Sunrun Reports Fourth Quarter and Full Year 2017 Financial Results

2018-03-06 / @nasdaq

 

Unlevered NPV of $1.22 per watt in Q4 2017, the highest in the company’s history

Total deployments of 323 MWs in 2017, an increase of 15% year-over-year

Net Earning Assets of $1.2 billion, an increase of 16% year-over-year

Customers now exceed 180,000, an increase of 34% year-over-year

Achieved structural cash flow positive milestone in 2017

SAN FRANCISCO, March 06, 2018 (GLOBE NEWSWIRE) -- Sunrun (Nasdaq:RUN), the nation’s largest dedicated provider of residential solar, storage and energy services, today announced financial results for the fourth quarter and full year ended December 31, 2017.

Full Year 2017 Operating Highlights

  • Total deployments of 323 MW, an increase of 15% year-over-year
  • Net Present Value of $314 million created, an increase of 47% year-over-year
  • Unlevered NPV of $1.09 per watt, an increase of 25% year-over-year
  • Cumulative MW deployed of 1,202 MW, an increase of 37% year-over-year
  • Net Earning Assets of $1.2 billion, reflecting a 16% increase year-over-year
  • Customers now exceed 180,000, an increase of 34% year-over-year
  • Achieved structural cash flow positive milestone in 2017

Fourth Quarter 2017 Operating Highlights

  • Unlevered NPV of $1.22 per watt, the highest level in the company’s history
  • Total deployments of 85 MW, an increase of 10% year-over-year
  • Net Present Value of $91 million created, an increase of 35% year-over-year

“Sunrun is entering 2018 as the residential market leader,” said Lynn Jurich, Sunrun Chief Executive Officer and co-founder.  “We achieved our highest unit margins and turned structurally cash flow positive. We expect to deliver an even stronger performance in 2018.”  Jurich added, “Last year households experienced an unprecedented level of power outages driving demand for a more reliable electricity solution.  Sunrun is meeting this need with our Brightbox solar and home battery service which is now available in six states and provides affordable electricity with backup power.”

Key Operating Metrics

In the fourth quarter of 2017, MW deployed increased to 85 MW from 77 MW in the fourth quarter of 2016, a 10% year-over-year increase.

In the full year 2017, MW deployed increased to 323 MW from 282 MW in the full year 2016, a 15% year-over-year increase.

In the fourth quarter of 2017, MW booked were 83 MW, an increase of 15% from the fourth quarter of 2016.

Creation Cost per watt was $3.30 in the fourth quarter of 2017 compared to $3.41 in the fourth quarter of 2016, an improvement of $0.11 year-over-year. Project Value per watt was $4.52 in the fourth quarter of 2017, an increase of $0.11 compared to the fourth quarter of 2016.

NPV created in the fourth quarter of 2017 was $91 million, a 35% increase from $67 million in the fourth quarter of 2016. Unlevered NPV per watt in the fourth quarter of 2017 was $1.22, reflecting the highest level in the company’s history, compared to $1.00 in the prior year. 

Gross Earning Assets as of December 31, 2017 were $2.2 billion, up $404 million, or 22% from the prior year. Net Earning Assets as of December 31, 2017 were $1.2 billion, up $165 million, reflecting a 16% increase from the prior year.

Financing Activities                                  

As of March 6, 2018, closed transactions and executed term sheets provide us expected tax equity and back-leverage capacity into the third quarter of 2018.

Fourth Quarter 2017 GAAP Results

Operating leases and incentives revenue grew 31% year-over-year to $59.5 million. Solar energy systems and product sales increased 15% year-over-year to $86.9 million. Total revenue grew to $146.4 million in the fourth quarter of 2017, up $25.9 million, or 21% from the fourth quarter of 2016.

Total cost of revenue was $127.4 million, an increase of 21% year-over-year. Total operating expenses were $197.9 million, an increase of 17% year-over-year.

Net income available to common stockholders was $58.9 million in the fourth quarter of 2017, an increase of 103% year-over-year. 

Diluted net earnings per share available to common stockholders was $0.54 per share. Net income available to common stockholders benefited from a one-time tax item of approximately $31.9 million related to recent changes to the U.S. tax code, or a $0.29 benefit per diluted share.

Full Year 2017 GAAP Results

Total revenue grew to $529.7 million in the full year 2017, up $75.8 million, or 17% from 2016. Operating leases and incentives revenue grew 37% year-over-year to $231.4 million. Solar energy systems and product sales grew 4% year-over-year to $298.3 million.

Total cost of revenue was $448.1 million, an increase of 12% year-over-year. Total operating expenses were $711.9 million, an increase of 6% year-over-year.

Net income available to common stockholders was $124.5 million in the full year 2017, compared to net income available to common stockholders of $91.7 million in 2016.

Diluted net earnings per share available to common shareholders was $1.15 per share.

Guidance for Full Year 2018

The following statement is based on current expectations. This statement is forward-looking and actual results may differ materially.

For the full year 2018, we expect deployments to grow 15% year-over-year.

