Hannon Armstrong Sustainable Infrastructure Capital(HASI) - 2025 Q2 - Quarterly Results

Executive Summary & Key Highlights Key Highlights HASI reported strong Q2 2025 progress, with H1 2025 closed transactions up 9% year-over-year, double-digit yields on new investments, and reaffirmed 8-10% Adjusted EPS growth guidance - HASI President and CEO Jeffrey A. Lipson stated, "Our business continues to make strong progress, with closed transactions growing 9% year-over-year in the first half of 2025 and double-digit yields on new Portfolio investments supporting strong margins." He also noted an increased pipeline of more than $6 billion, supporting the 8-10% Adjusted EPS growth guidance into 2027[4] Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | | :----------------------------------- | :------ | :------ | :-------------------- | | GAAP EPS | $0.74 | $0.23 | +221.7% | | Adjusted EPS | $0.60 | $0.63 | -4.8% | | Adjusted Recurring Net Investment Income (in millions) | $85 | $68 | +25% | | Managed Assets (as of June 30, 2025, in billions) | $14.6 | $12.9 | +13% | | Closed Transactions Year-to-Date (in millions) | ~$894 | N/A | N/A | | New Asset Yields on Portfolio Investments | >10.5% | N/A | N/A | | Pipeline (in billions) | >$6 | N/A | N/A | | Quarterly Dividend per Share | $0.42 | N/A | N/A | - HASI received its third investment grade rating with an upgrade by S&P, issued $1 billion of senior unsecured notes at a blended effective yield of 6.3%, and repurchased $700 million of bonds due in 2026 and 2027, while repaying $200 million convertible notes due in 2025[5] Financial Performance Analysis GAAP Net Income and Adjusted Earnings HASI reported significantly increased Q2 2025 GAAP net income and EPS, driven by equity method investments, while Adjusted EPS decreased due to higher shares outstanding GAAP and Adjusted Earnings Summary | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | 6M 2025 (in thousands) | 6M 2024 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | GAAP Net Income | $98,445 | $26,540 | $155,057 | $149,566 | | GAAP Diluted EPS | $0.74 | $0.23 | $1.18 | $1.22 | | Adjusted Earnings | $74,988 | $73,683 | $153,056 | $152,589 | | Adjusted EPS | $0.60 | $0.63 | $1.23 | $1.31 | - HASI CFO Chuck Melko highlighted the generation of over $160 million in high-quality recurring investment income through the first half of the year, further validated by S&P's recent upgrade and the refinancing of $900 million of debt[8] GAAP Earnings and EPS GAAP net income to controlling stockholders significantly increased to $98 million in Q2 2025, driving diluted EPS to $0.74, primarily due to equity method investments GAAP Earnings and EPS (Quarterly) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | | :----------------------------------- | :-------------------- | :-------------------- | | GAAP Net Income to Controlling Stockholders | $98 | $27 | | GAAP Diluted EPS | $0.74 | $0.23 | | Total Revenue | $86 | N/A | | Total Expenses | $105 | N/A | | Income from Equity Method Investments | $158 | N/A | | Income Tax Expense | $38 | N/A | - The increase in GAAP net income was primarily driven by larger income from equity method investments, resulting from higher allocations of income related to tax credits to tax equity investors in solar projects[9] Adjusted Earnings and EPS Adjusted earnings increased slightly to $75 million in Q2 2025, but Adjusted EPS decreased to $0.60 due to higher shares outstanding, despite growth in recurring net investment income Adjusted Earnings and EPS (Quarterly) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Year-over-Year Change | | :----------------------------------- | :-------------------- | :-------------------- | :-------------------- | | Adjusted Earnings | $75 | $74 | +$1M | | Adjusted Recurring Net Investment Income | $85 | N/A | N/A | | Gain on Sale of Assets | $8 | N/A | N/A | | Origination Fee and Other Income | $1 | N/A | N/A | | Compensation, Benefits & G&A (excluding Equity-Based Compensation) | ~$19 | N/A | N/A | | Adjusted EPS | $0.60 | $0.63 | -4.8% | - Adjusted earnings increased by $1 million year-over-year due to an $18 million increase in Adjusted Recurring Net Investment Income, offset by an $18 million decrease in Gain on Sale of Assets due to transaction timing[11] - Adjusted EPS decreased to $0.60 in Q2 2025 from $0.63 in Q2 2024, primarily due to higher shares outstanding[11] Adjusted Recurring Net Investment Income Adjusted Recurring Net Investment Income, a key indicator of investment economics, grew 25% year-over-year to $85 million in Q2 2025, driven by Portfolio growth, equity method investments, and management fees - Adjusted Recurring Net Investment Income measures recurring income from HASI's Portfolio (debt and equity investments), management fee income from securitization trusts and co-investment structures, and income from retained interests in securitized assets, net of interest expense[13][15] Adjusted Recurring Net Investment Income Summary | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Year-over-Year Change | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | | Adjusted Recurring Net Investment Income | $85,324 | $67,733 | +25.9% | | GAAP-based Net Investment Income (Loss) | $(3,317) | $8,550 | -138.8% | - GAAP-based net investment loss was $(3) million in Q2 2025, including an $11 million loss on debt extinguishment, and does not include income from equity method investments[14] Interest and Rental Income Revenue Interest and Rental Income Revenue increased to $67 million in Q2 2025, driven by higher yields and additional investment fundings, with receivables growing 9% year-over-year Interest and Rental Income Revenue Metrics | Metric | June 30, 2025 (in billions) | June 30, 2024 (in billions) | Year-over-Year Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Receivables, Net of Allowance, and Receivables Held-for-Sale | $3.1 | $2.8 | +9% | | Interest and Rental Income Revenue (Q2, in millions) | $67 | $63 | +6.3% | - The increase in Interest and Rental Income Revenue was driven by higher yields on investments and additional investment fundings[20] Adjusted Income from Equity Method Investments Adjusted Income from Equity Method Investments grew 33% year-over-year to $79 million in Q2 2025, fueled by increased investments and higher yields, including significant growth in co-investment vehicle CCH1 Adjusted Income from Equity Method Investments Metrics | Metric | June 30, 2025 (in billions) | June 30, 2024 (in billions) | Year-over-Year Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Equity Method Investments | $4.1 | $3.4 | +21% | | Adjusted Income from Equity Method Investments (Q2, in millions) | $79 | $59 | +33% | - Growth in Adjusted Income from Equity Method Investments was driven by both an increase in Equity Method Investments and their higher yields[22] - Equity Method Investments include HASI's proportionate share of co-investment vehicle CCH1, which grew from $66 million to $559 million year-over-year[21] Management Fees and Retained Interest Income Management Fees and Retained Interest Income Revenue increased 80% year-over-year to $9 million in Q2 2025, driven by growth in management fees from CCH1 and income from securitized assets Management Fees and Retained Interest Income Metrics | Metric | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Year-over-Year Change