Company Overview - The company owns a portfolio of 470 megawatts (MW) of solar photovoltaic (PV) systems and has long-term power purchase agreements (PPAs) with over 300 commercial and industrial (C&I) entities[17]. - The company has agreements to install over 70 additional MW of community solar projects, which are in advanced stages of development, expanding its service to customers in 5 states with projects in two additional states under construction[17]. - The company has experienced significant growth, providing clean electricity equivalent to the consumption of approximately 60,000 homes and displacing 320,000 tons of CO2 emissions annually[17]. - The company operates in 22 states and has a robust pipeline of projects supported by a deep network of developers and channel partners[21]. - The company has long-term power purchase agreements (PPAs) with over 300 commercial and industrial (C&I) entities and contracts with over 5,000 residential customers[206]. - The company has experienced significant growth in the last 12 months due to organic growth and targeted acquisitions, operating in 22 states[206]. Market Potential - The total addressable market for electricity in the U.S. is approximately $400 billion annually, with $200 billion spent on C&I, and an additional $98 billion investment required to meet 2030 sustainability goals[25]. - The solar energy market has penetrated less than 5% of its total addressable market in the U.S. C&I sector, indicating significant growth potential[60]. - The company’s community solar projects increase accessibility to clean electricity for customers who cannot install on-site solar, thus expanding its total addressable market[19]. Financial Performance - The company reported net revenue of $101.2 million for the year ended December 31, 2022, compared to $71.8 million for 2021, representing an increase of approximately 40.5%[121]. - The company's net income for the year ended December 31, 2022, was $52.2 million, up from $13.0 million in 2021, indicating a growth of approximately 302%[121]. - The company has not paid any cash dividends on its common stock to date, with future payments dependent on revenues and earnings[201]. Regulatory Environment - The Inflation Reduction Act of 2022 extended the investment tax credit (ITC) for solar power facilities to 30% for installations from 2022 to 2032, which is expected to enhance the company's financial performance[41]. - The Inflation Reduction Act (IRA) signed into law on August 16, 2022, extends investment tax credits (ITCs) and production tax credits (PTCs) for qualifying solar energy projects, which the company expects to continue claiming[130]. - Changes in federal, state, and local regulations could significantly reduce demand for solar energy systems, impacting the company's financial condition and operations[137]. Operational Challenges - Altus faces intense competition from traditional utilities and other renewable energy companies, which may have greater financial and operational resources[57]. - The company is at risk of adverse effects from potential shortages or price increases of key components, such as solar panels, due to industry disruptions[63]. - Recent increases in the price of solar panels may harm Altus's financial results, reversing previous benefits from declining costs[51]. - The increase in solar panel and raw material costs may slow growth and negatively impact financial results, reversing previous benefits from declining costs[69]. - Future growth may be constrained by operational risks, including equipment failures and regulatory compliance issues, which could adversely affect financial performance[78]. - The company faces challenges in managing growth effectively, requiring improvements in operational and financial systems to support expansion[86]. Strategic Initiatives - The company is developing a next-generation proprietary software stack that will integrate AI/ML to enhance operational efficiency and support growth[32]. - The company aims to pursue acquisitions of operating solar power generation assets, although success in this strategy is uncertain[53]. - The company’s growth strategy relies on the widespread adoption of solar power technology, which is influenced by cost-effectiveness and government incentives[54]. - The company is investing in strategic relationships with third parties, including large retailers, to generate new customers, but these initiatives may not yield expected results[95]. - The company’s growth strategy includes the development of new technologies and products, but successful execution is critical to achieving financial and strategic goals[97]. Human Resources - As of December 31, 2022, Altus had 62 employees, with 59 being full-time[47]. - The company has designed compensation and benefits programs to attract and retain top talent in a competitive industry[48]. - The company plans to form a diversity and inclusion committee to enhance workplace culture and broaden recruitment efforts[49]. - The company’s ability to attract and retain skilled personnel is crucial for project completion and customer account management, with competition for talent increasing[98]. Risks and Liabilities - The company faces potential product liability claims that could lead to significant monetary damages and adverse publicity[144]. - The company may incur substantial costs related to legal proceedings and regulatory inquiries, which could distract from core business operations[141]. - The company is subject to potential audits of its income and sales taxes, which could adversely affect its financial condition and results of operations[117]. - The company has identified material weaknesses in its internal control over financial reporting, which could lead to material misstatements in its consolidated financial statements[164]. - The company is currently working on a remediation plan that includes hiring additional finance department employees and formalizing risk assessment processes[167]. Market Position - The company is positioned to capitalize on the shift to renewable energy, aiming to become a "one-stop-shop" for clean energy transition by expanding EV charging and energy storage offerings[210]. - The company has a competitive edge in the C&I scale renewable energy market due to its innovative development process, which reduces costs and time in project development[211]. - Long-term revenue contracts for C&I solar generation typically last 20 years or more, with an average remaining life of approximately 15 years, enhancing customer relationships and cross-selling opportunities[212]. - The company has a market-leading cost of capital through an investment-grade rated scalable credit facility from Blackstone, enhancing its competitiveness in asset acquisition[213]. Stock and Ownership - Approximately 33% of the outstanding shares of Class A common stock are beneficially owned by directors, executive officers, and their affiliates, giving them significant influence over corporate decisions[174]. - The market price of the company's common stock is expected to be volatile, influenced by factors such as operating results and changes in laws and regulations[178]. - The company may issue additional shares of Class A common stock without stockholder approval, which could dilute ownership interests and depress the market price of shares[182].

