Altus Power(AMPS) - 2022 Q3 - Quarterly Report

Part I Item 1. Financial Statements This section presents Altus Power, Inc.'s unaudited condensed consolidated financial statements, showing revenue growth and a net loss from non-cash fair value adjustments Condensed Consolidated Statements of Operations Operating revenues grew significantly for both Q3 and YTD 2022, but a substantial net loss was recorded due to non-cash fair value adjustments Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Operating revenues, net | $30,438 | $20,138 | $74,399 | $50,222 | | Operating income | $10,708 | $5,712 | $16,351 | $15,080 | | Total other expense | $105,372 | $9,555 | $28,722 | $18,045 | | Net loss | $(96,628) | $(1,291) | $(14,919) | $(1,468) | | Net loss per share (Basic & Diluted) | $(0.63) | $(0.01) | $(0.08) | $(0.01) | - The significant increase in net loss for Q3 2022 was primarily driven by a $29.6 million charge for the change in fair value of redeemable warrant liability and a $72.4 million charge for the change in fair value of alignment shares liability[6] Condensed Consolidated Balance Sheets Total assets slightly increased to $1.13 billion, while total liabilities decreased and total equity increased as of September 30, 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,130,330 | $1,113,249 | | Cash and cash equivalents | $290,894 | $325,983 | | Property, plant and equipment, net | $788,132 | $745,711 | | Total Liabilities | $750,668 | $771,711 | | Long-term debt, net | $527,709 | $524,837 | | Redeemable warrant liability | $12,715 | $49,933 | | Alignment shares liability | $136,826 | $127,474 | | Total Equity | $361,218 | $326,011 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased, but net cash decreased due to significant investing and financing activities for the nine months ended September 30, 2022 Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,839 | $18,248 | | Net cash used for investing activities | $(44,911) | $(213,493) | | Net cash (used for) provided by financing activities | $(12,860) | $196,216 | | Net (decrease) increase in cash | $(32,932) | $971 | Notes to Financial Statements These notes detail accounting policies, revenue recognition, 2022 acquisitions, debt structure, fair value measurements, and a significant post-quarter acquisition - The company develops, owns, and operates large-scale solar energy and storage systems, selling electricity to commercial, industrial, public sector, and community solar customers under long-term contracts[26] Disaggregation of Revenue (in thousands) | Revenue Source | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Revenue under power purchase agreements | $18,058 | $12,341 | | Revenue from net metering credit agreements | $20,908 | $17,922 | | Solar renewable energy certificate revenue | $28,521 | $17,164 | | Other Revenue Streams | $7,212 | $2,795 | | Total | $74,399 | $50,222 | - In 2022, the company completed several asset acquisitions, including the Stellar NJ, Stellar HI 2, and Stellar NJ 2 portfolios, adding a combined 13.9 MW of solar energy facilities[49][50][53] - Subsequent to the quarter end, on November 11, 2022, the company acquired approximately 88 MW of operating solar facilities for a total consideration of about $102.0 million[119] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth from acquisitions and new assets, detailing financial performance, key operational metrics, liquidity, and growth strategies leveraging partnerships - The company's portfolio grew to over 350 MW of solar PV, serving over 300 C&I entities and 5,000 residential customers through community solar projects[124] - Growth strategies focus on leveraging partnerships with Blackstone for capital and CBRE for access to a large portfolio of commercial and industrial properties to expand its customer base[123][129][133] Key Operational Metrics | Metric | As of Sep 30, 2022 | As of Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Megawatts installed (Cumulative) | 377 MW | 262 MW | +115 MW | | Megawatt hours generated (Q3) | 139,000 MWh | 115,000 MWh | +24,000 MWh | | Megawatt hours generated (YTD) | 362,000 MWh | 287,000 MWh | +75,000 MWh | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net loss | $(96,628) | $(14,919) | | Adjustments (Interest, Tax, D&A, etc.) | $115,018 | $56,974 | | Adjusted EBITDA | $19,390 | $42,055 | | Operating revenues, net | $30,438 | $74,399 | | Adjusted EBITDA margin | 64% | 57% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces modest interest rate risk due to fixed-rate debt and manages credit risk through high-quality financial institutions and customer evaluations - The company has modest exposure to interest rate risk as a significant portion of its debt is fixed-rate. It sometimes uses derivative instruments to hedge exposure on floating-rate debt[253] - Credit risk from cash and receivables is managed by using high-quality financial institutions and performing ongoing credit evaluations of customers[254] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to material weaknesses, and a remediation plan is underway to enhance financial controls - Management concluded that disclosure controls and procedures were not effective as of September 30, 2022, due to previously identified material weaknesses in internal control over financial reporting[256] - The company's remediation plan includes hiring additional finance and SOX personnel, formalizing the risk assessment process, and documenting and improving control activities, including deploying a new ERP system[257][258] Part II Item 1. Legal Proceedings The company is involved in routine legal claims, none of which are expected to materially impact its financial position or operations - The company reports no material legal proceedings that are expected to have a significant adverse effect on its financial condition or operations[262] Item 1A. Risk Factors This section details key risks including intense competition, supply chain reliance, operational challenges, acquisition integration, and internal control weaknesses - The company faces significant competition from traditional utilities and other renewable energy companies, and its business could be harmed by reductions in retail electricity prices or changes in government incentives[263] - The company's growth strategy includes acquisitions, but it may not be successful in identifying or integrating them, which could disrupt business and management[266][267] - Material weaknesses in internal control over financial reporting have been identified. Failure to remediate these weaknesses could result in material misstatements of financial statements or failure to meet reporting obligations[286][287][288] - The accounting for redeemable warrants and alignment shares as derivative liabilities can cause significant non-cash fluctuations in reported earnings, which may adversely affect the stock price[303] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 1,111,243 Class A common shares in exchange for 4,630,163 redeemable warrants via private agreements, relying on a registration exemption - The company issued 1,111,243 shares of Class A common stock in exchange for 4,630,163 redeemable warrants through privately negotiated agreements, relying on a registration exemption[308]