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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-37511
Sunrun Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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26-2841711 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
225 Bush Street, Suite 1400
San Francisco, California 94104
(Address of principal executive offices and Zip Code)
(415) 580-6900
(Registrant’s telephone number, including area
code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, $0.0001 par value per share |
RUN |
Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definition of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
As of November 3, 2020, the number of shares of the
registrant’s common stock outstanding was 197,530,444.
Table of Contents
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Page |
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Item 1 |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. |
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Item 6. |
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Sunrun Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Par Values)
(Unaudited)
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September 30, 2020 |
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December 31, 2019 |
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Assets |
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Current assets: |
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Cash |
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$ |
276,052 |
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$ |
269,577 |
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Restricted cash |
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105,314 |
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93,504 |
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Accounts receivable (net of allowances for doubtful accounts of
$2,316 and $3,151 as of September 30, 2020 and
December 31, 2019, respectively)
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70,654 |
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77,728 |
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State tax credits receivable |
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— |
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6,466 |
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Inventories |
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177,967 |
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260,571 |
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Prepaid expenses and other current assets |
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15,752 |
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25,984 |
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Total current assets |
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645,739 |
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733,830 |
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Restricted cash |
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148 |
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148 |
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Solar energy systems, net |
|
4,979,322 |
|
|
4,492,615 |
|
|
Property and equipment, net |
|
44,567 |
|
|
56,708 |
|
|
Intangible assets, net |
|
15,725 |
|
|
19,543 |
|
|
Goodwill |
|
95,094 |
|
|
95,094 |
|
|
Other assets |
|
526,239 |
|
|
408,403 |
|
|
Total assets
(1)
|
|
$ |
6,306,834 |
|
|
$ |
5,806,341 |
|
|
Liabilities and total equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
151,804 |
|
|
$ |
223,356 |
|
|
Distributions payable to noncontrolling interests and redeemable
noncontrolling interests
|
|
18,161 |
|
|
16,062 |
|
|
Accrued expenses and other liabilities |
|
196,444 |
|
|
148,497 |
|
|
Deferred revenue, current portion |
|
79,378 |
|
|
77,643 |
|
|
Deferred grants, current portion |
|
8,268 |
|
|
8,093 |
|
|
Finance lease obligations, current portion |
|
7,541 |
|
|
10,064 |
|
|
Non-recourse debt, current portion |
|
122,812 |
|
|
35,348 |
|
|
Pass-through financing obligation, current portion |
|
11,832 |
|
|
11,031 |
|
|
Total current liabilities |
|
596,240 |
|
|
530,094 |
|
|
Deferred revenue, net of current portion |
|
665,583 |
|
|
651,856 |
|
|
Deferred grants, net of current portion |
|
211,668 |
|
|
218,568 |
|
|
Finance lease obligations, net of current portion |
|
7,689 |
|
|
12,895 |
|
|
Recourse debt |
|
224,910 |
|
|
239,485 |
|
|
Non-recourse debt, net of current portion |
|
2,137,154 |
|
|
1,980,107 |
|
|
Pass-through financing obligation, net of current
portion |
|
324,576 |
|
|
327,974 |
|
|
Other liabilities |
|
199,320 |
|
|
141,401 |
|
|
Deferred tax liabilities |
|
11,093 |
|
|
65,964 |
|
|
Total liabilities
(1)
|
|
4,378,233 |
|
|
4,168,344 |
|
|
Commitments and contingencies (Note 15) |
|
|
|
|
|
Redeemable noncontrolling interests |
|
508,061 |
|
|
306,565 |
|
|
Stockholders’ equity: |
|
|
|
|
|
Preferred stock, $0.0001 par value—authorized, 200,000,000 shares
as of September 30, 2020 and December 31, 2019; no shares
issued and outstanding as of September 30, 2020 and
December 31, 2019
|
|
— |
|
|
— |
|
|
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of
September 30, 2020 and December 31, 2019; issued and
outstanding, 127,552 and 118,451 shares as of September 30,
2020 and December 31, 2019, respectively
|
|
13 |
|
|
12 |
|
|
Additional paid-in capital |
|
910,388 |
|
|
766,006 |
|
|
Accumulated other comprehensive loss |
|
(123,020) |
|
|
(52,753) |
|
|
Retained earnings |
|
246,164 |
|
|
251,466 |
|
|
Total stockholders’ equity |
|
1,033,545 |
|
|
964,731 |
|
|
Noncontrolling interests |
|
386,995 |
|
|
366,701 |
|
|
Total equity |
|
1,420,540 |
|
|
1,331,432 |
|
|
Total liabilities, redeemable noncontrolling interests and total
equity |
|
$ |
6,306,834 |
|
|
$ |
5,806,341 |
|
1)The
Company’s consolidated assets as of September 30, 2020 and
December 31, 2019 include $4,136,047 and $3,521,202,
respectively, in assets of variable interest entities (“VIEs”) that
can only be used to settle obligations of the VIEs. These assets
include solar energy systems, net, as of September 30, 2020
and December 31, 2019 of $3,773,324 and $3,259,712,
respectively; cash as of September 30, 2020 and
December 31, 2019 of $155,201 and $133,362, respectively;
restricted cash as of September 30, 2020 and December 31,
2019 of $14,495 and $2,746, respectively; accounts receivable, net
as of September 30, 2020 and December 31, 2019 of $27,471
and $21,956, respectively; inventories as of September 30,
2020 and December 31, 2019 of $51,894 and 15,721,
respectively; prepaid expenses and other current assets as of
September 30, 2020 and December 31, 2019 of $1,583 and
$554, respectively; and other assets as of September 30, 2020
and December 31, 2019 of $112,079 and $87,151, respectively.
The Company’s consolidated liabilities as of September 30,
2020 and December 31, 2019 include $875,866 and $774,564,
respectively, in liabilities of VIEs whose creditors have no
recourse to the Company. These liabilities include accounts payable
as of September 30, 2020 and December 31, 2019 of $25,535
and $11,531, respectively; distributions payable to noncontrolling
interests and redeemable noncontrolling interests as of
September 30, 2020 and December 31, 2019 of $17,776 and
$16,012, respectively; accrued expenses and other current
liabilities as of September 30, 2020 and December 31,
2019 of $15,053 and $10,740, respectively; deferred revenue as of
September 30, 2020 and December 31, 2019 of $514,564 and
$482,138, respectively; deferred grants as of September 30,
2020 and December 31, 2019 of $27,231 and $28,034,
respectively; non-recourse debt as of September 30, 2020 and
December 31, 2019 of $240,531 and $206,476, respectively; and
other liabilities as of September 30, 2020 and
December 31, 2019 of $35,176 and $19,633,
respectively.
The accompanying notes are an integral part of these consolidated
financial statements.
Sunrun Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
Customer agreements and incentives |
|
$ |
114,485 |
|
|
$ |
96,249 |
|
|
$ |
319,704 |
|
|
$ |
288,538 |
|
|
Solar energy systems and product sales |
|
95,275 |
|
|
119,293 |
|
|
282,081 |
|
|
326,103 |
|
|
Total revenue |
|
209,760 |
|
|
215,542 |
|
|
601,785 |
|
|
614,641 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Cost of customer agreements and incentives |
|
77,350 |
|
|
67,359 |
|
|
239,049 |
|
|
207,446 |
|
|
Cost of solar energy systems and product sales
|
|
75,679 |
|
|
92,031 |
|
|
231,023 |
|
|
256,178 |
|
|
Sales and marketing |
|
70,720 |
|
|
77,478 |
|
|
210,691 |
|
|
203,469 |
|
|
Research and development |
|
5,205 |
|
|
6,435 |
|
|
14,222 |
|
|
18,464 |
|
|
General and administrative |
|
41,829 |
|
|
31,059 |
|
|
111,659 |
|
|
93,166 |
|
|
Amortization of intangible assets |
|
1,167 |
|
|
1,524 |
|
|
3,817 |
|
|
3,231 |
|
|
Total operating expenses |
|
271,950 |
|
|
275,886 |
|
|
810,461 |
|
|
781,954 |
|
|
Loss from operations |
|
(62,190) |
|
|
(60,344) |
|
|
(208,676) |
|
|
(167,313) |
|
|
Interest expense, net |
|
51,368 |
|
|
43,911 |
|
|
152,013 |
|
|
127,560 |
|
|
Other (income) expenses, net |
|
(864) |
|
|
3,110 |
|
|
(766) |
|
|
9,254 |
|
|
Loss before income taxes |
|
(112,694) |
|
|
(107,365) |
|
|
(359,923) |
|
|
(304,127) |
|
|
Income tax (benefit) expense |
|
(27,293) |
|
|
5,169 |
|
|
(30,424) |
|
|
(102) |
|
|
Net loss |
|
(85,401) |
|
|
(112,534) |
|
|
(329,499) |
|
|
(304,025) |
|
|
Net loss attributable to noncontrolling interests and redeemable
noncontrolling interests
|
|
(122,848) |
|
|
(141,524) |
|
|
(325,425) |
|
|
(317,860) |
|
|
Net income (loss) attributable to common stockholders |
|
$ |
37,447 |
|
|
$ |
28,990 |
|
|
$ |
(4,074) |
|
|
$ |
13,835 |
|
|
Net income (loss) per share attributable to common
stockholders |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.30 |
|
|
$ |
0.25 |
|
|
$ |
(0.03) |
|
|
$ |
0.12 |
|
|
Diluted |
|
$ |
0.28 |
|
|
$ |
0.23 |
|
|
$ |
(0.03) |
|
|
$ |
0.11 |
|
|
Weighted average shares used to compute net income (loss) per share
attributable to common stockholders |
|
|
|
|
|
|
|
|
|
Basic |
|
125,003 |
|
|
117,652 |
|
|
121,813 |
|
|
115,790 |
|
|
Diluted |
|
134,548 |
|
|
125,151 |
|
|
121,813 |
|
|
123,645 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
Sunrun Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net income (loss) attributable to common stockholders |
|
$ |
37,447 |
|
|
$ |
28,990 |
|
|
$ |
(4,074) |
|
|
$ |
13,835 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
Unrealized loss on derivatives, net of income taxes |
|
(335) |
|
|
(25,178) |
|
|
(75,510) |
|
|
(68,301) |
|
|
Interest expense (income) on derivatives recognized into earnings,
net of income taxes |
|
4,579 |
|
|
212 |
|
|
5,243 |
|
|
(755) |
|
|
Other comprehensive income (loss) |
|
4,244 |
|
|
(24,966) |
|
|
(70,267) |
|
|
(69,056) |
|
|
Comprehensive income (loss) |
|
$ |
41,691 |
|
|
$ |
4,024 |
|
|
$ |
(74,341) |
|
|
$ |
(55,221) |
|
Sunrun Inc.
