Spruce Power Holding Corporation (NYSE: SPRU) (“Spruce” or the
“Company”), a leading owner and operator of distributed solar
energy assets across the United States, today reported financial
results for the second quarter ended June 30, 2024.
Business Highlights
- Reported 2Q revenues of $22.5 million, net loss attributable to
stockholders of $8.6 million and Operating EBITDA of $14.4
million.
- Ended quarter with strong liquidity position for future growth,
with $116.6 million of unrestricted cash.
- Continued to evaluate a pipeline of both operating residential
solar portfolio M&A opportunities and organic growth prospects
through Spruce Pro.
- Refinanced nearest maturing debt facility, the SP4 Facility,
providing for a net injection of incremental capital into the
Company of over $6 million.
Management Commentary and Outlook
"In the second quarter, our owner-operator platform delivered
solid performance, backed by reliable, long-term cash flows from
approximately 75,000 home solar assets and contracts. We exited the
quarter with substantial liquidity of over $100 million of
unrestricted cash to pursue our burgeoning growth opportunity set,"
said Chris Hayes, Spruce’s Chief Executive Officer.
Hayes continued, "The fundamentals of our business have never
been stronger as consumer preference for solar leases and power
purchase agreements (PPAs) continues to accelerate. This dynamic
creates a strong tailwind for our M&A focused customer
acquisition strategy and third-party servicing offerings through
Spruce Pro. We are focused on disciplined execution and driving
positive inflection in our platform's free cash flow
generation."
Consolidated Financial Results
Revenues totaled $22.5 million for the second quarter of 2024,
compared to $22.8 million for the second quarter of 2023. The
decrease was primarily due to lower solar renewable energy credit
(SREC) revenues during the three months ended June 30, 2024.
Core operating expenses (excluding depreciation), including both
selling, general & administrative expenses ("SG&A") and
operations & maintenance, were $21.1 million for the second
quarter of 2024, up from $19.0 million for the second quarter of
2023. The increase was primarily due to higher compensation
expenses of $2.2 million, which included one-time severance costs
of $1.9 million recognized upon the separation of the former Chief
Executive Officer in the second quarter of 2024.
Net loss attributable to stockholders was $8.6 million for the
second quarter of 2024.
Management considers Operating EBITDA a key measure in
evaluating Spruce's operating performance. For the second quarter
of 2024, Operating EBITDA was $14.4 million.
Balance Sheet and Liquidity
The Company's total principal amount of outstanding debt as of
June 30, 2024, was $640.0 million with a blended interest rate of
5.9%, including the impact of hedge arrangements. All debt consists
of project finance loans that are non-recourse to the Company
itself.
Total cash as of June 30, 2024, was $150.2 million, including
cash and cash equivalents of $116.6 million and restricted cash of
$33.6 million. Cash and cash equivalents decreased from $120.6
million as of March 31, 2024. The decrease is primarily
attributable to higher operations and maintenance expenditures,
partially offset by net cash proceeds associated with the refinance
of the Company's SP4 Facility.
2024 Guidance
Spruce Power maintains its guidance for 2024 Operating EBITDA in
the range of $68 - $86 million and 2024 Adjusted Free Cash Flow in
the range of $0 - $5 million, with current expectations trending to
the lower end of the ranges.
While Spruce's M&A pipeline continued to grow, home solar
assets and contracts at the end of the second quarter were lower
than the assumptions underlying the Company's previously disclosed
full year 2024 guidance, which contemplated growth in home solar
assets and contracts via M&A activity during the first half of
the year. Further, operating expenses have been higher than
initially projected given unforeseen CEO transition costs, an
increase in legal expenses associated with the proxy contest, that
ultimately led to the Company entering a cooperation agreement, and
timing of non-routine operations and maintenance expenditures.
Growth and Capital Allocation
Spruce is committed to maximizing long-term value for our
shareholders through a disciplined approach that includes strategic
acquisitions, capital expenditure projects, debt repayment, and
shareholder return initiatives.
