Market Performance - On August 15, U.S. stock indices closed mixed, with the Dow Jones slightly up by 0.08% at 44,946.12 points, while the Nasdaq fell by 0.40% to 21,622.98 points, and the S&P 500 decreased by 0.29% to 6,449.80 points [1] - Major tech stocks showed varied performance, with Intel rising nearly 3%, while Tesla dropped over 1% [1] Retail Sales Data - July retail sales in the U.S. increased by 0.5%, aligning with market expectations, indicating healthy consumer spending despite concerns over tariffs potentially raising prices [2] - Excluding automobiles, retail sales grew by 0.3%, with motor vehicle sales surging by 1.6% and furniture sales increasing by 1.4% [2] - Year-over-year, July retail sales rose by 3.9% [2] Notable Stock Movements - UnitedHealth saw a significant increase of 11.98%, marking its largest single-day gain since October 2008, following Berkshire Hathaway's purchase of 5.04 million shares valued at approximately $1.6 billion [3] - Nvidia's stock fell by 0.86%, with a focus on its substantial investment in AI cloud computing services [3] - Tesla's stock decreased by 1.50%, with JP Morgan Chase increasing its holdings by 16.7%, making it one of Tesla's top five institutional shareholders [3] Solar Sector Performance - The solar sector experienced a collective surge, with Sunrun's stock rising by 32.82% and SolarEdge Technologies increasing by 17.10% [4] - Other solar-related stocks also saw significant gains, with Array Technologies up by 25.33% and Enphase Energy rising by 8.13% [4][5] Tax Credit Changes for Renewable Energy - New guidelines from the U.S. Treasury and IRS have altered the criteria for tax credits for solar and wind projects, moving away from the previous "5% standard" to requiring proof of substantial ongoing construction [7] - The changes are expected to positively impact over 2,500 potential solar and wind projects, equivalent to the capacity of 383 nuclear power plants [7]

Core Viewpoint - The solar energy sector in the U.S. is experiencing a surge in stock prices, driven by concerns over upcoming tax guidance from the U.S. Treasury that could threaten the financial viability of numerous clean energy projects [1] Group 1: Stock Performance - Solar stocks such as Sunrun (RUN.US), Daqo New Energy (DQ.US), and Canadian Solar (CSIQ.US) have risen over 7%, while JinkoSolar (JKS.US) and Array Technologies (ARRY.US) have increased over 6%, and Enphase Energy (ENPH.US) has gained over 4% [1] Group 2: Policy Changes - The core controversy revolves around adjustments to the eligibility criteria for clean energy tax credits, which have historically allowed developers to qualify for tax subsidies by demonstrating over 5% of project costs incurred by a specific deadline [1] - An executive order signed by former President Trump last month mandates the Treasury to significantly raise this threshold or require developers to provide more evidence of construction progress [1] Group 3: Potential Impact - Analysts warn that if the new regulations are implemented, many projects that rely on tax credits for profitability may lose their eligibility, potentially leading to project cancellations [1]

Core Viewpoint - Sunrun Inc's shares are experiencing a decline despite a maintained "overweight" rating and an increased price target from Wells Fargo, indicating potential bullish sentiment in the future [1]. Group 1: Stock Performance - Shares of Sunrun Inc are down 3.4%, trading at $10.56, and are on track for a fifth consecutive daily drop, although they remain above the $10 support level [1][2]. - The stock has increased by 14.5% in 2025 but has struggled to surpass the $12.50 resistance level [2]. Group 2: Analyst Sentiment - Wells Fargo has raised the price target for Sunrun from $8 to $14, citing a strong long-term cash generation outlook [1]. - Among analysts covering the stock, 11 out of 21 have a "hold" or worse recommendation, suggesting a bearish sentiment overall [1]. Group 3: Short Selling Activity - Short sellers have decreased their positions by 7.2% in the most recent reporting period, which represents 25.6% of the stock's total available float, indicating potential buying pressure [2].

