Spruce Power (US:SPRU)2025-08-12 20:22PART I Item 1. Financial Statements This section presents Spruce Power's unaudited condensed consolidated financial statements, detailing financial position, operations, equity changes, and cash flows, with key accounting notes Condensed Consolidated Balance Sheets Total assets decreased to $862.6 million, while negative working capital of $120.2 million resulted from reclassifying $189.8 million of non-recourse debt to current liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $862,631 | $898,479 | | Cash and cash equivalents | $53,511 | $72,802 | | Property and equipment, net | $577,625 | $589,014 | | Total Liabilities | $735,221 | $752,327 | | Non-recourse debt, current | $215,624 | $28,310 | | Non-recourse debt, non-current | $479,424 | $677,021 | | Total Stockholders' Equity | $124,987 | $143,714 | - The company's working capital turned significantly negative to $(120.2) million as of June 30, 2025, from a positive $76.9 million at year-end 2024. This was primarily driven by the reclassification of the SP1 Facility debt to current liabilities1936 Condensed Consolidated Statements of Operations Q2 2025 revenues increased 48% to $33.2 million with a narrowed net loss of $3.0 million, while six-month revenues grew 40% to $57.1 million but net loss widened to $18.3 million due to fair value changes Quarterly Results of Operations (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $33,239 | $22,481 | | Income (loss) from operations | $8,902 | $(3,360) | | Net loss attributable to stockholders | $(2,966) | $(8,578) | | Net loss per share, basic and diluted | $(0.17) | $(0.45) | Six-Month Results of Operations (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenues | $57,057 | $40,768 | | Income (loss) from operations | $7,208 | $(6,957) | | Net loss attributable to stockholders | $(18,304) | $(11,032) | | Net loss per share, basic and diluted | $(1.01) | $(0.57) | Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased from $143.7 million to $125.0 million due to net loss and $1.8 million in share repurchases - Total stockholders' equity declined from $143.7 million on December 31, 2024, to $125.0 million on June 30, 202523 - During the six months ended June 30, 2025, the company repurchased 778,619 shares for a total cost of $1.8 million23 Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $11.5 million for H1 2025, with overall cash, cash equivalents, and restricted cash decreasing by $18.7 million Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,467) | $(27,302) | | Net cash provided by investing activities | $8,296 | $13,487 | | Net cash used in financing activities | $(15,520) | $(8,917) | | Net change in cash | $(18,691) | $(22,732) | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes cover the 'going concern' warning due to the SP1 Facility debt maturity, NJR acquisitions, $695.0 million in non-recourse debt, and legal settlements - The company's debt obligations under the SP1 Facility mature on April 30, 2026. These conditions, along with negative working capital and recurring net losses, raise substantial doubt about the company's ability to continue as a going concern. Management believes it can refinance this debt353637 - During the six months ended June 30, 2025, the company acquired 192 additional solar energy systems as part of the NJR Acquisitions for approximately $4.5 million in cash84 - As of June 30, 2025, total non-recourse debt was $695.0 million, with the SP1 Facility of $189.8 million due in April 202694 - The company settled a class action lawsuit for $4.75 million in April 2025 and paid $1.0 million in attorney fees for another settled matter in September 2024121122 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting 48% Q2 revenue growth, narrowed net loss, and the 'going concern' risk related to the SP1 debt facility maturity Results of Operations Q2 2025 revenues rose 48% to $33.2 million with net loss narrowing to $3.0 million, while six-month revenues grew 40% to $57.1 million but net loss widened to $18.3 million due to interest rate swap changes Comparison of Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $33,239 | $22,481 | $10,758 | 48% | | Cost of revenues - O&M | $2,137 | $4,474 | $(2,337) | (52)% | | SG&A expenses | $15,099 | $16,701 | $(1,602) | (10)% | | Net loss attributable to stockholders | $(2,966) | $(8,578) | $5,612 | (65)% | Comparison of Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $57,057 | $40,768 | $16,289 | 40% | | Net loss attributable to stockholders | $(18,304) | $(11,032) | $(7,272) | 66% | - The increase in Q2 revenue was primarily due to $3.0 million in incremental SLA revenues and a $5.9 million increase in SREC revenues, largely from the NJR Acquisitions158 - The wider net loss for the six-month period was primarily driven by a $10.3 million expense from the change in fair value of interest rate swaps in 2025, compared to a $3.6 million income from the same item in 2024177 Liquidity and Capital Resources The company had negative working capital of $120.2 million and $90.5 million in cash, with management planning to refinance the SP1 Facility to address going concern risk - The company had negative working capital of $120.2 million as of June 30, 2025, resulting from the current classification of the SP1 Facility debt178 - Total cash, cash equivalents, and restricted cash stood at $90.5 million as of June 30, 2025178 - Management's plans to refinance the SP1 Facility are central to alleviating the substantial doubt about the company's ability to continue as a going concern181 Item 3. 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 - As a smaller reporting company, Spruce Power is exempt from providing quantitative and qualitative disclosures about market risk192 Item 4. Controls and Procedures Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting194 - The material weakness stems from deficiencies in the control environment (insufficient qualified personnel) and control activities (ineffective controls over revenue recognition)197198 - A remediation plan is underway, which includes hiring qualified personnel, providing training on the COSO framework, and designing and implementing new controls related to revenue recognition201202206 PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 12 of the financial statements for a description of material pending legal proceedings, including class actions and state investigations - For details on legal proceedings, the report refers to Note 12 in the financial statements208 Item 1A. Risk Factors A key risk factor is the loss or transition of senior management, which could create uncertainty and negatively impact business operations and strategy execution - A key risk is the loss or transition of senior management, highlighted by the recent turnover of the CEO in 2024 and CFO in 2025210 - Management transitions may create uncertainty, divert resources, and negatively impact the company's ability to operate effectively and execute its strategies211 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 479,667 shares for $1.0 million, with $42.0 million remaining available under the program extended to May 15, 2027 Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 388,459 | $2.10 | | May 2025 | 91,208 | $2.03 | | June 2025 | 0 | $0.00 | | Total Q2 | 479,667 | | - As of June 30, 2025, approximately $42.0 million remained available under the share repurchase program216 - The Board of Directors extended the Repurchase Program to expire on May 15, 2027137215 Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None217 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable218 Item 5. Other Information No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter219 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as Inline XBRL documents220