Spruce Power Announces Record Net Income in Second Quarter 2023 Earnings Results
Business Highlights
-
Reported 2Q revenue of
, net income attributable to stockholders of$22.8 million , and adjusted EBITDA, together with proceeds from investment in lease agreement, of$3.1 million .$13.8 million -
Fully integrated the recent acquisition of "Spruce Power 4 Portfolio", bringing total home solar assets and contracts to over 72,000 in 2Q. This represents approximately
44% growth year-over-year. Spruce now believes that its business cash inflows will range from to$110 on an annual run rate basis.$130 million - Executed a non-binding Letter of Intent ("LOI") in July 2023 to acquire a portfolio of approximately 2,400 home solar assets and contracts. This deal is expected to close in the third quarter of 2023, which would bring total home solar assets and contracts to over 75,000.
- Reverse stock split at a 1:8 ratio approved by Board of Directors. Approval of the reverse split is expected to be presented for shareholder vote in October.
Management Commentary and Outlook
"Spruce delivered a strong performance in the second quarter as we benefited from the first full quarter's contribution from the recently acquired "Spruce Power 4 Portfolio" and the wind down of spending associated with our merger and integration of legacy XL Fleet. Results this quarter are a positive sign that our distributed generation solar energy ownership model is built for both consistent operating cash flow and profitable growth,” said Christian Fong, Spruce’s Chief Executive Officer.
Mr. Fong continued, "Looking ahead, with a substantial cash balance of over
Sarah Wells, Spruce's Chief Financial Officer, added "We are proud to have achieved record net income so early in our tenure as a publicly traded company. In the capital markets, we are executing our stock repurchase program, and more recently, our Board of Directors authorized a one-for-eight reverse stock split, which will require shareholder approval. The reverse stock split is intended to ensure compliance with NYSE continued listing standards while also expanding access and marketability to a broader set of institutional investors."
Consolidated Financial Results
Revenues totaled
Operating expenses (excluding depreciation), including both selling, general & administrative expenses ("SG&A") and operations & maintenance, were
Net income attributable to stockholders was
Adjusted EBITDA and proceeds from investment in lease agreement, in the aggregate, was
Balance Sheet and Liquidity
The Company's total principal amount of outstanding debt as of June 30, 2023, fell to
Total cash as of June 30, 2023, was
Growth and Capital Allocation
Spruce is committed to maximizing long-term value for our shareholders through a disciplined approach that includes strategic acquisitions, capex projects, common share repurchases, and debt repayment.
In July 2023, Spruce executed a non-binding letter of intent (LOI) to acquire a portfolio of approximately 2,400 home solar assets and contracts from a publicly traded company. The portfolio, which is supported by a diverse set of long-lived customer contracts, is complementary to Spruce's existing asset base. Spruce intends to fund the acquisition through a combination of cash on hand and non-recourse project level debt. The transaction is expected to close by the end of August 2023.
During the second quarter of 2023, Spruce repurchased 1.9 million shares of common stock at a weighted average price per share of
Reverse Stock Split
In August 2023, Spruce's Board of Directors approved a reverse stock split of the Company's common stock, and on August 9, 2023, the Company filed a preliminary proxy statement with the SEC to begin the necessary shareholder vote for approval. The Board's decision is intended to ensure the Company gains compliance with the New York Stock Exchange's (NYSE) continued listing standard related to minimum stock price. Further details regarding the proposed reverse stock split and the date of the shareholder meeting will be released within the coming weeks.
Key Operating Metrics
As of June 30, 2023, Spruce owned cash flows from over 72,000 home solar assets and contracts across 18 U.S. States with an average remaining contract life of approximately 12 years. Combined portfolio generation for the three months ended June 30, 2023, was approximately 135 thousand MWh of power. In addition, the Company also serviced 7,000 third-party owned residential solar systems and third-party loans as of June 30, 2023. Gross Portfolio Value, on a PV6 basis as described below, was
Conference Call Information
The Spruce management team will host a conference call to discuss its second quarter 2023 financial results today at 2:30 p.m. Mountain Time. The call can be accessed live over the telephone by dialing (888) 210-2654 and referencing Conference ID 2486267. 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 www.sprucepower.com. A replay will be available shortly after the call and can be accessed by dialing (800) 770-2030. The passcode for the replay is 2486267. The replay will be available until August 24, 2023.
