Sunrun Reports Third Quarter 2017 Financial Results

Sunrun Reports Third Quarter 2017 Financial Results

Unlevered NPV of $1.15 per watt in Q3 2017, the highest in the company’s history
Net Present Value of $93 million created in Q3 2017, an increase of 21% Year-Over-Year
Net Earning Assets of $1.2 billion, an increase of 24% Year-Over-Year

SAN FRANCISCO, Nov. 08, 2017 (GLOBE NEWSWIRE) -- Sunrun (Nasdaq:RUN), the nation’s largest dedicated provider of residential solar, storage and energy services, today announced financial results for the third quarter ended September 30, 2017.

Third Quarter 2017 Operating Highlights

  • Total deployments of 90 MW, an increase of 12% year-over-year and exceeding the company’s guidance of 88 MWs
  • Net Present Value (NPV) of $93 million created, an increase of 21% year-over-year
  • Unlevered NPV of $1.15 per watt, the highest level in the company’s history
  • Cumulative MW deployed of 1,117 MW, an increase of 39% year-over-year
  • Net Earning Assets of $1.2 billion, reflecting a 24% increase year-over-year

“Our positive momentum continues in Q3. We are reiterating our full-year guidance of 15% growth in volumes while increasing our annual NPV target to 40% growth,” said Lynn Jurich, Sunrun’s chief executive officer. “I am proud of the company’s performance and industry leadership. We have brought clean, affordable energy to more than 160,000 American families and provided job opportunities in hundreds of communities across the country. We have delivered our highest unit economics in the company’s history and increased our cash balance, even while continuing to invest in new markets, BrightBox and grid services.” 

Key Operating Metrics

In the third quarter of 2017, MW deployed increased to 90 MW from 80 MW in the third quarter of 2016, a 12% year-over-year increase.

In the third quarter of 2017, MW booked were 93 MW, an increase of 12% from the third quarter of 2016.

Creation Cost per watt was $3.34 in the third quarter of 2017 compared to $3.36 in the third quarter of 2016, an improvement of $0.02 year-over-year. Project Value per watt was $4.49 in the third quarter of 2017, an increase of $0.06 compared to the third quarter of 2016.

NPV created in the third quarter of 2017 was $93 million, a 21% increase from $76 million in the third quarter of 2016. Unlevered NPV per watt in the third quarter of 2017 was $1.15 compared to $1.07 in the prior year, reflecting the highest level in the company’s history. 

Gross Earning Assets as of September 30, 2017 were $2.1 billion, up $399 million, or 24% from the prior year. Net Earning Assets as of September 30, 2017 were $1.2 billion, up $232 million, also reflecting a 24% increase from the prior year.

Financing Activities                                  

As of November 8, 2017, closed transactions and executed term sheets provide us expected tax equity and back-leverage capacity well into Q2 2018.

Third Quarter 2017 GAAP Results

Operating leases and incentives revenue grew 35% year-over-year to $58.5 million. Solar energy systems and product sales increased 20% year-over-year to $82.8 million. Total revenue grew to $141.3 million in the third quarter of 2017, up $29.3 million, or 26% from the third quarter of 2016.

Total cost of revenue was $118.8 million, an increase of 21% year-over-year. Total operating expenses were $189.0 million, an increase of 16% year-over-year.

Net income available to common stockholders was $27.8 million in the third quarter of 2017, an increase of 65% year-over-year.

Diluted net earnings per share available to common shareholders was $0.25 per share.

Guidance for Q4 and Full Year 2017

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.

In Q4, we expect to deploy approximately 87 MW. We continue to expect to deploy 325 MWs for the full year 2017, reflecting 15% year-over-year growth.

Conference Call Information

Sunrun is hosting a conference call for analysts and investors to discuss its third quarter 2017 results and outlook for its fourth quarter 2017 at 2:00 p.m. Pacific Time today, November 8, 2017. A live audio webcast of the conference call along with supplemental financial information will be accessible via the “Investor Relations” section of the Company’s website at http://investors.sunrun.com. The conference call can also be accessed live over the phone by dialing (877) 470-1078 (domestic) or (615) 247-0087 (international) using ID #4288429. A replay will be available following the call via the Sunrun Investor Relations website or for one week at the following numbers (855) 859-2056 (domestic) or (404) 537-3406 (international) using ID #4288429.

