Financial Performance - Total revenues for Q3 2023 were $23.25 million, a significant increase from $5.08 million in Q3 2022, representing a growth of approximately 357%[17] - Operating expenses for Q3 2023 totaled $47.77 million, compared to $29.26 million in Q3 2022, reflecting an increase of about 63%[17] - The net loss attributable to stockholders for Q3 2023 was $19.31 million, compared to a net loss of $22.01 million in Q3 2022, showing an improvement of approximately 8%[17] - The company reported a loss from operations of $24.52 million for Q3 2023, slightly higher than the loss of $24.18 million in Q3 2022[17] - For the nine months ended September 30, 2023, the net loss was $36,407 thousand, an improvement from a net loss of $50,361 thousand in the same period of 2022, reflecting a reduction of approximately 27%[27] - The company reported a net income of $1,583,000 for the three months ended June 30, 2023, compared to a net loss of $18,805,000 for the same period in the previous year[20] - Net loss attributable to stockholders for the three months ended September 30, 2023, was $19.3 million, resulting in a basic and diluted loss per share of $1.11[179] Cash and Liquidity - Cash and cash equivalents decreased to $154.21 million as of September 30, 2023, down from $220.32 million as of December 31, 2022, a decline of about 30%[14] - The cash and cash equivalents at the end of the period were $192,733 thousand, down from $271,634 thousand at the beginning of the period, reflecting a net change of $47,411 thousand[28] - The total cash, cash equivalents, and restricted cash amounted to $192.7 million as of September 30, 2023, down from $271.6 million in 2022, a decrease of 29.0%[53] - The company has not experienced any credit loss related to cash and cash equivalents, which are primarily held in treasury bills[51] Assets and Liabilities - Total assets increased to $940.12 million as of September 30, 2023, up from $826.55 million as of December 31, 2022, representing a growth of approximately 14%[14] - Long-term debt, net of current portion, rose to $599.61 million as of September 30, 2023, compared to $474.44 million as of December 31, 2022, an increase of about 26%[14] - The accumulated deficit increased to $227.70 million as of September 30, 2023, from $193.34 million as of December 31, 2022[15] - As of September 30, 2023, total debt was $627.3 million, an increase from $499.8 million as of December 31, 2022[131] - Accrued expenses and other current liabilities totaled $51.6 million as of September 30, 2023, compared to $21.5 million as of December 31, 2022[130] Shareholder Equity and Stock Activity - As of September 30, 2023, the total stockholders' equity was $244,135,000, with a net loss of $19,188,000 for the quarter[20] - The weighted-average shares outstanding for Q3 2023 were 17,351,796, compared to 17,861,935 in Q3 2022[17] - The total number of common shares outstanding increased to 18,925,126 as of September 30, 2023, up from 18,046,903 at the end of December 2022[20] - The company executed share repurchases totaling 497,725 shares during the quarter, resulting in a reduction of $3,505,000 in equity[20] - The company has $44.9 million remaining available for future share repurchases under its share repurchase program as of September 30, 2023[187] Acquisitions and Investments - The company has made significant investments related to the SEMTH master lease agreement, totaling $145.67 million as of September 30, 2023[14] - The Company acquired Legacy Spruce Power for $32.6 million, consisting of cash payments of $61.8 million less cash and restricted cash acquired of $29.2 million[109] - The acquisition of Legacy Spruce Power added approximately 51,000 customer subscribers, significantly expanding the company's customer base[37] - The company completed the SEMTH Acquisition on March 23, 2023, for approximately $23.0 million in cash and assumed $125.0 million in senior indebtedness[122] - The Tredegar Acquisition on August 18, 2023, involved acquiring approximately 2,400 home solar assets for $20.9 million, funded by term loans[126] Revenue Streams - PPA revenues for the three months ended September 30, 2023, were $11.37 million, compared to $2.43 million in the same period of 2022, reflecting a growth of 368%[81] - SLA revenues increased to $7.60 million for the three months ended September 30, 2023, from $1.68 million in the same period of 2022, representing a growth of 352%[81] - The company generated $5,068 thousand from the sale of solar energy systems, a significant increase from $249 thousand in the prior year[28] - The company recognized $2.07 million in solar renewable energy credit revenues for the three months ended September 30, 2023, compared to $760,000 in the same period of 2022[81] Operational Efficiency - Cash used in continuing operating activities decreased to $10,737 thousand from $30,104 thousand year-over-year, indicating improved operational efficiency[27] - Selling, general and administrative expenses decreased by $3.6 million, or 22%, to $12.4 million[211] - Cost of revenues rose by $1.2 million, or 14%, to $9.8 million, mainly due to increased depreciation related to solar energy systems and higher operation and maintenance costs[213] Legal and