OREANDA-NEWS. May 13, 2016. Sunrun (Nasdaq:RUN), the largest dedicated residential solar company in the United States, today announced financial results for the first quarter ended March 31, 2016.

First Quarter 2016 Operating Highlights

  • Total deployments of 60 MW, an increase of 63% year-over-year.  Sunrun-built deployments grew 148% year-over-year.
  • Cumulative MW deployed of 656 MW.
  • Pre-tax Project Value per watt was \\$4.51, flat with Q4 2015. 
  • Pro forma Creation Cost (excluding one-time items related to Nevada exit) per watt of \\$4.11 decreased \\$0.25, or 6% year-over-year.

“The industry has reached a new milestone with one million solar homes underscoring the increasing power and relevance of rooftop solar in our energy future,” said Lynn Jurich, chief executive officer. “Sunrun has already saved our customers more than \\$100 million dollars. Our new BrightBox storage offering extends the profit potential and reach of solar energy.”

Key Operating Metrics 

In the first quarter of 2016, total MW deployed increased to 60 MW from 37 MW in the first quarter of 2015, a 63% year-over-year increase.

Pre-tax project value per watt was \\$4.51, compared to \\$5.02 in the first quarter of 2015. Pro forma creation cost was \\$4.11 per watt (excluding one-time items related to Nevada exit) in the first quarter of 2016 compared to \\$4.36 in the first quarter of 2015.

Pro forma net bookings (excluding cancellation of Nevada orders) were 56 MW, representing 46% year-over-year growth.

Pro forma NPV created in the first quarter of 2016 was \\$20.6 million, compared to \\$23.3 million in the first quarter of 2015.  Estimated nominal contracted payments remaining as of March 31, 2016 totaled \\$2.6 billion, up \\$920 million or 54% since March 31, 2015.  Estimated retained value as of March 31, 2016 was \\$1.6 billion, up \\$546 million, or 50%, since March 31, 2015.

Financing Activities

As of May 12, 2016, with the upsize of our previously announced back-leverage aggregation facility, and the addition of new tax equity partnerships, we have increased our total capacity to meet expected project finance needs well into 2017.

First Quarter 2016 GAAP Results

Total revenue grew to \\$98.7 million in the first quarter of 2016, up \\$49.1 million, or 99% from the first quarter of 2015.  Operating leases and incentives revenue grew 55% year-over-year to \\$34.5 million.  Solar energy systems and product sales grew 135% year-over-year to \\$64.2 million.

Total cost of revenue was \\$95.6 million, an increase of 105% year-over-year. Total operating expenses were \\$165.6 million, an increase of 75% year-over-year.

Net income attributable to common stockholders was \\$13.1 million in the first quarter of 2016, compared to a net loss of \\$15.0 million in the fourth quarter of 2015, and a net loss of \\$18.0 million in the first quarter of 2015.

GAAP net earnings per share attributable to common shareholders was \\$0.13 per share.

Guidance for Q2 and Full Year 2016

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.

For 2016, we expect deployments of approximately 285 MW but we will focus primarily on delivering NPV of above \\$1 per watt in the second half of the year.  We believe this NPV growth is supported by expected growth rates of nearly 100% in our Sunrun built business, which is double the market growth rate and lower unit level creation costs. 

In Q2, we expect to deploy approximately 60 MW.

Conference Call Information

Sunrun is hosting a conference call for analysts and investors to discuss its first quarter 2016 results and outlook for its second quarter and full year of 2016 at 2:00 p.m. Pacific Time today, May 12, 2016. A live audio webcast of the conference call along with supplemental financial information will also be accessible from the “Investors” section of the Company’s website at http://investors.sunrun.com.  The conference call can be accessed live via the Sunrun Investor Relations website at  http://investors.sunrun.com or over the phone by dialing (877) 470-1078 (domestic) or (615) 247-0087 (international) using ID# 95591236.  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# 95591236.

