Altus Power(AMPS) - 2022 Q1 - Quarterly Report

Part I Financial Statements Altus Power reported Q1 2022 operating revenues of $19.2 million, with net income surging to $60.1 million primarily from non-cash gains Condensed Consolidated Statements of Operations Q1 2022 operating revenues grew 54% to $19.2 million, with net income reaching $60.1 million driven by significant non-cash fair value gains Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Operating revenues, net | $19,199 | $12,471 | | Operating income | $161 | $3,028 | | Total other (income) expense | $(59,851) | $3,802 | | Net income | $60,135 | $263 | | Net income attributable to Altus Power, Inc. | $60,419 | $962 | | Diluted EPS | $0.39 | $0.01 | - The significant increase in net income was primarily driven by a $18.5 million gain on the change in fair value of redeemable warrant liability and a $46.3 million gain on the change in fair value of alignment shares liability, which are non-cash items[8] Condensed Consolidated Balance Sheets As of March 31, 2022, total assets were $1.104 billion, with liabilities decreasing to $702.6 million and equity increasing to $365.9 million Balance Sheet Summary (in thousands) | Metric | As of March 31, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Cash | $318,177 | $325,983 | | Total current assets | $335,848 | $344,404 | | Property, plant and equipment, net | $745,991 | $745,711 | | Total assets | $1,104,349 | $1,113,249 | | Total current liabilities | $31,473 | $32,891 | | Long-term debt, net | $521,869 | $524,837 | | Total liabilities | $702,636 | $771,711 | | Total stockholders' equity | $365,945 | $304,918 | Condensed Consolidated Statements of Cash Flows Q1 2022 net cash from operations was $3.5 million, while investing activities used $6.6 million and financing activities used $4.7 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,499 | $3,222 | | Net cash used for investing activities | $(6,571) | $(8,671) | | Net cash used for financing activities | $(4,720) | $(8,201) | | Net decrease in cash and restricted cash | $(7,792) | $(13,650) | Notes to Financial Statements Notes detail accounting policies, revenue streams, debt, and fair value measurements, highlighting a single operating segment and significant non-cash gains - The company operates as a single operating segment, focusing on developing, owning, and operating solar energy generation and storage systems in the United States[22][29] Disaggregation of Revenue (in thousands) | Revenue Source | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue under power purchase agreements | $4,182 | $3,132 | | Revenue from net metering credit agreements | $3,910 | $2,944 | | Solar renewable energy certificate revenue | $9,531 | $5,565 | | Rental income | $644 | $114 | | Performance based incentives | $359 | $551 | | Other revenue | $573 | $165 | | Total | $19,199 | $12,471 | - Total principal long-term debt as of March 31, 2022, was $552.6 million, primarily consisting of a $496.6 million Amended Rated Term Loan with a fixed weighted average interest rate of 3.51%[51][52] - The fair value of the redeemable warrant liability decreased by $18.5 million, and the alignment shares liability decreased by $46.3 million during Q1 2022, resulting in significant non-cash gains[70][75] - The company recognized $1.3 million in stock-based compensation expense in Q1 2022, a significant increase from $0.1 million in Q1 2021, mainly due to new RSU grants under the Omnibus Incentive Plan[94][97] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 54% revenue growth, 38% Adjusted EBITDA increase, a one-gigawatt pipeline, and internal control remediation efforts Overview and Key Factors Altus Power operates over 350 MW of solar and storage systems, leveraging long-term contracts and strategic partnerships for growth - The company's portfolio consists of over 350 MW of solar PV, with long-term PPAs with over 300 C&I entities and contracts with over 5,000 residential community solar customers[109] - Key growth strategies include expanding EV charging and energy storage offerings and leveraging partnerships with Blackstone and CBRE to access new customers[113] - The average remaining life of the company's contracts is approximately 18 years, with about 60% of the current installed portfolio having variable rates tied to local utility prices[115] - As of March 31, 2022, the company has a project pipeline of over one gigawatt, split between potential operating acquisitions and development projects, though supply chain challenges have extended timelines by 3 to 6 months[121][122] Key Financial and Operational Metrics Cumulative installed capacity reached 362 MW, with Adjusted EBITDA growing 38% to $8.8 million and an Adjusted EBITDA margin of 46% Cumulative Megawatts Installed | Metric | As of March 31, 2022 | As of March 31, 2021 | | :--- | :--- | :--- | | Megawatts installed | 362 MW | 247 MW | Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $60,135 | $263 | | Adjustments (Interest, D&A, non-cash/non-recurring items) | $(51,384) | $6,062 | | Adjusted EBITDA | $8,751 | $6,325 | | Operating revenues, net | $19,199 | $12,471 | | Adjusted EBITDA margin | 46% | 51% | Results of Operations Q1 2022 operating revenues grew 53.9% to $19.2 million, while G&A expenses increased 97.9% due to higher headcount and non-cash gains - Operating revenues increased by $6.7 million (53.9%) in Q1 2022 compared to Q1 2021, primarily due to the increased number of solar energy facilities from acquisitions and projects placed in service[160] - General and administrative expenses increased by $3.2 million (97.9%) year-over-year, mainly due to increased personnel costs from higher headcount[162] - Stock-based compensation increased by $1.3 million, primarily due to RSU grants under the new Omnibus Incentive Plan adopted in July 2021[166] - The company recorded a non-cash gain of $18.5 million from the change in fair value of its redeemable warrant liability and a $46.3 million gain from its alignment shares liability, driven by a decrease in the company's stock and warrant prices[167][169] Liquidity and Capital Resources As of March 31, 2022, the company held $322.5 million in cash, with future growth dependent on external financing and existing debt facilities - As of March 31, 2022, the Company had total cash and restricted cash of $322.5 million[176] - The company's business model requires substantial outside financing to grow, and it plans to use existing debt facilities, tax equity investors, and operating cash flow to fund expansion[177] - The company has outstanding letters of credit and surety bonds totaling $10.6 million as of March 31, 2022, primarily for performance-related obligations and debt service reserves[180] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks, primarily interest rate and credit risk, through fixed-rate debt, derivatives, and credit evaluations - A significant portion of the company's debt has a fixed interest rate, and derivative instruments are sometimes used to hedge floating-rate interest rate exposure[201][202] - Credit risk from cash and restricted cash is managed by using high-quality financial institutions, while customer credit risk is monitored through ongoing evaluations[203] Controls and Procedures Management concluded disclosure controls were ineffective due to material weaknesses, with a remediation plan underway including new hires and ERP implementation - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to previously identified material weaknesses in internal control over financial reporting[205] - The company's remediation plan includes hiring key finance and SOX personnel, formalizing risk assessment, and implementing a new ERP system to improve financial reporting controls[206] - During the quarter, the company completed the implementation of a new accounting system to create a more efficient financial statement closing process[208] Part II Legal Proceedings The company is involved in routine legal proceedings not expected to materially affect its financial position or operations - Current legal proceedings are considered ordinary and are not expected to have a material adverse effect on the company[210] Risk Factors No material changes to risk factors were reported since the 2021 Annual Report on Form 10-K - No material changes to risk factors were reported since the 2021 Annual Report on Form 10-K[211] Other Part II Items The report indicates no unregistered sales of equity, no defaults on senior securities, and no mine safety disclosures - Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information) were all reported as 'None' or 'Not applicable'[211]