Consolidated Statements of Redeemable Noncontrolling Interests and
Equity
Three Months Ended September 30, 2020 and 2019
(In Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
|
Redeemable
Noncontrolling
Interests |
|
|
|
|
Common Stock |
|
Additional
Paid-In
Capital |
|
Accumulated
Other
Comprehensive
Loss |
|
Retained
Earnings |
|
Total
Stockholders'
Equity |
|
Noncontrolling
Interests |
|
Total
Equity |
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
|
|
|
|
|
|
Balance at June 30, 2020 |
|
$ |
450,682 |
|
|
|
|
|
|
|
122,307 |
|
|
$ |
12 |
|
|
$ |
806,702 |
|
|
$ |
(127,264) |
|
|
$ |
208,717 |
|
|
$ |
888,167 |
|
|
$ |
353,338 |
|
|
$ |
1,241,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
— |
|
|
|
|
|
|
|
2,791 |
|
|
— |
|
|
20,469 |
|
|
— |
|
|
— |
|
|
20,469 |
|
|
— |
|
|
20,469 |
|
|
Issuance of restricted stock units
|
|
— |
|
|
|
|
|
|
|
379 |
|
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
8,217 |
|
|
— |
|
|
— |
|
|
8,217 |
|
|
— |
|
|
8,217 |
|
|
Contributions from noncontrolling interests and redeemable
noncontrolling interests
|
|
151,906 |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
85,000 |
|
|
85,000 |
|
|
Distributions to noncontrolling interests and redeemable
noncontrolling interests
|
|
(10,082) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,940) |
|
|
(12,940) |
|
|
Net (loss) income |
|
(84,445) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
37,447 |
|
|
37,447 |
|
|
(38,403) |
|
|
(956) |
|
|
Shares issued in connection with a subscription
agreement |
|
— |
|
|
|
|
|
|
|
2,075 |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of taxes |
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
4,244 |
|
|
— |
|
|
4,244 |
|
|
— |
|
|
4,244 |
|
|
Balance at September 30, 2020
|
|
$ |
508,061 |
|
|
|
|
|
|
|
127,552 |
|
|
$ |
13 |
|
|
$ |
910,388 |
|
|
$ |
(123,020) |
|
|
$ |
246,164 |
|
|
$ |
1,033,545 |
|
|
$ |
386,995 |
|
|
$ |
1,420,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
Redeemable
Noncontrolling
Interests |
|
|
|
|
Common Stock |
|
Additional
Paid-In
Capital |
|
Accumulated
Other
Comprehensive
Loss |
|
Retained
Earnings |
|
Total
Stockholders'
Equity |
|
Noncontrolling
Interests |
|
Total
Equity |
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
|
|
|
|
|
|
Balance at June 30, 2019 |
|
$ |
278,539 |
|
|
|
|
|
|
|
117,199 |
|
|
$ |
11 |
|
|
$ |
748,512 |
|
|
$ |
(47,954) |
|
|
$ |
214,976 |
|
|
$ |
915,545 |
|
|
$ |
293,542 |
|
|
$ |
1,209,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
— |
|
|
|
|
|
|
|
507 |
|
|
— |
|
|
2,766 |
|
|
— |
|
|
— |
|
|
2,766 |
|
|
— |
|
|
2,766 |
|
|
Issuance of restricted stock units, net of tax
withholdings
|
|
— |
|
|
|
|
|
|
|
218 |
|
|
1 |
|
|
(2,361) |
|
|
— |
|
|
— |
|
|
(2,360) |
|
|
|
|
(2,360) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
6,854 |
|
|
— |
|
|
— |
|
|
6,854 |
|
|
|
|
6,854 |
|
|
Contributions from noncontrolling interests and redeemable
noncontrolling interests
|
|
196,182 |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
45,002 |
|
|
45,002 |
|
|
Distributions to noncontrolling interests and redeemable
noncontrolling interests
|
|
(3,466) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(14,184) |
|
|
(14,184) |
|
|
Net (loss) income |
|
(134,669) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
28,990 |
|
|
28,990 |
|
|
(6,855) |
|
|
22,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of noncontrolling interest
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,268 |
|
|
1,268 |
|
|
Other comprehensive loss, net of taxes
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
(24,966) |
|
|
— |
|
|
(24,966) |
|
|
— |
|
|
(24,966) |
|
|
Balance at September 30, 2019
|
|
$ |
336,586 |
|
|
|
|
|
|
|
117,924 |
|
|
$ |
12 |
|
|
$ |
755,771 |
|
|
$ |
(72,920) |
|
|
$ |
243,966 |
|
|
$ |
926,829 |
|
|
$ |
318,773 |
|
|
$ |
1,245,602 |
|
Sunrun Inc.
Consolidated Statements of Redeemable Noncontrolling Interests and
Equity
Nine Months Ended September 30, 2020 and 2019
(In Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
Redeemable
Noncontrolling
Interests |
|
|
|
|
Common Stock |
|
Additional
Paid-In
Capital |
|
Accumulated
Other
Comprehensive
Loss |
|
Retained
Earnings |
|
Total
Stockholders'
Equity |
|
Noncontrolling
Interests |
|
Total
Equity |
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$ |
306,565 |
|
|
|
|
|
|
|
118,451 |
|
|
$ |
12 |
|
|
$ |
766,006 |
|
|
$ |
(52,753) |
|
|
$ |
251,466 |
|
|
$ |
964,731 |
|
|
$ |
366,701 |
|
|
$ |
1,331,432 |
|
|
Cumulative effect of adoption of new ASU (No.
2016-13)
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,228) |
|
|
(1,228) |
|
|
— |
|
|
(1,228) |
|
|
Exercise of stock options
|
|
— |
|
|
|
|
|
|
|
4,188 |
|
|
— |
|
|
29,127 |
|
|
— |
|
|
— |
|
|
29,127 |
|
|
— |
|
|
29,127 |
|
|
Issuance of restricted stock units, net of tax
withholdings
|
|
— |
|
|
|
|
|
|
|
2,509 |
|
|
1 |
|
|
(1,026) |
|
|
— |
|
|
— |
|
|
(1,025) |
|
|
— |
|
|
(1,025) |
|
|
Shares issued in connection with the Employee Stock Purchase
Plan
|
|
— |
|
|
|
|
|
|
|
329 |
|
|
— |
|
|
3,737 |
|
|
— |
|
|
— |
|
|
3,737 |
|
|
— |
|
|
3,737 |
|
|
Stock-based compensation
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
37,544 |
|
|
— |
|
|
— |
|
|
37,544 |
|
|
— |
|
|
37,544 |
|
|
Contributions from noncontrolling interests and redeemable
noncontrolling interests
|
|
471,858 |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
139,997 |
|
|
139,997 |
|
|
Distributions to noncontrolling interests and redeemable
noncontrolling interests
|
|
(25,179) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(39,461) |
|
|
(39,461) |
|
|
Net loss
|
|
(245,183) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,074) |
|
|
(4,074) |
|
|
(80,242) |
|
|
(84,316) |
|
|
Shares issued in connection with a subscription
agreement |
|
— |
|
|
|
|
|
|
|
2,075 |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
75,000 |
|
|
Other comprehensive loss, net of taxes
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
(70,267) |
|
|
— |
|
|
(70,267) |
|
|
— |
|
|
(70,267) |
|
|
Balance at September 30, 2020
|
|
$ |
508,061 |
|
|
|
|
|
|
|
127,552 |
|
|
$ |
13 |
|
|
$ |
910,388 |
|
|
$ |
(123,020) |
|
|
$ |
246,164 |
|
|
$ |
1,033,545 |
|
|
$ |
386,995 |
|
|
$ |
1,420,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
Redeemable
Noncontrolling
Interests |
|
|
|
|
Common Stock |
|
Additional
Paid-In
Capital |
|
Accumulated
Other
Comprehensive
Loss |
|
Retained
Earnings |
|
Total
Stockholders'
Equity |
|
Noncontrolling
Interests |
|
Total
Equity |
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
|
|
|
|
|
|
Balance at December 31, 2018
|
|
$ |
126,302 |
|
|
|
|
|
|
|
113,149 |
|
|
$ |
11 |
|
|
$ |
722,429 |
|
|
$ |
(3,124) |
|
|
$ |
229,391 |
|
|
$ |
948,707 |
|
|
$ |
334,075 |
|
|
$ |
1,282,782 |
|
|
Cumulative effect of adoption of new ASU (No.
2018-02)
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
(740) |
|
|
740 |
|
|
— |
|
|
— |
|
|
— |
|
|
Exercise of stock options
|
|
— |
|
|
|
|
|
|
|
3,288 |
|
|
— |
|
|
17,982 |
|
|
— |
|
|
— |
|
|
17,982 |
|
|
— |
|
|
17,982 |
|
|
Issuance of restricted stock units, net of tax
withholdings
|
|
— |
|
|
|
|
|
|
|
901 |
|
|
1 |
|
|
(8,534) |
|
|
— |
|
|
— |
|
|
(8,533) |
|
|
— |
|
|
(8,533) |
|
|
Shares issued in connection with the Employee Stock Purchase
Plan
|
|
— |
|
|
|
|
|
|
|
586 |
|
|
— |
|
|
3,397 |
|
|
— |
|
|
— |
|
|
3,397 |
|
|
— |
|
|
3,397 |
|
|
Stock-based compensation
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
19,420 |
|
|
— |
|
|
— |
|
|
19,420 |
|
|
— |
|
|
19,420 |
|
|
Contributions from noncontrolling interests and redeemable
noncontrolling interests
|
|
397,956 |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
173,539 |
|
|
173,539 |
|
|
Distributions to noncontrolling interests and redeemable
noncontrolling interests
|
|
(10,144) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(43,711) |
|
|
(43,711) |
|
|
Net (loss) income |
|
(177,528) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
13,835 |
|
|
13,835 |
|
|
(140,332) |
|
|
(126,497) |
|
|
Acquisition of noncontrolling interest
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
1,077 |
|
|
— |
|
|
— |
|
|
1,077 |
|
|
(4,798) |
|
|
(3,721) |
|
|
Other comprehensive loss, net of taxes
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
(69,056) |
|
|
— |
|
|
(69,056) |
|
|
— |
|
|
(69,056) |
|
|
Balance at September 30, 2019
|
|
$ |
336,586 |
|
|
|
|
|
|
|
117,924 |
|
|
$ |
12 |
|
|
$ |
755,771 |
|
|
$ |
(72,920) |
|
|
$ |
243,966 |
|
|
$ |
926,829 |
|
|
$ |
318,773 |
|
|
$ |
1,245,602 |
|
Sunrun Inc.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
Operating activities: |
|
|
|
|
|
Net loss |
|
$ |
(329,499) |
|
|
$ |
(304,025) |
|
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
Depreciation and amortization, net of amortization of deferred
grants |
|
156,257 |
|
|
138,620 |
|
|
Deferred income taxes |
|
(30,424) |
|
|
(102) |
|
|
Stock-based compensation expense |
|
37,544 |
|
|
19,420 |
|
|
|
|
|
|
|
Interest on pass-through financing obligations |
|
17,480 |
|
|
18,358 |
|
|
Reduction in pass-through financing obligations |
|
(28,907) |
|
|
(29,408) |
|
|
Other noncash items |
|
31,247 |
|
|
16,500 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
|
2,727 |
|
|
(11,043) |
|
|
Inventories |
|
82,604 |
|
|
(30,310) |
|
|
Prepaid and other assets |
|
(37,958) |
|
|
(67,329) |
|
|
Accounts payable |
|
(57,513) |
|
|
6,744 |
|
|
Accrued expenses and other liabilities |
|
(25,964) |
|
|
14,531 |
|
|
Deferred revenue |
|
15,647 |
|
|
121,936 |
|
|
Net cash used in operating activities |
|
(166,759) |
|
|
(106,108) |
|
|
Investing activities: |
|
|
|
|
|
Payments for the costs of solar energy systems |
|
(619,012) |
|
|
(594,137) |
|
|
Business acquisition |
|
— |
|
|
(2,722) |
|
|
Purchase of equity method investment |
|
(65,356) |
|
|
— |
|
|
Purchases of property and equipment, net |
|
(2,384) |
|
|
(21,184) |
|
|
Net cash used in investing activities |
|
(686,752) |
|
|
(618,043) |
|
|
Financing activities: |
|
|
|
|
|
Proceeds from state tax credits, net of recapture |
|
6,027 |
|
|
911 |
|
|
Proceeds from issuance of recourse debt |
|
126,950 |
|
|
140,000 |
|
|
Repayment of recourse debt |
|
(141,525) |
|
|
(147,965) |
|
|
Proceeds from issuance of non-recourse debt |
|
442,950 |
|
|
682,050 |
|
|
Repayment of non-recourse debt |
|
(208,371) |
|
|
(388,100) |
|
|
Payment of debt fees |
|
(8,353) |
|
|
(9,759) |
|
|
Proceeds from pass-through financing and other
obligations |
|
5,728 |
|
|
7,223 |
|
|
Early repayment of pass-through financing obligation |
|
— |
|
|
(7,597) |
|
|
Payment of finance lease obligations |
|
(7,763) |
|
|
(10,449) |
|
|
Contributions received from noncontrolling interests and redeemable
noncontrolling interests |
|
611,855 |
|
|
571,495 |
|
|
Distributions paid to noncontrolling interests and redeemable
noncontrolling interests |
|
(62,541) |
|
|
(52,893) |
|
|
Acquisition of noncontrolling interest |
|
— |
|
|
(4,600) |
|
|
Net proceeds related to stock-based award activities |
|
31,839 |
|
|
12,848 |
|
|
Proceeds from shares issued in connection with a subscription
agreement |
|
75,000 |
|
|
— |
|
|
Net cash provided by financing activities |
|
871,796 |
|
|
793,164 |
|
|
Net change in cash and restricted cash |
|
18,285 |
|
|
69,013 |
|
|
Cash and restricted cash, beginning of period |
|
363,229 |
|
|
304,399 |
|
|
Cash and restricted cash, end of period |
|
$ |
381,514 |
|
|
$ |
373,412 |
|
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
Cash paid for interest |
|
$ |
85,503 |
|
|
$ |
69,096 |
|
|
Cash paid for income taxes |
|
$ |
— |
|
|
$ |
— |
|
|
Supplemental disclosures of noncash investing and financing
activities |
|
|
|
|
|
Purchases of solar energy systems and property and equipment
included in accounts payable and accrued expenses |
|
$ |
82,301 |
|
|
$ |
58,914 |
|
|
Right-of-use assets obtained in exchange for new finance lease
liabilities |
|
$ |
1,092 |
|
|
$ |
17,390 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
Sunrun Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Organization
Sunrun Inc. (“Sunrun” or the “Company”) was originally formed in
2007 as a California limited liability company and was converted
into a Delaware corporation in 2008. The Company is engaged in the
design, development, installation, sale, ownership and maintenance
of residential solar energy systems (“Projects”) in the United
States.
