law has affected project financing, Vivent has sufficient tax-equity partnerships to enable around 265 MW of installations, CFO Dana Russell said on the call. The company supplied a total of 184 MW in 2017.
Vivint’s share closed up nearly 7% on March 8 on the New York Stock Exchange, touching a daily high of $3.25. The stock has fallen 47% from its high of $6.05 in July 2017.