Regulatory Matters - The Company accrued a settlement amount of $19.5 million related to securities class action proceedings as of September 30, 2023, expecting to offset this with $4.5 million from its directors and officers liability insurance[164] - A civil monetary penalty of $11.0 million was paid to the SEC in October 2023 as part of a settlement, which was accrued as of September 30, 2023[169] Discontinued Operations - The company discontinued its Drivetrain and XL Grid operations in the fourth quarter of 2022, impacting its financial results[180] - For the three months ended September 30, 2023, XL Grid reported revenues of $0, compared to $2,422,000 in the same period of 2022, reflecting a significant decline[183] - The total net loss from discontinued operations for the nine months ended September 30, 2023, was $4,253,000, compared to a loss of $25,393,000 in the same period of 2022[181]

Financial Data and Key Metrics Changes - Third quarter revenue was $23.3 million, up 2% from $22.8 million in the second quarter, primarily due to incremental revenues from the acquisition of 2,400 residential solar systems and higher revenues from solar renewable energy credit sales [88] - Net loss attributable to stockholders was $19.3 million in the third quarter, but excluding legacy legal items, the company would have seen income of $5.1 million [14] - Cash and cash equivalents stood at approximately $193 million at the end of the third quarter, compared to $192 million at the end of the second quarter [114] - Adjusted EBITDA totaled $7 million, with total cash flow from the Spruce Power portfolio bringing the total to $14.9 million [89] Business Line Data and Key Metrics Changes - The environmental commodities market segment, particularly solar renewable energy credits (SRECs), was highlighted as the fastest-growing segment, with cash inflows increasing by 25% sequentially [30][20] - Customer satisfaction score rose to a record 76%, up from 61% last year, indicating improved customer trust and engagement [4][104] - The company acquired cash flows from about 25,000 rooftops, representing a 49% year-on-year growth [7] Market Data and Key Metrics Changes - The company operates across 18 states, facilitating solar electricity for approximately 80,000 households [27] - The renewable power markets are facing liquidity concerns due to higher interest rates, impacting installers, but the company remains positioned as a strong buyer in secondary markets [82][60] Company Strategy and Development Direction - The core strategy is to be the dominant long-term owner and operator of distributed energy assets, focusing on low-cost customer acquisition and recurring revenue [77][78] - The company aims to reach a customer contract portfolio of 90,000 by the end of 2024, with a projected growth rate reduction from 49% to about 20% annually [84][119] - The launch of Spruce Pro, a new brand focused on selling services to the commercial and industrial segment, is planned for the next three months [8] Management's Comments on Operating Environment and Future Outlook - Management noted that the debt markets for seasoned assets remain robust, with lenders offering more money than needed due to strong performance history [9] - The company is actively negotiating with various installers and asset owners to enhance its growth strategy and liquidity [120] - Management expressed confidence in the ability to generate strong cash flows and maintain a healthy cash position through disciplined acquisition strategies [110][103] Other Important Information - The company executed a 1 for 8 reverse stock split in early October to address NYSE listing standards [85] - Legal settlements related to XL Fleet amounted to $11 million, with additional settlements expected for ongoing lawsuits [10][87] - The total principal balance of long-term debt was $657 million as of September 30, 2023, reflecting an increase due to recent acquisitions [90] Q&A Session Summary Question: Can you discuss the M&A landscape and your target of 90,000 customers by the end of 2024? - Management indicated that the pipeline for installers is strong, with ongoing negotiations for 10,000 systems, although there are no guarantees for completion [18][19] Question: How does the field services initiative enhance the platform? - The field services initiative is expected to improve customer experience and operational efficiency, particularly in dense markets [95][45] Question: What are the implications of the current market conditions on your strategy? - Management acknowledged liquidity concerns in the renewable power markets but emphasized the company's strong cash position and ability to capitalize on opportunities [82][60]