During the second quarter of 2024, the Company continued to
evaluate a pipeline of both operating residential solar portfolio
M&A opportunities and organic growth prospects through Spruce
Pro.
In June 2024, the Company closed on a new $130 million
non-recourse debt facility, refinancing the Company's previous term
loan of $125 million (the "SP4 Facility"). The refinancing
transaction provided for an injection of incremental capital into
the Company of over $6 million, net of fees and inclusive of
positive value realized in the termination of interest rate swaps
underlying the previous term loan.
There were no common stock repurchases made during the second
quarter of 2024. There was $44.7 million remaining under the
Company's authorized $50.0 million common share repurchase program
as of June 30, 2024. The Company will continue to assess common
stock repurchases on a quarterly basis with its Board of
Directors.
Key Operating Metrics
As of June 30, 2024, Spruce owned cash flows from approximately
75,000 home solar assets and contracts across 18 U.S. States with
an average remaining contract life of approximately 11 years.
Combined portfolio generation for the second quarter ended June 30,
2024, was approximately 133 thousand MWh of power. In addition, the
Company also serviced approximately 4,500 third-party owned home
solar systems and third-party loans as of June 30, 2024. Gross
Portfolio Value, on a PV6 basis as described below, was $778.0
million as of June 30, 2024.
Conference Call Information
The Spruce management team will host a conference call for
analysts and investors to discuss its second quarter 2024 financial
results and business outlook today at 2:30 p.m. Mountain Time. The
conference call can be accessed live over the telephone by dialing
(888) 596-4144 and referencing Conference ID 6052195.
Alternatively, the call can be accessed via a live webcast
accessible on the Events & Presentations page in the Investor
Relations section of the Company’s website at
https://investors.sprucepower.com/overview/default.aspx. An audio
replay will be available shortly after the call and can be accessed
by dialing (800) 770-2030. The passcode for the replay is 6052195.
The replay will be available until August 28, 2024.
About Spruce Power
Spruce Power is a leading owner and operator of distributed
solar energy assets across the United States. We provide
subscription-based services that make it easy for homeowners to
benefit from rooftop solar power and battery storage. Our power
as-a-service model allows consumers to access new technology
without making a significant upfront investment or incurring
maintenance costs. Our Company owns the cash flows from
approximately 75,000 home solar assets and contracts across the
United States. For additional information, please visit
www.sprucepower.com.
Forward Looking Statements
Certain statements in this press release may constitute
“forward-looking statements” within the meaning of the federal
securities laws. Forward-looking statements can be identified by
the use of forward-looking words or phrases such as “anticipate,”
“believe,” “could,” “expect,” “intends,” “may,” “opportunity,”
“plans,” “goals,” “target,” “predict,” “potential,” “estimate,”
“should,” “will,” “would,” “continue,” “likely” or the negative of
these terms or other words of similar meaning. These statements are
based upon our current plans and strategies and reflect our current
assessment of the risks and uncertainties. Forward-looking
statements in this release include statements regarding 2024
guidance, potential future acquisitions and debt reductions, and
the Company's prospects for long-term growth in revenues, business
cash inflows and earnings. Repurchases under the stock repurchase
program will depend upon market prices, trading volume, available
cash and other factors, and therefore, there is no guarantee as to
the number of shares that may be purchased. These statements are
based on various assumptions, whether or not identified in this
press release and on the current expectations of management and are
not predictions of actual performance. Forward-looking statements
are subject to a number of risks and uncertainties that could cause
actual results to differ materially from the forward-looking
statements, including but not limited to: expectations regarding
the growth of the solar industry and home electrification; the
ability to identify and complete future acquisitions; the ability
to develop and market new products and services; the effects of
pending and future legislation; the highly competitive nature of
the Company’s business and markets; the ability to execute on and
consummate business plans in anticipated time frames; litigation,
complaints, product liability claims, government investigations
and/or adverse publicity; cost increases or shortages in the
components or chassis necessary to support the Company’s products
and services; the introduction of new technologies; the impact of
natural disasters and other events beyond our control, such as
hurricanes, wildfires or pandemics, on the Company’s business,
results of operations, financial condition, regulatory compliance
and customer experience; privacy and data protection laws, privacy
or data breaches, or the loss of data; general economic, financial,
legal, political and business conditions and changes in domestic
and foreign markets; risks related to the rollout of the Company’s
business and the timing of expected business milestones; the
effects of competition on the Company’s future business; the
availability of capital; and the other risks discussed under the
heading “Risk Factors” in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2023 filed with the SEC on April 9,
2024, subsequent Quarterly and Annual Reports on Form 10-Q and Form
10-K, respectively, and other documents that the Company files with
the SEC in the future. If any of these risks materialize or our
assumptions prove incorrect, actual results could differ materially
from the results implied by these forward-looking statements. These
forward-looking statements speak only as of the date hereof and the
Company specifically disclaims any obligation to update these
forward-looking statements.
