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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
___________________________________
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE TRANSITION PERIOD FROM _________ TO _________
Commission File Number 001-38971
Spruce Power Holding Corporation
(Exact name of Registrant as specified in its Charter)
Delaware83-4109918
(State or other jurisdiction of
 incorporation or organization)		(I.R.S. Employer
 Identification Number)
2000 S Colorado Blvd, Suite 2-825
Denver, Colorado
80222
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (866) 777-8235
___________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:Trading Symbol(s)Name of Each Exchange on Which Registered:
Shares of common stock, $0.0001 par value
SPRU
New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyo
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 13, 2024, 18,602,612 shares of the registrant’s common stock, $0.0001 par value, were outstanding.


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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that relate to future events or our future financial performance including, but not limited to, statements regarding the plans, strategies and prospects, both business and financial, of Spruce Power Holding Corporation (the “Company”), our growth plans, future financial and operating results, costs and expenses, the outcome of contingencies, financial condition, results of operations, liquidity, cost savings, business strategies, including the potential acquisition of approximately 10,000 home solar assets and contracts as contemplated by the non-binding Letter of Intent executed by the Company in September 2024 (the “Potential Acquisition”), and other statements that are not historical facts. Forward-looking statements can be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “opportunity,” “plan,” “predict,” “potential,” “estimate,” “should,” “will,” “would” or the negative of these terms or other words of similar meaning. These statements are based upon the Company’s current plans and strategies and reflect the Company’s current assessment of the risks and uncertainties related to its business and are made as of the date of this report. These statements are inherently subject to known and unknown risks and uncertainties. You should read these statements carefully as they discuss our future expectations or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control and our actual results may differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results to differ materially from those currently anticipated include the following:
•Uncertainties relating to the solar energy industry and the risk that sufficient additional demand for home solar energy systems may not develop or take longer to develop than we anticipate.
•Disruptions to our solar monitoring systems could negatively impact our revenues and increase our expenses.
•Warranties provided by the manufacturers of equipment for our assets and maintenance obligations may be inadequate to protect us.
•The solar energy systems we own or may acquire may have a limited operating history and may not perform as we expect, including as a result of unsuitable solar and meteorological conditions.
•Problems with performance of our solar energy systems may cause us to incur expenses, may lower the value of our solar energy systems and may damage our market reputation.
•Developments in technology or improvements in distributed solar energy generation and related technologies or components may materially adversely affect demand for our offerings.
•We could be harmed by a material reduction in the retail price of traditional utility generated electricity, electricity from other sources or renewable energy credits.
•We may fail to grow by expanding our market penetration or to manage our growth effectively.
•We may not enter into a definitive agreement to complete the Potential Acquisition, which is still subject to negotiation, the Potential Acquisition may not be completed in a timely manner or at all, and the Company may incur significant costs, fees and expenses related to the Potential Acquisition.
•We may not be able to identify strategic acquisition or strategic relationship opportunities, we may not be able to complete strategic acquisitions or strategic relationships, or we may experience difficulties in integrating strategic acquisitions, including the Potential Acquisition if it is completed.
•We may require additional financing to support the development of our business and implementation of our growth strategy.
•We are subject to risks relating to our outstanding debt, including risks relating to rising interest rates and the risk that we may not have sufficient cash flow to pay our debt.
•We may be adversely affected by the impact of natural disasters and other events beyond our control, such as hurricanes, wildfires or pandemics.
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•We are subject to cybersecurity risks.
•We are subject to risks relating to global economic conditions.
•Governmental investigations, litigation or other claims may cause us to incur significant expense, hinder execution of business and growth strategy or impact the price of our Common Stock.
•Changes in tax laws may materially adversely affect our business, prospects, financial condition, and operating results.
•Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with business combinations or other ownership changes.
•We are subject to risks associated with construction, regulatory compliance, risks relating to changes in, and our compliance with, laws and regulations affecting our business, and other contingencies.
•Violations of export control and/or economic sanctions laws and regulations to which we are subject could have a material adverse effect on our business operations, financial position and results of operations.
•Our insurance coverage may not be adequate to protect us from all business risks.
•We face competition from traditional energy companies as well as solar and other renewable energy companies.
These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Quarterly Report on Form 10-Q are more fully described in Part II, Item 1A under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and the risk factors set forth in Part I, Item 1A Risk Factors, within our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 9, 2024 (the “Annual Report”). These factors are not exhaustive. Other sections of this Quarterly Report on Form 10-Q, such as our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 describe additional factors that could adversely affect the business, financial condition or results of operations of the Company and its consolidated subsidiaries. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This report includes certain registered trademarks, including trademarks that are the property of the Company and its affiliates. This report also includes other trademarks, service marks and trade names owned by the Company or other persons. All trademarks, service marks and traded names included herein are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress, or products in this report is not intended to, and does not, imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owners.
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Part I - Financial Information
Item 1. Financial Statements
Spruce Power Holding Corporation
Condensed Consolidated Balance Sheets (Unaudited)
As of
(In thousands, except share and per share amounts)September 30,
2024		December 31,
2023
Assets
Current assets
Cash and cash equivalents$113,658 $141,354 
Restricted cash36,323 31,587 
Accounts receivable, net of allowance of $0.9 million and $1.7 million as of September 30, 2024 and December 31, 2023, respectively
11,523 9,188 
Interest rate swap assets, current6,723 11,333 
Prepaid expenses and other current assets4,779 9,879 
Total current assets173,006 203,341 
Investment related to SEMTH master lease agreement138,340 143,095 
Property and equipment, net464,695 484,406 
Interest rate swap assets, non-current12,812 16,550 
Intangible assets, net9,267 10,196 
Deferred rent assets3,370 2,454 
Right-of-use assets, net5,029 5,933 
Goodwill— 28,757 
Other assets255 257 
Long-term assets of discontinued operations— 32 
Total assets$806,774 $895,021 
Liabilities and stockholders’ equity
Current liabilities
Accounts payable$858 $1,120 
Non-recourse debt, current, net28,351 27,914 
Accrued expenses and other current liabilities30,892 40,634 
Deferred revenue, current1,686 878 
Lease liability, current956 1,166 
Current liabilities of discontinued operations65 — 
Total current liabilities62,808 71,712 
Non-recourse debt, non-current, net577,005 590,866 
Deferred revenue, non-current2,876 1,858 
Lease liability, non-current5,061 5,731 
Warrant liabilities— 17 
Unfavorable solar renewable energy agreements, net3,510 6,108 
Interest rate swap liabilities, non-current607 843 
Other long-term liabilities3,219 3,047 
Long-term liabilities of discontinued operations
52 170 
Total liabilities655,138 680,352 
Commitments and contingencies (Note 14)
Stockholders’ equity:
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Common stock, $0.0001 par value; 350,000,000 shares authorized at September 30, 2024 and December 31, 2023; 19,398,378 and 18,597,728 shares issued and outstanding at September 30, 2024, respectively, and 19,093,186 and 18,292,536 shares issued and outstanding at December 31, 2023, respectively
2 2 
Additional paid-in capital477,413 475,654 
Accumulated deficit(322,449)(257,888)
Treasury stock at cost, 800,650 shares at September 30, 2024 and December 31, 2023
(5,424)(5,424)
Noncontrolling interests2,094 2,325 
Total stockholders’ equity151,636 214,669 
Total liabilities and stockholders’ equity$806,774 $895,021 
See notes to unaudited condensed consolidated financial statements.
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Spruce Power Holding Corporation
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands, except per share and share amounts)2024202320242023
Revenues$21,378 $23,250 $61,881 $64,158 
Operating expenses:
Cost of revenues9,657 9,810 28,500 26,257 
Selling, general and administrative expenses13,521 12,391 43,426 44,093 
Litigation settlements, net7,205 26,339 7,205 26,339 
Gain on asset disposal(603)(773)(2,055)(4,225)
Impairment of goodwill28,757 — 28,757 — 
Total operating expenses58,537 47,767 105,833 92,464 
Loss from operations(37,159)(24,517)(43,952)(28,306)
Other (income) expense:
Interest income(6,265)(8,255)(16,908)(13,846)
Interest expense, net11,367 11,192 29,900 30,815 
Change in fair value of warrant liabilities(2)(70)(17)(218)
Change in fair value of interest rate swaps11,328 (8,061)8,153 (11,663)
Other income, net(37)(360)(453)(1,240)
Net loss from continuing operations(53,550)(18,963)(64,627)(32,154)
Net income (loss) from discontinued operations (including loss on disposal of $0 and $3,083 for the three and nine months ended September 30, 2023, respectively)
(4)(204)50 (4,253)
Net loss(53,554)(19,167)(64,577)(36,407)
Less: Net income (loss) attributable to redeemable noncontrolling interests and noncontrolling interests(25)146 (16)(764)
Net loss attributable to stockholders$(53,529)$(19,313)$(64,561)$(35,643)
Net loss from continuing operations per share, basic and diluted$(2.88)$(1.09)$(3.51)$(1.78)
Net loss from discontinued operations per share, basic and diluted$— $(0.01)$— $(0.24)
Net loss attributable to stockholders per share, basic and diluted$(2.88)$(1.11)$(3.50)$(1.97)
Weighted-average shares outstanding, basic and diluted18,566,015 17,351,796 18,438,375 18,072,115 