Financial Data and Key Metrics Changes - Second quarter revenue was $22.8 million, up from $18.1 million in the first quarter of 2023, driven by increased operational hours and improved performance ratios [42] - Net income from continuing operations was $1.8 million compared to a $15 million loss in the first quarter of 2023 [43] - Adjusted EBITDA totaled $9.5 million, with total cash flow from the Spruce Power 4 portfolio bringing it to $13.8 million, compared to $5.7 million in the first quarter [43] Business Line Data and Key Metrics Changes - The Spruce Power 4 portfolio acquisition increased rooftop solar assets and contracts by approximately 44% [15] - The company achieved a weather-adjusted performance ratio of 103%, indicating strong asset management performance [36] - Portfolio O&M expense increased to $3 million in the second quarter from $1.9 million in the first quarter, attributed to meter upgrade activities [20] Market Data and Key Metrics Changes - The company is experiencing increased demand for home battery storage, particularly in California, due to new net metering rules [16] - The Environmental Commodities Markets group reported a quarter-on-quarter growth of close to 10% [38] Company Strategy and Development Direction - The company aims to reach a customer contract portfolio of 90,000 by the end of 2024, with a focus on acquiring existing power portfolios rather than high-cost sales strategies [34][16] - A reverse stock split plan was authorized to address the issue of a high number of shares outstanding, which is affecting stock price perception [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to close the acquisition of approximately 2,400 home solar systems, which would bring the total to around 75,000 [7] - The company is optimistic about the debt markets, noting an abundance of debt offered at attractive terms [7] Other Important Information - As of June 30, 2023, the company had cash and cash equivalents of approximately $192 million, down from $205 million at the end of the first quarter [21] - The company repurchased approximately 3.6 million shares for about $3.2 million as part of its share repurchase program [45] Q&A Session Summary Question: Can you provide insights on extracting additional value from existing systems? - Management highlighted two mechanisms: increasing revenues through environmental commodities markets and upselling additional products like home batteries to existing customers [25] Question: What is the competitive landscape for reaching the 90,000 customer target? - Management indicated confidence in achieving the target, citing ongoing bilateral negotiations and a strong pipeline of potential deals [26] Question: What are the core drivers behind the positive earnings this past quarter? - Strong production from assets and improved performance ratios were noted as key drivers, alongside the resolution of integration costs from the merger [51] Question: How does the company balance acquisition opportunities with share repurchase? - Management stated that the share repurchase program is part of their strategy to drive shareholder value, and they see it as complementary to acquisition efforts [52][55]

Financial Performance - Total revenues for the three months ended June 30, 2023, were $22.813 million, compared to $0 in the same period of 2022[19] - The net income attributable to stockholders for the three months ended June 30, 2023, was $3.065 million, compared to a net loss of $12.698 million in the same period of 2022[19] - For the six months ended June 30, 2023, the company reported a net loss of $17,240,000, compared to a net loss of $28,775,000 for the same period in 2022, indicating a 40% improvement in losses year-over-year[25] - The company reported a net income from continuing operations of $3.37 million for the three months ended June 30, 2022, and $14.02 million for the six months ended June 30, 2022[115] - The company reported a net loss of $17.2 million for the six months ended June 30, 2023, a 40% improvement from a loss of $28.8 million in the prior year[198] Expenses and Costs - Operating expenses for the three months ended June 30, 2023, were $24.579 million, an increase from $9.782 million in the same period of 2022[19] - Selling, general, and administrative expenses rose by $6.2 million to $16.0 million for the three months ended June 30, 2023, driven by ongoing operations of the residential solar business and integration costs[196] - Selling, general, and administrative expenses rose by $14.2 million to $31.7 million, reflecting an 81% increase compared to $17.5 million in the prior year[200] - Cost of revenues increased by $0.7 million, or 9%, to $8.6 million for the three months ended June 30, 2023, primarily due to increased operation and maintenance costs[192] Assets and Liabilities - Total assets as of June 30, 2023, were $917.195 million, an increase from $826.552 million as of December 31, 2022[17] - Current liabilities decreased to $49.575 million as of June 30, 2023, from $59.697 million as of December 31, 2022[17] - Long-term debt, net of current portion, increased to $587.393 million as of June 30, 2023, from $474.441 million as of December 31, 2022[17] - Cash and cash equivalents decreased to $162.749 million as of June 30, 2023, from $220.321 million as of December 31, 2022[17] - The accumulated deficit increased to $208.387 million as of June 30, 2023, from $193.342 million as of December 31, 2022[17] Acquisitions and Strategic Initiatives - The company completed the acquisition of Legacy Spruce Power, which had approximately 51,000 customer subscribers as of December 31, 2022, enhancing its market position in residential solar energy[35] - The company has initiated a strategic review leading to the exit from its Drivetrain business and