Use of Non-GAAP Financial Information
This press release includes references to certain non-GAAP
financial measures. We believe that these non-GAAP financial
measures, when reviewed in conjunction with GAAP financial
measures, can provide meaningful supplemental information for
investors regarding the performance of our business and facilitate
a meaningful evaluation of current period performance on a
comparable basis with prior periods. Our management uses these
non-GAAP financial measures in order to have comparable financial
results to analyze changes in our underlying business from quarter
to quarter. These non-GAAP financial measures should be considered
as a supplement to, and not as a substitute for or superior to, the
GAAP financial measures presented in this press release, our
financial statements, and other publicly filed reports. This
prospective financial information was not prepared with a view
toward compliance with published guidelines of the SEC or the
guidelines established by the American Institute of Certified
Public Accountants for preparation and presentation of prospective
financial information or U.S. GAAP with respect to forward-looking
financial information. The non-GAAP measures presented herein may
not be comparable to similarly titled measures presented by other
companies.
Definitions of Non-GAAP Financial Information
Earnings (Loss) Before Interest, Income Taxes, Depreciation
and Amortization (“EBITDA”):
We define EBITDA as our consolidated net income (loss) and
adding back interest expense, net, income taxes, and depreciation
and amortization. We believe EBITDA provides meaningful information
to the performance of our business and therefore we use it to
supplement our GAAP reporting. We believe that Adjusted EBITDA,
which excludes certain identified items that we do not consider to
be part of our ongoing business, improves the comparability of
year-to-year results, and is representative of our underlying
performance. Management uses this information to assess and measure
the performance of our operating segment. We have chosen to provide
this supplemental information to investors, analysts and other
interested parties to enable them to perform additional analyses of
operating results, to illustrate the results of operations giving
effect to the non-GAAP adjustments shown in the below
reconciliations, and to provide an additional measure of
performance.
Operating EBITDA:
We define Operating EBITDA as Adjusted EBITDA plus proceeds from
investment in lease agreement, net, proceeds from buyouts /
prepayments and interest earned on cash investments. Proceeds from
investment in lease agreement, net, represent cash flows from the
Company's Spruce Power 4 Portfolio, which holds the 20-year use
rights to customer payment streams of approximately 22,500 solar
lease and power purchase agreements, net of servicing costs.
Proceeds from buyouts / prepayments represent cash inflows from the
early buyout of customer solar contracts and cash inflows from the
prepayment of customer solar contracts. Interest earned on cash
investments represent cash interest received on investments in
money market funds / U.S. Treasury securities.
Adjusted Free Cash Flow:
We define Adjusted Free Cash Flow as Operating EBITDA less
project finance debt service, platform capital expenditures, and
other non-cash items. Project finance debt service represents
principal and interest payments, including sweeps where applicable,
on Spruce's non-recourse, project finance debt facilities. Other
non-cash items represent miscellaneous non-cash income or expense
associated with our various operating portfolios of residential
solar assets.
Portfolio Value Metrics:
We believe Portfolio Value Metrics are helpful to management,
investors, and analysts to understand the value of our business and
to evaluate the estimated remaining value of our customer
contracts, including present value implied from future,
uncontracted sales of solar renewable energy credits generated from
assets that the Company owns today.