About Spruce Power
Spruce Power is a leading owner and operator of distributed solar energy assets across
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 generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Forward-looking statements in this release include statements regarding future repurchases under the stock repurchase program, 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. The Company may not reach a definitive agreement to purchase the portfolio of approximately 2.400 home solar assets and contracts and such acquisition may not be completed in a timely manner or at all. 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, home electrification, electric vehicles and distributed energy resources; the ability to successfully integrate XL Fleet and Spruce; 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 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; the risk that the proposed reverse stock split, if effected, may not have the effect of increasing the market price of the Company's common stock in proportion to the reduction in the number of shares of common stock outstanding, or at all, and may not result in compliance with NYSE continued listing standards or expanded access and marketability of the common stock; 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, 2022 filed with the SEC on March 30, 2023, subsequent Quarterly Reports on Form 10-Q 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.
Additional Information about the Proposed Reverse Stock Split and Where You Can Find It
The Company, its directors and certain of its executive officers are participants in the solicitation of proxies from the Company’s stockholders in connection with the special meeting of its stockholders to be held for the purpose of voting on matters relating to the proposed reverse stock split. The Company will file a definitive proxy statement with the SEC relating to the solicitation of proxies from its stockholders in connection with the special meeting. BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE PROPOSED REVERSE STOCK SPLIT, STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
The proxy statement and other relevant materials, and any other documents filed by Spruce with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov. In addition, stockholders of Spruce may obtain free copies of the documents filed with the SEC by contacting Spruce's Corporate Secretary at (866) 903-2399 or by writing to the Corporate Secretary at Spruce Power Holding Corporation, 1875 Lawrence Street, Suite 320,
Use of Non-GAAP Financial Information
To supplement its consolidated financial statements, which are prepared and presented in accordance with
Earnings (Loss) Before Interest, Income Taxes, Depreciation, and Amortization (“EBITDA”):
We define EBITDA as our consolidated net income (loss) and adding back interest expense, 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 have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results.
Adjusted EBITDA and Adjusted Net Income (Loss):
We believe that Adjusted EBITDA and Adjusted Net Income (loss), 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.
Business Cash Inflows:
We define business cash inflows as receipts of cash from long-term customer contracts, proceeds from investment in SEMTH master lease agreement, cash flows from SRECs and proceeds from customer contract buyouts. Business cash inflows may also include interest earned on cash invested, servicing revenue from third-parties and other extraordinary one time receipts.
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
|
|
Contracted Portfolio Value (1) |
$ |
697 |
Renewal Portfolio Value (2) |
|
217 |
Uncontracted Renewable Energy Credits (3) |
|
16 |
Gross Portfolio Value (4) |
$ |
929 |
(1) Contracted Portfolio Value represents the present value of the remaining net cash flows discounted at
(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 either a system purchase or a renewal and a 30-year customer relationship (although the customer may renew for additional years, or purchase the system), at a contract rate equal to
(3) Uncontracted sales of solar Renewable Energy Credits (RECs) 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 RECs.
Spruce Power Holding Corporation Consolidated Statements of Operations For the Three Months Ended June 30, 2023 and 2022 |
||||||
|
|
Three Months Ended
|
||||
(In thousands, except per share and share amounts) |
|
2023 |
|
2022 |
||
|
|
|
|
|
||
Revenues |
|
$ |
22,813 |
|
$ |
— |
Operating expenses: |
|
|
|
|
||
Cost of revenues |
|
|
8,594 |
|
|
— |
Selling, general, and administrative expenses |
|
|
15,985 |
|
|
9,782 |
Total operating expenses |
|
|
24,579 |
|
|
9,782 |
Loss from operations |
|
|
(1,766) |
|
|
(9,782) |
Other (income) expense: |
|
|
|
|
||
Interest expense, net |
|
|
7,216 |
|
|
7 |
Gain on disposal of assets |
|
|
(794) |
|
|
— |
Change in fair value of obligation to issue shares of common stock to sellers of World Energy |
|
|
— |
|
|
(137) |
Change in fair value of warrant liabilities |
|
|
(33) |
|
|
(1,783) |
Change in fair value of interest rate swaps |
|
|
(9,190) |
|
|
— |
Other income, net |
|
|
(752) |
|
|
(22) |
Net income (loss) from continuing operations |
|
|
1,787 |
|
|
(7,847) |
Net loss from discontinued operations |
|
|
(183) |
|
|
(4,851) |
Net income (loss) |
|
|
1,604 |
|
|
(12,698) |
Less: Net loss attributable to redeemable noncontrolling interests and noncontrolling interests |
|
|
(1,461) |
|
|
— |
Net income (loss) attributable to stockholders |
|
$ |
3,065 |
|
$ |
(12,698) |
Net income (loss) attributable to stockholders per share, basic |
|
$ |
0.02 |
|
$ |
(0.09) |
Net income (loss) attributable to stockholders per share, diluted |
|
$ |
0.02 |
|
$ |
(0.09) |
Net loss from discontinued operations, basic |
|
$ |
— |
|
$ |
(0.03) |
Net loss from discontinued operations, diluted |
|
$ |
— |
|
$ |
(0.03) |
Weighted-average shares outstanding, basic |
|
|
148,894,058 |
|
|
142,247,590 |
Weighted-average shares outstanding, diluted |
|
|
161,606,658 |
|
|
142,247,590 |
Spruce Power Holding Corporation Reconciliation of Non-GAAP Financial Measures For the Three Months Ended June 30, 2023 and March 31, 2023 |
||||||
|
|
Three Months
|
|
Three Months
|
||
(In thousands) |
|
2023 |
|
2023 |
||
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA |
|
|
|
|
||
Net income (loss) attributable to stockholders |
|
$ |
3,065 |
|
$ |
(19,395) |
Net income (loss) attributable to noncontrolling interests |
|
|
(1,461) |
|
|
551 |
Interest expense, net |
|
|
7,216 |
|
|
6,816 |
Depreciation and amortization |
|
|
4,647 |
|
|
5,507 |
EBITDA |
|
|
13,467 |
|
|
(6,521) |
Net loss on discontinued operations |
|
|
183 |
|
|
3,866 |
Restructuring charges |
|
|
293 |
|
|
672 |
Legal charges related to SEC investigation and shareholder lawsuits |
|
|
3,083 |
|
|
2,153 |
(Gain) loss on disposal of assets |
|
|
(794) |
|
|
(2,658) |
Change in fair value of interest rate swaps |
|
|
(9,190) |
|
|
5,588 |
Meter upgrade campaign |
|
|
1,122 |
|
|
554 |
Other one-time costs |
|
|
969 |
|
|
720 |
Change in fair value warrant liabilities |
|
|
(33) |
|
|
(115) |
Non-recurring acquisition/divestment expenses |
|
|
446 |
|
|
409 |
Adjusted EBITDA |
|
$ |
9,546 |
|
$ |
4,668 |
Spruce Power Holding Corporation Reconciliation of Non-GAAP Financial Measures For the Three Months Ended June 30, 2023 |
|||
|
|
Three Months
|
|
(In thousands) |
|
2023 |
|
Reconciliation of Net Income (Loss) to Adjusted Net Loss |
|
|
|
Net income (loss) attributable to stockholders |
|
$ |
3,065 |
Net income (loss) attributable to noncontrolling interests |
|
|
(1,461) |
Net loss on discontinued operations |
|
|
183 |
Restructuring charges |
|
|
293 |
Legal charges related to SEC investigation and shareholder lawsuits |
|
|
3,083 |
(Gain) loss on disposal of assets |
|
|
(794) |
Change in fair value of interest rate swaps |
|
|
(9,190) |
Meter upgrade campaign |
|
|
1,122 |
Other one-time costs |
|
|
969 |
Change in fair value warrant liabilities |
|
|
(33) |
Non-recurring acquisition/divestment expenses |
|
|
446 |
Adjusted Net Loss |
|
$ |
(2,317) |
Spruce Power Holding Corporation Consolidated Balance Sheets June 30, 2023 and December 31, 2022 |
||||||
|
|
As of |
||||
(In thousands, except share and per share amounts) |
|
June 30,
|
|
December 31,
|
||
Assets |
|
|
|
|
||
Current assets: |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
162,749 |
|
$ |
220,321 |
Restricted cash |
|
|
29,361 |
|
|
19,823 |
Accounts receivable, net of allowance of |
|
|
13,565 |
|
|
8,336 |
Interest rate swap assets, current |
|
|
13,558 |
|
|
10,183 |
Prepaid expenses and other current assets |
|
|
8,062 |
|
|
5,316 |
Current assets of discontinued operations |
|
|
— |
|
|
10,977 |
Total current assets |
|
|
227,295 |
|
|
274,956 |
Investment related to SEMTH master lease agreement |
|
|
146,627 |
|
|
— |
Property and equipment, net |
|
|
475,688 |
|
|
396,168 |
Interest rate swap assets, non-current |
|
|
21,900 |
|
|
22,069 |
Intangible assets, net |
|
|
10,553 |
|
|
— |
Deferred rent assets |
|
|
1,585 |
|
|
1,626 |
Right-of-use assets, net |
|
|
4,499 |
|
|
2,802 |
Goodwill |
|
|
28,757 |
|
|
128,548 |
Other assets |
|
|
254 |
|
|
383 |
Long-term assets of discontinued operations |
|
|
37 |
|
|
— |
Total assets |
|
$ |
917,195 |
|
$ |
826,552 |
|
|
|
|
|
||
Liabilities, redeemable noncontrolling interests and stockholders’ equity |
|
|
|
|
||
Current liabilities: |
|
|
|
|
||
Accounts payable |
|
$ |
3,291 |
|
$ |
2,904 |
Current portion of long-term debt |
|
|
25,971 |
|
|
25,314 |
Accrued expenses and other current liabilities |
|
|
19,521 |
|
|
21,509 |
Deferred revenue, current |
|
|
86 |
|
|
39 |
Lease liability, current |
|
|
706 |
|
|
834 |
Current liabilities of discontinued operations |
|
|
— |
|
|
9,097 |
Total current liabilities |
|
|
49,575 |
|
|
59,697 |
Long-term debt, net of current portion |
|
|
587,393 |
|
|
474,441 |
Deferred revenue, non-current |
|
|
887 |
|
|
452 |
Lease liability, non-current |
|
|
4,582 |
|
|
2,426 |
Warrant liabilities |
|
|
109 |
|
|
256 |
Unfavorable solar renewable energy agreements, net |
|
|
8,278 |
|
|
— |
Other long-term liabilities |
|
|
15 |
|
|
10 |
Long-term liabilities of discontinued operations |
|
|
191 |
|
|
294 |
Total liabilities |
|
|
651,030 |
|
|
537,576 |
Commitments and contingencies |
|
|
|
|
||
|
|
|
|
|
||
Redeemable noncontrolling interests |
|
|
199 |
|
|
85 |
Stockholders’ equity: |
|
|
|
|
||
Common stock, |
|
|
14 |
|
|
14 |
Additional paid-in capital |
|
|
473,538 |
|
|
473,277 |
Noncontrolling interests |
|
|
2,415 |
|
|
8,942 |
Accumulated deficit |
|
|
(208,387) |
|
|
(193,342) |
Treasury stock at cost, 1,864,173 shares and 0 at June 30, 2023 and December 31, 2022, respectively |
|
|
(1,614) |
|
|
— |
Total stockholders’ equity |
|
|
265,966 |
|
|
288,891 |
Total liabilities, redeemable noncontrolling interests and stockholders’ equity |
|
$ |
917,195 |
|
$ |
826,552 |
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230810592557/en/
Investor Contact: investors@sprucepower.com
Head of Investor Relations: Bronson Fleig
Media Contact: publicrelations@sprucepower.com
Source: Spruce Power Holding Corporation