the sale of its XL Grid operations, focusing on core solar energy assets[33][38] - The Company completed the acquisition of Legacy Spruce Power in September 2022, which had over 52,000 customer subscribers at the time, allowing for low customer acquisition costs[178] - The acquisition of SEMTH was completed on March 23, 2023, for approximately $23.0 million in cash and the assumption of $125.0 million in senior indebtedness[116] Cash Flow and Financing - Cash used in continuing operating activities was $(13.0) million for the six months ended June 30, 2023, compared to $(22.3) million in the same period last year[205] - The net change in cash and cash equivalents and restricted cash was $(48.0) million for the six months ended June 30, 2023, compared to $(29.3) million in the prior year[206] - The company believes no additional capital will be needed to execute its current business plan over the next 12 months[204] Shareholder Information - The company had 150,143,890 shares issued and outstanding as of June 30, 2023, compared to 144,375,226 shares as of December 31, 2022[17] - The Company repurchased 1.9 million shares of common stock at a weighted-average price of $0.87 per share for a total of $1.6 million during the three and six months ended June 30, 2023[169] - As of June 30, 2023, $48.4 million remained available for future share repurchases under the authorized program[169] Revenue Streams - The company generated $3,631,000 from the sale of solar energy systems during the six months ended June 30, 2023[25] - Total revenue for the three months ended June 30, 2023, was $22.8 million, with PPA revenues at $12.2 million and SLA revenues at $7.0 million[77] - For the six months ended June 30, 2023, total revenue was $40.9 million, with solar renewable energy credit revenues contributing $3.2 million[77] Legal and Regulatory Matters - The Company believes that ongoing lawsuits, including those from BMZ USA Inc. and Plastic Omnium, lack substantial merit and is vigorously defending against them[156][157] - A settlement agreement was reached with Firstar Development LLC for $2.3 million regarding reimbursement obligations under a tax recapture guaranty agreement[155] Other Financial Metrics - The effective interest rate on the Deutsche Bank Credit Agreement was 7.16% as of June 30, 2023[124] - The company has long-term debt of $613.4 million as of June 30, 2023, which includes debt assumed from acquisitions[203] - The company reported a net cash used in continuing operating activities of $13,030,000 for the six months ended June 30, 2023, compared to $22,332,000 in the prior year[25]

PART I – FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q1 2023 reflect the company's transition to residential solar, showing increased assets, a net loss, and significant cash used in investing activities [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets increased to **$926.4 million** driven by the SEMTH acquisition, while total liabilities rose to **$661.0 million** due to increased long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $172,797 | $220,321 | | Investment under SEMTH master lease agreement | $146,889 | $— | | Property and equipment, net | $482,328 | $396,168 | | Goodwill | $28,757 | $128,548 | | **Total Assets** | **$926,393** | **$826,552** | | **Liabilities & Equity** | | | | Total current liabilities | $52,078 | $59,697 | | Long-term debt, net of current portion | $594,395 | $474,441 | | **Total Liabilities** | **$661,006** | **$537,576** | | **Total Stockholders' Equity** | **$265,209** | **$288,891** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2023, the company reported **$18.1 million** in residential solar revenues, resulting in a **$19.4 million** net loss attributable to stockholders, including a **$3.9 million** loss from discontinued operations Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $18,095 | $— | | Cost of revenues | $7,853 | $— | | Loss from operations | ($5,475) | ($7,734) | | Net loss from continuing operations | ($14,978) | ($134) | | Net loss from discontinued operations | ($3,866) | ($15,943) | | **Net loss attributable to stockholders** | **($19,395)** | **($16,077)** | | **Net loss per share, basic & diluted** | **($0.13)** | **($0.11)** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2023, net cash used in continuing operating activities was **$3.7 million**, with **$20.4 million** used in investing activities primarily for the SEMTH acquisition, leading to a **$34.2 million** decrease in total cash Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in continuing operating activities | ($3,678) | ($10,476) | | Net cash used in continuing investing activities | ($20,377) | $— | | Net cash (used in) provided by continuing financing activities | ($5,916) | $248 | | **Net change in cash, cash equivalents, and restricted cash** | **($34,219)** | **($18,215)** | - Cash paid to acquire SEMTH assets, net of cash acquired, was **$23.1 million**[23](index=23&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's transformation to a distributed solar energy owner, including the SEMTH acquisition, discontinued operations, **$620.1 million** in debt, legal proceedings, and a **$50 million** stock repurchase program - The company is now a leading owner and operator of distributed solar energy assets, serving approximately **72,000 customers**; its former Drivetrain and XL Grid segments are presented as discontinued operations[26](index=26&type=chunk)[37](index=37&type=chunk) - On March 23, 2023, the company acquired SEMTH for approximately **$23 million** in cash and assumed **$125 million** of senior debt, adding a master lease covering about **22,500 residential solar agreements**[116](index=116&type=chunk)[117](index=117&type=chunk) - The company is involved in several legal proceedings, including putative securities class actions and an SEC subpoena related to its 2020 merger and business practices[150](index=150&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk) - Subsequent to the quarter end, the Board of Directors authorized a share repurchase program for up to **$50 million** of common stock, effective through May 15, 2025[166](index=166&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic shift to distributed solar assets, highlighting **$18.1 million** in Q1 2023 residential solar revenue, increased SG&A, and **$182.7 million** in working capital, with sufficient liquidity for the next 12 months - The company's corporate strategy focuses on leveraging its platform for subscription-based distributed energy solutions, profitably growing assets through low customer acquisition cost channels, and increasing shareholder value via predictable revenues and cash flow[172](index=172&type=chunk) - In January 2023, the company completed the exit from its legacy XL Fleet (Drivetrain and XL Grid) operations, and in March 2023, it acquired SEMTH, adding approximately **22,500 solar contracts**[176](index=176&type=chunk)[177](index=177&type=chunk) Results of Operations Comparison (in thousands) | Metric | Q1 2023 | Q1 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $18,095 | $— | $18,095 | N.M. | | Selling, general and administrative expenses | $15,717 | $7,734 | $7,983 | 103% | | Loss from operations | ($5,475) | ($7,734) | $2,259 | (29)% | | Net loss attributable to stockholders | ($19,395) | ($16,077) | ($3,318) | 21% | - As of March 31, 2023, the company had **$620.1 million** of long-term debt and was in compliance with all debt covenants, with management believing current liquidity is sufficient for the next 12 months[191](index=191&type=chunk)[192](index=192&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Spruce Power is exempt from providing quantitative and qualitative disclosures about market risk[203](index=203&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2023, due to three material weaknesses in IT general controls, manual journal entry review, and complex transaction accounting, with remediation ongoing - Management concluded that disclosure controls and procedures were not effective as of March 31, 2023[205](index=205&type=chunk) - Material weaknesses were identified in three areas: Information Technology General Controls (ITGC) related to user access and segregation of duties, ineffective controls over review and approval of manual journal entries, and lack of sufficient resources to account for complex transactions[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - A remediation plan is in progress, focusing on integrating Legacy Spruce Power's controls and addressing identified deficiencies, but the material weaknesses will not be considered remediated until new controls are implemented and tested over a sufficient period[211](index=211&type=chunk)[212](index=212&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) Material pending legal proceedings are incorporated by reference from Note 15 of the unaudited condensed consolidated financial statements - Details on material pending legal proceedings are incorporated by reference from Note 15, which includes information on securities class action lawsuits and an SEC subpoena[219](index=219&type=chunk)[149](index=149&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2022 Form 10-K, except for a new risk concerning adverse developments in the financial services industry that could impact liquidity and access to capital - No material changes from the risk factors in the 2022 Form 10-K, except for one new addition[220](index=220&type=chunk) - A new risk factor was added concerning adverse developments in the financial services industry, such as liquidity issues or bank failures, which could impact the company's access to its cash and ability to fund growth[221](index=221&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[222](index=222&type=chunk) [Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[222](index=222&type=chunk) [Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[222](index=222&type=chunk) [Other Information](index=48&type=section&id=Item%205.%20Other%20Information) This item is not applicable - Not applicable[223](index=223&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002[224](index=224&type=chunk) - Inline XBRL data files are included as exhibits 101 and 104[224](index=224&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ___________________________ (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-38971 ___________________________ Spruce Power Holding Corporation (Exact name of Regis ...