About Sunrun

Sunrun (Nasdaq:RUN) is the largest dedicated residential solar company in the United States with a mission to create a planet run by the sun. Since establishing the solar as a service model in 2007, Sunrun continues to lead 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 solar panels on a homeowner's roof, while families receive predictable pricing for 20 years or more. 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 future financial and operating guidance, operational and financial results such as growth, value creation, MW bookings and deployments, estimates of nominal contracted payments remaining, estimated retained value, project value, estimated 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: 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, Except Share Par Values)
 
  March 31, 2016 December 31, 2015
  (Unaudited)  
Assets    
Current assets:    
Cash \\$208,313  \\$203,864 
Restricted cash  9,246   9,203 
Accounts receivable (net of allowances for doubtful
  accounts of \\$1,167 and \\$1,641 as of March 31, 2016
  and December 31, 2015, respectively)		  56,774   60,275 
State tax credits receivable  —   9,198 
Inventories  94,682   71,258 
Prepaid expenses and other current assets  13,903   5,917 
Total current assets  382,918   359,715 
Restricted cash  6,125   8,094 
Solar energy systems, net  2,137,015   1,992,021 
Property and equipment, net  51,897   44,866 
Intangible assets, net  21,653   22,705 
Goodwill  87,543   87,543 
Prepaid tax asset  222,596   190,146 
Other assets  31,833   29,502 
Total assets \\$2,941,580  \\$2,734,592 
Liabilities and total equity    
Current liabilities:    
Accounts payable \\$93,701  \\$104,133 
Distributions payable to noncontrolling interests and
  redeemable noncontrolling interests		  7,368   8,144 
Accrued expenses and other liabilities  53,826   49,146 
Deferred revenue, current portion  65,820   59,726 
Deferred grants, current portion  14,399   13,949 
Capital lease obligation, current portion  10,890   8,951 
Long-term non-recourse debt, current portion  5,591   4,722 
Lease pass-through financing obligation, current portion  4,540   3,710 
Total current liabilities  256,135   252,481 
Deferred revenue, net of current portion  577,220   559,066 
Deferred grants, net of current portion  216,176   220,784 
Capital lease obligation, net of current portion  17,154   15,042 
Recourse debt  191,000   197,000 
Long-term non-recourse debt, net of current portion  436,196   333,042 
Lease pass-through financing obligation, net of current
  portion		  143,020   153,188 
Other liabilities  8,863   7,144 
Deferred tax liabilities  222,596   190,146 
Total liabilities  2,068,360   1,927,893 
Redeemable noncontrolling interests  138,049   147,139 
Stockholders’ equity   565,793   554,069 
Noncontrolling interests  169,378   105,491 
Total equity   735,171   659,560 
Total liabilities, redeemable noncontrolling interests and total equity \\$2,941,580  \\$2,734,592 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
  Three Months Ended March 31,
   2016   2015 
Revenue:    
Operating leases and incentives \\$34,540  \\$22,308 
Solar energy systems and product sales  64,203   27,369 
Total revenue  98,743   49,677 
Operating expenses:    
Cost of operating leases and incentives  38,100   21,377 
Cost of solar energy systems and product sales  57,512   25,330 
Sales and marketing  43,188   24,926 
Research and development  2,463   2,287 
General and administrative  23,248   20,306 
Amortization of intangible assets  1,052   542 
Total operating expenses  165,563   94,768 
Loss from operations  (66,820)  (45,091)
Interest expense, net  11,515   7,130 
Other expenses (income), net  (532)  299 
Loss before income taxes  (77,803)  (52,520)
Income tax benefit  —   — 
Net loss  (77,803)  (52,520)
Net loss attributable to noncontrolling interests and redeemable noncontrolling
  interests		  (90,937)  (34,525)
Net income (loss) attributable to common stockholders \\$13,134  \\$(17,995)
     
Net income (loss) per share attributable to common stockholders    
Basic \\$0.13  \\$(0.74)
Diluted \\$0.13  \\$(0.74)
Weighted average shares used to compute net income (loss) per share
  attributable to common stockholders		    
Basic  101,273   24,427 
Diluted  104,219   24,427 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
  Three Months Ended March 31,
   2016   2015 
Operating activities:    
Net loss \\$(77,803) \\$(52,520)
Adjustments to reconcile net loss to net cash used in operating activities:    
Noncash losses  1,321   — 
Depreciation and amortization, net of amortization of deferred grants  21,596   15,429 
Bad debt expense  336   457 
Interest on lease pass-through financing  3,002   3,474 
Noncash interest expense  3,502   2,635 
Stock-based compensation expense  3,809   3,220 
Reduction in lease pass-through financing obligations  (4,236)  (4,887)
Changes in operating assets and liabilities:    
Accounts receivable  3,595   (5,535)
Inventories  (23,314)  (11,537)
Prepaid and other assets  (4,355)  5,069 
Accounts payable  (10,103)  26,932 
Accrued expenses and other liabilities  (317)  2,643 
Deferred revenue  5,572   12,304 
Net cash used in operating activities  (77,395)  (2,316)
     