Sunrun acquires customers directly and through relationships with
various solar and strategic partners (“Partners”). The Projects are
constructed either by Sunrun or by Sunrun’s Partners and are owned
by the Company. Sunrun’s customers enter into an agreement to
utilize the solar energy system (“Customer Agreement”) which
typically has an initial term of 20 or 25 years. Sunrun monitors,
maintains and insures the Projects. The Company also sells solar
energy systems and products, such as panels and racking and solar
leads generated to customers.
The Company has formed various subsidiaries (“Funds”) to finance
the development of Projects. These Funds, structured as limited
liability companies, obtain financing from outside investors and
purchase or lease Projects from Sunrun under master purchase or
master lease agreements. The Company currently utilizes three legal
structures in its investment Funds, which are referred to as:
(i) pass-through financing obligations,
(ii) partnership-flips and (iii) joint venture (“JV”)
inverted leases.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) and applicable rules and regulations of the
Securities and Exchange Commission (the "SEC") regarding interim
financial reporting. Certain information and note disclosures
normally included in the financial statements prepared in
accordance with GAAP have been condensed or omitted pursuant to
such rules and regulations. As such, these unaudited condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements and accompanying notes
included in the Company’s annual report on Form 10-K for the year
ended December 31, 2019.
Beginning in the quarter ended March 31, 2020, a strain of
coronavirus (COVID-19) has spread throughout the world, and at this
point, the extent to which the coronavirus may impact operations of
the Company is uncertain. The extent of the impact of the
coronavirus on the Company's business and operations will depend on
several factors, such as the duration, severity, and geographic
spread of the outbreak. The Company is monitoring the evolving
situation closely and evaluating its potential exposure. The
results of the three and nine months ended September 30, 2020
are not necessarily indicative of the results to be expected for
the fiscal year ending December 31, 2020 or other future
periods, particularly in light of the uncertain impact COVID-19
could have on the Company's business.
The consolidated financial statements reflect the accounts and
operations of the Company and those of its subsidiaries, including
Funds, in which the Company has a controlling financial interest.
The typical condition for a controlling financial interest
ownership is holding a majority of the voting interests of an
entity. However, a controlling financial interest may also exist in
entities, such as variable interest entities (“VIEs”), through
arrangements that do not involve controlling voting interests. In
accordance with the provisions of Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification Topic 810
(“ASC 810”)
Consolidation,
the Company consolidates any VIE of which it is the primary
beneficiary. The primary beneficiary, as defined in ASC 810, is the
party that has (1) the power to direct the activities of a VIE that
most significantly impact the VIE’s economic performance and (2)
the obligation to absorb the losses of the VIE or the right to
receive benefits from the VIE that could potentially be significant
to the VIE. The Company evaluates its relationships with its VIEs
on an ongoing basis to determine whether it continues to be the
primary beneficiary. The consolidated financial statements reflect
the assets and liabilities of VIEs that are consolidated. All
intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates
The preparation of the consolidated financial statements requires
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. The Company regularly makes estimates and
assumptions, including, but not limited to, revenue recognition
constraints that result in variable consideration, the discount
rate used to adjust the promised amount of consideration for the
effects of a significant financing component, the estimates that
affect the collectability of accounts receivable, the valuation of
inventories, the useful lives of solar energy systems, the useful
lives of property and equipment, the valuation and useful lives of
intangible assets, the effective interest rate used to amortize
pass-through financing obligations, the discount rate uses for
operating and financing leases, the fair value of contingent
consideration, the valuation of stock-based compensation, the
determination of valuation allowances associated with deferred tax
assets, the fair value of debt instruments disclosed and the
redemption value of redeemable noncontrolling interests. The
Company bases its estimates on historical experience and on various
other assumptions believed to be reasonable. In light of the
uncertain impact COVID-19 could have on the Company's business, the
Company's estimates may change in the future. Actual results may
differ from such estimates.
Segment Information
The Company has one operating segment with one business activity,
providing solar energy services and products to customers. The
Company’s chief operating decision maker (“CODM”) is its Chief
Executive Officer, who manages operations on a consolidated basis
for purposes of allocating resources. When evaluating performance
and allocating resources, the CODM reviews financial information
presented on a consolidated basis.
Revenue from external customers for each group of similar products
and services is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Customer agreements |
|
$ |
102,213 |
|
|
$ |
89,241 |
|
|
$ |
294,991 |
|
|
$ |
253,046 |
|
|
Incentives |
|
12,272 |
|
|
7,008 |
|
|
24,713 |
|
|
35,492 |
|
|
Customer agreements and incentives |
|
114,485 |
|
|
96,249 |
|
|
319,704 |
|
|
288,538 |
|
|
|
|
|
|
|
|
|
|
|
Solar energy systems |
|
52,238 |
|
|
67,230 |
|
|
168,094 |
|
|
192,235 |
|
|
Products |
|
43,037 |
|
|
52,063 |
|
|
113,987 |
|
|
133,868 |
|
|
Solar energy systems and product sales |
|
95,275 |
|
|
119,293 |
|
|
282,081 |
|
|
326,103 |
|
|
Total revenue |
|
$ |
209,760 |
|
|
$ |
215,542 |
|
|
$ |
601,785 |
|
|
$ |
614,641 |
|
Revenue from Customer Agreements includes payments by customers for
the use of the system as well as utility and other rebates assigned
by the customer to the Company in the Customer Agreement. Revenue
from incentives includes revenue from the sale of commercial
investment tax credits ("Commercial ITCs") and solar renewable
energy credits (“SRECs”).
Cash and Restricted Cash
Restricted cash represents amounts related to obligations under
certain financing transactions and future replacement of solar
energy system components.
The following table provides a reconciliation of cash and
restricted cash reported within the consolidated balance sheets
that sum to the total of the same such amounts shown in the
consolidated statement of cash flows. Cash and restricted cash
consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2020 |
|
2019 |
|
Beginning of period: |
|
|
|
|
|
Cash |
|
$ |
269,577 |
|
|
$ |
226,625 |
|
|
Restricted cash, current and
long-term |
|
93,652 |
|
|
77,774 |
|
|
Total |
|
$ |
363,229 |
|
|
$ |
304,399 |
|
|
|
|
|
|
|
|
End of period: |
|
|
|
|
|
Cash |
|
$ |
276,052 |
|
|
$ |
324,698 |
|
|
Restricted cash, current and
long-term |
|
105,462 |
|
|
48,714 |
|
|
Total |
|
$ |
381,514 |
|
|
$ |
373,412 |
|
Accounts Receivable
Accounts receivable consist of amounts due from customers, as well
as state and utility rebates due from government agencies and
utility companies. Under Customer Agreements, the customers
typically assign incentive rebates to the Company.
The opening balance of Accounts receivable, net was $66.4 million
as of December 31, 2018. Accounts receivable, net, consists of
the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
Customer receivables |
|
$ |
67,849 |
|
|
$ |
79,899 |
|
|
Other receivables |
|
2,276 |
|
|
23 |
|
|
Rebates receivable |
|
2,845 |
|
|
957 |
|
|
Allowance for doubtful accounts |
|
(2,316) |
|
|
(3,151) |
|
|
Total |
|
$ |
70,654 |
|
|
$ |
77,728 |
|
Deferred Revenue
When the Company receives consideration, or when such consideration
is unconditionally due, from a customer prior to delivering goods
or services to the customer under the terms of a Customer
Agreement, the Company records deferred revenue. Such deferred
revenue consists of amounts for which the criteria for revenue
recognition have not yet been met and includes amounts that are
collected or assigned from customers, including upfront deposits
and prepayments, and rebates. Deferred revenue relating to
financing components represents the cumulative excess of interest
expense recorded on financing component elements over the related
revenue recognized to date and will eventually net to zero by the
end of the initial term. Amounts received related to the sales of
SRECs which have not yet been delivered to the counterparty are
recorded as deferred revenue.