Financial Data and Key Metrics Changes - For the fourth quarter, the company's revenue was $18.1 million, a significant increase from $5.1 million in the third quarter of 2022, which only included 21 days of contribution from Spruce [77] - Adjusted EBITDA totaled $3.5 million compared to negative $8.3 million in the prior year quarter [103] - The total principal balance of long-term debt as of December 31 was $533 million, with a weighted average interest cost of approximately 5.5% [11][63] Business Line Data and Key Metrics Changes - The company aims to grow its customer portfolio by about 80% over the next two years, targeting over 90,000 rooftops [6][22] - The SEMTH acquisition increased system ownership by 40%, contributing to a projected annual cash flow of about $23 million [26][57] - Customer satisfaction improved significantly, with the average CSAT score rising from 54% in Q1 2022 to 81% in Q4 2022 [5][25] Market Data and Key Metrics Changes - The company operates rooftop solar assets and contracts in 18 states, powering over 70,000 homes [4] - The average customer FICO score is 738, indicating solid credit risk [89] - The company is among the top five owner-operators of U.S. residential solar companies based on 2022 revenue [4] Company Strategy and Development Direction - The company is focused on enhancing customer experience through technology investments, including a new billing system that improves efficiency [23][100] - The strategic goal includes maintaining a balanced use of capital, allocating 10% to 20% of EBITDA for capital improvements [24] - The company plans to build an integrated enterprise technology stack to improve customer interactions and service [8][100] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in having access to substantial growth capital, starting 2023 with over $200 million in cash [4] - The company anticipates a more active market for acquisitions due to recent industry turbulence, with opportunities arising from struggling private installers [17] - Management emphasized the importance of cash flow and the flexibility it provides for future growth and debt management [7][74] Other Important Information - The company has zero corporate recourse debt, with all debt being non-recourse project debt [7][11] - Fourth quarter selling, general, and administrative expenses were $28.6 million, which included restructuring charges of $8.4 million [28] - The company is transitioning from legacy XL businesses to focus solely on residential rooftop solar [96] Q&A Session Summary Question: Does acquiring a portfolio come with existing debts? - The company often assumes existing debt with acquisitions, which can be favorable depending on market conditions [31] Question: What is the current landscape for potential deals? - The company is in active discussions and sees an opportunity in the market due to some private installers needing to sell assets [17][41] Question: Can the company disclose net subscriber value? - The company has not disclosed a net number but acknowledges the importance of transparency in financial metrics [34] Question: What is the expected run rate for SG&A expenses? - The company estimates a sustainable SG&A run rate of around $16 million, excluding one-time restructuring costs [83] Question: How does the company plan to improve customer service? - The company is investing in technology to enhance customer interactions and streamline service processes [100]

Financial Data and Key Metrics Changes - Total company revenues for Q3 2022 were $8.4 million, up from $3 million in Q2 2022 and $3.2 million in Q3 2021 [42] - Adjusted EBITDA was negative $9 million, an improvement from negative $11.1 million in Q2 2022 and negative $14.2 million in Q3 2021 [43] - Unrestricted cash and cash equivalents were approximately $240 million as of September 30, 2022, down from $322 million at the end of Q2 2022 [45] Business Line Data and Key Metrics Changes - Revenue from Spruce Power, the residential solar segment, totaled $5.1 million for the period from September 9 to September 30, 2022 [44] - Revenue in the Drivetrain segment was approximately $900,000, compared to $800,000 in the prior quarter and $600,000 in Q3 2021 [44] - Revenue in the XL Grid segment totaled $2.4 million, slightly up from $2.2 million in the prior quarter but down from $2.6 million in the prior year quarter [45] Market Data and Key Metrics Changes - The residential solar market is experiencing strong growth driven by rising utility electricity prices, increased adoption of electric vehicles, and decreasing battery costs [33][34][35] - A