Sunrun(US:RUN)2024-11-07 21:19PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financials show asset and liability growth, with a narrowed net loss in Q3 2024 due to no goodwill impairment Consolidated Balance Sheets Total assets grew to $22.10 billion, liabilities to $15.07 billion, primarily from solar systems and non-recourse debt Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash | $533,863 | $678,821 | | Solar energy systems, net | $14,427,903 | $13,028,871 | | Total Assets | $22,104,323 | $20,450,237 | | Non-recourse debt, net of current portion | $11,219,898 | $9,191,689 | | Total Liabilities | $15,069,930 | $13,536,224 | | Total Equity | $6,400,576 | $6,237,836 | - Assets of Variable Interest Entities (VIEs) that can only be used to settle VIE obligations totaled $12.72 billion as of September 30, 2024, up from $11.54 billion at the end of 202321 Consolidated Statements of Operations Q3 2024 revenue declined 4.6% to $537.2 million, but net loss significantly narrowed to $83.8 million due to no goodwill impairment Q3 Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $537,173 | $563,181 | (4.6%) | | - Customer agreements and incentives | $405,861 | $316,528 | 28.2% | | - Solar energy systems and product sales | $131,312 | $246,653 | (46.8%) | | Loss from Operations | $(127,778) | $(1,347,477) | 90.5% | | Net Loss Attributable to Common Stockholders | $(83,766) | $(1,069,459) | 92.2% | | Net Loss Per Share (Basic & Diluted) | $(0.37) | $(4.92) | 92.5% | Nine Months Ended Sep 30 Statement of Operations Summary (in thousands, except per share data) | Metric | YTD 2024 | YTD 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $1,519,227 | $1,743,223 | (12.8%) | | Loss from Operations | $(438,948) | $(1,781,112) | 75.4% | | Net Loss Attributable to Common Stockholders | $(32,510) | $(1,254,373) | 97.4% | | Net Loss Per Share (Basic & Diluted) | $(0.15) | $(5.81) | 97.4% | Consolidated Statements of Cash Flows Cash used in operations improved to $507.8 million, with $2.44 billion from financing funding investing activities Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(507,794) | $(704,733) | | Net Cash Used in Investing Activities | $(1,908,612) | $(1,952,019) | | Net Cash Provided by Financing Activities | $2,439,185 | $2,655,674 | | Net Change in Cash and Restricted Cash | $22,779 | $(1,078) | Notes to Consolidated Financial Statements Notes detail accounting policies, revenue shifts to customer agreements, reliance on non-recourse debt, and purchase commitments Revenue by Product and Service (in thousands) | Revenue Source | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Customer agreements | $368,641 | $289,678 | $1,030,859 | $789,256 | | Incentives | $37,220 | $26,850 | $85,794 | $75,895 | | Solar energy systems | $47,189 | $135,476 | $167,535 | $566,861 | | Product sales | $84,123 | $111,177 | $235,039 | $311,211 | | Total Revenue | $537,173 | $563,181 | $1,519,227 | $1,743,223 | - Total debt as of September 30, 2024, was $12.45 billion, a significant increase from $10.67 billion at year-end 2023. The majority of this debt is non-recourse, totaling $11.46 billion86 - The company has purchase commitments for $125.4 million of photovoltaic modules, inverters, and batteries to be fulfilled by the end of Q1 2025129 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses solar capacity growth, macroeconomic impacts, revenue shifts, and reliance on external financing for operations Key Operating Metrics Key operating metrics show continued growth in networked solar capacity, customer count, and gross earning assets Key Operating Metrics Comparison | Metric | As of Sep 30, 2024 | As of Sep 30, 2023 | | :--- | :--- | :--- | | Networked Solar Energy Capacity (megawatts) | 7,288 | 6,462 | | Customers | 1,015,910 | 903,270 | | Gross Earning Assets (in thousands) | $16,779,712 | $13,299,394 | Results of Operations Q3 2024 revenue from customer agreements grew, offset by lower system sales; operating expenses decreased due to no goodwill impairment - The increase in revenue from Customer Agreements for Q3 2024 was primarily due to new systems placed in service over the last year201 - The decrease in revenue from solar energy systems sales for Q3 2024 was attributed to a higher proportion of customers choosing Customer Agreements over outright purchases, likely due to increased interest rates202 - The significant decrease in total operating expenses in Q3 2024 compared to Q3 2023 was primarily due to a $1.2 billion goodwill impairment charge recorded in the 2023 period that did not recur203208 Liquidity and Capital Resources Liquidity relies on external financing, with $533.9 million cash and sufficient funds for the next 12 months - The company's business model requires substantial outside financing to grow and facilitate the deployment of solar energy systems228 - As of September 30, 2024, the company had $392.5 million in outstanding borrowings on its $447.5 million credit facility226 - Management believes cash, investment fund commitments, and available borrowings will be sufficient to meet anticipated cash needs for at least the next 12 months228 Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate exposure on floating-rate debt, partially hedged, with no material changes - The primary market risk is from changes in interest rates on floating-rate debt, which is partially managed through derivative instruments239 - Market risk exposures have not changed materially since the end of the previous fiscal year (December 31, 2023)239 Item 4. Controls and Procedures Disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2024241 - No material changes to the internal control over financial reporting were identified during the quarter243 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company faces ordinary course legal proceedings, not expected to have a material adverse effect - The company is subject to legal proceedings in the ordinary course of business but does not currently expect them to have a material adverse effect135245 Item 1A. Risk Factors Key risks include industry evolution, reliance on incentives, macroeconomic factors, supply chain, competition, and financing challenges - The solar industry is an emerging market, and its growth depends on factors beyond the company's control, such as consumer acceptance, favorable regulations, and tax incentives. Changes to California's net metering policy (NBT) may limit the financial attractiveness of solar-only offerings248249 - The business requires substantial capital to finance growth. An inability to raise capital on acceptable terms, potentially exacerbated by rising interest rates and changes in tax law, could materially impact business and prospects275282 - The company and its partners depend on a limited number of suppliers for key components like panels, batteries, and inverters. Any shortage, delay, or price increase could result in installation delays, cancellations, and loss of market share321322323 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or issuer purchases occurred during the reported period - There were no unregistered sales of equity securities or issuer purchases of equity securities in the reported quarter490 Item 5. Other Information Paul Dickson, President and CRO, terminated and adopted new Rule 10b5-1 trading plans for company stock sales - Paul Dickson, President and Chief Revenue Officer, terminated a Rule 10b5-1 trading plan on August 16, 2024, and adopted a new one on August 26, 2024, for the sale of company stock492 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and certifications Signatures The report is signed by the CEO and CFO of Sunrun Inc., dated November 7, 2024