See notes to unaudited condensed consolidated financial statements.
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Spruce Power Holding Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Three and Nine Months Ended
September 30, 2024
Common StockAdditional
Paid-In
Capital		Accumulated
Deficit		Treasury StockNon controlling InterestsTotal Stockholders’
Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance at December 31, 2023
19,093,186 $2 $475,654 $(257,888)800,650 $(5,424)$2,325 $214,669 
Issuance of restricted stock5,060 — — — — — — — 
Capital distributions to noncontrolling interests— — — — — — (76)(76)
Stock-based compensation expense, net— — 821 — — — — 821 
Net income (loss)— — — (2,454)— — 4 (2,450)
Balance at March 31, 2024
19,098,246 $2 $476,475 $(260,342)800,650 $(5,424)$2,253 $212,964 
Issuance of restricted stock259,604 — — — — — — — 
Capital distributions to noncontrolling interests— — — — — — (64)(64)
Stock-based compensation expense, net— — 236 — — — — 236 
Net income (loss)— — — (8,578)— — 5 (8,573)
Balance at June 30, 2024
19,357,850 $2 $476,711 $(268,920)800,650 $(5,424)$2,194 $204,563 
Issuance of restricted stock40,528 — — — — — — — 
Capital distributions to noncontrolling interests— — — — — — (75)(75)
Stock-based compensation expense, net— — 702 — — — — 702 
Net loss— — — (53,529)— — (25)(53,554)
Balance at September 30, 2024
19,398,378 $2 $477,413 $(322,449)800,650 $(5,424)$2,094 $151,636 
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Three and Nine Months Ended
September 30, 2023
Redeemable Noncontrolling InterestsCommon StockAdditional
Paid-in
Capital		Accumulated
Deficit		Treasury StockNon controlling InterestsTotal Stockholders’
Equity
(In thousands, except share data)SharesAmountSharesAmount
Balance at December 31, 2022$85 18,046,903 $2 $473,289 $(193,342)— $— $8,942 $288,891 
Cumulative-effect adjustment of ASC 326 adoption— — — — 1,285 — — — 1,285 
Purchase accounting measurement period adjustments240 — — (1,813)— — — (5,490)(7,303)
Exercise of stock options— 135,210 283 — — — — 283 
Issuance of restricted stock— 341,490 — — — — — — — 
Issuance of common stock— 25,818 — 150 — — — — 150 
Capital distributions to noncontrolling interests(108)— — — — — — (88)(88)
Stock-based compensation expense, net— — — 796 — — — — 796 
Net income (loss)(39)— — — (19,395)— — 590 (18,805)
Balance at March 31, 2023$178 18,549,421 $2 $472,705 $(211,452)— $— $3,954 $265,209 
Exercise of stock options— 111,637 $— 252 $— — $— — 252 
Issuance of restricted stock— 106,928 — — — — — — — 
Share repurchases— — — — — 233,022 (1,614)— (1,614)
Stock-based compensation expense, net— — — 593 — — — — 593 
Capital distributions to noncontrolling interests— — — — — — — (57)(57)
Net income (loss)21 — — — 3,065 — — (1,482)1,583 
Balance at June 30, 2023$199 18,767,986 $2 $473,550 $(208,387)233,022 $(1,614)$2,415 $265,966 
Exercise of stock options— 84,245 — 165 — — — — 165 
Issuance of restricted stock— 72,895 — — — — — — — 
Share repurchases— — — — — 497,725 (3,505)— (3,505)
Stock-based compensation expense, net— — — 660 — — — — 660 
Buyout of redeemable noncontrolling interests(55)— — 139 — — — — 139 
Equity related to buyout of redeemable noncontrolling interest(139)— — — — — — — — 
Capital distributions to noncontrolling interests(26)— — — — — — (102)(102)
Net income (loss)21 — — — (19,313)— — 125 (19,188)
Balance at September 30, 2023$— 18,925,126 $2 $474,514 $(227,700)730,747 $(5,119)$2,438 $244,135 
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See notes to unaudited condensed consolidated financial statements.
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Spruce Power Holding Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30,
(In thousands)20242023
Operating activities:
Net loss$(64,577)$(36,407)
Adjust for net (income) loss from discontinued operations(50)4,253 
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense, net1,759 2,049 
Bad debt expense1,128 2,436 
Amortization of deferred revenue(671)— 
Depreciation and amortization expense15,695 16,445 
Impairment of goodwill28,757 — 
Accretion expense181 — 
Change in fair value of interest rate swaps8,153 (11,663)
Change in fair value of warrant liabilities(17)(218)
Interest income related to SEMTH master lease agreement(12,159)(7,658)
Gain on disposal of assets(2,055)(4,225)
Change in operating right-of-use assets24 49 
Amortization of fair value adjustment and deferred financing costs4,447 4,390 
Changes in operating assets and liabilities:
Accounts receivable, net(3,463)(5,166)
Deferred rent assets(916)(488)
Prepaid expenses and other current assets4,961 (1,992)
Other assets2 124 
Accounts payable(262)(1,667)
Accrued expenses and other current liabilities(11,735)25,212 
Other long-term liabilities(9)5 
Deferred revenue2,541 701 
Net cash used in continuing operating activities(28,266)(13,820)
Net cash used in discontinued operating activities(87)(2,104)
Net cash used in operating activities
(28,353)(15,924)
Investing activities:
Proceeds from sale of solar energy systems4,712 5,068 
Proceeds from investment related to SEMTH master lease agreement18,868 13,188 
Cash paid for acquisitions, net of cash acquired— (43,097)
Purchases of other property and equipment(182)(285)
Net cash provided by (used in) continuing investing activities23,398 (25,126)
Net cash provided by discontinued investing activities— 325 
Net cash provided by (used in) investing activities
23,398 (24,801)
Financing activities:
Repayments of long-term non-recourse debt(145,763)(22,821)
Proceeds from issuance of non-recourse debt130,000 21,396 
Repayments under financing leases— (165)
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Payment of deferred financing costs(2,108)(391)
Proceeds from issuance of common stock— 150 
Proceeds from exercise of stock options— 700 
Share repurchases— (5,119)
Buyout of redeemable non-controlling interest— (55)
Capital distributions to redeemable noncontrolling interests and noncontrolling interests(215)(381)
Net cash used in continuing financing activities(18,086)(6,686)
Net cash provided by discontinued financing activities81 — 
Net cash used in financing activities
(18,005)(6,686)
Net change in cash and cash equivalents and restricted cash:(22,960)(47,411)
Cash and cash equivalents and restricted cash, beginning of period172,941 240,144 
Cash and cash equivalents and restricted cash, end of period$149,981 $192,733 
Supplemental disclosure of cash flow information:
Cash paid for interest$22,021 $24,105 
Supplemental disclosures of noncash investing and financing information:
Right-of-use assets obtained in exchange for lease liability$— $933 
Settlement of operating lease liability$— $436 
Settlement of finance lease liability$— $43 
See notes to unaudited condensed consolidated financial statements.
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Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Organization and Description of Business
Description of Business
Spruce Power Holding Corporation and its subsidiaries (“Spruce Power” or the “Company”) is a leading owner and operator of distributed solar energy assets across the United States (the “U.S.”), offering subscription-based services to approximately 75,000 home solar assets and customer contracts, making renewable energy more accessible to everyone.
The Company is engaged in the ownership and maintenance of home solar energy systems for homeowners in the U.S. The Company provides clean, solar energy typically at savings compared to traditional utility energy. The Company’s primary customers are homeowners and the Company’s core solar service offerings generate revenues primarily through (i) the sale of electricity generated by its home solar energy systems to homeowners pursuant to long-term agreements, which requires the Company’s subscribers to make recurring monthly payments, (ii) third party contracts to sell solar renewable energy credits (“SRECs”) generated by the solar energy systems for fixed prices and (iii) the servicing of those agreements for other institutional owners of home solar energy systems. In addition, the Company generates cash flows and earns interest income from an investment through a master lease agreement described below.