About Sunrun                    

Sunrun (Nasdaq:RUN) is the nation’s largest dedicated residential solar, storage and energy services company with a mission to create a planet run by the sun. Since establishing the solar as a service model in 2007, Sunrun leads the industry in providing clean energy to homeowners with little to no upfront cost and at a savings to traditional electricity. The company designs, installs, finances, insures, monitors and maintains the systems, while families receive predictable pricing for 20 years or more. The company also offers Sunrun BrightBoxTM solar power generation with smart inverter technology and home battery storage. For more information, please visit: www.sunrun.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, including statements regarding our future financial and operating guidance, operational and financial results such as growth, value creation, MW bookings and deployments, gross and net earning assets, project value, creation costs and NPV, and the assumptions related to the calculation of the foregoing metrics, as well as our expectations regarding our growth and financing capacity. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to: the availability of additional financing on acceptable terms; changes in the retail prices of traditional utility generated electricity; changes in policies and regulations including net metering and interconnection limits or caps; the availability of rebates, tax credits and other incentives; the availability of solar panels and other raw materials; our limited operating history, particularly as a new public company; our ability to attract and retain our relationships with third parties, including our solar partners; our ability to meet the covenants in our investment funds and debt facilities; and such other risks identified in the reports that we file with the U.S. Securities and Exchange Commission, or SEC, from time to time. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.



Consolidated Balance Sheets
(In Thousands)

 
  September 30, 2017 December 31, 2016
     
Assets    
Current assets:    
Cash $216,142  $206,364 
Restricted cash 14,036  11,882 
Accounts receivable, net 73,031  60,258 
State tax credits receivable 11,085  13,713 
Inventories 63,323  67,326 
Prepaid expenses and other current assets 13,907  9,802 
Total current assets 391,524  369,345 
Restricted cash 5,952  6,117 
Solar energy systems, net 3,147,383  2,629,366 
Property and equipment, net 38,819  48,471 
Intangible assets, net 15,345  18,499 
Goodwill 87,543  87,543 
Prepaid tax asset   378,541 
Other assets 31,187  34,936 
Total assets $3,717,753  $3,572,818 
Liabilities and total equity    
Current liabilities:    
Accounts payable $108,689  $66,018 
Distributions payable to noncontrolling interests and redeemable noncontrolling interests 14,785  10,654 
Accrued expenses and other liabilities 54,533  59,261 
Deferred revenue, current portion 74,793  70,849 
Deferred grants, current portion 7,827  8,011 
Capital lease obligations, current portion 7,883  10,015 
Recourse debt, current portion 247,000   
Non-recourse debt, current portion 22,538  14,153 
Lease pass-through financing obligation, current portion 6,043  5,823 
Total current liabilities 544,091  244,784 
Deferred revenue, net of current portion 581,517  583,401 
Deferred grants, net of current portion 231,478  226,893 
Capital lease obligations, net of current portion 7,060  12,965 
Recourse debt, net of current portion   244,000 
Non-recourse debt, net of current portion 846,257  639,870 
Lease pass-through financing obligation, net of current portion 137,997  137,958 
Other liabilities 10,277  5,457 
Deferred tax liabilities 68,975  415,397 
Total liabilities 2,427,652  2,510,725 
Redeemable noncontrolling interests 176,460  137,907 
Total stockholders’ equity 753,936  672,961 
Noncontrolling interests 359,705  251,225 
Total equity 1,113,641  924,186 
Total liabilities, redeemable noncontrolling interests and total equity $3,717,753  $3,572,818 
 
 


Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)

 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2017 2016 2017 2016
Revenue:        
Operating leases and incentives $58,462  $43,150  $171,897  $123,084 
Solar energy systems and product sales 82,829  68,883  211,359  210,230 
Total revenue 141,291  112,033  383,256  333,314 
Operating expenses:        
Cost of operating leases and incentives 49,232  40,770  140,682  117,478 
Cost of solar energy systems and product sales 69,588  57,264  179,957  176,376 
Sales and marketing 37,298  40,192  101,758  127,096 
Research and development 3,936  2,458  10,642  7,294 
General and administrative 27,925  21,331  77,776  68,193 
Amortization of intangible assets 1,052  1,051  3,154  3,154 
Total operating expenses 189,031  163,066  513,969  499,591 
Loss from operations (47,740) (51,033) (130,713) (166,277)
Interest expense, net 17,707  13,957  49,586  38,535 
Other expenses (income), net (94) 42  589  (460)
Loss before income taxes (65,353) (65,032) (180,888) (204,352)
Income tax expense 14,834  9,936  37,625  13,146 
Net loss (80,187) (74,968) (218,513) (217,498)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests (107,969) (91,846) (284,144) (280,153)
Net income available to common stockholders $27,782  $16,878  $65,631  $62,655 
Net income per share available to common stockholders        
Basic $0.26  $0.16  $0.62  $0.61 
Diluted $0.25  $0.16  $0.61  $0.60 
Weighted average shares used to compute net income per share available to common stockholders        
Basic 105,783  102,707  105,060  101,988 
Diluted 109,598  105,092  107,893  104,698 
 
 


Consolidated Statements of Cash Flows
(In Thousands)

       
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Operating activities:        
Net loss $(80,187) $(74,968) $(218,513) $(217,498)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization, net of amortization of deferred grants 34,392  27,006  99,674  73,570 
Deferred income taxes 14,836  9,936  37,624  13,146 
Stock-based compensation expense 5,105  5,379  16,494  14,026 
Noncash interest expense 3,663  2,689  13,144  8,024 
Interest on lease pass-through financing obligations 3,014  3,032  8,963  9,051 
Reduction in lease pass-through financing obligations (4,559) (4,658) (13,721) (14,149)
Other noncash losses and expenses 2,259  1,230  6,849  4,154 
Changes in operating assets and liabilities:        
Accounts receivable (9,748) 5,299  (13,963) 9,183 
Inventories (10,579) 2,266  4,003  (14,573)
Prepaid and other assets (766) (2,375) (3,620) (5,135)
Accounts payable 29,033  (12,331) 31,669  (22,220)
Accrued expenses and other liabilities (84) 4,796  (11,367) 8,014 
Deferred revenue 7,912  3,881  3,598  7,176 
   Net cash used in operating activities (5,709) (28,818) (39,166) (127,231)
Investing activities:        
Payments for the costs of solar energy systems, leased and to be leased (226,462) (197,823) (583,188) (530,295)
Purchases of property and equipment (1,492) (2,189) (5,956) (10,397)
Business acquisition, net of cash acquired       (5,000)
   Net cash used in investing activities (227,954) (200,012) (589,144) (545,692)
Financing activities:        
Proceeds from state tax credits, net of recapture (386) (42) 12,785  9,081 
Proceeds from issuance of recourse debt 34,000  97,000  125,400  354,400 
Repayment of recourse debt (34,000) (95,400) (122,400) (307,400)
Proceeds from issuance of non-recourse debt 94,561  60,074  294,086  249,820 
Repayment of non-recourse debt (7,971) (1,570) (92,801) (18,113)
Payment of debt fees (1,377) (1,337) (6,332) (13,614)
Proceeds from lease pass-through financing obligations 1,577  1,437  4,639  14,242 
Contributions received from noncontrolling interests and redeemable noncontrolling interests 167,777  182,586  471,322  422,207 
Distributions paid to noncontrolling interests and redeemable noncontrolling interests (14,126) (9,492) (38,761) (27,749)
(Payments) proceeds from exercises of stock options, net of withholding taxes on restricted stock units and issuance
of shares in connection with the Employee Stock Purchase Plan
 218  1,088  (207) 4,704 
Offering costs paid related to initial public offering       (437)
Payment of capital lease obligations (2,323) (3,252) (7,585) (9,668)
Change in restricted cash 534  (2,005) (2,058) (937)
   Net cash provided by financing activities 238,484  229,087  638,088  676,536 
         
Net change in cash 4,821  257  9,778  3,613 
Cash, beginning of period 211,321  207,220  206,364  203,864 
Cash, end of period $216,142  $207,477  $216,142  $207,477 
 
 

Key Operating Metrics and Financial Metrics

 
  Three Months Ended
September 30,
  2017  2016
MW Booked (during the period)(1)  93   83
MW Deployed (during the period)  90   80
Cumulative MW Deployed (end of period)  1,117   801
Gross Earning Assets under Energy Contract (end of period)(in millions) $1,359  $1,108
Gross Earning Assets Value of Purchase or Renewal (end of period)(in millions) $709  $561
Gross Earning Assets (end of period)(in millions)(2) $2,068  $1,669
 Net Earning Assets (end of period)(in millions)(2) $1,186  $954
 
   Three Months Ended
September 30,
  2017  2016
Project Value, Contracted Portion (per watt) $3.92  $3.84
Project Value, Renewal Portion (per watt) $0.57  $0.59
Total Project Value (per watt) $4.49  $4.43
Creation Cost (per watt)(3) $3.34  $3.36
Unlevered NPV (per watt)(2) $1.15  $1.07
NPV (in millions)(2) $93  $76
  1. The presentation of MW Booked for periods prior to December 31, 2016 reflects changes made to the calculation methodology as further described in our Annual Report on Form 10-K filed with the SEC on March 8, 2017.
  2. Numbers may not sum due to rounding.
  3. The presentation of Creation Cost for periods prior to December 31, 2016 reflects changes made to the calculation methodology as further described in our Fourth Quarter 2016 earnings presentation available on our investor relations website.

Definitions

Creation Cost includes (i) certain installation and general and administrative costs after subtracting the gross margin on solar energy systems and product sales divided by watts deployed during the measurement period and (ii) certain sales and marketing expenses under new Customer Agreements, net of cancellations during the period divided by the related watts deployed.

Customers refers to all residential homeowners (i) who have executed a Customer Agreement or cash sales agreement with us and (ii) for whom we have internal confirmation that the applicable solar energy system has reached notice to proceed or “NTP”, net of cancellations.

Customer Agreements refers to, collectively, solar power purchase agreements and solar leases.

Gross Earning Assets represents the net cash flows (discounted at 6%) we expect to receive during the initial 20-year term of our Customer Agreements for systems that have been deployed as of the measurement date, plus a discounted estimate of the value of the Customer Agreement renewal term or solar energy system purchase at the end of the initial term. Gross Earning Assets excludes estimated cash distributions to investors in consolidated joint ventures and estimated operating, maintenance and administrative expenses for systems deployed as of the measurement date. In calculating Gross Earning Assets, we deduct estimated cash distributions to our cash equity financing providers. In calculating Gross Earning Assets, we do not deduct customer payments we are obligated to pass through to investors in lease pass-throughs as these amounts are reflected on our balance sheet as long-term and short-term lease pass-through obligations, similar to the way that debt obligations are presented. In determining our finance strategy, we use lease pass-throughs and long-term debt in an equivalent fashion as the schedule of payments of distributions to lease pass-through investors is more similar to the payment of interest to lenders than the internal rates of return (IRRs) paid to investors in other tax equity structures.

Gross Earning Assets Under Energy Contract represents the net cash flows during the initial (typically 20 year) term of our Customer Agreements (less substantially all value from SRECs prior to July 1, 2015), for systems deployed as of the measurement date.

Gross Earning Assets Value of Purchase or Renewal is the forecasted net present value we would receive upon or following the expiration of the initial Customer Agreement term (either in the form of cash payments during any applicable renewal period or a system purchase at the end of the initial term), for systems deployed as of the measurement date.

MW Booked represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to an executed Customer Agreement, for which we have confirmation that the systems have reached NTP, net of cancellations.

MW Deployed represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to executed Customer Agreements, for which we have (i) confirmation that the systems are installed on the roof, subject to final inspection or (ii) in the case of certain system installations by our partners, accrued at least 80% of the expected project cost.

Net Earning Assets represents Gross Earning Assets less both project level debt and Lease Pass-Through Financing Obligation, as of the same measurement date. Because estimated cash distributions to our cash equity financing partners are deducted from Gross Earning Assets, a proportional share of the corresponding project level debt is deducted from Net Earning Assets. 

NPV equals Unlevered NPV multiplied by leased megawatts deployed in period.

NTP or Notice to Proceed refers to our internal confirmation that a solar energy system has met our installation requirements for size, equipment and design.

Project Value represents the value of upfront and future payments by customers, the benefits received from utility and state incentives, as well as the present value of net proceeds derived through investment funds. Specifically, Project Value is calculated as the sum of the following items (all measured on a per-watt basis with respect to megawatts deployed under Customer Agreements during the period): (i) estimated Gross Earning Assets, (ii) utility or upfront state incentives, (iii) upfront payments from customers for deposits and partial or full prepayments of amounts otherwise due under Customer Agreements and which are not already included in Gross Earning Assets and (iv) finance proceeds from tax equity investors, excluding cash true-up payments or the value of asset contributions in lieu of cash true-up payments made to investors. Project Value includes contracted SRECs for all periods after July 1, 2015.

Unlevered NPV equals the difference between Project Value and estimated Creation Cost on a per watt basis.

Investor Relations Contact:

Patrick Jobin
Vice President, Finance & Investor Relations
[email protected]
(415) 638-4007

Media Contact:

Georgia Dempsey
Director of Corporate Communications
[email protected]
(415) 518-9418