Spruce Power Holding Corporation (NYSE: SPRU) (“Spruce” or the
“Company”), a leading owner and operator of distributed solar
energy assets across the United States, today reported financial
results for the quarter and full year ended December 31, 2022.
Business Highlights
- Completed strategic transformation into pure play owner and
operator of residential rooftop solar assets following exit of
legacy Drivetrain and XL Grid operations, and naming of Christian
Fong as President and CEO
- Completed four tax equity buyouts in 4Q, adding approximately
$1.0 million in annual portfolio EBITDA, and today announced the
acquisition of a portfolio with approximately 22,500 residential
solar customers and over $18.0 million of projected annual
portfolio EBITDA
- After recent acquisitions, Spruce now serves over 72,000
customers, an increase of about 44% from the end of 3Q 2022
- Reported total revenue of $18.1 million in 4Q 2022, reflecting
the first full quarter contribution of Spruce Power
- Finished 4Q 2022 with PV6 Gross Total Subscriber Value of $741
million, and with today’s portfolio acquisition, now approximately
$954 million
Management Commentary and Outlook
“We are proud of our accomplishments in 2022 and in this current
quarter’s recent events, highlighted by going public via the merger
with XL Fleet and completing the strategic transformation to Spruce
Power quickly and effectively,” said Christian Fong, Spruce Power’s
Chief Executive Officer. “More importantly, we are set up for
success in the years ahead. The Company enters 2023 as a pure play
owner and operator of residential rooftop solar assets with a
substantial cash position to power our differentiated
M&A-driven growth strategy for the foreseeable future. We are
intensely focused on delivering performance across key metrics that
will create value for customers and for shareholders. We are
confident in our prospects, and excited to share our success with
our new shareholders.”
Fong continued, “Today, we are proud to announce the acquisition
of the SEMTH Portfolio, which we have renamed to the Spruce Power 4
Portfolio. The transaction is in line with Spruce’s growth strategy
and represents the largest acquisition in the company’s history.
The addition of the Spruce Power 4 Portfolio significantly bolsters
Spruce’s stable asset base through the addition of approximately
22,500 long-term customers and recurring customer collections of
about $21 million. This acquisition is a solid first step as we
start life as a public company and demonstrates our ability to
execute step-change growth through our M&A driven strategy. Our
investors can read more about our vision in my 2023 CEO’s Letter to
Shareholders.” (link here)
“Financial results for the fourth quarter of 2022 reflect the
first full quarter of contribution from Spruce Power following the
acquisition on September 9, 2022,” said Don Klein, Chief Financial
Officer of Spruce Power. “In line with our previously announced
review of strategic alternatives, we exited the Drivetrain and XL
Grid operations. As a result, both Drivetrain and XL Grid
operations are presented as discontinued operations for the fourth
quarter and full year 2022 financial results. In addition, we
substantially completed integration and transition of corporate
functions. With the completion of these strategic actions, Spruce
is well-positioned to drive value for stakeholders.”
Consolidated Financial Results
Revenue totaled $18.1mm for the fourth quarter of 2022, compared
to $5.1mm for the third quarter of 2022 adjusted for discontinued
operations. The sequential increase in revenue is attributable to a
full quarter of contribution from Spruce Power following our
acquisition completed on September 9, 2022.
Selling, general & administrative expenses were $28.6
million for the fourth quarter of 2022, compared to $27.0 million
for the third quarter of 2022. SG&A expenses for the fourth
quarter of 2022 include approximately $8.4 million of restructuring
and restructuring related charges and $3.8 million in legal fees
related to the previously disclosed class action complaints and SEC
investigation.
For the fourth quarter 2022, net loss attributable to Spruce was
$43.2 million, which includes a loss from continuing operations of
$27.7 million and loss from discontinued operations of $14.7
million. Adjusted for certain items, the net loss for the fourth
quarter of 2022 was $10.8 million.
Adjusted EBITDA totaled $3.5 million for the fourth quarter of
2022, compared to ($8.3) million for the third quarter of 2022.