The opening balance of deferred revenue was $591.6 million as of
December 31, 2018. Deferred revenue consists of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
Under Customer Agreements: |
|
|
|
|
|
Payments received, net |
|
$ |
562,996 |
|
|
$ |
558,630 |
|
|
Financing component balance |
|
50,124 |
|
|
44,874 |
|
|
|
613,120 |
|
|
603,504 |
|
|
|
|
|
|
|
|
Under SREC contracts: |
|
|
|
|
|
Payments received, net |
|
126,806 |
|
|
122,680 |
|
|
Financing component balance |
|
5,035 |
|
|
3,315 |
|
|
|
|
131,841 |
|
|
125,995 |
|
|
|
|
|
|
|
Total |
|
$ |
744,961 |
|
|
$ |
729,499 |
|
In the three months ended September 30, 2020 and 2019, the
Company recognized revenue of $22.5 million and $15.1 million,
respectively, and in the nine months ended September 30, 2020 and
2019, the Company recognized revenue of $60.2 million and $44.6
million, respectively, from amounts included in deferred revenue at
the beginning of the respective periods. Revenue allocated to
remaining performance obligations represents contracted revenue
that has not yet been recognized and includes deferred revenue as
well as amounts that will be invoiced and recognized as revenue in
future periods. Contracted but not yet recognized revenue was
approximately $7.4 million as of September 30, 2020, of which
the Company expects to recognize approximately 6% over the next 12
months. The annual recognition is not expected to vary
significantly over the next 10 years as the vast majority of
existing Customer Agreements have at least 10 years remaining,
given that the average age of the Company's fleet of residential
solar energy systems under Customer Agreements is less than four
years due to the Company being formed in 2007 and having
experienced significant growth in the last few years. The annual
recognition on these existing contracts will gradually decline over
the midpoint of the Customer Agreements over the following 10 years
as the typical 20- or 25-year initial term expires on individual
Customer Agreements.
Fair Value of Financial Instruments
The Company defines fair value as the exchange price that would be
received for an asset or an exit price that would be paid to
transfer a liability in the principal or most advantageous market
for the asset or liability in an orderly transaction between market
participants on the measurement date. The Company uses valuation
approaches to measure fair value that maximize the use of
observable inputs and minimize the use of unobservable inputs. The
FASB establishes a three-tier fair value hierarchy for disclosure
of fair value measurements as follows:
•Level
1—Inputs are unadjusted, quoted prices in active markets for
identical assets or liabilities at the measurement
date;
•Level
2—Inputs are observable, unadjusted quoted prices in active markets
for similar assets or liabilities, unadjusted quoted prices for
identical or similar assets or liabilities in markets that are not
active, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the
related assets or liabilities; and
•Level
3—Inputs that are unobservable, significant to the measurement of
the fair value of the assets or liabilities and are supported by
little or no market data.
The Company's financial instruments include cash, receivables,
accounts payable, accrued expenses, distributions payable to
noncontrolling interests, derivatives, contingent consideration,
and recourse and non-recourse debt.
Revenue Recognition
The Company recognizes revenue when control of goods or services is
transferred to its customers, in an amount that reflects the
consideration it expected to be entitled to in exchange for those
goods or services.
Customer agreements and incentives
Customer agreements and incentives revenue is primarily comprised
of revenue from Customer Agreements in which the Company provides
continuous access to a functioning solar system and revenue from
the sales of SRECs generated by the Company’s solar energy systems
to third parties.
The Company begins to recognize revenue on Customer Agreements when
permission to operate ("PTO") is given by the local utility company
or on the date daily operation commences if utility approval is not
required. Revenue recognition does not necessarily follow the
receipt of cash. The Company recognizes revenue evenly over the
time that it satisfies its performance obligations over the initial
term of the Customer Agreements. Customer Agreements typically have
an initial term of 20 or 25 years. After the initial contract term,
the Company's Customer Agreements typically automatically renew on
an annual basis and the rate is initially set at up to a 10%
discount to then-prevailing power prices.
SREC revenue arises from the sale of environmental credits
generated by solar energy systems and is generally recognized upon
delivery of the SRECs to the counterparty. For pass-through
financing obligation Funds, the value attributable to the
monetization of Commercial ITCs is recognized in the period a solar
system is granted PTO - see
Note 10,
Pass-through Financing Obligations.
In determining the transaction price, the Company adjusts the
promised amount of consideration for the effects of the time value
of money when the timing of payments provides it with a significant
benefit of financing the transfer of goods or services to the
customer. In those circumstances, the contract contains a
significant financing component. When adjusting the promised amount
of consideration for a significant financing component, the Company
uses the discount rate that would be reflected in a separate
financing transaction between the entity and its customer at
contract inception and recognizes the revenue amount on a
straight-line basis over the term of the Customer Agreement, and
interest expense using the effective interest rate
method.
Consideration from customers is considered variable due to the
performance guarantee under Customer Agreements and liquidating
damage provisions under SREC contracts in the event minimum
deliveries are not achieved. Performance guarantees provide a
credit to the customer if the system's cumulative production, as
measured on various PTO anniversary dates, is below the Company's
guarantee of a specified minimum. Revenue is recognized to the
extent it is probable that a significant reversal of such revenue
will not occur.
The Company capitalizes incremental costs incurred to obtain a
contract in Other Assets in the consolidated balance sheets. These
amounts are amortized on a straight-line basis over the term of the
Customer Agreements, and are included in Sales and marketing in the
consolidated statements of operations.
Solar energy systems and product sales
For solar energy systems sold to customers, the Company recognizes
revenue when the solar energy system passes inspection by the
authority having jurisdiction. The Company’s installation projects
are typically completed in less than 12 months.
Product sales consist of solar panels, racking systems, inverters,
other solar energy products sold to resellers and customer leads.
Product sales revenue is recognized at the time when control is
transferred, upon shipment. Customer lead revenue, included in
product sales, is recognized at the time the lead is
delivered.
Taxes assessed by government authorities that are directly imposed
on revenue producing transactions are excluded from solar energy
systems and product sales.
Cost of Revenue
Customer agreements and incentives
Cost of revenue for customer agreements and incentives is primarily
comprised of (1) the depreciation of the cost of the solar
energy systems, as reduced by amortization of deferred grants,
(2) solar energy system operations, monitoring and maintenance
costs including associated personnel costs, and (3) allocated
corporate overhead costs.
Solar energy systems and product sales
Cost of revenue for solar energy systems and non-lead generation
product sales consist of direct and indirect material and labor
costs for solar energy systems installations and product sales.
Also included are engineering and design costs, estimated warranty
costs, freight costs, allocated corporate overhead costs, vehicle
depreciation costs and personnel costs associated with supply
chain, logistics, operations management, safety and quality
control. Cost of revenue for lead generations consists of costs
related to direct-response advertising activities associated with
generating customer leads.
Recently Issued and Adopted Accounting Standards
Accounting standards adopted January 1, 2019:
In February 2018, the FASB issued Accounting Standards Update
("ASU") No. 2018-02,
Income Statement—Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income,
which allows companies to reclassify stranded tax effects resulting
from the Tax Cuts and Jobs Act from accumulated other comprehensive
income to retained earnings. The Company adopted ASU No. 2018-02
effective January 1, 2019, which resulted in an adjustment of $0.7
million for the reclassification, as reflected in its consolidated
statement of redeemable noncontrolling interests and equity. The
Company uses the aggregate portfolio approach when reclassifying
stranded tax effects from accumulated other comprehensive
income.
Accounting standards adopted January 1, 2020:
In June 2016, the FASB issued ASU No. 2016-13,
Measurement of Credit Losses on Financial
Instruments,
which replaces the current incurred loss impairment methodology
with a current expected credit losses model. The amendment applies
to entities that hold financial assets and net investment in leases
that are not accounted for at fair value through net income as well
as loans, debt securities, trade receivables, net investments in
leases, off-balance sheet credit exposures, reinsurance receivables
and any other financial assets not excluded from the scope that
have the contractual right to receive cash. The Company adopted ASU
No. 2016-13 effective January 1, 2020, using a modified
retrospective transition method, which resulted in a
cumulative-effect adjustment of $1.2 million for the establishment
of a credit loss allowance for unbilled receivables related to
Customer Agreements, as reflected in its consolidated statement of
redeemable noncontrolling interests and stockholders'
equity.
In August 2018, the FASB issued ASU No. 2018-13, Fair
Value Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value
Measurement,
which modifies the disclosure requirements on fair value
measurements as part of its disclosure framework project. Under
this amendment, entities will no longer be required to disclose the
amount of and reasons for transfers between Level 1 and Level 2 of
the fair value hierarchy. However, for Level 3 fair value
measurements, disclosures around the range and weighted average
used to develop significant unobservable inputs will be required.
The Company adopted ASU No. 2018-13 effective January 1, 2020, and
there was no impact to its consolidated financial
statements.
In August 2018, the FASB issued ASU No. 2018-15,
Intangibles—Goodwill and Other—Internal-Use Software (Subtopic
350-40): Customer’s Accounting for Implementation Costs Incurred in
a Cloud Computing Arrangement That Is a Service
Contract,
which requires a customer in a cloud computing arrangement that is
a service contract to follow the internal-use software guidance in
Topic 350,
Intangibles—Goodwill and Other,
to determine which implementation costs to capitalize as assets or
expense as incurred. This ASU is effective for annual reporting
periods, and interim periods within those years, beginning
after December 15, 2019, and can be applied either
prospectively to implementation costs incurred after the date of
adoption or retrospectively to all arrangements. The Company
prospectively adopted ASU No. 2018-15 effective January 1, 2020,
and there was no adoption date impact to its consolidated financial
statements.
In October 2018, the FASB issued ASU No. 2018-17,
Consolidation (Topic 810),
Targeted Improvements to Related Party Guidance for Variable
Interest Entities, which aligns the evaluation of decision-making
fees under the variable interest entity guidance. Under this new
guidance, in order to determine whether decision-making fees
represent a variable interest, an entity considers indirect
interests held through related parties under common control on a
proportionate basis. This ASU is effective for annual reporting
periods, and interim periods within those years, beginning
after December 15, 2019, and must be applied retrospectively
with a cumulative-effect adjustment to retained earnings at the
beginning of the earliest period presented. The Company adopted ASU
No. 2018-17 effective January 1, 2020, and there was no impact to
its consolidated financial statements.
Accounting standards to be adopted:
In November 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740),
which simplifies the accounting for income taxes, primarily by
eliminating certain exceptions to the guidance in ASC 740. This ASU
is effective for fiscal periods beginning after December 15, 2020.
The Company is currently evaluating this guidance and the impact it
may have on the Company’s consolidated financial
statements.