Core Insights - Sunrun (NASDAQ: RUN) reported its Q2 earnings, significantly beating estimates, which came as a surprise to many [1] Financial Performance - The earnings report indicated a substantial positive deviation from market expectations, highlighting the company's strong performance in the quarter [1]

Core Insights - Sunrun reported revenue of $569.34 million for the quarter ended June 2025, reflecting an 8.7% increase year-over-year and a surprise of +2.17% over the Zacks Consensus Estimate of $557.23 million [1] - The company's EPS was $1.07, significantly up from $0.55 in the same quarter last year, resulting in an EPS surprise of +694.44% against a consensus estimate of -$0.18 [1] Financial Performance Metrics - Storage Capacity Installed: 391.50 MWh, exceeding the four-analyst average estimate of 344.10 MWh [4] - Solar Capacity Installed: 227.20 MW, surpassing the four-analyst average estimate of 200.11 MW [4] - Subscriber additions reached 28,823, compared to the average estimate of 25,419 [4] - Revenue from customer agreements and incentives was $458 million, above the average estimate of $424.12 million, marking an 18.1% year-over-year increase [4] - Revenue from solar energy systems and product sales was $111.34 million, below the average estimate of $121.38 million, representing an 18.2% decrease year-over-year [4] Stock Performance - Sunrun's shares have returned -4.3% over the past month, while the Zacks S&P 500 composite has increased by +0.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Sunrun reported quarterly earnings of $1.07 per share, significantly exceeding the Zacks Consensus Estimate of a loss of $0.18 per share, marking an earnings surprise of +694.44% [1] - The company achieved revenues of $569.34 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.17% and showing an increase from $523.87 million year-over-year [2] Financial Performance - Over the last four quarters, Sunrun has surpassed consensus EPS estimates three times and topped revenue estimates two times [2] - The current consensus EPS estimate for the upcoming quarter is -$0.11 on revenues of $604.9 million, and for the current fiscal year, it is -$0.41 on revenues of $2.26 billion [7] Market Position - Sunrun shares have increased by approximately 1.8% since the beginning of the year, underperforming compared to the S&P 500's gain of 7.1% [3] - The Zacks Industry Rank indicates that the Solar industry is currently in the bottom 40% of over 250 Zacks industries, which may impact stock performance [8] Future Outlook - The sustainability of Sunrun's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The estimate revisions trend for Sunrun was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market in the near future [6]

Financial Data and Key Metrics Changes - The company generated $1.6 billion in top line aggregate subscriber value, a 40% year-over-year increase, significantly exceeding guidance [7][20] - Contracted net value creation reached $376 million, more than doubling from the previous quarter and well above guidance [8][20] - Cash generation was $27 million, marking the fifth consecutive quarter of positive cash generation, although lower than prior guidance [9][10][29] Business Line Data and Key Metrics Changes - The attachment rate of storage offerings grew to an all-time high of 70% of customer additions during the quarter [8] - Subscriber value increased to approximately $54,000, a 22% increase compared to the prior year, driven by a 16 percentage point increase in storage attachment rate [18] - Net subscriber value grew by 182% year-over-year to $17,000, the highest in the company's history [19] Market Data and Key Metrics Changes - The company represents over 40% of storage installations and more than one-third of subscription volumes nationally [14] - The company expects to have more than 10 gigawatt hours of dispatchable energy online by 2029, indicating significant growth potential in the market [12] Company Strategy and Development Direction - The company is transitioning to lead with storage and provide sophisticated products and services, positioning itself as a major independent power producer [10][11] - The focus remains on running a sustainable business with strong margins and high-quality installations, even as market dynamics present growth opportunities [14] - The company is actively engaged in Washington D.C. to ensure its role in building the nation's largest distributed power plant is recognized [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting cash generation outlook of $200 million to $500 million for the full year despite lower quarterly cash generation [10][29] - The company anticipates continued strong financial returns under enacted legislation, with a focus on energy resilience and independence for homeowners [13][14] - Management noted that the transition to a post-ITC world will require strategic adjustments but remains optimistic about maintaining margins and growth [16][29] Other Important Information - The company paid down $21 million in recourse debt during the quarter, ending with $618 million in unrestricted cash, a $13 million increase from the prior quarter [10][27] - The company has secured approximately $1.2 billion in upfront cash for subscriber additions in Q2, representing about 85% of the aggregate contracted subscriber value [21] Q&A Session Summary Question: Clarification on safe harbor and construction timelines - Management confirmed that safe harbor activities extend the runway for ITC benefits beyond 2028, with a focus on maintaining margins [33][34] Question: Cash generation guidance and working capital - Management indicated that cash generation guidance reflects working capital effects and expectations for the remainder of the year [36][37] Question: Drivers of net value creation increase - Management attributed the increase to higher volume, improved margins, and operational efficiencies, while noting that cash generation may be back-weighted [41][45] Question: Safe harbor spending and future plans - Management plans to continue safe harbor activities, depending on forthcoming treasury guidance [52][96] Question: Recurring revenue from grid services - Management estimated current recurring revenue from enrolled customers at around $20 million per year, with potential for significant growth [53][55] Question: Market dynamics post-25D tax credit - Management anticipates a 25% contraction in the overall market but expects some volume to flow to the company [61][64] Question: Opportunities to re-engage existing customers - Management sees significant potential to market grid services to the existing customer base, particularly those without storage [66][68] Question: Cost savings and efficiencies - Management emphasized ongoing efforts to reduce customer acquisition costs and improve operational efficiencies [71][73] Question: State-level policy and subsidy outlook - Management noted that state-level programs remain stable and may enhance opportunities for growth in renewable energy [80][81]

Financial Data and Key Metrics Changes - The company generated $1.6 billion in top line aggregate subscriber value, a 40% year-over-year increase, significantly exceeding guidance [6][19] - Contracted net value creation reached $376 million, more than doubling from the previous quarter and well above guidance [6][19] - Cash generation was $27 million, marking the fifth consecutive quarter of positive cash generation, although lower than prior guidance [7][8][22] - The company ended the quarter with $618 million in unrestricted cash, a $13 million increase from the prior quarter [9] Business Line Data and Key Metrics Changes - The attachment rate of storage offerings grew to an all-time high of 70% of customer additions [6] - Subscriber value increased to approximately $54,000, a 22% increase compared to the prior year [16] - Net subscriber value grew by 182% year-over-year to $17,000, the highest in the company's history [18] Market Data and Key Metrics Changes - The company represents over 40% of storage installations and more than one-third of subscription volumes nationally [13] - The enrollment in Home to Grid programs grew by 300% year-over-year, with over 71,000 customers participating [10] Company Strategy and Development Direction - The company is transitioning to lead with storage and provide sophisticated products and services, positioning itself as a significant independent power producer [9][10] - The focus remains on running a sustainable business with strong margins and high-quality installations, even as market dynamics present growth opportunities [13] - The company plans to have more than 10 gigawatt hours of dispatchable energy online by 2029 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate strong financial returns under the new legislation, despite the upcoming sunset of certain tax credits [12][13] - The company anticipates a cash generation outlook of $200 million to $500 million for the full year, reflecting strong operating performance [28] - Management noted that cash generation may be back-weighted in the year due to working capital timing and market activity [42] Other Important Information - The company has paid down $21 million in recourse debt during the quarter and has a plan to pay down $100 million or more in 2025 [26] - The company has secured $1.7 billion in tax equity thus far in 2025, providing a strong capital runway [23] Q&A Session Summary Question: Clarification on safe harbor and construction timelines - Management confirmed that the safe harbor extends the runway beyond 2028 and is working to articulate the loss in margin from the solar ITC [31][32] Question: Cash generation guidance and working capital - Management indicated that cash generation guidance reflects working capital effects and expectations for the balance of the year [34][35] Question: Factors driving net value creation increase - Management attributed the increase to