Financial Data and Key Metrics Changes - The third quarter of 2022 was the most profitable in the company's history, with record revenues of $30.4 million, a 51% increase over Q3 2021 [27] - Adjusted EBITDA reached $19.4 million, a 57% increase year-over-year, resulting in an adjusted EBITDA margin of 64% [27][28] - For the first nine months of 2022, revenues were $74.4 million, up 48% from $50.2 million in the same period of 2021, while adjusted EBITDA increased by 49% to $42.1 million [28][31] Business Line Data and Key Metrics Changes - The company reported strong performance in its commercial scale segment, benefiting from long-term contracted revenues and a majority of contracts structured to escalate over time [14][21] - The recent acquisition of approximately 97 megawatts of solar assets and an additional 88 megawatts from D.E. Shaw renewable investments are expected to contribute positively to long-term recurring revenue and cash flow [19][20] Market Data and Key Metrics Changes - The company operates in 22 states, with a diverse portfolio that allows it to benefit from rising power prices through variable rate contracts [27][46] - The company has seen a significant increase in power prices, which has positively impacted its revenue per megawatt hour generated, up about 25% [45] Company Strategy and Development Direction - The company focuses on the commercial scale segment of the solar market, which has more attractive unit economics and long-term contracted revenues [14] - The strategic partnership with Blackstone enhances the company's access to capital and supports its growth through securitization [16][17] - The company aims to achieve a throughput of 200 to 250 megawatts of new construction assets per year, working to reduce obstacles in permitting and component availability [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to thrive despite industry challenges, including supply chain issues and tightening financial conditions [11][12] - The company anticipates significant increases in recurring cash flow due to asset growth, which will support platform growth while maintaining attractive profit margins [15][18] Other Important Information - The company recorded a GAAP net loss of $97 million in Q3, primarily due to a non-cash loss related to the mark-to-market of redeemable warrants [29] - The company is focused on minimizing shareholder dilution and has redeemed public and private warrants to achieve this goal [31][32] Q&A Session Summary Question: Progress on assets in pre-construction and construction phases - Management indicated that some assets are expected to come online in late 2022 and early 2023, with ongoing efforts to overcome challenges related to permitting and component availability [34][35] Question: Timing of acquisitions and market environment - The company expects to close several transactions within months, maintaining a strong position in the market despite rising interest rates [37][39] Question: Accessibility of financing for new assets and acquisitions - Management highlighted diverse funding sources, including a new revolving credit facility, which provides flexibility in financing decisions [40][42] Question: Year-over-year rate among variable rate contracts - The company experienced increases in power prices, which, along with seasonality, were key drivers for Q3 margins [45][46] Question: Impact of IRA on pipeline and tax credits - Management noted that clients are currently more influenced by rising power prices than the IRA, but they are well-positioned to take advantage of potential tax credit adders in 2023 [58][62] Question: Update on CBRE relationship and storage integration - The partnership with CBRE is progressing well, with plans to integrate storage into solar projects where beneficial, particularly in markets with favorable rate structures [67][72]

Part I [Item 1. Financial Statements](index=4&type=section&id=Item%201%2E%20Financial%20Statements) This section presents Altus Power, Inc.'s unaudited condensed consolidated financial statements, showing revenue growth and a net loss from non-cash fair value adjustments [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Operating revenues grew significantly for both Q3 and YTD 2022, but a substantial net loss was recorded due to non-cash fair value adjustments Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Operating revenues, net** | **$30,438** | **$20,138** | **$74,399** | **$50,222** | | Operating income | $10,708 | $5,712 | $16,351 | $15,080 | | Total other expense | $105,372 | $9,555 | $28,722 | $18,045 | | **Net loss** | **$(96,628)** | **$(1,291)** | **$(14,919)** | **$(1,468)** | | Net loss per share (Basic & Diluted) | $(0.63) | $(0.01) | $(0.08) | $(0.01) | - The significant increase in net loss for Q3 2022 was primarily driven by a **$29.6 million** charge for the change in fair value of redeemable warrant liability and a **$72.4 million** charge for the change in fair value of alignment shares liability[6](index=6&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to **$1.13 billion**, while total liabilities decreased and total equity increased as of September 30, 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$1,130,330** | **$1,113,249** | | Cash and cash equivalents | $290,894 | $325,983 | | Property, plant and equipment, net | $788,132 | $745,711 | | **Total Liabilities** | **$750,668** | **$771,711** | | Long-term debt, net | $527,709 | $524,837 | | Redeemable warrant liability | $12,715 | $49,933 | | Alignment shares liability | $136,826 | $127,474 | | **Total Equity** | **$361,218** | **$326,011** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, but net cash decreased due to significant investing and financing activities for the nine months ended September 30, 2022 Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,839 | $18,248 | | Net cash used for investing activities | $(44,911) | $(213,493) | | Net cash (used for) provided by financing activities | $(12,860) | $196,216 | | **Net (decrease) increase in cash** | **$(32,932)** | **$971** | [Notes to Financial Statements](index=12&type=section&id=Notes%20to%20Financial%20Statements) These notes detail accounting policies, revenue recognition, 2022 acquisitions, debt structure, fair value measurements, and a significant post-quarter acquisition - The company develops, owns, and operates large-scale solar energy and storage systems, selling electricity to commercial, industrial, public sector, and community solar customers under long-term contracts[26](index=26&type=chunk) Disaggregation of Revenue (in thousands) | Revenue Source | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue under power purchase agreements | $18,058 | $12,341 | | Revenue from net metering credit agreements | $20,908 | $17,922 | | Solar renewable energy certificate revenue | $28,521 | $17,164 | | Other Revenue Streams | $7,212 | $2,795 | | **Total** | **$74,399** | **$50,222** | - In 2022, the company completed several asset acquisitions, including the Stellar NJ, Stellar HI 2, and Stellar NJ 2 portfolios, adding a combined **13.9 MW** of solar energy facilities[49](index=49&type=chunk)[50](index=50&type=chunk)[53](index=53&type=chunk) - Subsequent to the quarter end, on November 11, 2022, the company acquired approximately **88 MW** of operating solar facilities for a total consideration of about **$102.0 million**[119](index=119&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong revenue growth from acquisitions and new assets, detailing financial performance, key operational metrics, liquidity, and growth strategies leveraging partnerships - The company's portfolio grew to over **350 MW** of solar PV, serving over **300 C&I entities** and **5,000 residential customers** through community solar projects[124](index=124&type=chunk) - Growth strategies focus on leveraging partnerships with Blackstone for capital and CBRE for access to a large portfolio of commercial and industrial properties to expand its customer base[123](index=123&type=chunk)[129](index=129&type=chunk)[133](index=133&type=chunk) Key Operational Metrics | Metric | As of Sep 30, 2022 | As of Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Megawatts installed (Cumulative) | 377 MW | 262 MW | +115 MW | | Megawatt hours generated (Q3) | 139,000 MWh | 115,000 MWh | +24,000 MWh | | Megawatt hours generated (YTD) | 362,000 MWh | 287,000 MWh | +75,000 MWh | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net loss | $(96,628) | $(14,919) | | Adjustments (Interest, Tax, D&A, etc.) | $115,018 | $56,974 | | **Adjusted EBITDA** | **$19,390** | **$42,055** | | Operating revenues, net | $30,438 | $74,399 | | **Adjusted EBITDA margin** | **64%** | **57%** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces modest interest rate risk due to fixed-rate debt and manages credit risk through high-quality financial institutions and customer evaluations - The company has modest exposure to interest rate risk as a significant portion of its debt is fixed-rate. It sometimes uses derivative instruments to hedge exposure on floating-rate debt[253](index=253&type=chunk) - Credit risk from cash and receivables is managed by using high-quality financial institutions and performing ongoing credit evaluations of customers[254](index=254&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to material weaknesses, and a remediation plan is underway to enhance financial controls - Management concluded that disclosure controls and procedures were not effective as of September 30, 2022, due to previously identified material weaknesses in internal control over financial reporting[256](index=256&type=chunk) - The company's remediation plan includes hiring additional finance and SOX personnel, formalizing the risk assessment process, and documenting and improving control activities, including deploying a new ERP system[257](index=257&type=chunk)[258](index=258&type=chunk) Part II [Item 1. Legal Proceedings](index=54&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is involved in routine legal claims, none of which are expected to materially impact its financial position or operations - The company reports no material legal proceedings that are expected to have a significant adverse effect on its financial condition or operations[262](index=262&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A%2E%20Risk%20Factors) This section details key risks including intense competition, supply chain reliance, operational challenges, acquisition integration, and internal control weaknesses - The company faces significant competition from traditional utilities and other renewable energy companies, and its business could