Balance Sheet and Capital
Cash and cash equivalents and restricted cash as of December 31,
2022 totaled $240.1 million, compared to $271.6 million as of
September 30, 2022. Cash used in the fourth quarter of 2022
included $9.3 million for debt principal payments and $7.6 million
for distributions and buyout of tax equity partnerships. Total
outstanding debt principal as of December 31, 2022, was $533.2
million. Spruce Power had 144.3 million shares of Common Stock
outstanding as of December 31, 2022.
Key Operating Metrics
As of December 31, 2022, Spruce Power owned approximately 51,000
rooftop solar assets and contracts across 16 U.S. states with an
average remaining contract life of approximately 12.5 years.
Combined portfolio generation for the three months ended December
31, 2022, was 76 thousand MWh of power. In addition, the Company
also serviced approximately 30,000 third-party owned residential
solar systems and third-party loans as of December 31, 2022. Gross
Total Subscriber Value was $741 million as of December 31,
2022.
Conference Call Information
The Spruce Power management team will host a conference call to
discuss its fourth quarter 2022 financial results today at 2:30
p.m. Mountain Time. The call can be accessed live over the
telephone by dialing (888) 210-2654 and referencing Conference ID
248627. Alternatively, the call can be accessed via a live webcast
accessible on the Events & Presentations page in the Investor
Relations section of The Company’s website at www.sprucepower.com.
A replay will be available shortly after the call and can be
accessed by dialing (800) 770-2030. The passcode for the replay is
2486267. The replay will be available until April 6, 2023.
About Spruce Power
Spruce Power is a leading owner and operator of distributed
solar energy assets across the United States. We provide
subscription-based services that make it easy for homeowners and
small businesses to own and maintain rooftop solar and battery
storage. Our as-a-service model allows consumers to access new
technology without making a significant upfront investment or
incurring maintenance costs. Our company owns over 70,000 rooftop
solar assets and contracts across the United States. For additional
information, please visit www.sprucepower.com.
Forward Looking Statements
Certain statements in this press release may constitute
“forward-looking statements” within the meaning of the federal
securities laws. Forward-looking statements generally are
accompanied by words such as “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “expect,” “should,” “would,”
“plan,” “predict,” “potential,” “seem,” “seek,” “future,”
“outlook,” and similar expressions that predict or indicate future
events or trends or that are not statements of historical matters.
These statements are based on various assumptions, whether or not
identified in this press release, and on the current expectations
of management and are not predictions of actual performance.
Forward-looking statements are subject to a number of risks and
uncertainties that could cause actual results to differ materially
from the forward looking statements, including but not limited to:
expectations regarding the growth of the solar industry, home
electrification, electric vehicles and distributed energy
resources; the ability to successfully integrate XL Fleet and
Spruce Power; the ability to identify and complete future
acquisitions; the ability to develop and market new products and
services; the effects of pending and future legislation; the highly
competitive nature of the Company’s business and markets; the
ability to execute on and consummate business plans in anticipated
time frames; litigation, complaints, product liability claims
and/or adverse publicity; cost increases or shortages in the
components or chassis necessary to support the Company’s products
and services; the introduction of new technologies; the impact of
the COVID-19 pandemic on the Company’s business, results of
operations, financial condition, regulatory compliance and customer
experience; the potential loss of certain significant customers;
privacy and data protection laws, privacy or data breaches, or the
loss of data; general economic, financial, legal, political and
business conditions and changes in domestic and foreign markets;
risks related to the rollout of the Company’s business and the
timing of expected business milestones; the effects of competition
on the Company’s future business; the availability of capital; and
the other risks discussed under the heading “Risk Factors” in the
Company’s Annual Report on Form 10-K filed on March 31, 2022,
subsequent Quarterly Reports on Form 10-Q and other documents that
the Company files with the SEC in the future. If any of these risks
materialize or our assumptions prove incorrect, actual results
could differ materially from the results implied by these
forward-looking statements. These forward-looking statements speak
only as of the date hereof and the Company specifically disclaims
any obligation to update these forward-looking statements.
Use of Non-GAAP Financial Information
To supplement its consolidated financial statements, which are
prepared and presented in accordance with U.S. generally accepted
accounting principles (“GAAP”), Spruce Power reports certain
non-GAAP financial information which have been reconciled to the
nearest GAAP measures in the tables within this press release. This
prospective financial information was not prepared with a view
toward compliance with published guidelines of the SEC or the
guidelines established by the American Institute of Certified
Public Accountants for preparation and presentation of prospective
financial information or U.S. GAAP with respect to forward looking
financial information. We believe that these non-GAAP measures,
viewed in addition to and not in lieu of our reported GAAP results,
provides useful information to investors by providing a more
focused measure of operating results, enhances the overall
understanding of past financial performance and future prospects,
and allows for greater transparency with respect to key metrics
used by management in its financial and operational decision
making. The non-GAAP measures presented herein may not be
comparable to similarly titled measures presented by other
companies.
Earnings (loss) Before Interest, Income Taxes, Depreciation,
and Amortization (“EBITDA”):
We define EBITDA as our consolidated net income (loss) and
adding interest expense, income taxes, and depreciation and
amortization. We believe EBITDA provides meaningful information to
the performance of our business and therefore we use it to
supplement our GAAP reporting. We have chosen to provide this
supplemental information to investors, analysts and other
interested parties to enable them to perform additional analyses of
operating results.
Adjusted EBITDA and Adjusted Net Income (Loss):
We believe that adjusted EBITDA and Adjusted Net Income (loss),
which excludes certain identified items that we do not consider to
be part of our ongoing business, improves the comparability of year
to year results, and is representative of our underlying
performance. Management uses this information to assess and measure
the performance of our operating segments. We have chosen to
provide this supplemental information to investors, analysts and
other interested parties to enable them to perform additional
analyses of operating results, to illustrate the results of
operations giving effect to the non GAAP adjustments shown in the
below reconciliations, and to provide an additional measure of
performance.
Subscriber Value Metrics
We believe Subscriber Value Metrics are helpful to management,
investors, and analysts to understand the value of our business and
to evaluate the estimated remaining value of our customer
contracts, including present value implied from future,
uncontracted sales of solar renewable energy credits generated from
assets that the Company owns today.
- Gross Total Subscriber Value reflects the remaining projected
net cash flows from current customers discounted at 6% (“PV6”)
- Projected cash flows include the customer’s initial agreement
plus renewal
($ in millions) As of December 31, 2022 Gross
Contracted Subscriber Value(1)
$
510
Gross Renewal Subscriber Value(2)
215
Uncontracted Renewable Energy Credits(3)
16
Gross Total Subscriber Value(4)
$
741
(1) Gross Contracted Subscriber Value represents the present
value of the remaining net cash flows discounted at 6% during the
initial term of the company’s customer agreements as of the
measurement date. It is calculated as the present value of cash
flows discounted at 6% that the company expects to receive from
subscribers in future periods as set forth in customer agreements,
after deducting expected operating and maintenance costs, equipment
replacements costs, distributions to tax equity partners in
consolidated joint venture partnership flip structures, and
distributions to third party project equity investors. The
calculation includes cash flows the company expects to receive in
future periods from state incentive and rebate programs, contracted
sales of solar renewable energy credits, and awarded net cash flows
from grid service programs with utilities or grid operators.
(2) Gross Renewal Subscriber Value is the forecasted net present
value the company would receive upon or following the expiration of
the initial customer agreement term, but before the 30th
anniversary of the system’s activation in the form of cash payments
during any applicable renewal period for subscribers as of the
measurement date. The company calculates the Gross Renewal
Subscriber Value amount at the expiration of the initial contract
term assuming either a system purchase or a renewal and a 30-year
customer relationship (although the customer may renew for
additional years, or purchase the system), at a contract rate equal
to 90% of the customer’s contractual rate in effect at the end of
the initial contract term. After the initial contract term, a
majority of the company's customer agreements automatically renew
on an annual basis and the rate is initially set at up to a 10%
discount to then-prevailing utility power prices.
(3) Uncontracted sales of solar renewable energy credits (RECs)
based on forward market REC pricing curves, adjusted for liquidity
discounts.
(4) Gross Total Subscriber Value represents the sum of Gross
Contracted Subscriber Value, Gross Renewal Subscriber Value and
Uncontracted Renewable Energy Credits
Spruce Power Holding Corporation Consolidated
Statements of Operations For the Three Months and Year Ended
December 31, 2022 and 2021
Three Months Ended December
31,
Year Ended December
31,
(In thousands, except per share and share
amounts)
2022
2021
2022
2021
Revenues
$
18,113
$
-
$
23,194
$
-
Cost of revenues
7,975
-
9,949
-
Gross margin
10,138
-
13,245
-
Operating expenses: Selling, general, and administrative expenses
28,586
11,576
73,118
35,094
Loss from operations
(18,448
)
(11,576
)
(59,873
)
(35,094
)
Other (income) expense: Interest expense, net
7,920
4
10,062
39
Gain on extinguishment of debt
-
-
(4,527
)
-
Loss on impairment
-
-
-
3,000
(Gain) loss on asset disposal
(851
)
2,981
(580
)
26
Change in fair value of obligation to issue shares of common stock
to sellers of World Energy
5
(547
)
(535
)
(565
)
Change in fair value of warrant liability
(2
)
(8,178
)
(5,148
)
(90,138
)
Change in fair value of interest rate swaps
2,978
-
(5,554
)
-
Other income
(787
)
(18
)
(912
)
(58
)
Net (loss) income from continuing operations
$
(27,711
)
$
(5,818
)
$
(52,679
)
$
52,602
Net loss from discontinued operations
(14,719
)
(9,306
)
(40,112
)
(23,812
)
Net (loss) income
$
(42,430
)
$
(15,124
)
$
(92,791
)
$
28,790
Less: Net income attributable to redeemable noncontrolling
interests and noncontrolling interests
721
-
1,140
-
Net (loss) income attributable to stockholders
$
(43,151
)
$
(15,124
)
$
(93,931
)
$
28,790
Net (loss) income atrributable to stockholders per share, basic
$
(0.30
)
$
(0.11
)
$
(0.66
)
$
0.21
Net (loss) income atrributable to stockholders per share, diluted
$
(0.30
)
$
(0.11
)
$
(0.66
)
$
0.19
Weighted-average shares outstanding, basic
144,123,212
139,570,367
142,692,003
138,457,416
Weighted-average shares outstanding, diluted
144,123,212
139,570,367
142,692,003
148,510,351
Spruce Power Holding Corporation Reconciliation of
Non-GAAP Financial Measures For the Three and Twelve Months
Ended December 31, 2022 and 2021
Three Months Ended December
31,
Twelve Months Ended December
31,
(In thousands)
2022
2021
2022
2021
Reconciliation of Net (Loss) Income to EBITDA and Adjusted
EBITDA Net (loss) income attributable to stockholders
$
(43,151
)
$
(15,124
)
$
(93,931
)
$
28,790
Net income attributable to noncontrolling interests
721
-
1,140
-
Interest expense, net
7,920
4
10,062
39
Impairment of goodwill and intangibles
877
-
9,483
-
Depreciation and amortization
5,507
682
8,419
1,756
EBITDA
(28,126
)
(14,438
)
(64,827
)
30,585
Loss on discontinued operations
14,719
9,306
40,112
23,812
Gain on extinguishment of debt
-
-
(4,527
)
-
Loss on impairment of investment
-
3,000
-
3,000
Restructuring charges (1)
8,394
5,534
9,939
5,534
Legal charges related to SEC investigation and shareholder lawsuits
3,809
-
9,553
-
Accreted contingent compensation obligation to sellers of World
Energy
36
49
(77
)
1,049
(Gain) loss on disposal of assets
(851
)
(2,981
)
(580
)
26
Change in fair value of interest rate swaps
2,978
-
(5,554
)
-
Change in fair value of obligation to issue shares of common stock
5
(547
)
(535
)
(565
)
Meter upgrade campaign
483
-
663
-
Other one-time costs
216
-
332
-
Change in fair value warrant liabilities
(2
)
(8,178
)
(5,148
)
(90,138
)
Non-recurring acquisition/divestment expenses
1,828
-
16,544
498
Adjusted EBITDA
$
3,489
$
(8,255
)
$
(4,105
)
$
(26,199
)
Spruce Power Holding Corporation
Reconciliation of Non-GAAP Financial Measures For the
Three and Twelve Months Ended December 31, 2022 and 2021