The Company holds subsidiary fund companies, defined below as the Funds, that own and operate portfolios of home solar energy systems, which are subject to solar lease agreements (“SLAs”) and power purchase agreements (“PPAs”, together with the SLAs, “Customer Agreements”) with residential customers who benefit from the production of electricity generated by the solar energy systems. The solar energy systems may qualify for subsidies, renewable energy credits and other incentives as provided by various states and local agencies. These benefits have generally been retained by the Company's subsidiaries that own the systems, with the exception of the investment tax credit (“ITCs”) under Section 48 of the Internal Revenue Code, as amended, which were generally passed through to the various financing partners of the solar energy systems. The Company also offers services which include asset management services and operating and maintenance services for home solar energy systems.
Historically, the Company provided fleet electrification solutions for commercial vehicles in North America, offering its systems for vehicle electrification (the “Drivetrain” operations) and through its energy efficiency and infrastructure solutions business, offering and installing charging stations to enable customers develop the charging infrastructure required for their electrified vehicles (the “XL Grid” operations). The Company ceased the Drivetrain and XL Grid operations in late 2022, and both are presented as discontinued operations in the unaudited condensed consolidated financial statements (see Note 16. Discontinued Operations).
Note 2. Summary of Significant Accounting Policies
Basis of unaudited condensed consolidated financial statement presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. The Company has condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As such, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s 2023 annual audited consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2023. The Company’s interim unaudited condensed consolidated financial statements reflect all normal and recurring adjustments necessary, in its opinion, to state fairly the financial position and results of operations for the reported periods. Amounts reported for interim periods may not be indicative of a full year period due to the Company’s continual growth, seasonal fluctuations in solar energy generation, timing of maintenance and other expenditures, changes in interest expense and other factors.
The Company's accompanying unaudited condensed consolidated financial statements include the accounts of its wholly owned subsidiaries and variable interest entities (“VIEs”), for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been
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Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, continued
reclassified to conform to the Company’s current presentation and such reclassifications had no effect on the Company’s previously reported financial position, results of operations, or cash flows.
On October 6, 2023, the Company effected a one-for-eight reverse stock split with respect to its issued and outstanding shares of common stock (the “Reverse Stock Split”). Excluding the par value and the number of authorized shares of the Company’s common stock, all share amounts, all per share amounts, and the values of the common stock outstanding and related effect on additional paid in capital included in this Form 10-Q have been retrospectively presented as if the Reverse Stock Split had been effective from the beginning of the earliest period presented.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of income and expenses during the reporting period. The Company’s most significant estimates and judgments involve (i) deferred income taxes, (ii) warranty reserves, (iii) valuation of stock-based compensation, (iv) valuation of warrant liability, (v) the useful lives of certain assets and liabilities, (vi) the allowance for current expected credit losses and (vii) the valuation of business combinations, including the fair values and useful lives of acquired assets and assumed liabilities, goodwill and the fair value of purchase consideration of asset acquisitions. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to the Company’s financial statements.
Variable interest entities
The Company consolidates any VIE of which it is the primary beneficiary. The Company formed or acquired VIEs which are partially funded by tax equity investors in order to facilitate the funding and monetization of certain attributes associated with solar energy systems. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. A variable interest holder is required to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when the Company is not considered the primary beneficiary. The Company evaluates its relationships with the VIEs on an ongoing basis to determine if it is the primary beneficiary. The Company's initial investments in Volta Solar Owner II, LLC and ORE F4 HoldCo, LLC (collectively, the “Funds”) were determined to be VIEs and remained as such as of September 30, 2024. During the three months ended September 30, 2023, the Company purchased all membership interests in Level Solar Fund IV and it ceased being a VIE as of September 30, 2023.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks, money market accounts, and U.S. Treasury securities. Cash equivalents are carried at cost, which approximates fair value due to their short-term nature. The Company’s cash and cash equivalents are placed with large financial institutions, and at times exceed federally insured limits. To date, the Company has not experienced any credit loss relating to its cash and cash equivalents.
Concentration of credit and revenue risks
Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents. At times, such cash may be in excess of the Federal Deposit Insurance Corporation limit. At September 30, 2024 and December 31, 2023, the Company had cash in excess of the $250,000 federally insured limit. The Company
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Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, continued
believes that its credit risk is not significant on cash and cash equivalents as most of the balances are kept in treasury bills, which are government backed securities.
For the three and nine months ended September 30, 2024 and 2023, the Company had no customers that represented at least 10% of the Company’s revenues. As of September 30, 2024 and December 31, 2023, the Company had no customers that represented at least 10% of the Company’s accounts receivable balances.
Restricted cash
Restricted cash held at September 30, 2024 and December 31, 2023 of $36.3 million and $31.6 million, respectively, primarily consists of cash that is subject to restriction due to provisions in the Company's financing agreements and the operating agreements of the Funds. The carrying amount reported in the unaudited condensed consolidated balance sheets for restricted cash approximates its fair value.
The following table provides a reconciliation of the Company’s cash and cash equivalents and restricted cash balances to the total amounts shown in the unaudited condensed consolidated statements of cash flows for the end of the periods:
As of
(Amounts in thousands)September 30, 2024September 30, 2023
Cash and cash equivalents$113,658 $154,209 
Restricted cash36,323 38,524 
Total cash, cash equivalents and restricted cash$149,981 $192,733 
Accounts receivable, net
Accounts receivable primarily represent amounts due from the Company’s customers. Accounts receivable is recorded net of an allowance for expected credit losses, which is determined by the Company’s assessment of the collectability of customer accounts based on the best available data at the time of the assessment. Management reviews the allowance by considering factors such as historical experience, contractual term, aging category and current economic conditions that may affect customers. The following table presents the changes in the allowance for credit losses recorded against accounts receivable, net on the unaudited condensed consolidated balance sheets:
As of
(Amounts in thousands)September 30, 2024December 31, 2023
Balance at the beginning of the period$1,693 $12,164 
Impact of ASC 326 adoption— (1,285)
Write-off of uncollectible accounts(1,881)(11,447)
Provision recognized upon valuation of assets acquired
— 420 
Provision for current expected credit losses1,128 1,841 
Balance at the end of the period$940 $1,693 
Investment related to SEMTH master lease agreement and interest income