sequential growth in volume, margin expansion from ITC increases, and operating cost efficiencies [40][41] Question: Safe harbor financing needs - Management stated that they are pursuing a capital-light strategy for safe harbor activities and are assessing the impact of executive orders on future plans [45][46] Question: Recurring revenue from grid services - Management noted that current recurring revenue from enrolled customers is around $20 million per year, with expectations for growth as more customers enroll [51][52] Question: State-level subsidies and policy programs - Management highlighted the importance of state-level programs and the potential for enhancements in renewable commitments [79][80] Question: Cost savings and efficiencies - Management emphasized ongoing efforts to reduce customer acquisition costs and improve operational efficiencies, aided by AI innovations [70][71] Question: Market dynamics post-25D tax credit - Management anticipates a 25% contraction in the overall market but believes some volume will flow to the company as partners transition to third-party owned models [60][61]

Financial Performance Highlights - Aggregate Subscriber Value reached $1.6 billion in 2Q25, a 40% year-over-year increase[7] - Contracted Net Value Creation was $376 million in 2Q25, up 316% year-over-year[7] - Cash Generation was $27 million in 2Q25, marking the fifth consecutive quarter of positive cash generation[8] - Upfront Net Subscriber Value exceeded $5.7k, representing an 11% margin, expanding 17 percentage points year-over-year[10] Operational Achievements - Customer Additions grew 15% year-over-year in Q2[14] - Customer Additions with Storage grew 50% year-over-year in Q2, with Storage Attachment Rate reaching 70%[14] - Sunrun dispatched 325 MWs of capacity during peak demand in California dispatches in June 2025[20] - Customer enrollments in home-to-grid distributed power plant programs has grown >300% y/y to more than 71k customers[17] Guidance and Outlook - 3Q 2025 Aggregate Subscriber Value is guided to be $1.5 to $1.6 billion, representing 8% growth year-over-year at the midpoint[81] - Full-year 2025 Contracted Net Value Creation is projected to be $1.0 to $1.3 billion, an increase from the prior guidance of $650 to $850 million, representing 67% growth year-over-year at the midpoint[81]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=8&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Sunrun's unaudited consolidated financial statements for Q2 2025, detailing the company's financial position, performance, and cash flows [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) As of **June 30, 2025**, total assets increased to **$21.23 billion** from **$19.90 billion** at year-end **2024**, with total liabilities rising to **$16.78 billion** from **$15.73 billion**, and total equity growing to **$3.73 billion** from **$3.54 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$21,230,135** | **$19,897,884** | | Cash | $618,057 | $574,956 | | Solar energy systems, net | $16,063,482 | $15,032,115 | | **Total Liabilities** | **$16,783,913** | **$15,733,674** | | Non-recourse debt, net | $13,224,063 | $12,037,846 | | **Total Equity** | **$3,730,637** | **$3,540,051** | - Assets of Variable Interest Entities (VIEs) that can only be used to settle VIE obligations amounted to **$14.46 billion** as of **June 30, 2025**, up from **$13.29 billion** at the end of **2024**[25](index=25&type=chunk) [Consolidated Statements of Operations](index=11&type=section&id=Consolidated%20Statements%20of%20Operations) For **Q2 2025**, total revenue grew to **$569.3 million**, while net loss widened to **$279.0 million**, yet net income attributable to common stockholders increased to **$279.8 million** due to noncontrolling interests Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$569,336** | **$523,866** | **$1,073,607** | **$982,054** | | Customer agreements and incentives | $458,000 | $387,825 | $860,920 | $710,792 | | Solar energy systems and product sales | $111,336 | $136,041 | $212,687 | $271,262 | | **Loss from Operations** | **($112,249)** | **($128,048)** | **($227,137)** | **($311,170)** | | **Net Loss** | **($278,984)** | **($259,928)** | **($556,155)** | **($543,078)** | | **Net Income Attributable to Common Stockholders** | **$279,773** | **$139,074** | **$329,784** | **$51,256** | | Diluted EPS | $1.07 | $0.55 | $1.28 | $0.23 | [Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended **June 30, 2025**, net cash used in operating activities was **$396.9 million** and investing activities was **$1.35 billion**, offset by **$1.81 billion** from financing, resulting in a **$64.7 million** net increase in cash Consolidated Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($396,865) | ($351,638) | | Net cash used in investing activities | ($1,347,842) | ($1,144,249) | | Net cash provided by financing activities | $1,809,368 | $1,550,297 | | **Net change in cash and restricted cash** | **$64,661** | **$54,410** | [Notes to Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, including VIE consolidation and revenue recognition, alongside disclosures on financial instruments, debt, derivatives, stock-based compensation, and commitments - The company's primary business is the design, installation, sale, ownership, and maintenance of home battery storage and solar energy systems. It utilizes a partnership-flip legal structure for its financing Funds[39](index=39&type=chunk)[41](index=41&type=chunk) - Revenue from customer agreements is recognized when the system receives permission to operate (PTO), typically on a straight-line basis over the **20 or 25-year** contract term. Revenue from solar energy system sales is recognized upon passing inspection by the local authority[60](index=60&type=chunk)[65](index=65&type=chunk) - As of **June 30, 2025**, the company had total debt of **$14.04 billion**, consisting of **$814.7 million** in recourse debt and **$13.22 billion** in non-recourse debt[82](index=82&type=chunk) - The company uses interest rate swaps to hedge variable interest payments on its debt, with a total notional amount of over **$4.3 billion** as of **June 30, 2025**[89](index=89&type=chunk)[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Sunrun's financial performance, key operating metrics, and liquidity, addressing macroeconomic challenges and regulatory impacts on its solar-plus-storage business [Overview and Market Environment](index=38&type=section&id=Overview%20and%20Market%20Environment) Sunrun, a leading solar-plus-storage provider, navigates macroeconomic headwinds and regulatory shifts like California's NBT and the federal OBBB Act, while pursuing home electrification and grid services opportunities - Sunrun's core offering is a solar-plus-storage service through **20- or 25-year** Customer Agreements, insulating customers from rising retail electricity prices[121](index=121&type=chunk) - The business is impacted by macroeconomic challenges such as rising interest rates, which increase the cost of capital, and trade policy uncertainties, including tariffs on solar components[128](index=128&type=chunk)[129](index=129&type=chunk) - The One Big Beautiful Bill Act (OBBB), signed into law on **July 4, 2025**, presents a significant regulatory challenge by shortening the availability of the Section 48E tax credit for solar facilities to the **end of 2027** and ending the Section 25D residential credit in **2026**[130](index=130&type=chunk) - In California, the Net Billing Tariff (NBT) has enhanced the value proposition for storage offerings, making the state predominantly a solar-plus-storage market for new installations[130](index=130&type=chunk) [Key Operating Metrics](index=43&type=section&id=Key%20Operating%20Metrics) As of **June 30, 2025**, key metrics show Networked Solar Capacity at **7,949 MW**, total customers at **1,105,080**, Gross Earning Assets at **$19.8 billion**, and Q2 subscriber additions of **28,823** with **$1.44 billion** in contracted value Key Metrics as of June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Networked Solar Capacity (MW) | 7,949 | 7,058 | | Customers | 1,105,080 | 984,000 | Gross Earning Assets as of June 30 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Contracted Gross Earning Assets | $15,154,928 | $12,050,938 | | Non-contracted or Upside Gross Earning Assets | $4,630,393 | $3,640,744 | | **Gross Earning Assets** | **$19,785,321** | **$15,691,682** | Subscriber Additions for Q2 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Subscriber Additions | 28,823 | 24,984 | | Contracted Subscriber Value (per Subscriber) | $49,919 | $41,872 | | Aggregate Contracted Subscriber Value (in thousands) | $1,438,803 | $1,046,136 | [Results of Operations](index=50&type=section&id=Results%20of%20Operations) For **Q2 2025**, total revenue increased **9%** to **$569.3 million**, while total operating expenses rose **5%** to **$681.6 million**, resulting in a **$279.0 million** net loss but a **$279.8 million** net income attributable to common stockholders Revenue Comparison - Q2 2025 vs. Q2 2024 (in thousands) | Revenue Category | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Customer agreements and incentives | $458,000 | $387,825 | $70,175 | 18% | | Solar energy systems and product sales | $111,336 | $136,041 | ($24,705) | (18)% | | **Total Revenue** | **$569,336** | **$523,866** | **$45,470** | **9%** | - The decrease in solar energy systems sales revenue was primarily due to a higher proportion of customers choosing service agreements over outright purchases, likely influenced by increased interest rates[174](index=174&type=chunk) Operating Expense Comparison - Q2 2025 vs. Q2 2024 (in thousands) | Expense Category | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cost of customer agreements and incentives | $345,376 | $298,665 | $46,711 | **16%** | | Cost of solar energy systems and product sales | $104,144 | $130,120 | ($25,976) | **(20)%** | | Sales and