Spruce Power (US:SPRU)2022-11-10 02:40Financial Data and Key Metrics Changes - Total company revenues for Q3 2022 were $8.4 million, up from $3 million in Q2 2022 and $3.2 million in Q3 2021 [42] - Adjusted EBITDA was negative $9 million, an improvement from negative $11.1 million in Q2 2022 and negative $14.2 million in Q3 2021 [43] - Unrestricted cash and cash equivalents were approximately $240 million as of September 30, 2022, down from $322 million at the end of Q2 2022 [45] Business Line Data and Key Metrics Changes - Revenue from Spruce Power, the residential solar segment, totaled $5.1 million for the period from September 9 to September 30, 2022 [44] - Revenue in the Drivetrain segment was approximately $900,000, compared to $800,000 in the prior quarter and $600,000 in Q3 2021 [44] - Revenue in the XL Grid segment totaled $2.4 million, slightly up from $2.2 million in the prior quarter but down from $2.6 million in the prior year quarter [45] Market Data and Key Metrics Changes - The residential solar market is experiencing strong growth driven by rising utility electricity prices, increased adoption of electric vehicles, and decreasing battery costs [33][34][35] - A nationwide shortage of skilled labor is emerging as a bottleneck for the residential solar industry, impacting maintenance and installation [36] Company Strategy and Development Direction - The company is focused on transformational M&A, having acquired Spruce Power to enhance its position in the decarbonization market and generate positive EBITDA [6][7] - The company plans to rebrand as Spruce Power Holding Corporation and change its ticker symbol to SPRU [15] - The company is exploring strategic alternatives for its legacy Drivetrain business and is in advanced discussions with several interested parties [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's progress and the potential for shareholder value creation, emphasizing the disconnect between market valuation and the company's cash position [50] - The company is committed to executing its strategy to unlock value and maximize resources over the long term [50] Other Important Information - The company has approximately $542 million in long-term debt, with a weighted average interest cost of about 5.5% [46] - The company is undergoing a multimillion-dollar upgrade of its solar systems to transition from 3G to 4G networks, with expectations to complete upgrades by the end of 2023 [36] Q&A Session Summary Question: Is the $821 million in subscriber value contracted and renewal or just contracted? - The $821 million includes both contracted and renewal values [53] Question: Will the company continue to focus on buying post-flip assets? - The company will focus on seasoned assets, primarily post-flip, but some pre-flip opportunities are also being considered [57][59] Question: How does the company view the current capital structure for new deals? - The company sees robust availability of senior debt capital and is confident in its ability to secure financing for acquisitions [60] Question: What is the unlevered IRR on new portfolios? - The unlevered IRR on recent transactions was 14%, but future negotiations may vary [61] Question: How does the shift towards TPO impact acquisition opportunities? - The shift towards TPO is seen as a tailwind for the company, as it aligns with their business model and increases the addressable market [69] Question: How does the company manage skilled labor shortages in the solar space? - The company operates a lean model, partnering with local O&M providers to maintain efficiency and manage costs [71][73]