The Company accounts for its investment related to the SEMTH (as defined below) master lease agreement in accordance with Accounting Standards Codification (“ASC”) 325-40, Investments—Other—Beneficial Interests in Securitized Financial Assets. The Company recognizes accretable yield as interest income over the life of the related beneficial interest using the effective yield method, which is reflected within interest income in the unaudited condensed consolidated statements of operations in the amount of $4.8 million and $12.3 million for the three and nine months ended September 30, 2024, respectively. On a recurring basis, the Company evaluates changes in the cash flows expected to be collected from the cash flows previously projected, and when favorable or adverse changes are deemed other than temporary, the
11
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, continued
Company prospectively updates its expectation of cash flows to be collected and recalculates the amount of accretable yield for the related beneficial interest.

Favorable or adverse changes deemed other than temporary are accounted for as a change in estimate in conformity with ASC 250, Accounting Changes and Error Corrections, with the amount of periodic accretion adjusted over the remaining life of the master lease agreement. During the three months period ended September 30, 2024, the Company revised its estimated cash flows expected to be collected related to the SEMTH master lease agreement. As a result, the Company recognized additional accretable yield of $0.9 million within interest income in the unaudited condensed consolidated statements of operations. The Company estimates approximately $3.0 million of additional interest income per year over the life of the related beneficial interest.
Impairment of long-lived assets
The Company reviews long-lived assets, such as property and equipment and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable. The Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluates the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value. There were no long-lived asset impairment charges for the three and nine months ended September 30, 2024 and 2023.
Impairment of goodwill
Goodwill represents the excess of cost over the fair market value of tangible and intangible assets acquired and liabilities assumed of acquired businesses. Goodwill is not amortized, however it is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. The Company has historically recorded goodwill in connection with its business acquisitions.
The Company performs its annual goodwill impairment assessment on October 1 of each fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired. An assessment can be performed by first completing a qualitative assessment of the Company’s single reporting unit. The Company can also bypass the qualitative assessment in any period and proceed directly to the quantitative impairment test, and then resume the qualitative assessment in any subsequent period. Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of the reporting unit. Additionally, a significant change in business climate, a loss of a significant customer, increased competition, a sustained decrease in share price, or a decrease in estimated fair value below book value may trigger the need for interim impairment testing of goodwill.
If the Company believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding charge to earnings in the period the goodwill is determined to be impaired. The income tax effect associated with an impairment of tax-deductible goodwill is also considered in the measurement of the goodwill impairment. Any goodwill impairment is limited to the total amount of goodwill.
The Company evaluates the fair value of the Company’s reporting unit using the market and income approach. Under the market approach, the Company uses multiples of EBITDA or revenues of the comparable guideline public companies by selecting a population of public companies with similar operations and attributes. Using this guideline public company data, a range of multiples of enterprise value to EBITDA or revenue is calculated. The income approach of computing fair value is based on the present value of the expected future economic benefits generated by the asset or business, such as cash flows or profits which will then be compared to its book value. See Note 11. Goodwill for further information on the Company’s determination relating to impairment of goodwill.
12
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, continued
Contingencies
When it is probable that a loss has occurred and the loss amount can be reasonably estimated, the Company records liabilities for loss contingencies. In certain cases, the Company may be covered by one or more corporate insurance policies, resulting in insurance loss recoveries. When such recoveries are in excess of a loss recognized in the Company’s financial statements, the Company recognizes a gain contingency at the earlier of when the gain has been realized or when it is realizable, however when the Company expects recovery of proceeds up to the amount of the loss recognized, a receivable, which offsets the related loss contingency, is recognized when realization of the claim for recovery is determined to be probable.
Fair value measurements
The fair value of the Company’s financial assets and liabilities reflects Management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair value measurement as follows:
•Level 1: Observable inputs that reflect unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.
•Level 2: Observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy must be determined based on the lowest level input that is significant to the fair value measurement. An assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability being measured.
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, net, accounts payable, accrued expenses and other current liabilities, non-recourse debt, and interest rate swaps. The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses and other current liabilities approximates fair value due to the short-term nature of those instruments. See Note 10. Fair Value Measurements for additional information on assets and liabilities measured at fair value.
Revenues
The Company’s revenue is derived from its home solar energy portfolio and servicing platform, which primarily generates revenue through the sale to homeowners of power generated by the home solar energy systems and the rental of solar equipment by certain homeowners, pursuant to long-term agreements. Pursuant to Accounting Standard Codification 606 (“ASC 606”) defined below, the Company has elected the “right to invoice” practical expedient, and revenues for the performance obligations related to energy generation and servicing revenue are recognized as services are rendered based upon the underlying contractual arrangements.
The following table presents the detail of the Company’s revenues as reflected within the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023:

13
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, continued
