Hannon Armstrong Sustainable Infrastructure Capital(HASI) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Hannon Armstrong's Q2 2023 financial statements show total assets at $5.4 billion and net income of $13.5 million, driven by improved equity method investments and higher interest income Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $5,375,229 | $4,760,148 | | Equity method investments | $2,298,962 | $1,869,712 | | Commercial receivables, net | $2,134,154 | $1,887,483 | | Total Liabilities | $3,381,324 | $3,095,402 | | Senior unsecured notes | $1,770,047 | $1,767,647 | | Total Stockholders' Equity | $1,993,905 | $1,664,746 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | 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 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $74,334 | $62,803 | $143,435 | $121,280 | | Income (loss) from equity method investments | $2,252 | $(19,585) | $24,670 | $27,981 | | Net income (loss) | $13,522 | $(18,538) | $38,120 | $27,166 | | Diluted earnings (loss) per common share | $0.14 | $(0.21) | $0.39 | $0.30 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Category | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $65,726 | $(26,890) | | Net cash provided by (used in) investing activities | $(688,406) | $(255,550) | | Net cash provided by (used in) financing activities | $598,486 | $335,568 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The MD&A highlights the company's climate-positive strategy, $10 billion in managed assets, and a $5.0 billion project pipeline, alongside strong Q2 2023 net income and robust liquidity - The company's investment pipeline exceeded $5.0 billion as of June 30, 2023, with 50% in Behind-the-Meter (BTM) assets and 35% in Grid-Connected (GC) assets[186] - Management is considering revoking the company's REIT status for the 2024 tax year, aiming for similar tax efficiency through alternative structures and existing NOLs[188] Key Financial Metrics Comparison (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $13.5M | $(18.5)M | $38.1M | $27.2M | | Distributable Earnings | $53.1M | $53.5M | $102.8M | $99.3M | | Distributable EPS | $0.53 | $0.60 | $1.07 | $1.13 | Liquidity and Leverage (in millions, except ratios) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Unrestricted Cash | $127M | $156M | | Unused Credit Capacity | $669M | N/A | | Debt to Equity Ratio | 1.6 to 1 | 1.8 to 1 | | Fixed-Rate Debt % | 97% | 86% | Quantitative and Qualitative Disclosures about Market Risk The company manages primary market risks including credit, interest rate, liquidity, and commodity price risks through rigorous underwriting, hedging, and long-term contracts - The company faces interest rate risk on $108 million of variable-rate debt; a 50 basis point rate increase would raise quarterly interest expense by approximately $135 thousand[252] - Credit risk is managed via thorough underwriting, strong structural protections, and continuous active asset management and portfolio monitoring[247] - Commodity price risk is mitigated by focusing on renewable energy projects with long-term Power Purchase Agreements (PPAs) or leases[256] Controls and Procedures 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 company's disclosure controls and procedures were effective as of the quarter-end[261] - No material changes to internal control over financial reporting occurred during the quarter[263] PART II. OTHER INFORMATION Legal Proceedings As of June 30, 2023, the company is not involved in any legal proceedings expected to materially affect its financial condition or operations - The company reports no material legal proceedings as of June 30, 2023[265] Risk Factors This section refers investors to the detailed discussion of potential risks and uncertainties in Item 1A of the company's 2021 Form 10-K - The report refers to Item 1A of the company's 2021 Form 10-K for a discussion of potential risks and uncertainties[266] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased common stock in 2023, primarily for employees to satisfy tax withholding obligations upon restricted stock vesting Issuer Purchases of Equity Securities (2023) | Period | Total Shares Purchased | Average Price Per Share (in US Dollars) | | :--- | :--- | :--- | | January 2023 | 6,468 | $34.43 | | March 2023 | 35,104 | $31.18 | | May 2023 | 4,452 | $26.10 | - Repurchases facilitated employees in satisfying tax and compensation-related withholdings upon restricted stock vesting[268]