nationwide shortage of skilled labor is emerging as a bottleneck for the residential solar industry, impacting maintenance and installation [36] Company Strategy and Development Direction - The company is focused on transformational M&A, having acquired Spruce Power to enhance its position in the decarbonization market and generate positive EBITDA [6][7] - The company plans to rebrand as Spruce Power Holding Corporation and change its ticker symbol to SPRU [15] - The company is exploring strategic alternatives for its legacy Drivetrain business and is in advanced discussions with several interested parties [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's progress and the potential for shareholder value creation, emphasizing the disconnect between market valuation and the company's cash position [50] - The company is committed to executing its strategy to unlock value and maximize resources over the long term [50] Other Important Information - The company has approximately $542 million in long-term debt, with a weighted average interest cost of about 5.5% [46] - The company is undergoing a multimillion-dollar upgrade of its solar systems to transition from 3G to 4G networks, with expectations to complete upgrades by the end of 2023 [36] Q&A Session Summary Question: Is the $821 million in subscriber value contracted and renewal or just contracted? - The $821 million includes both contracted and renewal values [53] Question: Will the company continue to focus on buying post-flip assets? - The company will focus on seasoned assets, primarily post-flip, but some pre-flip opportunities are also being considered [57][59] Question: How does the company view the current capital structure for new deals? - The company sees robust availability of senior debt capital and is confident in its ability to secure financing for acquisitions [60] Question: What is the unlevered IRR on new portfolios? - The unlevered IRR on recent transactions was 14%, but future negotiations may vary [61] Question: How does the shift towards TPO impact acquisition opportunities? - The shift towards TPO is seen as a tailwind for the company, as it aligns with their business model and increases the addressable market [69] Question: How does the company manage skilled labor shortages in the solar space? - The company operates a lean model, partnering with local O&M providers to maintain efficiency and manage costs [71][73]

Financial Performance - Total revenues for the three months ended September 30, 2022, were $8.36 million, a 161.25% increase from $3.2 million in the same period of 2021[18]. - Operating expenses for the three months ended September 30, 2022, were $36.37 million, up 96.73% from $18.47 million in the same period of 2021[18]. - Net loss attributable to XL Fleet for the three months ended September 30, 2022, was $22.01 million, compared to a net loss of $7.53 million in the same period of 2021[18]. - For the nine months ended September 30, 2022, XL Fleet Corp. reported a net loss of $50,361,000 compared to a net income of $43,914,000 for the same period in 2021[22]. - The company reported a loss from operations of $28.01 million for the three months ended September 30, 2022, compared to a loss of $15.27 million in the same period of 2021[18]. - The net loss for the three months ended September 30, 2022, was $(6,663,000), compared to a net loss of $(83,000) in the same period of 2021[106]. Cash and Liquidity - Cash and cash equivalents as of September 30, 2022, were $239.51 million, down from $351.68 million as of December 31, 2021[16]. - Cash and cash equivalents and restricted cash decreased to $271,634,000 at the end of September 2022 from $366,898,000 at the end of September 2021[23]. - The company experienced a net cash used in operating activities of $46,396,000 for the nine months ended September 30, 2022, an increase from $34,215,000 in the prior year[22]. - The company had cash paid for interest of $22,000 for the nine months ended September 30, 2022, down from $35,000 in the previous year[23]. - The company’s cash and cash equivalents at the beginning of the period were $351,826,000, compared to $329,791,000 at the beginning of the same period in 2021[23]. Assets and Liabilities - Total assets increased to $917.63 million as of September 30, 2022, from $393.22 million as of December 31, 2021[16]. - Total liabilities rose to $552.54 million as of September 30, 2022, compared to $31.41 million as of December 31, 2021[16]. - The accumulated deficit increased to $150.19 million as of September 30, 2022, from $99.41 million as of December 31, 2021[17]. - The