Sunnova(NOVA) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for June 30, 2023, indicate substantial growth in assets and liabilities, increased revenue, but also significantly widened net losses and increased cash usage from operations and investing Unaudited Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $187,331 | $360,257 | | Total current assets | $746,766 | $948,389 | | Property and equipment, net | $4,512,510 | $3,784,801 | | Customer notes receivable, net | $3,228,299 | $2,466,149 | | Total assets | $9,606,795 | $8,336,892 | | Total current liabilities | $580,470 | $541,946 | | Long-term debt, net | $6,123,923 | $5,194,755 | | Total liabilities | $7,618,670 | $6,449,442 | | Total equity | $1,888,044 | $1,721,713 | Unaudited Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Data (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $166,377 | $147,012 | $328,073 | $212,734 | | Total operating expense, net | $226,148 | $149,743 | $436,625 | $249,671 | | Operating loss | ($59,771) | ($2,731) | ($108,552) | ($36,937) | | Net loss | ($100,781) | ($13,831) | ($211,127) | ($35,935) | | Net loss attributable to stockholders | ($86,091) | ($41,137) | ($167,174) | ($76,195) | | Net loss per share | ($0.74) | ($0.36) | ($1.45) | ($0.67) | Unaudited Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($182,542) | ($162,343) | | Net cash used in investing activities | ($1,173,923) | ($893,992) | | Net cash provided by financing activities | $1,216,765 | $1,028,328 | | Net decrease in cash, cash equivalents and restricted cash | ($139,700) | ($28,007) | Notes to Unaudited Condensed Consolidated Financial Statements - Sunnova operates as an Energy as a Service provider, serving over 348,000 customers across more than 45 U.S. states and territories, and has raised over $13.3 billion in total capital commitments since inception through June 30, 2023[25][26][27] - The company revised previously issued interim financial statements for Q1 and Q2 2022 to correct immaterial errors related to the credit valuation adjustment for its interest rate derivative financial instruments, resulting in adjustments to Other Assets and Accumulated Deficit[31][32][33] - Contracted but not yet recognized revenue was approximately $4.1 billion as of June 30, 2023, with approximately 3% expected to be recognized over the next 12 months[47] - As of June 30, 2023, total long-term debt (including current portion) was approximately $6.37 billion, a significant increase from $5.41 billion at year-end 2022, following new securitizations and amended revolving credit facilities in H1 2023[73][82][84] - As of June 30, 2023, the company had future commitments of $216.4 million to dealers, estimated purchase commitments of $334.6 million for solar equipment, and $32.8 million for information technology services[107][108][109] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights continued customer growth and revenue increases, despite significantly widened net losses driven by higher operating and interest expenses, a decline in Adjusted EBITDA, and successful new financing initiatives including a conditional DOE loan guarantee Key Financial and Operational Metrics Key Metrics | Metric | As of/For Period Ended June 30, 2023 | As of/For Period Ended June 30, 2022 | | :--- | :--- | :--- | | Number of customers | 348,600 | N/A (279,400 as of 12/31/22) | | Adjusted EBITDA (Q2) | $28.1 million | $39.7 million | | Adjusted EBITDA (H1) | $42.6 million | $52.2 million | | Estimated Gross Contracted Customer Value | $7.33 billion | N/A ($5.875 billion as of 12/31/22) | Results of Operations - Three Months Ended June 30, 2023 vs. 2022: - Revenue increased by $19.4 million (13.2%) to $166.4 million, mainly due to more solar energy systems in service - Operating expenses increased by $76.4 million, driven by higher O&M costs ($22.6M), G&A expenses ($33.1M), and other cost of revenue ($21.6M) - Net loss attributable to stockholders widened to $86.1 million from $41.1 million[184][185][191] - Six Months Ended June 30, 2023 vs. 2022: - Revenue increased by $115.3 million (54.2%) to $328.1 million, driven by more systems, higher inventory sales, and increased service revenue - Operating expenses increased by $187.0 million, with significant rises in G&A ($64.2M), O&M ($26.6M), and cost of revenue - Net loss attributable to stockholders widened to $167.2 million from $76.2 million[199][200][206] - Interest expense, net, increased significantly in both the three-month period (by $32.4 million) and six-month period (by $119.0 million) year-over-year, primarily due to higher debt levels and changes in gains/losses on derivative instruments[193][208] Liquidity and Capital Resources - As of June 30, 2023, the company had $187.3 million in unrestricted cash and $301.1 million in available borrowing capacity[212] - The business model requires substantial outside financing, and the company believes its current cash and financing arrangements are sufficient for at least the next twelve months[212] - In April 2023, the U.S. Department of Energy (DOE) announced a conditional commitment to guarantee 90% of up to approximately $3.3 billion of certain future financing arrangements for the company[122][221] - During H1 2023, the company increased tax equity commitments, amended and increased several revolving credit facilities (EZOP, TEPH, AP8), and issued new asset-backed and loan-backed notes (SOLV and HELXI securitizations)[215][216][222] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on variable-rate debt, mitigated by derivatives, where a hypothetical 10% rate increase would raise interest expense by $2.8 million for Q2 and $5.0 million for H1 2023 - The primary market risk is interest rate risk on variable-rate debt, where a hypothetical 10% increase in interest rates would have increased interest expense by $2.8 million for Q2 2023 and $5.0 million for H1 2023[234] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during Q2 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[235] - No material changes in internal control over financial reporting occurred during the second quarter of 2023[237] PART II - OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to materially adversely impact its financial position, results of operations, or liquidity - The company is not currently party to any legal proceedings expected to have a material adverse impact on its business[240] Risk Factors A new risk factor has been added concerning adverse developments in the financial services industry, which could impact the company's business, financial condition, and access to capital - A new risk factor was added concerning adverse developments in the financial services industry, citing the failures of Silicon Valley Bank and Credit Suisse and the potential impact on liquidity and counterparty performance[242] Unregistered Sales of Equity Securities and Use of Proceeds The company issued 693,443 shares of common stock to a Lennar Corporation subsidiary in Q2 2023 as part of an earnout agreement from the SunStreet acquisition, exempt from registration - In Q2 2023, the company issued a total of 693,443 shares of common stock to a subsidiary of Lennar Corporation as part of an earnout agreement related to the SunStreet acquisition[245] Other Information CEO William J. Berger adopted a Rule 10b5-1 trading plan to sell shares to cover tax obligations from vesting restricted stock units - CEO William J. Berger adopted a Rule 10b5-1 trading plan on May 2, 2023, to sell shares to cover tax obligations related to vesting restricted stock units[248]