be harmed by reductions in retail electricity prices or changes in government incentives[263](index=263&type=chunk) - The company's growth strategy includes acquisitions, but it may not be successful in identifying or integrating them, which could disrupt business and management[266](index=266&type=chunk)[267](index=267&type=chunk) - Material weaknesses in internal control over financial reporting have been identified. Failure to remediate these weaknesses could result in material misstatements of financial statements or failure to meet reporting obligations[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) - The accounting for redeemable warrants and alignment shares as derivative liabilities can cause significant non-cash fluctuations in reported earnings, which may adversely affect the stock price[303](index=303&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **1,111,243** Class A common shares in exchange for **4,630,163** redeemable warrants via private agreements, relying on a registration exemption - The company issued **1,111,243** shares of Class A common stock in exchange for **4,630,163** redeemable warrants through privately negotiated agreements, relying on a registration exemption[308](index=308&type=chunk)

Financial Data and Key Metrics Changes - The company reported revenues of $24.8 million for Q2 2022, a 41% increase compared to Q2 2021, and $44 million for the first half of 2022, reflecting a 46% increase year-over-year [27][28] - Adjusted EBITDA for Q2 2022 was $13.9 million, up 37% from $10.2 million in Q2 2021, with an adjusted EBITDA margin of 56% [28][29] - GAAP net income for Q2 2022 was $21.6 million, primarily due to a non-cash gain from the re-measurement of redeemable warrants [29] Business Line Data and Key Metrics Changes - The company sold 137 megawatt hours of clean electricity in Q2 2022, avoiding almost 100,000 equivalent metric tons of carbon emissions [10] - The operating portfolio reached 369 megawatts by the end of Q2 2022, with significant progress in both acquisition and development pipelines [16] Market Data and Key Metrics Changes - The company noted substantial utility rate increases for commercial customers, which are expected to continue due to elevated natural gas prices [26] - The Inflation Reduction Act is anticipated to enhance the economic argument for commercial-scale solar and accelerate battery storage additions [12] Company Strategy and Development Direction - The company aims to maintain profitability while scaling operations, focusing on cash flow positivity since 2017 [9] - A master services agreement with CBRE is expected to enhance project management efficiency and scale operations [21][23] - The company is focused on expanding its addressable market through community solar projects and leveraging the benefits of the Inflation Reduction Act [12][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2022 adjusted EBITDA guidance of $57 million to $63 million, with a focus on maintaining high EBITDA margins [8][29] - The company is optimistic about the long-term benefits of the Inflation Reduction Act, viewing it as an accelerant for growth and market expansion [62] Other Important Information - The company issued its first sustainability report, highlighting its commitment to environmental, social, and governance (ESG) standards [11] - Total debt at the end of Q2 2022 was $538 million, with $295 million in unrestricted cash, indicating a well-capitalized balance sheet [29] Q&A Session Summary Question: Capacity outlook and project timelines - Management indicated that approximately 100 megawatts of project acquisitions are expected to close in one to three months, with ongoing negotiations for additional assets [35][36] Question: Bottlenecks in securing components - Management acknowledged improvements in securing interconnection permissions and permits, while also addressing component scarcity by maintaining inventory [40] Question: Impact of the Inflation Reduction Act on project economics - Management noted that while the investment tax credit (ITC) remains favorable for commercial projects, they will evaluate the potential benefits of the production tax credit (PTC) [43][44] Question: CBRE collaboration and its impact on the pipeline - Management confirmed that CBRE's engagement is expected to significantly enhance the project pipeline, with ongoing projects already in construction [52][53] Question: Employee growth and scaling the business - Management highlighted the importance of hiring in construction and engineering roles to support the growing number of assets in operation and construction [66] Question: Inventory strategy for switch gear and transformers - Management is actively purchasing inventory and working on designs to mitigate delays caused by component scarcity [69][70]

Altus Power, Inc. (NYSE:AMPS) Q1 2022 Results Conference Call May 16, 2022 8:30 AM ET Company Participants Chris Shelton - Head of Investor Relations Lars Norell - Co-Founder and Co-CEO Gregg Felton - Co-Founder and Co-CEO Dustin Weber - Chief Financial and Operating Officer Conference Call Participants Justin Clare - ROTH Capital Partners Ryan Levine - Citi Operator Good morning and welcome to the Altus Power First Quarter 2022 Conference Call. As a reminder, today's call is being recorded and participants ...