company’s total stockholders' equity decreased to $326.19 million as of September 30, 2022, from $361.81 million as of December 31, 2021[17]. Segment Performance - Revenue is generated from three segments: Drivetrain, XL Grid, and Residential Solar, with the Drivetrain segment focusing on hybrid electric powertrain systems sales[61]. - The Drivetrain segment generated revenues of $858,000 for the three months ended September 30, 2022, compared to $555,000 in the same period of 2021, an increase of 54.67%[205]. - The XL Grid segment reported revenues of $2,422,000 for the three months ended September 30, 2022, down from $2,645,000 in 2021, a decrease of 8.43%[205]. - The Residential Solar segment generated $5,080,000 in revenues for the three months ended September 30, 2022, with no revenues reported in the same period of 2021[205]. Acquisitions and Investments - The company acquired 100% of Spruce Power on September 9, 2022, which generates revenue through long-term agreements for residential solar energy systems[27]. - The Company acquired Spruce Power for $32,585, consisting of cash payments of $61,788 less cash and restricted cash acquired of $29,203[101]. - The total purchase consideration for the Spruce Power acquisition was $32,585,000, with goodwill amounting to $158,636,000[103]. - The company incurred transaction expenses of $15,020,000 related to the acquisition of Spruce Power for the three and nine months ended September 30, 2022[108]. Operating Expenses - The company incurred severance charges totaling $840 in connection with the workforce reduction, with $725 paid in the first quarter of 2022[174]. - The company recognized a total charge of $2,358 related to restructuring activities in the first quarter of 2022, which included the closure of its production center and a workforce reduction of 51 employees[173]. - Engineering, research, and development expenses are expensed as incurred, including costs for salaries, benefits, and contracted services[93]. Debt and Financing - The company assumed long-term debt of $510,002,000 in connection with the acquisition of Spruce Power, with a fair value adjustment reducing the carrying value by $32,467,000[119]. - As of September 30, 2022, the total principal payments on long-term debt amount to $542,493,000, with a net long-term debt of $485,030,000 after accounting for the current portion[121]. - The interest rate on the A&R SVB Credit Agreement as of September 30, 2022, was 5.19%, while the Second SVB Credit Agreement had an interest rate of 5.11%[123][130]. - The KeyBank Credit Agreement, which amounts to $74,810,000, has an interest rate of 5.81% as of September 30, 2022[135]. Legal and Regulatory Matters - The company is involved in ongoing legal proceedings, including a shareholder derivative complaint alleging breaches of fiduciary duty, but believes the claims are without merit[185]. Stock and Equity - Share-based compensation expense for the three months ended September 30, 2022, was $2,651,000, compared to $1,194,000 for the same period in 2021[157]. - The aggregate intrinsic value of stock options outstanding as of September 30, 2022, was $3,505,000, with $534,000 received from options exercised during the nine months ended September 30, 2022[159]. - The company granted 10,732,372 restricted stock units during the nine months ended September 30, 2022, with a weighted average grant date fair value of $1.31 per share[161]. Restructuring and Strategic Initiatives - In Q1 2022, the Company initiated a strategic review leading to the elimination of a substantial majority of its hybrid drivetrain products and PHEV products, resulting in a workforce reduction of approximately 50 employees[211]. - The Company announced its decision to pursue transformational M&A, supported by a significant cash balance from its go-public transaction in December 2020, focusing on decarbonization and energy transition opportunities[212]. - The company restructured into three operating segments: Drivetrain, XL Grid, and Residential Solar, following the acquisition of Spruce Power in Q3 2022[202].

XL Fleet Corp. (XL) Q2 2022 Earnings Conference Call August 9, 2022 5:00 PM ET Company Participants Stacey Constas – General Counsel Eric Tech – Chief Executive Officer Donald Klein – Chief Financial Officer Mike Kenhard – Chief Technology Officer and General Manager-Power Drive Colleen Calhoun – Vice President and General Manager-XL Grid Conference Call Participants Operator Good day, and welcome to the XL Fleet Second Quarter 2022 Earnings Call. All participants will be in a listen-only mode. [Operator In ...