marketing | $152,459 | $151,657 | $802 | **1%** | | General and administrative | $71,543 | $61,229 | $10,314 | **17%** | | **Total Operating Expenses** | **$681,585** | **$651,914** | **$29,671** | **5%** | - The increase in net loss attributable to noncontrolling interests was primarily due to the addition of **six new investment funds** since **June 30, 2024**, as these funds typically allocate more losses to the noncontrolling interest in their early years[184](index=184&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) As of **June 30, 2025**, Sunrun had **$618.1 million** in cash, with operations primarily financed by investment funds and debt, and management expects sufficient liquidity for the **next 12 months** contingent on external financing - As of **June 30, 2025**, the company had cash of **$618.1 million** and outstanding borrowings of **$336.5 million** on its **$447.5 million** credit facility[199](index=199&type=chunk) - The business model requires substantial outside financing to fund growth. The company anticipates raising additional capital from new and existing investors and believes it has sufficient liquidity for at least the **next 12 months**[200](index=200&type=chunk) - The company has a purchase commitment with a supplier to purchase **$422.4 million** of batteries by the end of **Q4 2025**, which can be canceled without significant penalties[108](index=108&type=chunk)[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on variable-rate debt, which it hedges using derivative instruments, with no material changes since **December 31, 2024** - The company's main market risk is from interest rate fluctuations on its variable-rate debt[208](index=208&type=chunk) - Sunrun uses derivative instruments to hedge its interest rate exposure and does not use them for speculative purposes[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of **June 30, 2025**, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[210](index=210&type=chunk) - No material changes to the company's internal control over financial reporting were identified during the quarter[211](index=211&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary course legal proceedings, which management does not currently expect to have a material adverse effect on its financial position - The company is subject to legal proceedings in the ordinary course of business but does not currently expect them to have a material adverse effect[113](index=113&type=chunk)[214](index=214&type=chunk) [Item 1A. Risk Factors](index=59&type=page&id=Item%201A.%20Risk%20Factors) The company faces significant risks from evolving industry dynamics, regulatory changes, financing challenges, operational vulnerabilities, and tax policy uncertainties [Risks Related to the Battery Storage and Solar Industry](index=59&type=section&id=Risks%20Related%20to%20the%20Battery%20Storage%20and%20Solar%20Industry) The company operates in an evolving market, facing intense competition, rising material costs, and adverse changes to government incentives from the new OBBB Act - The business is highly dependent on government incentives. The OBBB Act, signed **July 4, 2025**, adversely changes tax policies by shortening the availability of the Section 48E credit for solar and ending the Section 25D residential credit in **2026**[218](index=218&type=chunk) - The company faces significant competition from traditional utilities, which have greater resources, and from other solar providers[229](index=229&type=chunk)[231](index=231&type=chunk) - Costs for solar panels and raw materials may increase due to supply chain disruptions, inflation, and trade policies, including new tariffs and national security investigations into imported components like polysilicon[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) [Risks Related to Our Operating Structure and Financing Activities](index=63&type=section&id=Risks%20Related%20to%20Our%20Operating%20Structure%20and%20Financing%20Activities) Sunrun's growth depends on raising capital through tax equity funds, which are constrained by tax law changes and rising interest rates, increasing the cost of capital - The company's future success depends on its ability to raise capital at acceptable terms. The OBBB Act is expected to create additional challenges for securing tax equity financing[246](index=246&type=chunk)[247](index=247&type=chunk) - Rising interest rates increase the company's cost of capital, reduce the proceeds from investment funds, and may negatively impact the attractiveness of its offerings to customers[253](index=253&type=chunk) - The company has substantial debt and expects to incur more in the future, which intensifies risks related to servicing debt obligations and complying with financial covenants[256](index=256&type=chunk)[261](index=261&type=chunk) [Risks Related to Regulation and Policy](index=67&type=section&id=Risks%20Related%20to%20Regulation%20and%20Policy) The business is heavily influenced by federal, state, and local regulations, including the OBBB Act and California's NBT, impacting tax policy, customer value, and market demand - The OBBB Act, signed **July 4, 2025**, directly impacts the business by shortening the availability of the Section 48E tax credit for solar facilities and ending the Section 25D residential credit[268](index=268&type=chunk) - Changes in state policies, particularly California's move away from traditional net metering to a Net Billing Tariff (NBT), have altered the economics of residential solar and increased the importance of battery storage[272](index=272&type=chunk)[273](index=273&type=chunk) - The company faces risks from changes in utility rate design, such as the imposition of fixed charges or demand charges, which could reduce customer savings and demand for solar offerings[278](index=278&type=chunk) [Risks Related to Our Business Operations](index=69&type=section&id=Risks%20Related%20to%20Our%20Business%20Operations) Operational risks include supplier dependence, construction challenges, customer cancellations, workforce management, and geographic concentration in California, increasing vulnerability to regional disruptions - The company depends on a limited number of suppliers for solar panels, inverters, and batteries, making it susceptible to shortages, price changes, and quality issues[286](index=286&type=chunk) - As the primary contractor, Sunrun is subject to risks associated with construction, cost overruns, delays, and regulatory compliance for every installation[294](index=294&type=chunk) - The business is geographically concentrated, with over **45% of its customer base** in California as of **June 30, 2025**, increasing its exposure to regional economic, regulatory, and environmental risks[305](index=305&type=chunk) - The company faces risks related to cybersecurity breaches, data privacy regulations, and the need to protect its intellectual property[325](index=325&type=chunk)[329](index=329&type=chunk) [Risks Related to Taxes and Accounting](index=89&type=section&id=Risks%20Related%20to%20Taxes%20and%20Accounting) The company's viability relies on monetizing federal tax benefits through tax equity funds, a model facing uncertainty from the OBBB Act and potential **IRS** challenges to system valuations - The business model relies on monetizing federal ITCs through tax equity investment funds. The OBBB Act has accelerated the sunsetting of certain ITCs and introduced restrictions, which could make this financing more challenging[382](index=382&type=chunk)[385](index=385&type=chunk) - The **IRS** could determine that the creditable basis of the company's solar systems is lower than claimed, which could result in reduced tax credits and significant indemnity payments to fund investors[392](index=392&type=chunk) - The business depends on the availability of various federal, state, and local incentives, including tax credits, rebates, and SRECs, which are subject to expiration, reduction, or elimination[395](index=395&type=chunk) [Risks Related to Ownership of Our Common Stock](index=94&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Ownership of common stock involves risks including price volatility, substantial control by insiders limiting shareholder influence, and anti-takeover provisions deterring acquisitions - Executive officers, directors, and principal stockholders beneficially own approximately **45.2%** of outstanding common stock, giving them substantial control over matters requiring stockholder approval[410](index=410&type=chunk) - The market price of the company's common stock has been and is expected to continue to be volatile[411](index=411&type=chunk) - The company does not expect to declare any dividends in the foreseeable future, so returns on investment may depend solely on stock price appreciation[428](index=428&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=100&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or issuer purchases of equity securities during the period - There were no unregistered sales of equity securities during the quarter[433](index=433&type=chunk) [Item 5. Other Information](index=100&type=section&id=Item%205.%20Other%20Information) This section discloses the adoption and modification of Rule 10b5-1 trading plans by company executives, including Jeanna Steele and Lynn Jurich, during the period - On **May 16, 2025**, Jeanna Steele (Chief People and Legal Officer) amended her Rule 10b5-1 trading plan[437](index=437&type=chunk) - On **June 9, 2025**, Lynn Jurich (Co-Executive Chair) adopted a new Rule 10b5-1 trading plan for the sale of up to **800,000 shares**[438](index=438&type=chunk) [Item 6. Exhibits](index=100&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the company's Restated Certificate of Incorporation, Bylaws, and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act - Lists all exhibits filed with the 10-Q, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act[439](index=439&type=chunk)[441](index=441&type=chunk)