Part I [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Altus Power reported Q1 2022 operating revenues of $19.2 million, with net income surging to $60.1 million primarily from non-cash gains [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2022 operating revenues grew 54% to $19.2 million, with net income reaching $60.1 million driven by significant non-cash fair value gains Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Operating revenues, net** | **$19,199** | **$12,471** | | Operating income | $161 | $3,028 | | Total other (income) expense | $(59,851) | $3,802 | | **Net income** | **$60,135** | **$263** | | Net income attributable to Altus Power, Inc. | $60,419 | $962 | | **Diluted EPS** | **$0.39** | **$0.01** | - The significant increase in net income was primarily driven by a **$18.5 million** gain on the change in fair value of redeemable warrant liability and a **$46.3 million** gain on the change in fair value of alignment shares liability, which are non-cash items[8](index=8&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets were **$1.104 billion**, with liabilities decreasing to **$702.6 million** and equity increasing to **$365.9 million** Balance Sheet Summary (in thousands) | Metric | As of March 31, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Cash | $318,177 | $325,983 | | Total current assets | $335,848 | $344,404 | | Property, plant and equipment, net | $745,991 | $745,711 | | **Total assets** | **$1,104,349** | **$1,113,249** | | Total current liabilities | $31,473 | $32,891 | | Long-term debt, net | $521,869 | $524,837 | | **Total liabilities** | **$702,636** | **$771,711** | | **Total stockholders' equity** | **$365,945** | **$304,918** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2022 net cash from operations was **$3.5 million**, while investing activities used **$6.6 million** and financing activities used **$4.7 million** Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,499 | $3,222 | | Net cash used for investing activities | $(6,571) | $(8,671) | | Net cash used for financing activities | $(4,720) | $(8,201) | | **Net decrease in cash and restricted cash** | **$(7,792)** | **$(13,650)** | [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Financial%20Statements) Notes detail accounting policies, revenue streams, debt, and fair value measurements, highlighting a single operating segment and significant non-cash gains - The company operates as a single operating segment, focusing on developing, owning, and operating solar energy generation and storage systems in the United States[22](index=22&type=chunk)[29](index=29&type=chunk) Disaggregation of Revenue (in thousands) | Revenue Source | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue under power purchase agreements | $4,182 | $3,132 | | Revenue from net metering credit agreements | $3,910 | $2,944 | | Solar renewable energy certificate revenue | $9,531 | $5,565 | | Rental income | $644 | $114 | | Performance based incentives | $359 | $551 | | Other revenue | $573 | $165 | | **Total** | **$19,199** | **$12,471** | - Total principal long-term debt as of March 31, 2022, was **$552.6 million**, primarily consisting of a **$496.6 million** Amended Rated Term Loan with a fixed weighted average interest rate of **3.51%**[51](index=51&type=chunk)[52](index=52&type=chunk) - The fair value of the redeemable warrant liability decreased by **$18.5 million**, and the alignment shares liability decreased by **$46.3 million** during Q1 2022, resulting in significant non-cash gains[70](index=70&type=chunk)[75](index=75&type=chunk) - The company recognized **$1.3 million** in stock-based compensation expense in Q1 2022, a significant increase from **$0.1 million** in Q1 2021, mainly due to new RSU grants under the Omnibus Incentive Plan[94](index=94&type=chunk)[97](index=97&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 54% revenue growth, **38% Adjusted EBITDA** increase, a **one-gigawatt pipeline**, and internal control remediation efforts [Overview and Key Factors](index=26&type=section&id=MD%26A%20Overview) Altus Power operates over **350 MW** of solar and storage systems, leveraging long-term contracts and strategic partnerships for growth - The company's portfolio consists of over **350 MW** of solar PV, with long-term PPAs with over 300 C&I entities and contracts with over 5,000 residential community solar customers[109](index=109&type=chunk) - Key growth strategies include expanding EV charging and energy storage offerings and leveraging partnerships with Blackstone and CBRE to access new customers[113](index=113&type=chunk) - The average remaining life of the company's contracts is approximately **18 years**, with about **60%** of the current installed portfolio having variable rates tied to local utility prices[115](index=115&type=chunk) - As of March 31, 