In March 2020, the FASB issued ASU No. 2020-04,
Reference Rate Reform (Topic 848),
Facilitation of the Effects of Reference Rate Reform on Financial
Reporting,
which provides optional expedients and exceptions for applying GAAP
to contracts, hedging relationships, and other transactions
affected by reference rate reform if certain criteria are met. The
amendments apply only to contracts, hedging relationships, and
other transactions that reference LIBOR or other reference rates
that are expected to be discontinued because of reference rate
reform. This ASU is available for adoption as of the beginning of
the interim period that includes March 12, 2020 through December
31, 2022, as contract modifications or hedging relationships
entered into or evaluated after December 31, 2022 are excluded
unless an entity has elected certain optional expedients for and
that are retained through the end of the hedging relationship. For
the Company’s cash flow hedges in which the designated hedged risk
is LIBOR or another rate that is expected to be discontinued, the
Company has adopted the portion of the guidance that allows it to
assert that it remains probable that the hedged forecasted
transaction will occur. The Company is currently evaluating the
remainder of this guidance and the impact it may have on the
Company's consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06,
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic
815-40),
simplifies the accounting for convertible instruments and the
application of the derivatives scope exception for contracts in an
entity’s own equity. This ASU is effective for fiscal periods
beginning after December 15, 2021. The Company is currently
evaluating this guidance and the impact it may have on the
Company’s consolidated financial statements.
Note 3. Fair Value Measurement
At September 30, 2020 and December 31, 2019, the carrying
value of receivables, accounts payable, accrued expenses and
distributions payable to noncontrolling interests approximates fair
value due to their short-term nature and falls under the Level 2
hierarchy. The carrying values and fair values of debt instruments
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
|
Carrying Value |
|
Fair Value |
|
Carrying Value |
|
Fair Value |
|
Bank line of credit |
|
$ |
224,910 |
|
|
$ |
224,910 |
|
|
$ |
239,485 |
|
|
$ |
239,485 |
|
|
Senior debt |
|
812,368 |
|
|
813,561 |
|
|
625,519 |
|
|
626,023 |
|
|
Subordinated debt |
|
594,852 |
|
|
621,211 |
|
|
513,938 |
|
|
524,581 |
|
|
Securitization debt |
|
852,746 |
|
|
976,188 |
|
|
875,998 |
|
|
931,320 |
|
|
Total |
|
$ |
2,484,876 |
|
|
$ |
2,635,870 |
|
|
$ |
2,254,940 |
|
|
$ |
2,321,409 |
|
At September 30, 2020 and December 31, 2019, the fair
value of the Company’s lines of credit, and certain senior,
subordinated and SREC loans approximate their carrying values
because their interest rates are variable rates that approximate
rates currently available to the Company. At September 30,
2020 and December 31, 2019, the fair value of the Company’s
other debt instruments are based on rates currently offered for
debt with similar maturities and terms. The Company’s fair value of
the debt instruments fell under the Level 2 hierarchy. These
valuation approaches involve some level of management estimation
and judgment, the degree of which is dependent on the price
transparency for the instruments or market.
At September 30, 2020 and December 31, 2019, financial
instruments measured at fair value on a recurring basis, based upon
the fair value hierarchy, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
— |
|
|
$ |
160 |
|
|
$ |
— |
|
|
$ |
160 |
|
|
Total |
|
$ |
— |
|
|
$ |
160 |
|
|
$ |
— |
|
|
$ |
160 |
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
— |
|
|
$ |
142,874 |
|
|
$ |
— |
|
|
$ |
142,874 |
|
|
Total |
|
$ |
— |
|
|
$ |
142,874 |
|
|
$ |
— |
|
|
$ |
142,874 |
|
|
Contingent consideration: |
|
|
|
|
|
|
|
|
|
Contingent consideration |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,088 |
|
|
$ |
6,088 |
|
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,088 |
|
|
$ |
6,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
— |
|
|
$ |
683 |
|
|
$ |
— |
|
|
$ |
683 |
|
|
Total |
|
$ |
— |
|
|
$ |
683 |
|
|
$ |
— |
|
|
$ |
683 |
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
— |
|
|
$ |
64,361 |
|
|
$ |
— |
|
|
$ |
64,361 |
|
|
Total |
|
$ |
— |
|
|
$ |
64,361 |
|
|
$ |
— |
|
|
$ |
64,361 |
|
|
Contingent consideration: |
|
|
|
|
|
|
|
|
|
Contingent consideration: |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
11,809 |
|
|
$ |
11,809 |
|
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
11,809 |
|
|
$ |
11,809 |
|
The above balances are recorded in other liabilities in the
consolidated balance sheets, except for $11.9 million as of
September 30, 2020, which is recorded in accrued expenses and
other liabilities.
The Company determines the fair value of its interest rate swaps
using a discounted cash flow model that incorporates an assessment
of the risk of non-performance by the interest rate swap
counterparty and an evaluation of the Company’s credit risk in
valuing derivative instruments. The valuation model uses various
inputs including contractual terms, interest rate curves, credit
spreads and measures of volatility.
The Company recorded contingent
consideration in connection with a business combination that
occurred in July 2019, which is dependent on the achievement of
specified deployment milestones associated with the number of solar
energy systems installed through 2022. The Company determined the
fair value of the contingent consideration using a
probability-weighted expected return methodology that considers the
timing and probabilities of achieving these milestones and uses
discount rates that reflect the appropriate cost of capital.
Contingent consideration was valued with Level 3
inputs. The Company reassesses the valuation assumptions each
reporting period, with any changes in the fair value accounted for
in the consolidated statements of operations.
The change in the activity of Level 3 contingent consideration
balance is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$ |
11,809 |
|
|
Change in fair value recognized in earnings within sales and
marketing expense |
|
(5,041) |
|
|
Payable for solar systems that have met deployment
milestones |
|
(680) |
|
|
Balance at September 30, 2020
|
|
$ |
6,088 |
|
Note 4. Inventories
Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
Raw materials |
|
$ |
164,346 |
|
|
$ |
239,449 |
|
|
Work-in-process |
|
13,621 |
|
|
21,122 |
|
|
Total |
|
$ |
177,967 |
|
|
$ |
260,571 |
|
The Internal Revenue Service (“IRS”) provided taxpayers a safe
harbor opportunity to retain access to the pre-2020 30% tax credit
amount through specific rules released in Notice 2018-59. The
Company has sought to avail itself of the safe harbor in order to
retain the 30% Commercial ITC that was available in 2019 with
respect to approximately 500 MW of projects by incurring certain
costs and taking title to equipment in 2019. As of
September 30, 2020, there was approximately $64.6 million
related to the safe harbor program within raw
materials.
Note 5. Solar Energy Systems, net
Solar energy systems, net consists of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
Solar energy system equipment costs |
|
$ |
5,027,861 |
|
|
$ |
4,510,677 |
|
|
Inverters |
|
531,144 |
|
|
471,471 |
|
|
Total solar energy systems |
|
5,559,005 |
|
|
4,982,148 |
|
|
Accumulated depreciation and amortization |
|
(833,928) |
|
|
(692,218) |
|
|
Construction-in-progress |
|
254,245 |
|
|
202,685 |
|
|
Total solar energy systems, net |
|
$ |
4,979,322 |
|
|
$ |
4,492,615 |
|
All solar energy systems, including construction-in-progress, have
been leased to or are subject to signed Customer Agreements with
customers. The Company recorded depreciation expense related to
solar energy systems of $49.8 million and $42.8 million for the
three months ended September 30, 2020 and 2019, respectively,
and $144.2 million and $123.1 million for the nine months ended
September 30, 2020 and 2019, respectively. The depreciation expense
was reduced by the amortization of deferred grants of $2.0 million
and $2.1 million for three months ended September 30, 2020 and
2019, respectively, and $6.1 million and $6.1 million for the nine
months ended September 30, 2020 and 2019,
respectively.
Note 6. Other Assets
Other assets consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
Costs to obtain contracts - customer agreements |
|
$ |
310,410 |
|
|
$ |
268,964 |
|
|
Costs to obtain contracts - incentives |
|
2,481 |
|
|
2,481 |
|
|
Accumulated amortization of costs to obtain contracts |
|
(47,484) |
|
|
(36,925) |
|
|
Unbilled receivables, net |
|
136,670 |
|
|
105,574 |
|
|
Allowance for credit loss on unbilled receivables |
|
(1,586) |
|
|
(1,228) |
|
|
Operating lease right-of-use assets |
|
28,783 |
|
|
34,678 |
|
|
Equity method investment |
|
65,356 |
|
|
— |
|
|
Other assets |
|
31,609 |
|
|
34,859 |
|
|
Total |
|
$ |
526,239 |
|
|
$ |
408,403 |
|
The Company recorded amortization of costs to obtain contracts of
$3.7 million and $3.2 million for the three months ended
September 30, 2020 and 2019, respectively, and $10.7 million
and $8.7 million for the nine months ended September 30, 2020 and
2019, respectively, in Sales and marketing in the consolidated
statements of operations.
The majority of unbilled receivables arise from fixed price
escalators included in the Company's long-term Customer
Agreements. The escalator is included in calculating the
total estimated transaction value for an individual Customer
Agreement. The total estimated transaction value is then
recognized over the term of the Customer Agreement. The
amount of unbilled receivables increases while cumulative billings
for an individual Customer Agreement are less than the cumulative
revenue recognized for that Customer Agreement. Conversely,
the amount of unbilled receivables decreases when the actual
cumulative billings become higher than the cumulative revenue
recognized. At the end of the initial term of a Customer
Agreement, the cumulative amounts recognized as revenue and billed
to date are the same; therefore the unbilled receivable balance for
an individual Customer Agreement will be zero. As a result of
the adoption of ASU No. 2016-13, an allowance for credit loss on
unbilled receivables was established as of January 1, 2020. The
Company applies an estimated loss-rate in order to determine the
current expected credit loss for unbilled receivables. The
estimated loss-rate is determined by analyzing historical credit
losses, residential first and second mortgage foreclosures and
consumers' utility default rates, as well as current economic
conditions. The Company reviews individual customer collection
status of electricity billings to determine whether the unbilled
receivables for an individual customer should be written off,
including the possibility of a service transfer to a potential new
homeowner.
Note 7. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
Accrued employee compensation |
|
$ |
46,455 |
|
|
$ |
38,750 |
|
|
Operating lease obligations |
|
10,774 |
|
|
9,790 |
|
|
Accrued interest |
|
11,945 |
|
|
13,048 |
|
|
Accrued professional fees |
|
20,795 |
|
|
4,732 |
|
|
Other accrued expenses |
|
106,475 |
|
|
82,177 |
|
|
Total |
|
$ |
196,444 |
|
|
$ |
148,497 |
|
Note 8. Indebtedness
As of September 30, 2020, debt consisted of the following (in
thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Values, net of debt discount |
|
Unused Borrowing Capacity(2)
|
|
Interest
Rate
(1)
|
|
Maturity Date |
|
|
Current |
|
Long Term |
|
Total |
|
|
|
|
|
|
|
Recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank line of credit |
|
$ |
— |
|
|
$ |
224,910 |
|
|
$ |
224,910 |
|
|
$ |
10,000 |
|
|
3.43% - 3.60%
|
|
April 2022 |
|
Total recourse debt |
|
— |
|
|
224,910 |
|
|
224,910 |
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior |
|
29,254 |
|
|
783,114 |
|
|
812,368 |
|
|
1,229 |
|
|
2.39% - 5.61%
|
|
April 2022 - August 2027
|
|
Subordinated |
|
64,974 |
|
|
529,878 |
|
|
594,852 |
|
|
705 |
|
|
6.00% - 10.50%
|
|
March 2023 - November 2030
|
|
Securitization Class A |
|
28,079 |
|
|
815,846 |
|
|
843,925 |
|
|
— |
|
|
3.61% - 5.31%
|
|
July 2024 - February 2055
|
|
Securitization Class B |
|
505 |
|
|
8,316 |
|
|
8,821 |
|
|
— |
|
|
5.38% |
|
July 2024 |
|
Total non-recourse debt
|
|
122,812 |
|
|
2,137,154 |
|
|
2,259,966 |
|
|
1,934 |
|
|
|
|
|
|
Total debt |
|
$ |
122,812 |
|
|
$ |
2,362,064 |
|
|
$ |
2,484,876 |
|
|
$ |
11,934 |
|
|
|
|
|
(1)
Reflects contractual, unhedged rates. See
Note 9,
Derivatives
for hedge rates.
(2) Represents
the additional amount the Company could borrow, if any, based on
the state of its existing assets as of September 30, 2020. For
a description of the amount of capital commitments the Company can
draw from as it constructs new assets, please see Item 2.
Management’s Discussion and Analysis of Financial Conditions and
Result of Operations,
Debt and Financing Fund Commitments.
As of December 31, 2019, debt consisted of the following (in
thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Values, net of debt discount |
|
Unused
Borrowing
Capacity |
|
Interest
Rate
(1)
|
|
Maturity Date |
|
|
Current |
|
Long Term |
|
Total |
|
|
|
|
|
|
|
Recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank line of credit |
|
$ |
— |
|
|
$ |
239,485 |
|
|
$ |
239,485 |
|
|
$ |
— |
|
|
5.09% - 5.38%
|
|
April 2022 |
|
Total recourse debt |
|
— |
|
|
239,485 |
|
|
239,485 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior |
|
8,020 |
|
|
617,499 |
|
|
625,519 |
|
|
14,639 |
|
|
3.94% - 5.61%
|
|
April 2022 - July 2027
|
|
Subordinated |
|
— |
|
|
513,938 |
|
|
513,938 |
|
|
— |
|
|
6.93% - 10.80%
|
|
March 2023 - July 2030
|
|
Securitization Class A |
|
26,838 |
|
|
839,981 |
|
|
866,819 |
|
|
— |
|
|
3.61% - 5.31%
|
|
July 2024 - February 2055
|
|
Securitization Class B |
|
490 |
|
|
8,689 |
|
|
9,179 |
|
|
— |
|
|
5.38% |
|
July 2024 |
|
Total non-recourse debt
|
|
35,348 |
|
|
1,980,107 |
|
|
2,015,455 |
|
|
14,639 |
|
|
|
|
|
|
Total debt |
|
$ |
35,348 |
|
|
$ |
2,219,592 |
|
|
$ |
2,254,940 |
|
|
$ |
14,639 |
|
|
|
|
|
(1)
Reflects contractual, unhedged rates. See
Note 9,
Derivatives
for hedge rates.
Bank Line of Credit
The Company has outstanding borrowings under a syndicated working
capital facility with banks for a total commitment of up to $250.0
million. The working capital facility is secured by substantially
all of the unencumbered assets of the Company, as well as ownership
interests in certain subsidiaries of the Company. Loans under the
facility bear interest at LIBOR +3.25% per annum or the Base Rate
+2.25% per annum. The Base Rate is the highest of the Federal Funds
Rate +0.50%, the Prime Rate, or LIBOR +1.00%.
Under the terms of the working capital facility, the Company is
required to meet various restrictive covenants, such as the
completion and presentation of audited consolidated financial
statements, maintaining a minimum unencumbered liquidity of at
least $25.0 million at the end of each calendar month,
maintaining quarter end liquidity of at least $35.0 million, and
maintaining a minimum interest coverage ratio of 3.50 or
greater, measured quarterly as of the last day of each quarter. The
Company was in compliance with all debt covenants as
of September 30, 2020. As of September 30,
2020, the balance under this facility was $224.9 million with
a maturity date in April 2022.
Senior and Subordinated Debt Facilities
Each of the Company's senior and subordinated debt facilities
contains customary covenants, including the requirement to maintain
certain financial measurements and provide lender reporting. Each
of the senior and subordinated debt facilities also contain certain
provisions in the event of default that entitle lenders to take
certain actions including acceleration of amounts due under the
facilities and acquisition of membership interests and assets that
are pledged to the lenders under the terms of the senior and
subordinated debt facilities. The facilities are non-recourse to
the Company and are secured by net cash flows from Customer
Agreements or inventories less certain operating, maintenance and
other expenses that are available to the borrower after
distributions to tax equity investors, where applicable. Under the
terms of these facilities, the Company's subsidiaries pay interest
and principal from the net cash flows available to the
subsidiaries. The Company was in compliance with all debt covenants
as of September 30, 2020.
As of September 30, 2020, certain subsidiaries of the
Company had an outstanding balance of $352.5 million on
secured credit facilities that were syndicated with various lenders
due in October 2024 and August 2029. The credit facilities
totaled $375.8 million and consisted of $363.3 million in
term loans, and a $12.5 million revolving debt service reserve
letter of credit facility. Term Loan A ("TLA") is a senior delayed
draw term loan that bears interest at LIBOR +2.125% per annum for
LIBOR loans or the Base Rate +1.125% per annum on Base Rate loans.
Term Loan B ("TLB") is subordinated debt that bears interest at
9.25% per annum.
As of September 30, 2020, certain subsidiaries of the
Company had an outstanding balance of $177.5 million on
senior secured credit facilities that were syndicated with various
lenders due in April 2024. These facilities are subject to the
National Grid project equity transaction. The credit facilities
totaled $202.0 million and consisted of a $195.0
million senior delayed draw term loan facility and a $7.0
million revolving debt service reserve letter of credit
facility. Loans under the facility bear interest at LIBOR +2.25%
per annum, for the initial four-year period for LIBOR loans or the
Base Rate +1.25% per annum for Base Rate Loans. The Base Rate is
the highest of the Federal Funds Rate +0.50%, the Prime Rate, or
LIBOR +1.00%. The facilities are non-recourse to the Company and
are secured by net cash flows from Customer Agreements and SRECs,
less certain operating, maintenance and other expenses that are
available to the borrower after distributions to tax equity
investors. Prepayments are permitted under the delayed draw term
loan facility.
As of September 30, 2020, certain subsidiaries of the
Company had an outstanding balance of $239.2 million on
secured credit facilities agreements, as amended, with a syndicate
of banks due in March 2023. The facilities totaled $595.0 million
and consisted of a revolving aggregation facility (“Aggregation
Facility”), a term loan ("Term Loan") and a revolving debt service
reserve letter of credit facility. Senior loans under the
Aggregation Facility bear interest at LIBOR +2.50% per annum for
the initial three-year revolving availability period, stepping up
to LIBOR +2.75% per annum in the following two-year period. The
subordinated Term Loan bears interest at LIBOR +5.00% per annum for
the first three-year period, stepping up to LIBOR +6.50% per annum
thereafter. Term Loan prepayment penalties range from 0% -
1% depending on the timing of prepayments.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $14.0 million on a term loan
due in April 2022. The loan is secured by the assets and related
net cash flow of this subsidiary and is non-recourse to the
Company's other assets. Loans under this facility bear interest at
4.50% per annum.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $11.5 million on a secured,
non-recourse loan agreement due in September 2022. The loan
will be repaid through cash flows from a pass-through financing
obligation arrangement previously entered into by the Company. The
loan agreement contains customary covenants including the
requirement to maintain certain financial measurements and provide
lender reporting. The loan also contains certain provisions in
the event of default that entitle the lender to take certain
actions including acceleration of amounts due under the loan. Loans
under this facility bear interest at LIBOR +2.25% per
annum.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $130.9 million on a term loan due
in January 2030. The loan is secured by the assets and related
net cash flow of this subsidiary and is non-recourse to the
Company’s other assets. Loans under this facility bear interest at
10.50% per annum.
As of September 30, 2020, a subsidiary of the Company had an
outstanding balance of $64.6 million on a term loan due in July
2030. The loan is secured by the assets and related net cash flow
of this subsidiary and is non-recourse to the Company’s other
assets. Loans under this facility bear interest between 2.00% -
3.25% plus 6.75% per annum.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $8.9 million on a term loan due
in July 2027. The loan is secured by the assets and related
net cash flow of this subsidiary and is non-recourse to the
Company’s other assets. Loans under this facility bear interest at
5.61% per annum.
As of September 30, 2020, a subsidiary of the Company had an
outstanding balance of $131.3 million on a term loan due in
November 2025. The loan is secured by the assets and related net
cash flow of this subsidiary and is non-recourse to the Company’s
other assets. Loans under this facility bear interest at LIBOR (at
a 2.00% floor) + 6.75% per annum.
As of September 30, 2020, certain subsidiaries of the Company
had an outstanding balance of $54.0 million on secured credit
facilities agreements with banks due in March 2024. The facilities
totaled $134.0 million and consisted of two revolving aggregation
facilities (“Aggregation Facilities”) and a revolving debt service
reserve letter of credit facility. The senior loan under the
Aggregation Facilities bear interest at LIBOR +3.00%. The
subordinated loan under the Aggregation Facilities bears interest
at LIBOR +9.00% per annum. These debt facilities are related to the
Company's participation in the IRS's safe harbor program to retain
access to the 30% Commercial ITC that was available in
2019.
As of September 30, 2020, certain subsidiaries of the Company
had an outstanding balance of $222.7 million on secured credit
facilities that were syndicated with various lenders due in August
2027 and November 2030. The credit facilities totaled $350.0
million and consisted of $340.0 million in term loans, and a $10.0
million revolving debt service reserve letter of credit facility.
Senior loans under this facility bear interest at LIBOR +2.75% per
annum through August 2024, stepping up to LIBOR + 3.00% thereafter
for LIBOR loans or the Base Rate + 1.75% through August 2024,
stepping up to Base Rate + 2.00% thereafter for Base Rate loans.
Subordinated debt under this facility bears interest at 10.00% per
annum.
Securitization Loans
Each of the Company's securitized loans contains customary
covenants including the requirement to provide reporting to the
indenture trustee and ratings agencies. Each of the securitized
loans also contain certain provisions in the event of default which
entitle the indenture trustee to take certain actions including
acceleration of amounts due under the facilities and acquisition of
membership interests and assets that are pledged to the lenders
under the terms of the securitized loans. The facilities are
non-recourse to the Company and are secured by net cash flows from
Customer Agreements less certain operating, maintenance and other
expenses that are available to the borrower after distributions to
tax equity investors, where applicable. Under the terms of these
loans, the Company's subsidiaries pay interest and principal from
the net cash flows available to the subsidiaries. The Company was
in compliance with all debt covenants as of September 30,
2020.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $79.8 million on solar asset-backed
notes secured by associated customer contracts (“Solar Assets”)
held by a special purpose entity (“Issuer”). As of
September 30, 2020 and December 31, 2019, these Solar
Assets had a carrying value of $151.5
million and $157.6 million, respectively, and are
included under solar energy systems, net, in the consolidated
balance sheets. The notes were issued at a discount
of 0.08%.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $296.6 million on solar
asset-backed notes secured by net cash flows from Customer
Agreements less certain operating, maintenance and other expenses
that are available to the issuer after distributions to tax equity
investors. The notes were issued at a discount of 1.47%. The
assets and cash flows generated by the Solar Assets are not
available to the other creditors of the Company, and the creditors
of the Issuer, including the Note holders, have no recourse to the
Company's other assets.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $177.2 million on solar
asset-backed notes secured by net cash flows from Customer
Agreements less certain operating, maintenance and other expenses
that are available to the issuer. The notes were issued at a
discount of 0.01%.
As of September 30, 2020, a subsidiary of the Company had
an outstanding balance of $299.2 million on solar
asset-backed notes secured by net cash flows from Customer
Agreements less certain operating, maintenance and other expenses
that are available to the issuer. The notes were issued at a
discount of 0.05%.
Note 9. Derivatives
Interest Rate Swaps
The Company uses interest rate swaps to hedge variable interest
payments due on certain of its term loans and aggregation facility.
These swaps allow the Company to incur fixed interest rates on
these loans and receive payments based on variable interest rates
with the swap counterparty based on the one- or three-month LIBOR
on the notional amounts over the life of the swaps.
The interest rate swaps have been designated as cash flow hedges.
The credit risk adjustment associated with these swaps is the risk
of non-performance by the counterparties to the contracts. In the
nine months ended September 30, 2020, the majority of hedge
relationships on the Company’s interest rate swaps have been
assessed as highly effective as the critical terms of the interest
rate swaps match the critical terms of the underlying forecasted
hedged transactions. Accordingly, changes in the fair value of
these derivatives are recorded as a component of accumulated other
comprehensive income, net of income taxes. Changes in the fair
value of these derivatives are subsequently reclassified into
earnings, and are included in interest expense, net in the
Company’s statements of operations, in the period that the hedged
forecasted transactions affects earnings. To the extent that the
hedge relationships are not effective, changes in the fair value of
these derivatives are recorded in other expenses, net in the
Company's statements of operations on a prospective
basis.
All amounts in Accumulated other comprehensive income (loss)
("AOCI") in the consolidated statements of redeemable
noncontrolling interests and equity relate to derivatives, refer to
the consolidated statements of comprehensive (loss) income. The net
(loss) gain on derivatives includes the tax effect of $1.6 million
and $9.1 million for the three months ended September 30, 2020 and
2019, respectively, and $25.7 million and $25.0 million for the
nine months ended September 30, 2020 and 2019,
respectively.
During the next 12 months, the Company expects to reclassify $17.8
million of net losses on derivative instruments from accumulated
other comprehensive income to earnings. There were no undesignated
derivative instruments recorded by the Company as of
September 30, 2020.
The Company’s master netting and other similar arrangements allow
net settlements under certain conditions. When those conditions are
met, the Company presents derivatives at net fair value. As
of September 30, 2020, the information related to these
offsetting arrangements were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Description |
|
Gross Amounts of Recognized Assets / Liabilities |
|
Gross Amounts Offset in the Consolidated Balance Sheet |
|
Net Amounts of Assets / Liabilities Included in the Consolidated
Balance Sheet |
|
Assets: |
|
|
|
|
|
|
|
Derivatives |
|
$ |
160 |
|
|
$ |
(160) |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Derivatives |
|
(142,874) |
|
|
160 |
|
|
(142,714) |
|
|
Total |
|
$ |
(142,714) |
|
|
$ |
— |
|
|
$ |
(142,714) |
|
As of December 31, 2019, the information related to these
offsetting arrangements were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Description |
|
Gross Amounts of Recognized Assets / Liabilities |
|
Gross Amounts Offset in the Consolidated Balance Sheet |
|
Net Amounts of Assets / Liabilities Included in the Consolidated
Balance Sheet |
|
Assets: |
|
|
|
|
|
|
|
Derivatives |
|
$ |
683 |
|
|
$ |
(615) |
|
|
$ |
68 |
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Derivatives |
|
(64,361) |
|
|
615 |
|
|
(63,746) |
|
|
Total |
|
$ |
(63,678) |
|
|
$ |
— |
|
|
$ |
(63,678) |
|
At September 30, 2020, the Company had the following
derivative instruments (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type |
|
Quantity |
|
Effective Dates |
|
Maturity Dates |
|
Hedge Interest Rates |
|
Notional Amount |
|
Fair Market Value |
|
Interest rate swap |
|
1 |
|
|
1/31/2020 |
|
4/30/2021 |
|
2.80%
|
|
$ |
100,000 |
|
|
$ |
(1,488) |
|
|
Interest rate swap |
|
1 |
|
|
4/29/2016
|
|
8/31/2022
|
|
1.27% - 1.29%
|
|
10,541 |
|
|
(222) |
|
|
Interest rate swaps |
|
8 |
|
|
7/31/2017 - 1/31/2018
|
|
4/30/2024 - 10/20/2024
|
|
2.16% - 2.39%
|
|
276,982 |
|
|
(20,212) |
|
|
Interest rate swaps |
|
3 |
|
|
4/30/2021 |
|
10/30/2026 - 10/31/2026
|
|
2.89% - 3.08%
|
|
102,720 |
|
|
(14,865) |
|
|
Interest rate swaps |
|
6 |
|
|
10/31/2019 - 10/30/2020
|
|
4/30/2027 - 8/13/2027
|
|
0.57% - 1.89%
|
|
156,156 |
|
|
(2,132) |
|
|
Interest rate swaps |
|
2 |
|
|
10/31/2019
|
|
10/31/2031
|
|
1.44% - 1.50%
|
|
22,696 |
|
|
(1,332) |
|
|
Interest rate swaps |
|
8 |
|
|
1/31/2018 - 7/31/2027
|
|
4/30/2034 - 10/31/2034
|
|
2.62% - 3.33%
|
|
356,652 |
|
|
(52,689) |
|
|
Interest rate swaps |
|
8 |
|
|
7/31/2017 - 10/18/2024
|
|
4/30/2035 - 10/31/2035
|
|
2.56% - 2.95%
|
|
275,317 |
|
|
(33,299) |
|
|
Interest rate swap |
|
1 |
|
|
10/18/2024
|
|
1/31/2036 |
|
2.95%
|
|
14,656 |
|
|
(1,686) |
|
|
Interest rate swaps |
|
3 |
|
|
10/30/2026 - 10/31/2026
|
|
1/31/2038 |
|
3.01% - 3.16%
|
|
101,135 |
|
|
(14,198) |
|
|
Interest rate swaps |
|
5 |
|
|
10/30/2020 - 8/13/2027
|
|
1/31/2043 |
|
1.02% - 1.43%
|
|
122,030 |
|
|
(591) |
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
1,538,885 |
|
|
$ |
(142,714) |
|
Note 10. Pass-through Financing Obligations
The Company's pass-through financing obligations ("financing
obligations") arise when the Company leases solar energy systems to
Fund investors who are considered commercial customers under a
master lease agreement, and these investors in turn are assigned
the Customer Agreements with customers. The Company receives all of
the value attributable to the accelerated tax depreciation and some
or all of the value attributable to the other incentives. Given the
assignment of operating cash flows, these arrangements are
accounted for as financing obligations. The Company also sells the
rights and related value attributable to the Commercial ITC to
these investors.
Under these financing obligation arrangements, wholly owned
subsidiaries of the Company finance the cost of solar energy
systems with investors for an initial term of typically 20 or 22
years. The solar energy systems are subject to Customer Agreements
with an initial term of typically 20 or 25 years that automatically
renew on an annual basis. These solar energy systems are reported
under the line item solar energy systems, net in the consolidated
balance sheets. As of September 30, 2020 and December 31,
2019, the cost of the solar energy systems placed in service under
the financing obligation arrangements was $656.3 million and $657.9
million, respectively. The accumulated depreciation related to
these assets as of September 30, 2020 and December 31,
2019 was $113.6 million and $95.9 million,
respectively.
The investors make a series of large up-front payments and, in
certain cases, subsequent smaller quarterly payments (lease
payments) to the subsidiaries of the Company. The Company accounts
for the payments received from the investors under the financing
obligation arrangements as borrowings by recording the proceeds
received as financing obligations on its consolidated balance
sheets, and cash provided by financing activities in its
consolidated statement of cash flows. These financing obligations
are reduced over a period of approximately 22 years by customer
payments under the Customer Agreements, U.S. Treasury grants (where
applicable) and proceeds from the contracted resale of SRECs as
they are received by the investor. In addition, funds paid for the
Commercial ITC value upfront are initially recorded as a refund
liability and recognized as revenue as the associated solar energy
system reaches PTO. The Commercial ITC value is reflected in the
cash provided by operations on the consolidated statement of cash
flows. The Company accounts for the Customer Agreements and any
related U.S. Treasury grants, as well as the resale of SRECs,
consistent with the Company’s revenue recognition accounting
policies as described in Note 2,
Summary of Significant Accounting Policies.
Interest is calculated on the financing obligations using the
effective interest rate method. The effective interest rate, which
is adjusted on a prospective basis, is the interest rate that
equates the present value of the estimated cash amounts to be
received by the investor over the lease term with the present value
of the cash amounts paid by the investor to the Company, adjusted
for amounts received by the investor. The financing obligations are
nonrecourse once the associated assets have been placed in service
and all the contractual arrangements have been assigned to the
investor.
Under the majority of the financing obligations, the investor has a
right to extend its right to receive cash flows from the customers
beyond the initial term in certain circumstances. Depending on the
arrangement, the Company has the option to settle the outstanding
financing obligation on the ninth or eleventh anniversary of the
Fund inception at a price equal to the higher of (a) the fair value
of future remaining cash flows or (b) the amount that would result
in the investor earning their targeted return. In several of these
financing obligations, the investor has an option to require
repayment of the entire outstanding balance on the tenth
anniversary of the Fund inception at a price equal to the fair
value of the future remaining cash flows.
Under all financing obligations, the Company is responsible for
services such as warranty support, accounting, lease servicing and
performance reporting to customers. As part of the warranty and
performance guarantee with the customers, the Company guarantees
certain specified minimum annual solar energy production output for
the solar energy systems leased to the customers, which the Company
accounts for as disclosed in Note 2,
Summary of Significant Accounting Policies.
Note 11. VIE Arrangements
The Company consolidated various VIEs at September 30, 2020
and December 31, 2019. The carrying amounts and classification
of the VIEs’ assets and liabilities included in the consolidated
balance sheets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash |
|
$ |
155,201 |
|
|
$ |
133,362 |
|
|
Restricted cash |
|
14,495 |
|
|
2,746 |
|
|
Accounts receivable, net |
|
27,471 |
|
|
21,956 |
|
|
Inventories |
|
51,894 |
|
|
15,721 |
|
|
Prepaid expenses and other current assets |
|
1,583 |
|
|
554 |
|
|
Total current assets |
|
250,644 |
|
|
174,339 |
|
|
Solar energy systems, net |
|
3,773,324 |
|
|
3,259,712 |
|
|
Other assets |
|
112,079 |
|
|
87,151 |
|
|
Total assets |
|
$ |
4,136,047 |
|
|
$ |
3,521,202 |
|
|
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
|
$ |
25,535 |
|
|
$ |
11,531 |
|
|
Distributions payable to noncontrolling interests and redeemable
noncontrolling interests
|
|
17,776 |
|
|
16,012 |
|
|
Accrued expenses and other liabilities |
|
15,053 |
|
|
10,740 |
|
|
Deferred revenue, current portion |
|
41,435 |
|
|
38,265 |
|
|
Deferred grants, current portion |
|
1,011 |
|
|
1,011 |
|
|
Non-recourse debt, current portion |
|
54,358 |
|
|
4,901 |
|
|
Total current liabilities |
|
155,168 |
|
|
82,460 |
|
|
Deferred revenue, net of current portion |
|
473,129 |
|
|
443,873 |
|
|
Deferred grants, net of current portion |
|
26,220 |
|
|
27,023 |
|
|
Non-recourse debt, net of current portion |
|
186,173 |
|
|
201,575 |
|
|
Other liabilities |
|
35,176 |
|
|
19,633 |
|
|
Total liabilities |
|
$ |
875,866 |
|
|
$ |
774,564 |
|
The Company holds a variable interest in an entity that provides
the noncontrolling interest with a right to terminate the leasehold
interests in all of the leased projects on the tenth anniversary of
the effective date of the master lease. In this circumstance, the
Company would be required to pay the noncontrolling interest an
amount equal to the fair market value, as defined in the governing
agreement of all leased projects as of that date.
The Company holds certain variable interests in nonconsolidated
VIEs established as a result of six pass-through Fund arrangements
as further explained in Note 10,
Pass-through Financing Obligations.
The Company does not have material exposure to losses as a result
of its involvement with the VIEs in excess of the amount of the
pass-through financing obligation recorded in the Company’s
consolidated financial statements. The Company is not considered
the primary beneficiary of these VIEs.
Note 12. Redeemable Noncontrolling Interests and
Equity
During certain specified periods of time (the “Early Exit
Periods”), noncontrolling interests in certain funding arrangements
have the right to put all of their membership interests to the
Company (the “Put Provisions”). During a specific period of time
(the “Call Periods”), the Company has the right to call all
membership units of the related redeemable noncontrolling
interests.
The carrying value of redeemable noncontrolling interests was
greater than the redemption value except for ten and nine Funds at
September 30, 2020 and December 31, 2019, respectively,
where the carrying value has been adjusted to the redemption
value.
Note 13. Stock-Based Compensation
Stock Options
The following table summarizes the activity for all stock options
under all of the Company’s equity incentive plans for the nine
months ended September 30, 2020 (shares and aggregate
intrinsic value in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options |
|
Weighted Average Exercise Price |
|
Weighted Average Remaining Contractual Life |
|
Aggregate Intrinsic Value |
|
Outstanding at December 31, 2019 |
|
10,784 |
|
|
$ |
7.38 |
|
|
6.52 |
|
$ |
71,745 |
|
|
Granted |
|
1,556 |
|
|
12.85 |
|
|
|
|
|
|
Exercised |
|
(4,187) |
|
|
6.95 |
|
|
|
|
|
|
Cancelled |
|
(382) |
|
|
9.16 |
|
|
|
|
|
|
Outstanding at September 30, 2020 |
|
7,771 |
|
|
$ |
8.61 |
|
|
6.74 |
|
$ |
532,004 |
|
|
|
|
|
|
|
|
|
|
|
|
Options vested and exercisable at September 30, 2020 |
|
4,545 |
|
|
$ |
6.33 |
|
|
5.41 |
|
$ |
321,566 |
|
Restricted Stock Units
The following table summarizes the activity for all restricted
stock units (“RSUs”) under all of the Company’s equity incentive
plans for the nine months ended September 30, 2020 (shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Awards |
|
Weighted Average Grant Date Fair Value |
|
Unvested balance at December 31, 2019 |
|
3,943 |
|
|
$ |
11.42 |
|
|
Granted |
|
3,304 |
|
|
14.10 |
|
|
Issued |
|
(2,509) |
|
|
11.81 |
|
|
Cancelled / forfeited |
|
(528) |
|
|
11.01 |
|
|
Unvested balance at September 30, 2020 |
|
4,210 |
|
|
$ |
13.35 |
|
Employee Stock Purchase Plan
Under the Company's 2015 Employee Stock Purchase Plan ("ESPP"),
eligible employees are offered shares bi-annually through a
24-month offering period that encompasses four six-month purchase
periods. Each purchase period begins on the first trading day on or
after May 15 and November 15 of each year. Employees may purchase a
limited number of shares of the Company’s common stock via regular
payroll deductions at a discount of 15% of the lower of the fair
market value of the Company’s common stock on the first trading
date of each offering period or on the exercise date. Employees may
deduct up to 15% of payroll, with a cap of $25,000 of fair market
value of shares in any calendar year and 10,000 shares per employee
per purchase period.
Stock-Based Compensation Expense
The Company recognized stock-based compensation expense, including
ESPP expenses, in the consolidated statements of operations as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Cost of customer agreements and incentives |
|
$ |
922 |
|
|
$ |
594 |
|
|
$ |
3,798 |
|
|
$ |
1,849 |
|
|
Cost of solar energy systems and product sales
|
|
205 |
|
|
209 |
|
|
1,148 |
|
|
566 |
|
|
Sales and marketing |
|
1,890 |
|
|
1,352 |
|
|
7,189 |
|
|
3,782 |
|
|
Research and development |
|
317 |
|
|
404 |
|
|
1,858 |
|
|
1,149 |
|
|
General and administration |
|
4,883 |
|
|
4,295 |
|
|
23,551 |
|
|
12,074 |
|
|
Total |
|
$ |
8,217 |
|
|
$ |
6,854 |
|
|
$ |
37,544 |
|
|
$ |
19,420 |
|
Note 14. Income Taxes
The income tax benefit (expense) rate for the three months ended
September 30, 2020 and 2019 was 24.5% and
(4.8)%,
respectively, and for the nine months ended September 30, 2020 and
2019 was 8.5% and 0.1%, respectively. The differences between the
actual consolidated effective income tax rate and the U.S. federal
statutory rate were primarily attributable to the allocation of
losses on noncontrolling interests and an increase in valuation
allowance and stock-based compensation.
The Company sells solar energy systems to investment Funds. As the
investment Funds are consolidated by the Company, the gain on the
sale of the assets has been eliminated in the consolidated
financial statements, however gains on sale are recognized for tax
purposes.
CARES Act
On March 27, 2020, President Trump signed the Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”) into law. The CARES
Act is a relief package that includes changes to the U.S. tax code
including but not limited to, (1) modifications to the calculation
of interest deductibility in 2019 and 2020, (2) changes to rules
related to the uses and limitations of net operating loss
carryforwards created from 2018 to 2020, and (3) technical
corrections for qualified improvement property. The Company does
not anticipate the CARES Act will have a material impact on income
tax expense for 2020.
Uncertain Tax Positions
As of September 30, 2020 and December 31, 2019, the
Company had no uncertain tax positions.
Tax Holidays
The Company received approval from a U.S. territory for a reduced
income tax rate on February 3, 2020. The reduced income tax rate is
retroactive to 2018 and is effective through December 31, 2043. The
benefit from the reduced income tax rate of $1.3 million for
the years ended
December 31, 2019 and 2018
was included in income tax expense for the quarter ended
September 30, 2020.
The benefit from the reduced income tax rate for the quarter
ended
September 30, 2020
was $0.5 million.
Note 15. Commitments and Contingencies
Letters of Credit
As of September 30, 2020 and December 31, 2019, the
Company had $25.9 million and $20.1 million, respectively, of
unused letters of credit outstanding, which carry fees of 2.13% -
3.25% per annum and 1.25% - 3.25% per annum,
respectively.
Operating and Finance Leases
The Company leases real estate under non-cancellable-operating
leases and equipment under finance leases.
The components of lease expense were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Finance lease cost: |
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
|
$ |
2,151 |
|
|
$ |
3,647 |
|
|
$ |
7,087 |
|
|
$ |
10,879 |
|
|
Interest on lease liabilities |
|
173 |
|
|
322 |
|
|
597 |
|
|
994 |
|
|
Operating lease cost |
|
3,195 |
|
|
3,528 |
|
|
9,353 |
|
|
10,027 |
|
|
Short-term lease cost |
|
113 |
|
|
118 |
|
|
352 |
|
|
1,263 |
|
|
Variable lease cost |
|
1,176 |
|
|
854 |
|
|
2,957 |
|
|
2,750 |
|
|
Sublease income |
|
(202) |
|
|
(197) |
|
|
(574) |
|
|
(546) |
|
|
Total lease cost |
|
$ |
6,606 |
|
|
$ |
8,272 |
|
|
$ |
19,772 |
|
|
$ |
25,367 |
|
Other information related to leases was as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Cash paid for amounts included in the measurement of lease
liabilities |
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
3,430 |
|
|
$ |
3,029 |
|
|
$ |
8,929 |
|
|
$ |
8,564 |
|
|
Operating cash flows from finance leases |
|
161 |
|
|
291 |
|
|
578 |
|
|
732 |
|
|
Financing cash flows from finance leases |
|
2,217 |
|
|
4,004 |
|
|
7,763 |
|
|
10,449 |
|
|
Right-of-use assets obtained in exchange for lease
obligations: |
|
|
|
|
|
|
|
|
|
Operating leases |
|
— |
|
|
3,136 |
|
|
32 |
|
|
23,286 |
|
|
Finance leases |
|
879 |
|
|
4,453 |
|
|
1,092 |
|
|
17,390 |
|
|
Weighted average remaining lease term (years): |
|
|
|
|
|
|
|
|
|
Operating leases |
|
4.88 |
|
5.26 |
|
4.88 |
|
5.26 |
|
Finance leases |
|
2.33 |
|
3.08 |
|
2.33 |
|
3.08 |
|
Weighted average discount rate: |
|
|
|
|
|
|
|
|
|
Operating leases |
|
5.5 |
% |
|
5.2 |
% |
|
5.5 |
% |
|
5.2 |
% |
|
Finance leases |
|
4.1 |
% |
|
4.2 |
% |
|
4.1 |
% |
|
4.2 |
% |
Future minimum lease commitments under non-cancellable leases as of
September 30, 2020 were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases |
|
Sublease Income |
|
Net Operating Leases |
|
Finance Leases |
|
2020 |
|
$ |
12,706 |
|
|
$ |
712 |
|
|
$ |
11,994 |
|
|
$ |
8,118 |
|
|
2021 |
|
10,365 |
|
|
125 |
|
|
10,240 |
|
|
5,525 |
|
|
2022 |
|
9,205 |
|
|
— |
|
|
9,205 |
|
|
2,030 |
|
|
2023 |
|
5,876 |
|
|
— |
|
|
5,876 |
|
|
216 |
|
|
2024 |
|
2,718 |
|
|
— |
|
|
2,718 |
|
|
41 |
|
|
Thereafter |
|
5,949 |
|
|
— |
|
|
5,949 |
|
|
— |
|
|
Total future lease payments |
|
46,819 |
|
|
837 |
|
|
45,982 |
|
|
15,930 |
|
|
Less: Amount representing interest |
|
5,589 |
|
|
— |
|
|
5,589 |
|
|
700 |
|
|
Present value of future payments |
|
41,230 |
|
|
837 |
|
|
40,393 |
|
|
15,230 |
|
|
|
|
|
|
|
|
|
|
|
Less: Tenant incentives |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net present value of future payments |
|
41,230 |
|
|
837 |
|
|