Investing activities:    
Payments for the costs of solar energy systems, leased and to be leased  (164,629)  (131,291)
Purchases of property and equipment  (5,023)  (1,947)
Net cash used in investing activities  (169,652)  (133,238)
     
Financing activities:    
Proceeds from grants and state tax credits, net of recapture  9,202   5,153 
Proceeds from recourse debt  141,000   — 
Repayment of recourse debt  (147,000)  — 
Proceeds from issuance of non-recourse debt  106,400   — 
Repayment of non-recourse debt  (2,160)  (690)
Payment of debt fees  (9,369)  — 
Proceeds from lease pass-through financing obligations  9,746   35,130 
Contributions received from noncontrolling interests and redeemable noncontrolling interests  154,944   59,341 
Distributions paid to noncontrolling interests and redeemable noncontrolling interests  (9,986)  (7,521)
Proceeds from exercises of stock options, net of withholding taxes on restricted stock units  452   1,058 
Offering costs paid related to initial public offering  (437)  — 
Payment of capital lease obligation  (3,115)  (602)
Change in restricted cash  1,819   (2,996)
Net cash provided by financing activities  251,496   88,873 
     
Net increase (decrease) in cash  4,449   (46,681)
Cash, beginning of period  203,864   152,154 
Cash, end of period \\$208,313  \\$105,473 
Key Operating Metrics   
    
          As of March 31,       
  2016  2015 
MW Booked  56 (1)    38 
MW Deployed  60   37 
Cumulative MW Deployed  656   430 
Estimated Nominal Contracted Payments Remaining (in millions) \\$2,633  \\$1,713 
Estimated Retained Value under Energy Contract (in millions) \\$1,115  \\$711 
Estimated Retained Value of Purchase or Renewal (in millions) \\$518  \\$377 
Estimated Retained Value (in millions) \\$1,633  \\$1,087 
Estimated Retained Value (per watt) \\$2.36  \\$2.41 
  Three Months Ended March 31,
  2016  2015
Project Value (per watt) \\$4.51   \\$5.02 
Creation Cost (2) (per watt) \\$4.11 (3)    \\$4.36 
Unlevered NPV (per watt) \\$0.40   \\$0.66 
NPV (in millions) \\$21 (3)    \\$23 
          

(1) Excludes 13 MW due to Nevada exit. 
(2) Excludes IDC costs paid prior to deployments and excludes non-cash items such as amortization of intangible assets and stock-based compensation.
(3) Excludes \\$0.24 per watt related to Nevada exit. See supplemental cost memo.

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 and (ii) certain sales and marketing expenses under new customer agreements, net of cancellations during the period divided by the related watts booked.

Customers refers to residential customers with solar energy systems that are installed or under contract to install, net of cancellations.

Estimated Nominal Contracted Payments Remaining equals the sum of the remaining cash payments that customers are expected to pay over the initial terms of their agreements (not including the value of any renewal or system purchase at the end of the initial agreement term), including estimated uncollected prepayments, for systems contracted as of the measurement date.

Estimated Retained Value represents the cash flows (discounted at 6%) we expect to receive pursuant to customer agreements during the initial agreement term, excluding substantially all value from solar renewable energy credits (“SRECs”) prior to July 1, 2015. It also includes a discounted estimate of the value of the purchase or renewal of the agreement at the end of the initial term.  Estimated retained value excludes estimated distributions to investors in consolidated joint ventures and estimated operating, maintenance and administrative expenses for systems contracted as of the measurement date.  We do not deduct amounts we are obligated to pass through to investors in lease pass-throughs. Estimated retained value under energy contract represents the net cash flows during the initial 20-year term of our customer agreements. Estimated retained value of purchase or renewal is the forecasted net present value we would receive upon or following the expiration of the initial contract term.

MW Booked represents the aggregate megawatt production capacity of our solar energy systems sold to customers or subject to an executed customer agreement, net of cancellations.

MW Deployed represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to 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.

NPV equals unlevered NPV multiplied by leased megawatts booked in period.

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. 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 retained value, (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 estimated retained value and (iv) finance proceeds from tax equity investors.  Project value includes contracted SRECs. Project value does not include cash true-up payments or the value of asset contributions in lieu of cash true-up payments made to investment fund investors, the cumulative impact of which is expected to be immaterial in 2016.

Unlevered NPV equals the difference between project value and estimated creation cost on a per watt basis.