Three Months Ended September 30,Nine Months Ended September 30,
(Amounts in thousands)2024202320242023
PPA revenues$11,458 $11,370 $31,297 $30,731 
SLA revenues6,702 7,596 20,574 22,543 
Solar renewable energy credit revenues1,222 2,072 4,396 5,268 
Government incentives110 68 333 164 
Servicing revenues178 100 534 325 
Intangibles amortization, unfavorable solar renewable energy agreements746 974 2,239 2,393 
Other revenues962 1,070 2,508 2,734 
Total$21,378 $23,250 $61,881 $64,158 
Energy generation
Customers purchase solar energy from the Company under PPAs or SLAs, both defined above. Revenue is recognized from contracts with customers as performance obligations are satisfied at a transaction price reflecting an amount of consideration based upon an estimated rate of return which is expressed as the solar rate per kilowatt hour or a flat rate per month as defined in the customer contracts.
•PPA revenues - Under ASC 606, Revenue from Contracts with Customers issued by the Financial Accounting Standards Board (“FASB”), PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs.
•SLA revenues - The Company has SLAs, which do not meet the definition of a lease under ASC 842, Leases, and are accounted for as contracts with customers under ASC 606. Revenue is recognized on a straight-line basis over the contract term as the obligation to provide continuous access to the solar energy system is satisfied. The amount of revenue recognized may not equal customer cash payments due to the performance obligation being satisfied ahead of cash receipt or evenly as continuous access to the solar energy system has been provided. The differences between revenue recognition and cash payments received are reflected as deferred rent assets on the unaudited condensed consolidated balance sheets. Certain SLAs contain provisions to provide customers a performance guarantee that each solar energy system will achieve certain specified minimum solar energy production output. If the solar energy system does not produce the guaranteed production amount, the Company is obligated to pay a performance guarantee calculated as the product of (a) the shortfall production amount and (b) guaranteed rate per kWh as defined in the SLA.
Solar renewable energy credit revenues
The Company enters contracts with third parties to sell Solar Renewable Energy Credits ("SRECs") generated by the solar energy systems for fixed prices. Certain contracts that meet the definition of a derivative may be exempted as normal purchase or normal sales transactions ("NPNS"). NPNS are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Certain SREC contracts meet these requirements and are designated as NPNS contracts. Such SRECs are exempted from the derivative accounting and reporting requirements, and the Company recognizes revenues in accordance with ASC 606. The Company recognizes revenue for SRECs based on pricing predetermined within the respective contracts at a point in time when the SRECs are transferred. As SRECs can be sold separate from the actual electricity generated by the renewable-based generation source, the Company accounts for the SRECs it generates from its solar energy systems as governmental incentives and do not consider those SRECs output of the underlying solar energy systems. The Company classifies these SRECs as inventory held until sold and delivered to third parties. As the Company did not incur costs to obtain these governmental incentives, the inventory carrying value for the SRECs was $0 as of September 30, 2024 and December 31, 2023.

14
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, continued
Deferred revenue
Deferred revenue consists of amounts for which the criteria for revenue recognition have not yet been met and includes prepayments received for unfulfilled performance obligations that will be recognized on a straight-line basis over the remaining term of the respective customer agreements. Deferred revenue, in the aggregate, as of September 30, 2024 and December 31, 2023 was $4.6 million and $2.7 million, respectively. The Company recognized revenues of $0.1 million related to deferred revenue as of the start of the period during each of the three and nine months ended September 30, 2024 and 2023.
Income taxes
The Company accounts for income taxes using the asset and liability method under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Deferred income taxes are provided for the temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and net operating loss carry-forwards and credits. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which the differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in the unaudited condensed consolidated statements of operations in the period in which the enactment rate changes. The ultimate recovery of deferred tax assets is dependent upon the amount and timing of future taxable income and other factors, such as the taxing jurisdiction in which the asset is to be recovered. Deferred tax assets are reduced through the establishment of a valuation allowance if, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.
Uncertain tax positions taken or expected to be taken in a tax return are accounted for using the more likely than not threshold for financial statement recognition and measurement. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. For the three and nine months ended September 30, 2024 and 2023, there were no uncertain tax positions taken or expected to be taken in the Company’s tax returns.
In the normal course of business, the Company is subject to regular audits by U.S. federal and state and local tax authorities. With few exceptions, the Company is no longer subject to federal, state or local tax examinations by tax authorities in its major jurisdictions for tax years prior to 2021. However, net operating loss carryforwards remain subject to examination to the extent they are carried forward and impact a year that is open to examination by tax authorities.
The Company did not recognize any tax related interest or penalties during the periods presented in the accompanying unaudited condensed consolidated financial statements, however, would record any such interest and penalties as a component of the provision for income taxes.
There has historically been no federal or state provision for income taxes since the Company has historically incurred net operating losses and maintains a full valuation allowance against its net deferred tax assets. For the three and nine months ended September 30, 2024 and 2023, the Company recognized no provision for income taxes consistent with its losses incurred and the valuation allowance against its deferred tax assets. As a result, the Company's effective income tax rate was 0% for the three and nine months ended September 30, 2024 and 2023.
Related parties
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, the board of directors, as well as members of their immediate families and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or that has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
15
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies, continued
SEC Climate Disclosure Rule