2022, the company has a project pipeline of over **one gigawatt**, split between potential operating acquisitions and development projects, though supply chain challenges have extended timelines by **3 to 6 months**[121](index=121&type=chunk)[122](index=122&type=chunk) [Key Financial and Operational Metrics](index=30&type=section&id=Key%20Financial%20and%20Operational%20Metrics) Cumulative installed capacity reached **362 MW**, with Adjusted EBITDA growing **38%** to **$8.8 million** and an Adjusted EBITDA margin of **46%** Cumulative Megawatts Installed | Metric | As of March 31, 2022 | As of March 31, 2021 | | :--- | :--- | :--- | | Megawatts installed | 362 MW | 247 MW | Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $60,135 | $263 | | Adjustments (Interest, D&A, non-cash/non-recurring items) | $(51,384) | $6,062 | | **Adjusted EBITDA** | **$8,751** | **$6,325** | | Operating revenues, net | $19,199 | $12,471 | | **Adjusted EBITDA margin** | **46%** | **51%** | [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Q1 2022 operating revenues grew **53.9%** to **$19.2 million**, while G&A expenses increased **97.9%** due to higher headcount and non-cash gains - Operating revenues increased by **$6.7 million (53.9%)** in Q1 2022 compared to Q1 2021, primarily due to the increased number of solar energy facilities from acquisitions and projects placed in service[160](index=160&type=chunk) - General and administrative expenses increased by **$3.2 million (97.9%)** year-over-year, mainly due to increased personnel costs from higher headcount[162](index=162&type=chunk) - Stock-based compensation increased by **$1.3 million**, primarily due to RSU grants under the new Omnibus Incentive Plan adopted in July 2021[166](index=166&type=chunk) - The company recorded a non-cash gain of **$18.5 million** from the change in fair value of its redeemable warrant liability and a **$46.3 million** gain from its alignment shares liability, driven by a decrease in the company's stock and warrant prices[167](index=167&type=chunk)[169](index=169&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company held **$322.5 million** in cash, with future growth dependent on external financing and existing debt facilities - As of March 31, 2022, the Company had total cash and restricted cash of **$322.5 million**[176](index=176&type=chunk) - The company's business model requires substantial outside financing to grow, and it plans to use existing debt facilities, tax equity investors, and operating cash flow to fund expansion[177](index=177&type=chunk) - The company has outstanding letters of credit and surety bonds totaling **$10.6 million** as of March 31, 2022, primarily for performance-related obligations and debt service reserves[180](index=180&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks, primarily interest rate and credit risk, through fixed-rate debt, derivatives, and credit evaluations - A significant portion of the company's debt has a fixed interest rate, and derivative instruments are sometimes used to hedge floating-rate interest rate exposure[201](index=201&type=chunk)[202](index=202&type=chunk) - Credit risk from cash and restricted cash is managed by using high-quality financial institutions, while customer credit risk is monitored through ongoing evaluations[203](index=203&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to material weaknesses, with a remediation plan underway including new hires and ERP implementation - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to previously identified material weaknesses in internal control over financial reporting[205](index=205&type=chunk) - The company's remediation plan includes hiring key finance and SOX personnel, formalizing risk assessment, and implementing a new ERP system to improve financial reporting controls[206](index=206&type=chunk) - During the quarter, the company completed the implementation of a new accounting system to create a more efficient financial statement closing process[208](index=208&type=chunk) Part II [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings not expected to materially affect its financial position or operations - Current legal proceedings are considered ordinary and are not expected to have a material adverse effect on the company[210](index=210&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the 2021 Annual Report on Form 10-K - No material changes to risk factors were reported since the 2021 Annual Report on Form 10-K[211](index=211&type=chunk) [Other Part II Items](index=44&type=section&id=Other%20Part%20II%20Items) The report indicates no unregistered sales of equity, no defaults on senior securities, and no mine safety disclosures - Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information) were all reported as 'None' or 'Not applicable'[211](index=211&type=chunk)