- Gross Portfolio Value reflects the remaining projected net cash
flows from current customers discounted at 6% (“PV6”)
- Projected cash flows include the customer’s initial agreement
plus renewal
($ in millions)
As of June 30, 2024
Contracted Portfolio Value (1)
$
701
Renewal Portfolio Value (2)
61
Uncontracted Renewable Energy Credits
(3)
16
Gross Portfolio Value (4)
$
778
(1) Contracted Portfolio Value represents the present value of
the remaining net cash flows discounted at 6% per annum during the
initial term of the Company’s customer agreements as of the
measurement date. It is calculated as the present value of cash
flows discounted at 6% that the Company expects to receive from
customers in future periods as set forth in customer agreements,
after deducting expected operating and maintenance costs, equipment
replacements costs, distributions to tax equity partners in
consolidated joint venture partnership flip structures, and
distributions to third-party project equity investors. The
calculation includes cash flows the Company expects to receive in
future periods from state incentive and rebate programs, contracted
sales of solar renewable energy credits, and awarded net cash flows
from grid service programs with utilities or grid operators.
(2) Renewal Portfolio Value is the forecasted net present value
the Company would receive upon or following the expiration of the
initial customer agreement term, but before the 30th anniversary of
the system’s activation in the form of cash payments during any
applicable renewal period for customers as of the measurement date.
The Company calculates the Renewal Portfolio Value amount at the
expiration of the initial contract term assuming that, on average,
Spruce's customers choose to renew 50% of the time at a contract
rate representing a 35% discount to the contract rate in effect at
the end of the initial contract term, for a term of 7-years.
(3) Uncontracted sales of SRECs based on forward market REC
pricing curves, adjusted for liquidity discounts.
(4) Gross Portfolio Value represents the sum of Contracted
Portfolio Value, Renewal Portfolio Value and Uncontracted
SRECs.
Spruce Power Holding
Corporation Condensed Consolidated Statements of Operations
(Unaudited) For the Three Months Ended June 30, 2024 and
2023
Three Months Ended June
30,
(In thousands, except per share and share
amounts)
2024
2023
Revenues
$
22,481
$
22,813
Operating expenses:
Cost of revenues
10,139
8,594
Selling, general and administrative
expenses
16,701
15,985
Gain on asset disposal
(999
)
(794
)
Total operating expenses
25,841
23,785
Loss from operations
(3,360
)
(972
)
Other (income) expense:
Interest income
(5,257
)
(3,240
)
Interest expense, net
7,591
10,456
Change in fair value of warrant
liabilities
(6
)
(33
)
Change in fair value of interest rate
swaps
3,234
(9,190
)
Other income, net
(130
)
(752
)
Net income (loss) from continuing
operations
(8,792
)
1,787
Net income (loss) from discontinued
operations
219
(183
)
Net income (loss)
(8,573
)
1,604
Less: Net income (loss) attributable to
redeemable noncontrolling interests and noncontrolling
interests
5
(1,461
)
Net income (loss) attributable to
stockholders
$
(8,578
)
$
3,065
Net income (loss) from continuing
operations per share, basic
$
(0.46
)
$
0.10
Net income (loss) from continuing
operations per share, diluted
$
(0.46
)
$
0.09
Net income (loss) from discontinued
operations per share, basic
$
0.01
$
(0.01
)
Net income (loss) from discontinued
operations per share, diluted
$
0.01
$
(0.01
)
Net income (loss) attributable to
stockholders per share, basic
$
(0.45
)
$
0.16
Net income (loss) attributable to
stockholders per share, diluted
$
(0.45
)
$
0.15
Weighted-average shares outstanding,
basic
19,271,954
18,611,757
Weighted-average shares outstanding,
diluted
19,271,954
20,200,832
Spruce Power Holding
Corporation Reconciliation of Non-GAAP Financial
Measures For the Three Months Ended June 30, 2024 and
2023
Three Months Ended June
30,
(In thousands)
2024
2023
Reconciliation of Net Income (Loss) to
EBITDA, Adjusted EBITDA and Operating EBITDA
Net income (loss) attributable to
stockholders
$
(8,578
)
$
3,065
Net income (loss) attributable to
redeemable noncontrolling interests and noncontrolling
interests
5
(1,461
)
Interest income
(5,257
)
(3,240
)
Interest expense, net
7,591
10,456
Depreciation and amortization
4,978
4,647
EBITDA
(1,261
)
13,467
Net (income) loss from discontinued
operations
(219
)
183
Restructuring charges
—
293
Legal charges related to SEC investigation
and shareholder lawsuits
879
3,083
Gain on asset disposal
(999
)
(794
)
Change in fair value of interest rate
swaps
3,234
(9,190
)
Meter upgrade campaign
431
1,122
Other one-time costs
2,432
969
Change in fair value warrant
liabilities
(6
)
(33
)
Stock based compensation
549
755
Bad debt expense
302
930
Accretion expense
60
—
Non-recurring acquisition/divestment
expenses
—
446
Adjusted EBITDA
5,402
11,231
Proceeds from investment in lease
agreement, net
5,637
3,695
Proceeds from buyouts / prepayments
1,902
1,943
Interest earned on cash investments
1,502
2,054
Operating EBITDA
$
14,443
$
18,923
Spruce Power Holding
Corporation Condensed Consolidated Balance Sheets
(Unaudited) June 30, 2024 and December 31, 2023
As of
(In thousands, except share and per share
amounts)
June 30, 2024
December 31, 2023
Assets
Current assets
Cash and cash equivalents
$
116,588
$
141,354
Restricted cash
33,621
31,587
Accounts receivable, net of allowance of
$1.1 million and $1.7 million as of June 30, 2024 and December 31,
2023, respectively
13,252
9,188
Interest rate swap assets, current
10,273
11,333
Prepaid expenses and other current
assets
5,136
9,879
Total current assets
178,870
203,341
Investment related to SEMTH master lease
agreement
141,078
143,095
Property and equipment, net
471,302
484,406
Interest rate swap assets, non-current
20,116
16,550
Intangible assets, net
9,577
10,196
Deferred rent assets
3,155
2,454
Right-of-use assets, net
5,324
5,933
Goodwill
28,757
28,757
Other assets
255
257
Long-term assets of discontinued
operations
—
32
Total assets
$
858,434
$
895,021
Liabilities and stockholders’
equity
Current liabilities
Accounts payable
$
1,417
$
1,120
Non-recourse debt, current, net
28,374
27,914
Accrued expenses and other current
liabilities
20,811
40,634
Deferred revenue, current
2,101
878
Lease liability, current
1,042
1,166
Current liabilities of discontinued
operations
65
—
Total current liabilities
53,810
71,712
Non-recourse debt, non-current, net
584,478
590,866
Deferred revenue, non-current
2,537
1,858
Lease liability, non-current
5,269
5,731
Warrant liabilities
2
17
Unfavorable solar renewable energy
agreements, net
4,376
6,108
Interest rate swap liabilities,
non-current
174
843
Other long-term liabilities
3,157
3,047
Long-term liabilities of discontinued
operations
68
170
Total liabilities
653,871
680,352
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value;
350,000,000 shares authorized at June 30, 2024 and December 31,
2023; 19,357,850 and 18,557,200 shares issued and outstanding at
June 30, 2024, respectively, and 19,093,186 issued and 18,292,536
outstanding at December 31, 2023
2
2
Additional paid-in capital
476,711
475,654
Accumulated deficit
(268,920
)
(257,888
)
Treasury stock at cost, 800,650 shares at
June 30, 2024 and December 31, 2023, respectively
(5,424
)
(5,424
)
Noncontrolling interests
2,194
2,325
Total stockholders’ equity
204,563
214,669
Total liabilities and stockholders’
equity
$
858,434
$
895,021
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version on businesswire.com: https://www.businesswire.com/news/home/20240814353193/en/
For More Information Investor Contact:
investors@sprucepower.com Head of Investor Relations: Bronson
Fleig
Media Contact: publicrelations@sprucepower.com
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