In March 2024, the SEC adopted final rules requiring public entities to disclose certain climate-related information in their registration statements and annual reports. The rules will be effective for non-accelerated filers and smaller reporting companies commencing with the fiscal year beginning on or after January 1, 2027. In April 2024, the SEC issued an administrative stay of the implementation of these rules, pending judicial review. The Company is evaluating the impact of the final rules on its unaudited condensed consolidated financial statements and related disclosures.
Recent Accounting Pronouncements
In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, (“ASU 2023-09”), which requires enhancements regarding the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for the Company on December 31, 2025. The Company will adopt this ASU as of December 31, 2025 and will prospectively apply its requirements to income tax disclosures presented in the notes to the condensed consolidated financial statements in the period of adoption. The Company is currently evaluating the impact of this standard but does not expect that it will have a material impact on its unaudited condensed consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosures, (“ASU 2023-07”), which requires enhanced disclosures for reportable segments, primarily in relation to significant segment expenses, even in the event an entity has a single reportable segment in accordance with Topic 280. ASU 2023-07 is effective for the Company on December 31, 2024. The Company will adopt this ASU as of December 31, 2024 and will retrospectively apply its requirements to all prior periods based on the significant segment expense categories identified and disclosed in its condensed consolidated financial statements in the period of adoption. The Company is currently evaluating the impact of this standard but does not expect that it will have a material impact on its unaudited condensed consolidated financial statements.
Note 3. Business Combinations
Legacy Spruce Power

On September 9, 2022 (the “Acquisition Date”), the Company acquired Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC, and Spruce Manager LLC (collectively and together with their subsidiaries, “Legacy Spruce Power”) for $32.6 million, which consisted of cash payments of $61.8 million less cash and restricted cash acquired of $29.2 million. Management evaluated which entity should be considered the accounting acquirer in the transaction by giving consideration to the form of consideration transferred, the composition of the equity holders, the composition of voting rights of the Board of Directors, continuity of management structure, and size of the respective organizations. Based on the evaluation of the applicable factors, management noted that all factors, with the exception of the relative size of organization, were indicators that the Company was the acquiring entity resulting in management’s conclusion that for accounting purposes, the Company acquired Legacy Spruce Power.
The acquisition was accounted for as a business combination. The Company allocated the Legacy Spruce Power purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the Acquisition Date. The excess of the purchase price over those fair values was recorded as goodwill.
The Company’s evaluations of the facts and circumstances available as of the Acquisition Date, to assign fair values to assets acquired and liabilities assumed, remained ongoing subsequent to the Acquisition Date. As the Company completed further analysis of assets including solar systems, intangible assets, as well as noncontrolling interests and non-recourse debt, additional information on the assets acquired and liabilities assumed became available. Changes in information related to the value of net assets acquired changed the amount of the purchase price initially assigned to goodwill, and as a result, the fair values set forth below were subject to adjustments as additional information was obtained and valuations completed. These provisional adjustments were recognized during the reporting period in which the adjustments were determined. The Company has finalized its purchase price allocation as of September 8, 2023.
Accounting for business combinations requires management to make significant estimates and assumptions, especially at the Acquisition Date, including the Company’s estimates of the fair value of solar systems, production based incentives,
16
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 3. Business Combinations, continued
solar renewable energy agreements, non-controlling interest, trade name and non-recourse debt, where applicable. The Company believes the assumptions and estimates are based on information obtained from the management of the acquired companies and are inherently uncertain. Critical estimates in valuing solar systems under the income approach include future expected cash flows and discount rate. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the acquisition of Legacy Spruce Power, as adjusted, during the measurement period:

(Amounts in thousands)Initial Purchase Price AllocationMeasurement Period AdjustmentsUpdated Purchase Price Allocation
Total purchase consideration:
Cash, net of cash acquired, and restricted cash$32,585 $— $32,585 
Allocation of consideration to assets acquired and liabilities assumed:
Accounts receivable, net10,995 — 10,995 
Prepaid expenses and other current assets6,768 (2,405)4,363 
Solar energy systems406,298 89,268 495,566 
Other property and equipment337 — 337 
Intangible assets— 11,980 11,980 
Interest rate swap assets26,698 — 26,698 
Right-of-use asset3,279 (328)2,951 
Other assets358 (102)256 
Goodwill158,636 (129,879)28,757 
Accounts payable(2,620)(22)(2,642)
Unfavorable solar renewable energy agreements— (10,500)(10,500)
Accrued expenses(13,061)(241)(13,302)
Lease liability(3,382)42 (3,340)
Long-term debt(510,002)2,772 (507,230)
Other liabilities(335)292 (43)
Redeemable noncontrolling interests and noncontrolling interests(51,384)39,123 (12,261)
Total assets acquired and liabilities assumed$32,585 $— $32,585 
As reflected in the preceding table, as a result of third party valuation reports received in the first quarter of 2023, the Company adjusted solar energy systems and intangible assets with corresponding changes to goodwill. In the first quarter of 2023, due to a change in the provisional amounts assigned to intangible assets and solar energy systems, the Company recognized $0.4 million of revenue, $1.9 million of depreciation expense and $0.4 million of trade name amortization, of which $0.5 million of revenue, $0.9 million of depreciation expense and $0.3 million of trade name amortization related to the previous year.
During the first quarter of 2023, the Company adjusted the fair value of its noncontrolling interest and its redeemable noncontrolling interest in the Company's financials, which resulted in related downward revision of $5.5 million and upward revision of $0.2 million, respectively. Additional paid in capital was also downward revised by $1.8 million, which included the fair value adjustment associated with the purchase of 100% of the membership interests in Ampere Solar Owner IV, LLC, ORE F5A HoldCo, LLC, ORE F6 HoldCo, LLC, RPV Fund 11 LLC and RPV Fund 13 LLC, Sunserve Residential Solar I, LLC's and Level Solar Fund III, LLC in 2022.
17
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 3. Business Combinations, continued
The gross intangibles acquired are amortized over their respective estimated useful lives as follows:

(Amounts in thousands)AssetLiabilityEstimated Life (in years)
Solar renewable energy agreements$340 $10,500 
3 to 6
Performance based incentives agreements3,240 — 13
Trade name8,400 — 30
Total intangibles acquired$11,980 $10,500 
The weighted-average useful life of the intangibles identified above is approximately 16 years, which approximates the period over which the Company expects to gain the estimated economic benefits.
Goodwill represents the excess of the purchase consideration over the estimated fair value of the net assets acquired. Goodwill is primarily attributable to the Company's ability to leverage and use its existing capital and access to capital markets along with Legacy Spruce Power's established operations and mergers and acquisition capabilities to grow the Spruce Power business.
Note 4. Acquisitions
SEMTH Master Lease Agreement
In furtherance of its growth strategy, on March 23, 2023, the Company completed the acquisition of all the issued and outstanding interests in SS Holdings 2017, LLC and its subsidiaries (“SEMTH”) from certain funds, pursuant to a membership interest purchase and sale agreement dated March 23, 2023 (the “SEMTH Acquisition”). SEMTH’s assets include 20-year use rights to customer payment streams of approximately 22,500 home SLAs and PPAs (the “SEMTH Master Lease”). The Company acquired SEMTH for approximately $23.0 million of cash, net of cash received, and assumed $125.0 million of outstanding senior indebtedness under the SP4 Facility (See Note 8. Non-Recourse Debt) and interest rate swaps with Deutsche Bank AG, New York Bank held by SEMTH and its subsidiaries at the close of the acquisition.
The purchase of SEMTH's future revenue has been accounted for as an acquisition of financial assets. Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed based on their relative fair value. All fair value measurements of assets acquired and liabilities assumed were based on significant estimates and assumptions, including Level 3 (unobservable) inputs, which require judgment. Estimates and assumptions include the projected timing and amount of future cash flows, discount rates reflecting risk inherent in future cash flows and future utility prices.
For the purposes of establishing the fair value of the Company's investment in the SEMTH Master Lease, its analysis considered cash flows beginning in March 2023 (the effective date of the transaction). The Company estimated the fair value of its investment in the SEMTH Master Lease to be approximately $146.9 million on the transaction date.
Tredegar Acquisition
On August 18, 2023, the Company acquired approximately 2,400 home solar assets and contracts from a publicly traded, regulated utility company for $20.9 million (the “Tredegar Acquisition”). The home solar assets acquired had an average remaining contract life of approximately 11 years. The Tredegar Acquisition was funded by term loans from the concurrent amendment of the Company’s existing debt facility as of the acquisition date.
The Tredegar Acquisition has been accounted for as an acquisition of assets, wherein the total consideration paid was allocated to the assets acquired and liabilities assumed based on their relative fair value. The Company’s determination of the fair value of assets acquired and liabilities assumed was based on an independent third-party valuation, which involved significant estimates and assumptions, including Level 3 (unobservable) inputs, using the income method approach to value long-lived assets. The Company estimated the fair value of the Tredegar Acquisition to be approximately $21.2 million, inclusive of transaction costs of $0.3 million, of which $19.6 million was allocated to the solar energy systems.
18
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 5. Property and Equipment, Net
Property and equipment, net consisted of the following as of September 30, 2024 and December 31, 2023:
As of
(Amounts in thousands)September 30, 2024December 31, 2023
Solar energy systems$510,947 $513,526 
Less: Accumulated depreciation(46,732)(29,594)
Solar energy systems, net$464,215 $483,932 
Equipment$— $157 
Furniture and fixtures430 461 
Computers and related equipment272 218 
Software— 8 
Leasehold improvements30 59 
Gross other property and equipment732 903 
Less: Accumulated depreciation(252)(429)
Other property and equipment, net$480 $474 
Property and equipment, net$464,695 $484,406 
Depreciation expense related to solar energy systems is included within cost of revenues in the unaudited condensed statements of operations, and for the three and nine months ended September 30, 2024 was $5.7 million and $17.1 million, respectively, and for the three and nine months ended September 30, 2023 was $6.3 million and $17.9 million, respectively. Depreciation expense related to other property and equipment is included within selling, general and administrative expenses in the unaudited condensed statements of operations, and for the three and nine months ended September 30, 2024 was $0.1 million and $0.2 million, respectively, and for each of three and nine months ended September 30, 2023 was $0.1 million.
Note 6. Intangible Assets, Net
The following table presents the detail of intangible assets, net as recorded in the unaudited condensed consolidated balance sheets:
As of
(Amounts in thousands)September 30, 2024December 31, 2023
Intangible assets:
Solar renewable energy agreements$340 $340 
Performance based incentives agreements3,240 3,240 
Trade name8,400 8,400 
Gross intangible assets
11,980 11,980 
Less: Accumulated amortization(2,713)(1,784)
Intangible assets, net$9,267 $10,196 
Amortization of intangible assets for the three and nine months ended September 30, 2024 was $0.3 million and $0.9 million, respectively. For the three months ended September 30, 2024, $0.1 million and $0.2 million were recorded within revenues and selling, general and administrative expenses in the unaudited condensed consolidated statements of
19
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
operations, respectively, and for the nine months ended September 30, 2024, $0.3 million and $0.6 million were recorded within revenues and selling, general and administrative expenses in the unaudited condensed consolidated statements of operations, respectively. Amortization of intangible assets for the three and nine months ended September 30, 2023 was $0.3 million and $0.9 million, respectively. For the three months ended September 30, 2023, $0.1 million and $0.2 million were recorded within revenues and selling, general and administrative expenses in the unaudited condensed consolidated statements of operations, respectively, and for the nine months ended September 30, 2023, $0.3 million and $0.5 million were recorded within revenues and selling, general and administrative expenses in the unaudited condensed consolidated statements of operations, respectively.
As of September 30, 2024, expected amortization of intangible assets for each of the five succeeding fiscal years and thereafter is as follows:

As of September 30,
(Amounts in thousands)2024
Remainder of 2024$310 
20251,126 
20261,122 
2027978 
2028878 
Thereafter
4,853 
    Total
$9,267 

Note 7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of September 30, 2024 and December 31, 2023:
As of
(Amounts in thousands)September 30, 2024December 31, 2023
Accrued interest$11,545 $8,587 
Accrued professional fees2,249 2,386 
Accrued contingencies (See Note 14. Commitments and Contingencies)8,030 21,300 
Accrued compensation and related benefits4,764 3,237 
Accrued expenses, other1,030 2,293 
Accrued operating and maintenance expenses2,102 2,079 
Accrued taxes, stock-based compensation1,132 752 
Current portion of interest rate swap liability40 — 
Accrued expenses and other current liabilities
$30,892 $40,634 
20
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 8. Non-Recourse Debt
The following table provides a summary of the Company’s non-recourse debt as of September 30, 2024 and December 31, 2023:

As of
(Amounts in thousands)DueSeptember 30, 2024December 31, 2023
SVB Credit Agreement, SP1 Facility (1)
April 2026$202,753 $214,803 
Second SVB Credit Agreement, SP2 Facility (1)
May 202780,233 85,231 
KeyBank Credit Agreement, SP3 Facility (1)
November 202755,260 58,962 
Second KeyBank Credit Agreement (1)
April 2030162,712 162,725 
Deutsche Bank Credit Agreement, SP4 Facility August 2025— 125,000 
Barings GPSF Credit Agreement, SET FacilityApril 2042130,000 — 
Less: Unamortized fair value adjustment (1)
(23,348)(27,600)
Less: Unamortized deferred financing costs (1)
(2,254)(341)
Total Non-recourse debt605,356 618,780 
Less: Non-recourse debt, current(28,351)(27,914)
Non-recourse debt, non-current$577,005 $590,866 
(1) In connection with the acquisition of Legacy Spruce Power effective September 9, 2022, the Company assumed all non-recourse debt instruments valued at approximately $507.2 million as of that date. In connection with accounting for the business combination, the Company adjusted the carrying value of this non-recourse debt to its fair value as of the Acquisition Date. This fair value adjustment resulted in a reduction of the carrying value of the debt by $35.2 million. This adjustment to fair value and associated adjustment to unamortized deferred financing costs is being amortized to interest expense over the life of the related debt instruments using the effective interest method. Amortization expense for the fair value adjustment and deferred financing costs for the three and nine months ended September 30, 2024 were $1.5 million and $4.4 million, respectively, and for the three and nine months ended September 30, 2023 were $1.5 million and $4.4 million, respectively.
On June 26, 2024, Spruce SET Borrower 2024, LLC (the “Borrower”), a wholly owned subsidiary of the Company, entered into a non-recourse Credit Agreement with Barings GPSF LLC, which provided a fixed interest term loan in the aggregate principal amount of $130.0 million (the “SET Facility”). The proceeds of the SET Facility were primarily used to repay the SP4 Facility of $125.0 million. The repayment of the SP4 Facility was treated as a debt extinguishment under ASC 470-50, Debt—Modifications and Extinguishments. In connection with the repayment of the SP4 Facility, the Company settled the related interest rate swap contracts (see Note 9. Interest Rate Swaps for further discussion). The Borrower incurred approximately $2.1 million of deferred financing costs related to the SET Facility, which are being amortized on a straight-line basis over the anticipated debt servicing period. The SET Facility matures on April 17, 2042 and requires quarterly interest payments at 6.889% per annum beginning August 2024. Effective December 26, 2027, the SET Facility requires additional interest to be accrued on any outstanding aggregate principal or unpaid accrued interest. The SET Facility is collateralized by all of the assets and property of the Borrower. The SET Facility requires the Borrower to be in compliance with various covenants, and the Borrower was in compliance with the required covenants under the SET Facility as of September 30, 2024.
Note 9. Interest Rate Swaps
The purpose of the Company’s interest rate swaps is to convert the floating interest rate on the Company's Credit Agreements to a fixed rate. As of September 30, 2024, the notional amount of the interest rate swaps covers approximately 99% of the balance of the Company’s floating rate term loans.
During the three and nine months ended September 30, 2024, the change in the fair value of the interest rate swaps was $(11.3) million and $(8.2) million, respectively, and for the three and nine months ended September 30, 2023 was $8.1 million and $11.8 million, respectively, which are reflected in change in fair value of interest rate swaps within the unaudited condensed consolidated statements of operations. The Company also recognized $3.0 million and $13.8 million
21
Spruce Power Holding Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 9. Interest Rate Swaps, continue
of realized gains for the three and nine months ended September 30, 2024, and for the three and nine months ended September 30, 2023, realized gains of $3.8 million and $9.7 million, respectively, reflected within interest expense, net within the unaudited condensed consolidated statements of operations.
In June 2024, interest rate swaps related to the SP4 Facility were settled concurrently with the full repayment of the SP4 Facility (see Note 8. Non-Recourse Debt), and as a result, the Company recorded a gain of approximately $3.6 million within interest expense, net during the nine months ended September 30, 2024.
See Note 10. Fair Value Measurements for further information on the Company’s determination of the fair value of its interest rate swaps.

Note 10. Fair Value Measurements
The Company uses various assumptions and methods in estimating the fair values of its financial instruments.
The Company’s private warrants are valued using a Black-Scholes model, pursuant to the inputs provided in the table below:
InputSeptember 30, 2024December 31, 2023
Risk-free rate3.9 %4.2 %
Remaining term in years1.231.98
Expected volatility59.7 %82.0 %
Exercise price$92.00 $92.00 
Fair value of common stock$2.84 $4.42 
The Company's interest rate swaps are not traded on a market exchange and the fair values are determined using a valuation model based on a discounted cash flow analysis. This analysis reflects the contractual terms of the interest rate swap agreements and uses observable market-based inputs, including estimated future SOFR interest rates. The fair value of the Company's interest rate swap is the net difference in the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates and are observable inputs available to a market participant. The interest rate swap valuation is classified in Level 2 of the fair value hierarchy.
The fair value of the Company’s non-recourse debt as of September 30, 2024 and December 31, 2023 was $626.1 million and $628.2 million, respectively.
The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy:
Fair Value Measurements as of
September 30, 2024
(Amounts in thousands)Level ILevel IILevel IIITotal
Asset:
Interest rate swaps$— $19,535 $— $19,535 
Money market accounts106,790 — — 106,790 
Total$106,790 $19,535 $— $126,325 
Liabilities: