Sunrun Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Amounts below are in millions unless stated otherwise. Sunrun provides residential solar services and systems, primarily through long-term customer agreements.
Financial results and key metrics
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $209.8 | $215.5 | $601.8 | $614.6 |
| Operating loss | $(62.2) | $(60.3) | $(208.7) | $(167.3) |
| Consolidated net loss | $(85.4) | $(112.5) | $(329.5) | $(304.0) |
| Net income (loss) attributable to common stockholders | $37.4 | $29.0 | $(4.1) | $13.8 |
| Net cash used in operating activities | Not provided quarterly | $(166.8) | $(106.1) |
- Q3 operating margin was approximately -29.6%, versus -28.0% a year earlier; nine-month operating margin was approximately -34.7%, versus -27.2%.
- Q3 customer-agreement and incentive revenue increased 19% to $114.5 million, while solar system and product sales fell 20% to $95.3 million. Nine-month total revenue declined 2%.
- Net interest expense rose 17% in Q3 to $51.4 million and 19% for the nine-month period to $152.0 million. The common-stockholder result differs from consolidated net loss because losses are allocated to noncontrolling interests.
- At September 30, cash was $276.1 million and restricted cash was $105.5 million. Current assets were $645.7 million and current liabilities $596.2 million.
- Total debt was $2.485 billion, including $224.9 million of recourse debt and $2.260 billion of non-recourse debt. Separately, pass-through financing obligations totaled approximately $336.4 million. The company reported compliance with debt covenants.
- Nine-month investing cash outflow was $686.8 million, mainly for solar systems and a $65.4 million home-electrification venture investment. Financing provided $871.8 million, including fund-investor contributions, debt proceeds and $75 million from a share issuance. Cash and restricted cash increased $18.3 million.
- Sunrun reported approximately $226.2 million of committed and available capital restricted to solar-system purchases and installation. Management said cash, fund commitments and available borrowings were expected to cover anticipated needs for at least 12 months.
Changes, outlook and notable items
- Higher recurring customer-agreement revenue was offset by lower system and product sales. Management attributed lower sales partly to reduced retail-partner demand and lower wholesale purchases after customers bought safe-harbor equipment in 2019. Incentive revenue also fell year to date, principally because a prior financing fund’s Commercial ITC activity largely concluded in 2019.
- Q3 general and administrative expense increased, including $8.6 million of acquisition-related costs. Nine-month expenses included $11.9 million of acquisition costs, a $6.7 million legal-settlement accrual and $8.0 million of non-recurring and restructuring costs in sales and marketing.
- Sunrun completed its acquisition of Vivint Solar on October 8, 2020, after quarter-end. It issued 69.5 million shares; the estimated purchase price was $5.0 billion. Illustrative pro forma combined revenue was $316.2 million for Q3 2020 and $904.9 million for the first nine months of 2020; pro forma earnings were not provided.
- In August, Sunrun issued 2.075 million shares to SK E&S for approximately $75 million. The parties also agreed to establish a home-electrification venture, with Sunrun contributing $65 million in cash and advisory services valued at $10 million.
- COVID-19 effects remained uncertain. Management described digital-sales initiatives, cost reductions and workforce actions, while warning that pandemic duration, restrictions, demand, installation activity, supply chains and capital-market conditions could affect results.
- Key risks include dependence on tax-equity and other external financing, interest-rate exposure, changes to tax incentives and net-metering or utility policies, customer cancellations, supply constraints, and integration of Vivint Solar. The Commercial ITC step-down and safe-harbor eligibility are relevant financing risks.
- An investor fund was under IRS audit concerning system fair-market-value determinations; Sunrun said it could not determine potential tax liabilities. A $5.5 million TCPA class-action settlement was accrued and had preliminary court approval, with final approval scheduled for May 2021.
- No specific forward-looking financial guidance is stated in the provided filing text. The filing notes that results may fluctuate and are not necessarily indicative of full-year results.
Investor verification priorities
- Track operating cash burn against available unrestricted cash, financing commitments, and debt maturities and covenants.
- Assess whether recurring agreement growth can offset weaker system and product sales while improving operating margins.
- Review Vivint Solar integration, acquisition financing and dilution, and subsequent combined-company results; the pro forma figures are illustrative, not actual results.
- Monitor the IRS audit, Commercial ITC and safe-harbor exposure, and the settlement’s final approval and payment.
- Evaluate exposure to COVID-19 disruption, capital-market access, interest rates, incentive changes and net-metering regulation.