Three Months Ended December
31,
Twelve Months Ended December
31,
(In thousands)
2022
2021
2022
2021
Reconciliation of Net (Loss) Income to Adjusted Net Loss Net
(loss) income attributable to stockholders
$
(43,151
)
$
(15,124
)
$
(93,931
)
$
28,790
Net income attributable to noncontrolling interests
721
-
1,140
-
Net loss on discontinued operations
14,719
9,306
40,112
23,812
Gain on extinguishment of debt
-
-
(4,527
)
-
Loss on impairment of investment
-
3,000
-
3,000
Restructuring charges (1)
8,394
5,534
9,939
5,534
Legal charges related to SEC investigation and shareholder lawsuits
3,809
-
9,553
-
Accreted contingent compensation obligation to sellers of World
Energy
36
49
(77
)
1,049
(Gain) loss on disposal of assets
(851
)
(2,981
)
(580
)
26
Change in fair value of interest rate swaps
2,978
-
(5,554
)
-
Change in fair value of obligation to issue shares of common stock
5
(547
)
(535
)
(565
)
Meter upgrade campaign
483
-
663
-
Other one-time costs
216
-
332
-
Change in fair value warrant liabilities
(2
)
(8,178
)
(5,148
)
(90,138
)
Non-recurring acquisition/divestment expenses
1,828
-
16,544
498
Adjusted Net Loss
$
(10,815
)
$
(8,941
)
$
(32,069
)
$
(27,994
)
(1) Amount for the three months ended December 31, 2022
represents severance charges of $3.6 million and equity
accelerations of $4.8 million. The amount for the twelve months
ended December 31, 2022 also includes severance charges of $1.5
million relating to the restructuring of the business in the first
quarter.
Spruce Power Holding Corporation Consolidated Balance
Sheets December 31, 2022 and 2021
As of December 31,
(In thousands, except share and per share amounts)
2022
2021
Assets Current assets: Cash and cash equivalents
$
220,321
$
351,676
Restricted cash
19,823
150
Accounts receivable, net
8,336
-
Interest rate swap assets, current
10,183
-
Prepaid expenses and other current assets
5,316
310
Current assets of discontinued operations
10,977
22,469
Total current assets
274,956
374,605
Solar energy systems, net
395,826
-
Other property and equipment, net
342
252
Interest rate swap assets, non-current
22,069
-
Deferred rent assets
1,626
-
Right-of-use asset
2,802
146
Goodwill
128,548
-
Other assets
383
-
Long-term assets of discontinued operations
-
18,218
Total assets
$
826,552
$
393,221
Liabilities, redeemable noncontrolling interests and
stockholders' equity Current liabilities: Current portion of
long-term debt
$
25,314
$
-
Accounts payable
2,904
697
Deferred revenue, current
39
-
Lease liability, current
834
51
Accrued expenses and other current liabilities
21,509
6,241
Current liabilities of discontinued operations
9,097
9,644
Total current liabilities
59,697
16,633
Long-term debt, net of current portion
474,441
-
Deferred revenue
452
-
Lease liability, non-current
2,426
91
Warrant liabilities
256
5,405
Contingent consideration
-
541
New market tax credit obligation
-
4,521
Other long-term liabilities
10
-
Long-term liabilities of discontinued operations
294
4,220
Total liabilities
537,576
31,411
Redeeemable noncontrolling interests
85
-
Stockholders' equity Common stock, $0.0001 par value;
350,000,000 shares authorized at December 31, 2022 and December 31,
2021; 144,375,226 and 140,540,671 issued and outstanding at
December 31, 2022 and 2021, respectively.
14
14
Additional paid-in capital
473,277
461,207
Noncontrolling interests
8,942
-
Accumulated deficit
(193,342
)
(99,411
)
Total stockholders' equity
288,891
361,810
Total liabilities, redeemable noncontrolling interests and
stockholders' equity
$
826,552
$
393,221
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