Conference Call Information

Sunrun is hosting a conference call for analysts and investors to discuss its fourth quarter and full year 2017 results and outlook for its first quarter 2018 at 2:00 p.m. Pacific Time today, March 6, 2018. A live audio webcast of the conference call along with supplemental financial information will be accessible via the “Investor Relations” section of the Company’s website at http://investors.sunrun.com. The conference call can also be accessed live over the phone by dialing (877) 470-1078 (domestic) or (615) 247-0087 (international) using ID #5768987. A replay will be available following the call via the Sunrun Investor Relations website or for one week at the following numbers (855) 859-2056 (domestic) or (404) 537-3406 (international) using ID #5768987.

About Sunrun                    

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

Forward Looking Statements

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

 
Consolidated Balance Sheets
(In Thousands)
 
  As of December 31,
  2017 2016
Assets    
Current assets:    
Cash $202,525  $206,364 
Restricted cash 39,265  11,882 
Accounts receivable, net 76,198  60,258 
State tax credits receivable 11,085  13,713 
Inventories 94,427  67,326 
Prepaid expenses and other current assets 9,202  9,802 
Total current assets 432,702  369,345 
Restricted cash   6,117 
Solar energy systems, net 3,319,708  2,629,366 
Property and equipment, net 36,402  48,471 
Intangible assets, net 14,294  18,499 
Goodwill 87,543  87,543 
Prepaid tax asset   378,541 
Other assets 37,225  34,936 
Total assets $3,927,874  $3,572,818 
Liabilities and total equity    
Current liabilities:    
Accounts payable $115,193  $66,018 
Distributions payable to noncontrolling interests and redeemable noncontrolling interests 13,583  10,654 
Accrued expenses and other liabilities 85,639  59,261 
Deferred revenue, current portion 77,310  70,849 
Deferred grants, current portion 8,269  8,011 
Capital lease obligations, current portion 7,421  10,015 
Non-recourse debt, current portion 21,529  14,153 
Lease pass-through financing obligation, current portion 6,087  5,823 
Total current liabilities 335,031  244,784 
Deferred revenue, net of current portion 584,427  583,401 
Deferred grants, net of current portion 228,603  226,893 
Capital lease obligations, net of current portion 5,811  12,965 
Recourse debt, net of current portion 247,000  244,000 
Non-recourse debt, net of current portion 1,026,416  639,870 
Lease pass-through financing obligation, net of current portion 138,124  137,958 
Other liabilities 13,520  5,457 
Deferred tax liabilities 59,131  415,397 
Total liabilities 2,638,063  2,510,725 
Redeemable noncontrolling interests 123,737  137,907 
Total stockholders’ equity 811,998  672,961 
Noncontrolling interests 354,076  251,225 
Total equity 1,166,074  924,186 
Total liabilities, redeemable noncontrolling interests and total equity $3,927,874  $3,572,818 
         


 
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
 
  Three Months Ended
December 31,
 Year Ended
December 31,
  2017 2016 2017 2016
Revenue:        
Operating leases and incentives $59,536  $45,333  $231,433  $168,417 
Solar energy systems and product sales 86,907  75,251  298,266  285,481 
Total revenue 146,443  120,584  529,699  453,898 
Operating expenses:        
Cost of operating leases and incentives 53,272  42,380  193,954  159,858 
Cost of solar energy systems and product sales 74,174  63,005  254,131  239,381 
Sales and marketing 35,357  35,685  137,115  162,781 
Research and development 4,437  2,905  15,079  10,199 
General and administrative 29,644  24,184  107,420  92,377 
Amortization of intangible assets 1,050  1,052  4,204  4,206 
Total operating expenses 197,934  169,211  711,903  668,802 
Loss from operations (51,491) (48,627) (182,204) (214,904)
Interest expense, net 20,932  14,709  70,518  53,244 
Other expenses (income), net 1,285  (380) 1,874  (840)
Loss before income taxes (73,708) (62,956) (254,596) (267,308)
Income tax expense (benefit) (5,487) 22,847  32,138  35,993 
Net loss (68,221) (85,803) (286,734) (303,301)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests (127,115) (114,835) (411,259) (394,988)
Net income available to common stockholders $58,894  $29,032  $124,525  $91,687 
Net income per share available to common stockholders        
Basic $0.55  $0.28  $1.18  $0.90 
Diluted $0.54  $0.27  $1.15  $0.87 
Weighted average shares used to compute net income per share available to common stockholders        
Basic 106,538  103,504  105,432  102,367 
Diluted 109,135  105,761  108,206  104,964 
         


 
Consolidated Statements of Cash Flows
(In Thousands)
 
  Three Months Ended
December 31,
 Year Ended
December 31,
  2017 2016 2017 2016
Operating activities:        
Net loss $(68,221) $(85,803) $(286,734) $(303,301)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization, net of amortization of deferred grants 36,687  30,535  136,361  104,105 
Deferred income taxes (5,486) 22,847  32,138  35,993 
Stock-based compensation expense 5,548  4,697  22,042  18,723 
Noncash interest expense 4,006  5,417  17,150  13,441 
Interest on lease pass-through financing obligations 3,010  3,030  11,973  12,081 
Reduction in lease pass-through financing obligations (4,509) (4,402) (18,230) (18,551)
Other noncash losses and expenses 6,697  1,081  13,546  5,235 
Changes in operating assets and liabilities:        
Accounts receivable (3,907) (8,509) (17,870) 674 
Inventories (31,104) 18,615  (27,101) 4,042 
Prepaid and other assets 142  336  (3,478) (4,799)
Accounts payable 16,168  (18,116) 47,837  (40,336)
Accrued expenses and other liabilities 13,940  3,805  2,573  11,819 
Deferred revenue 5,184  3,118  8,782  10,294 
Net cash used in operating activities (21,845) (23,349) (61,011) (150,580)
Investing activities:        
Payments for the costs of solar energy systems, leased and to be leased (221,183) (197,273) (804,371) (727,568)
Purchases of property and equipment (2,000) (2,147) (7,956) (12,544)
Business acquisition, net of cash acquired       (5,000)
Net cash used in investing activities (223,183) (199,420) (812,327) (745,112)
Financing activities:        
Proceeds from state tax credits, net of recapture 988    13,773  9,081 
Proceeds from issuance of recourse debt 45,000  104,000  170,400  458,400 
Repayment of recourse debt (45,000) (104,000) (167,400) (411,400)
Proceeds from issuance of non-recourse debt 454,720  85,846  748,806  335,666 
Repayment of non-recourse debt (269,962) (4,963) (362,763) (23,076)
Payment of debt fees (8,060) (127) (14,392) (13,741)
Proceeds from lease pass-through financing obligations 1,582  1,805  6,221  16,047 
Repayment of lease pass-through financing obligations        
Contributions received from noncontrolling interests and redeemable
  noncontrolling interests
 123,599  151,335  594,921  573,542 
Distributions paid to noncontrolling interests and redeemable noncontrolling interests (15,769) (11,793) (54,530) (39,542)
Acquisition of noncontrolling interests (35,386)   (35,386)  
Proceeds from exercises of stock options, net of withholding taxes on restricted stock
  units and issuance of shares in connection with the Employee Stock Purchase Plan
 1,242  2,660  1,035  7,364 
Proceeds received, net and (offering costs paid) related to initial public offering       (437)
Payment of capital lease obligations (2,251) (3,091) (9,836) (12,759)
Change in restricted cash (19,292) (16) (21,350) (953)
Net cash provided by financing activities 231,411  221,656  869,499  898,192 
Net change in cash (13,617) (1,113) (3,839) 2,500 
Cash, beginning of period 216,142  207,477  206,364  203,864 
Cash, end of period $202,525  $206,364  $202,525  $206,364 
                 


 
Key Operating Metrics and Financial Metrics
 
  Full Year Ended
December 31,
  2017  2016
MW Booked (during the period) (1)   337   285
MW Deployed (during the period)  323   282
Cumulative MW Deployed (end of period)  1,202   879
Gross Earning Assets under Energy Contract (end of period)(in millions) (2) $1,459  $1,200
Gross Earning Assets Value of Purchase or Renewal (end of period)(in millions) $754  $609
Gross Earning Assets (end of period)(in millions) (2)(3) $2,213  $1,809
 Net Earning Assets (end of period)(in millions) (3)  $1,176  $1,011
 

 
 
Three Months Ended
December 31,
  2017  2016
Project Value, Contracted Portion (per watt) $3.96  $3.80
Project Value, Renewal Portion (per watt) $0.56  $0.60
Total Project Value (per watt) $4.52  $4.41
Creation Cost (per watt) (4) $3.30  $3.41
Unlevered NPV (per watt) (3) $1.22  $1.00
NPV (in millions) (3) $91  $67
  1. The presentation of MW Booked for periods prior to December 31, 2016 reflects changes made to the calculation methodology as further described in our Annual Report on Form 10-K filed with the SEC on March 8, 2017.

  2. In the fourth quarter of 2017, Gross Earning Assets under Energy Contract and Total Gross Earning Assets were reduced by $13 million to reflect changes related to modifications to the Federal Tax Code for assets deployed through December 31, 2017, including a reduction held as a reserve pending final tax regulation guidance based on the company’s best estimate of the potential effect.

  3. Numbers may not sum due to rounding.

  4. The presentation of Creation Cost for periods prior to December 31, 2016 reflects changes made to the calculation methodology as further described in our Fourth Quarter 2016 earnings presentation available on our investor relations website.

Definitions

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

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

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

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

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

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

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

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

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

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

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

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

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

Investor Relations Contact:

Patrick Jobin
Vice President, Finance & Investor Relations
investors@sunrun.com
(415) 638-4007

Media Contact:

Georgia Dempsey
Director of Corporate Communications
press@sunrun.com
(415) 518-9418

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