Sunrun Inc.

Previous wording

We have experienced substantial growth in our business and operations since our inception in 2007, as well as through our acquisition of Vivint Solar on October 8, 2020. As of September 30, 2024, we operate the largest fleet of residential solar energy systems in the United States. We have a Networked Solar Energy Capacity of 7,288 megawatts as of September 30, 2024, which represents the aggregate megawatt production capacity of our solar energy systems that have been recognized as deployments, from our inception through the measurement date. Gross Earning Assets as of September 30, 2024 were approximately $16.8 billion. Please see the section entitled “Key Operating Metrics” for more details on how we calculate Networked Solar Energy Capacity and Gross Earning Assets.

Current wording

We have experienced substantial growth in our business and operations since our inception in 2007, as well as through our acquisition of Vivint Solar on October 8, 2020. As of March 31, 2025, we operate the largest fleet of residential solar energy systems in the United States. We have a Networked Solar Energy Capacity of 7,721 megawatts (“MW”) as of March 31, 2025, which represents the aggregate megawatt production capacity of our solar energy systems that have been recognized as deployments, from our inception through the measurement date. Gross Earning Assets as of March 31, 2025 were approximately $18.5 billion. Please see the section entitled “Key Operating Metrics” for more details on how we calculate Networked Solar Energy Capacity and Gross Earning Assets.

Previous wording

We also have a long track record of attracting low-cost capital from diverse sources, including tax equity and debt investors. Since inception we have raised tax equity investment funds to finance the installation of solar energy systems.

Current wording

We also have a long track record of attracting low-cost capital from diverse sources, including tax equity and debt investors. Since inception we have raised tax equity Funds to finance the installation of solar energy systems.

Previous wording

Our business and financial performance also depend on worldwide economic conditions. We face global macroeconomic challenges, particularly in light of increases and volatility in interest rates, uncertainty in markets, inflationary trends, navigating complex and evolving regulatory and tax frameworks, and the dynamics of the global trade environment. During fiscal year 2023 and the first nine months of fiscal 2024, we observed market uncertainty, increasing inflationary pressures, rising interest rates, the market impacts of proposed or newly enacted regulatory frameworks in markets within which we do business and within our industry, supply constraints, and bank failures. In particular, rising interest rates, including recent historic increases starting in 2021, have resulted and may continue to result in a decrease in our advance rates, reducing the proceeds we receive from certain investment funds. Because our financing structure is sensitive to volatility in interest rates, higher rates increase our cost of capital and may decrease the amount of capital available to us to finance the deployment of new solar energy systems. These market dynamics, some of which we expect will continue into the foreseeable future, have impacted and may continue to impact our business and financial results.

Current wording

Our business and financial performance also depend on worldwide economic conditions. We face global macroeconomic challenges, particularly in light of increases and volatility in interest rates, uncertainty in markets, inflationary trends, navigating complex and evolving regulatory and tax frameworks, and the dynamics of the global trade environment. During fiscal year 2024 and the first three months of fiscal 2025, we observed market uncertainty, including as a result of recently announced tariffs, inflationary pressures, rising interest rates, the market impacts of proposed or newly enacted regulatory frameworks in markets within which we do business and within our industry and supply constraints. In particular, rising interest rates, including recent historic increases starting in 2021, have resulted and may continue to result in a decrease in our advance rates, reducing the proceeds we receive from certain Funds. Because our financing structure is sensitive to volatility in interest rates, higher rates increase our cost of capital and may decrease the amount of capital available to us to finance the deployment of new solar energy systems. These market dynamics, some of which we expect will continue into the foreseeable future, have impacted and may continue to impact our business and financial results.

Previous wording

Under the new NBT framework, the value proposition of our products is best understood when customers compare the combined costs of their utility bill along with their Sunrun solar and storage bill, due to the impact of time-of-use rates and export rates. The solar industry in California is adjusting from selling based on the value of solar-only to a more complicated rate design with NBT. We believe the best customer offering is one that pairs solar and storage, although it may be more confusing to customers when compared to solar-only offerings from competitors. This dynamic may result in less sales efficacy so long as customers continue to be presented with inferior, but simpler, solar-only offerings and as a result, may harm our business, financial condition, and results of operations, and may also harm the reputation of the solar industry in California at large.

Current wording

Under the new NBT framework, the value proposition of our products is best understood when customers compare the combined costs of their utility bill along with their Sunrun solar and storage bill, due to the impact of time-of-use rates and export rates. The solar industry in California is adjusting from selling based on the value of solar-only to a more complicated rate design with NBT. We believe the best customer offering is one that pairs solar and storage, although it may be more confusing to customers when compared to solar-only offers from competitors. This dynamic may result in less sales efficacy so long as customers continue to be presented with inferior, but simpler, solar-only offerings and as a result, may harm our business, financial condition, and results of operations, and may also harm the reputation of the solar industry in California at large.

Previous wording

As a result of the recent election, we are in a period of transition in both the White House and Congress. The policy implications of these political shifts remain uncertain, and we may face changes or delays in policies that affect our business, including those related to federal tax credits, tariffs, and other regulatory measures. Any delay, reduction, or elimination in the implementation of policies that support the residential solar industry, such as the Investment Tax Credit and adders under the Inflation Reduction Act, could have an adverse effect on our business. Additionally, the election outcome could contribute to a higher interest rate environment, which may further negatively impact our operations and financing costs. While it is difficult to predict specific outcomes at this time, we expect a period of regulatory and policy uncertainty in the near term. However, we believe our diversified business model and flexible operational framework position us to adapt to potential changes in the regulatory landscape and will continue to build on the robust bi-partisan support for residential solar policy.

Current wording

The recent transition in both the White House and Congress following the 2024 election has created a dynamic policy environment that may impact our business and financial results, including those related to federal tax credits, tariffs, and other regulatory measures. Any delay, reduction, or elimination in the implementation of policies that support the residential solar industry, such as the ITCs and adders under the IRA, or Executive Orders issued by the President of the United States, could have an adverse effect on our business. Additionally, these changes in the United States’ government could contribute to a higher interest rate environment, which may further negatively impact our operations and financing costs. While it is difficult to predict specific outcomes at this time, we expect a period of regulatory and policy uncertainty in the near term. However, we believe our diversified business model and flexible operational framework position us to adapt to potential changes in the regulatory landscape and will continue to build on the robust bi-partisan support for residential solar policy.

Previous wording

Our Customer Agreements provide for recurring customer payments, typically over 20 or 25 years, and the related solar energy systems are generally eligible for Commercial ITCs, accelerated tax depreciation and other government or utility incentives. Our financing strategy is to monetize these benefits at a low weighted average cost of capital. This low cost of capital enables us to offer attractive pricing to our customers for the energy generated by the solar energy system on their homes. Historically, we have monetized a portion of the value created by our Customer Agreements and the related solar energy systems through investment funds. These assets are attractive to fund investors due to the long-term, recurring nature of the cash flows generated by our Customer Agreements, the high credit scores of our customers, the fact that energy is a non-discretionary good and our low loss rates. In addition, fund investors can receive attractive after-tax returns from our investment funds due to their ability to utilize

Current wording

Our Customer Agreements provide for recurring customer payments, typically over 20 or 25 years, and the related solar energy systems are generally eligible for Commercial ITCs, accelerated tax depreciation and other government or utility incentives. Our financing strategy is to monetize these benefits at a low weighted average cost of capital. This low cost of capital enables us to offer attractive pricing to our customers for the energy generated by the solar energy system on their homes. Historically, we have monetized a portion of the value created by our Customer Agreements and the related solar energy systems through Funds, as defined below. These assets are attractive to Fund investors due to the long-term, recurring nature of the cash flows generated by our Customer Agreements, the high credit scores of our customers, the fact that energy is a non-discretionary good and our low loss rates. In addition, Fund investors can receive attractive after-tax returns from our Funds due to their ability to utilize Commercial ITCs, accelerated depreciation and certain government or utility incentives associated with the Funds’ ownership of solar energy systems.

Previous wording

As of September 30, 2024, we had 62 active investment funds, which are described below. We have established different types of investment funds to implement our asset monetization strategy. Depending on the nature of the investment fund, cash may be contributed to the investment fund by the investor upfront or in stages based on milestones associated with the design, construction or interconnection status of the solar energy systems. The cash contributed by the fund investor is used by the investment fund to purchase solar energy systems. The investment funds either own or enter into a master lease with a Sunrun subsidiary for the solar energy systems, Customer Agreements and associated incentives. We receive on-going cash distributions from the investment funds representing a portion of the monthly customer payments received. We use the upfront cash, as well as on-going distributions to cover our costs associated with designing, purchasing and installing the solar energy systems. In addition, we also use debt, equity and other financing strategies to fund our operations. The allocation of the economic benefits between us and the fund investor and the corresponding accounting treatment varies depending on the structure of the investment fund.

Current wording

As of March 31, 2025, we had 64 active Funds, which are described below. We have established different types of Funds to implement our asset monetization strategy. Depending on the nature of the Fund, cash may be contributed to the Fund by the investor upfront or in stages based on milestones associated with the design, construction or interconnection status of the solar energy systems. The cash contributed by the Fund investor is used by the Fund to purchase solar energy systems. The Funds own a Sunrun subsidiary for the solar energy systems, Customer Agreements and associated incentives. We receive on-going cash distributions from the Funds representing a portion of the monthly customer payments received. We use the upfront cash, as well as on-going distributions to cover our costs associated with designing, purchasing and installing the solar energy systems. In addition, we also use debt, equity and other financing strategies to fund our operations. The allocation of the economic benefits between us and the Fund investor and the corresponding accounting treatment varies depending on the structure of the Fund.

Previous wording

We currently utilize two legal structures in our investment funds, which we refer to as: (i) pass-through financing obligations, and (ii) partnership flips. We reflect pass-through financing obligations on our consolidated balance sheet as a pass-through financing obligation. We record the investor’s interest in partnership flips as noncontrolling interests or redeemable noncontrolling interests. If redemption is at our option, we record the investor’s interest as a noncontrolling interest and account for the interest using the hypothetical liquidation at book value (“HLBV”) method. If the investor has the option to put their interest to us, we record the investor’s interest as a redeemable noncontrolling interest at the greater of the HLBV and the redemption value.

Current wording

We currently utilize the partnership flip structure for our Funds which we refer to as partnership flips. Historically, we also utilized pass-through financing obligations as a legal structure for our Funds. In Q4 2024, we retired our last pass-through financing obligation Fund. We record the investor’s interest in partnership flips as noncontrolling interests or redeemable noncontrolling interests. These partnership flips are usually redeemable at our option and, in certain cases, at the investor’s option. If redemption is at our option, we record the investor’s interest as a noncontrolling interest and account for the interest using the hypothetical liquidation at book value (“HLBV”) method. If the investor has the option to put their interest to us, we record the investor’s interest as a redeemable noncontrolling interest at the greater of the HLBV and the redemption value.

Previous wording

For further information regarding our investment funds, including the associated risks, see Part II, Item 1A. Risk Factors— “Our ability to provide our solar service offerings to customers on an economically viable basis depends in part on our ability to finance these systems with fund investors who seek particular tax and other benefits”, Note 10, Pass-Through Financing Obligations, Note 11, VIE Arrangements, and Note 12, Redeemable Noncontrolling Interests to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Current wording

For further information regarding our Funds, including the associated risks, see Part II, Item 1A. Risk Factors— “Our ability to provide our solar service offerings to customers on an economically viable basis depends in part on our ability to finance these systems with Fund investors who seek particular tax and other benefits”, Note 10, VIE Arrangements, and Note 11, Redeemable Noncontrolling Interests to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

•Networked Solar Energy Capacity represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to executed Customer Agreements (i) for which we have confirmation that the systems are installed, subject to final inspection; or (ii) in the case of certain system installations by our partners, for which we have accrued at least 80% of the expected project cost (inclusive of acquisitions of installed systems). Systems that have met these criteria are considered to be deployed. We believe it is helpful to investors to evaluate networked solar energy capacity added during the period in order to measure the growth of our business as a whole, whether sold directly to customers or subject to executed Customer Agreements.

Current wording

•Deployments represent solar or storage systems, whether sold directly to customers or subject to executed Customer Agreements (i) for which we have confirmation that the systems are installed, subject to final inspection, or (ii) in the case of certain system installations by our partners, for which we have accrued at least 80% of the expected project cost (inclusive of acquisitions of installed systems). A portion of customers have subsequently entered into Customer Agreements to obtain, or have directly purchased, additional solar or storage systems at the same host customer site, and since these represent separate assets, they are considered separate Deployments.

Previous wording

•Customers represent the cumulative number of deployments, from our inception through the measurement date. We believe that it is helpful to investors to evaluate customers added during the period in order to measure the growth of our business as a whole.

Current wording

•Customers represent aggregate Subscribers and Purchase Customers. We believe that it is helpful to investors to evaluate customers added during the period in order to measure the growth of our business as a whole.

Previous wording

Gross Earning Assets is forecasted as of a specific date. It is forward-looking, and we use judgment in developing the assumptions used to calculate it. Factors that could impact Gross Earning Assets include, but are not limited to, customer payment defaults, or declines in utility rates or early termination of a contract in certain circumstances, including prior to installation. We believe it is useful for investors to evaluate the future expected cash flows from all customers that have been deployed through the respective measurement date, less estimated costs to maintain such systems and estimated distributions to tax equity partners in partnership flip structures, and distributions to project equity investors. Various assumptions are made when calculating these metrics. Gross Earning Assets utilize a 6% unlevered discount rate (weighted average cost of capital or “WACC”) to discount future cash flows to the present period. Furthermore, this metric assumes that customers renew after the initial contract period at a rate equal to 90% of the rate in effect at the end of the initial contract term. For Customer Agreements with 25-year initial contract terms, a 5-year renewal period is assumed. For a 20-year initial contract term, a 10-year renewal period is assumed. In all instances, we assume a 30-year customer relationship, although the customer may renew for additional years, or purchase the system. Estimated cost of servicing assets has been deducted and is estimated based on the service agreements underlying each fund.

Current wording

•Gross Earning Assets is calculated as Contracted Gross Earning Assets plus Non-contracted or Upside Gross Earning Assets. Gross Earning Assets is forecasted as of a specific date. It is forward-looking, and we use judgment in developing the assumptions used to calculate it. Factors that could impact Gross Earning Assets include, but are not limited to, customer payment defaults, or declines in utility rates or early termination of a contract in certain circumstances, including prior to installation. We believe it is useful for investors to evaluate the future expected cash flows from all customers that have been deployed through the respective measurement date, less estimated costs to maintain such systems and estimated distributions to tax equity partners in partnership flip structures, and distributions to project equity investors. Various assumptions are made when calculating these metrics. Gross Earning Assets utilize a 6% unlevered discount rate to discount future cash flows to the present period. Furthermore, this metric assumes that customers renew after the initial contract period at a rate equal to 90% of the rate in effect at the end of the initial contract term. In all instances, we assume a 30-year customer relationship, although the customer may renew for additional years, or purchase the system. For instance, Customer Agreements with 25-year initial contract terms, a 5-year renewal period is assumed. For a 20-year initial contract term, a 10-year renewal period is assumed. Estimated cost of servicing assets has been deducted and is estimated based on the service agreements underlying each fund.

Previous wording

We believe that policies associated with our principles of consolidation, revenue recognition, goodwill, impairment of long-lived assets, provision for income taxes, business combinations and calculation of noncontrolling interests and redeemable noncontrolling interests have the greatest impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Current wording

We believe that policies associated with our principles of consolidation, revenue recognition, impairment of long-lived assets, provision for income taxes, business combinations and calculation of noncontrolling interests and redeemable noncontrolling interests have the greatest impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Previous wording

Customer Agreements and Incentives Revenue. Customer agreements and incentives revenue is primarily comprised of revenue from our Customer Agreements and sales of Commercial ITCs and SRECs to third parties.

Current wording

Customer Agreements and Incentives Revenue. Customer agreements and incentives revenue is primarily comprised of revenue from our Customer Agreements and sales of Commercial ITCs and solar renewable energy credits ("SRECs") to third parties.

Previous wording

We begin to recognize revenue from a Customer Agreement when PTO for the applicable solar energy system is given by the local utility company or on the date daily operation commences if utility approval is not required. For Customer Agreements that include a fixed fee per month which entitles the customer to any and all electricity generated by the system, we recognize revenue evenly over the time that we satisfy our performance obligations over the initial term of Customer Agreements. For Customer Agreements that charge a fixed price per kilowatt hour, revenue is recognized based on the actual amount of power generated at rates specified under the contracts. Customer Agreements typically have an initial term of 20 or 25 years. After the initial contract term, our Customer Agreements typically automatically renew annually or for a five year term.

Current wording

We begin to recognize revenue from a Customer Agreement when permission to operate ("PTO") for the applicable solar energy system is given by the local utility company or on the date daily operation commences if utility approval is not required. For Customer Agreements that include a fixed fee per month which entitles the customer to any and all electricity generated by the system, we recognize revenue evenly over the time that we satisfy our performance obligations over the initial term of Customer Agreements. For Customer Agreements that charge a fixed price per kilowatt hour, revenue is recognized based on the actual amount of power generated at rates specified under the contracts. Customer Agreements typically have an initial term of 20 or 25 years. After the initial contract term, our Customer Agreements typically automatically renew annually or for a five year term.

Previous wording

For pass-through financing obligation funds, the value attributable to the Commercial ITCs is recognized in the period a solar system is granted PTO, at which point we have met our obligation to the investor. The Commercial ITCs are subject to recapture under the Internal Revenue Code (“Code”) if the underlying solar energy system either ceases to be a qualifying property or undergoes a change in ownership within five years of its placed-in-service date. The recapture amount decreases on the anniversary of the PTO date. We have not historically incurred a material recapture of Commercial ITCs, and do not expect to experience a material recapture of Commercial ITCs in the future.

Current wording

The Commercial ITCs are subject to recapture under the Internal Revenue Code (“Code”) if the underlying solar energy system either ceases to be a qualifying property or undergoes a change in ownership within five years of its placed-in-service date. The recapture amount decreases on the anniversary of the PTO date. We have not historically incurred a material recapture of Commercial ITCs, and do not expect to experience a material recapture of Commercial ITCs in the future.

Previous wording

Consideration from customers is considered variable due to the performance guarantee under Customer Agreements and liquidated damage provisions under SREC contracts in the event minimum deliveries are not achieved. Customer Agreements with a performance guarantee provide a credit to the customer if the system’s cumulative production, as measured on various PTO anniversary dates, is below our guarantee of a specified minimum. Revenue is recognized to the extent it is probable that a significant reversal of such revenue will not occur. If our estimate of the future production shortfall amount for Customer Agreements with a performance guarantee was 10% higher, the additional reduction to revenue in the nine months ended September 30, 2024 would have been less than $3.7 million. Our estimated production shortfall reduced revenue during the nine months ended September 30, 2024 by $7.2 million more than the prior year’s period. We have historically estimated an immaterial amount of liquidated damages pursuant to SREC contracts, and actual damages have not been materially different from estimates, nor material in amount during the nine months ended September 30, 2024 and 2023.

Current wording

Consideration from customers is considered variable due to the performance guarantee under Customer Agreements and liquidated damage provisions under SREC contracts in the event minimum deliveries are not achieved. Customer Agreements with a performance guarantee provide a credit to the customer if the system’s cumulative production, as measured on various PTO anniversary dates, is below our guarantee of a specified minimum. Revenue is recognized to the extent it is probable that a significant reversal of such revenue will not occur. If our estimate of the future production shortfall amount for Customer Agreements with a performance guarantee was 10% higher, the additional reduction to revenue in the three months ended March 31, 2025 would have been less than $4.2 million. Our estimated production shortfall reduced revenue during the three months ended March 31, 2025 by approximately $2.1 million more than the prior year’s period. We have historically estimated an immaterial amount of liquidated damages pursuant to SREC contracts, and actual damages have not been materially different from estimates, nor material in amount during the three months ended March 31, 2025 and 2024.

Previous wording

Product sales revenue consists of revenue from the sale of solar panels, inverters, racking systems, roof repair, and other solar energy products sold to resellers, as well as the sale of customer leads to third parties, including our partners and other solar providers. Product sales revenue is recognized when control is transferred, generally upon shipment, or as services are delivered. Customer lead revenue is recognized at the time the lead is delivered.

Current wording

Product sales revenue consists of revenue from the sale of batteries and other solar energy products sold to resellers, as well as the sale of customer leads to third parties, including our partners and other solar providers.

Previous wording

The carrying values of our long-lived assets, including solar energy systems, are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Factors that we consider in deciding when to perform an impairment review would include significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. Recoverability of these assets is measured by comparison of the carrying value of each asset group to the future undiscounted cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life. During the three and nine months ended September 30, 2024 and 2023, there were no indicators of impairment and therefore no cash flow analysis was performed.

Current wording

The carrying values of our long-lived assets, including solar energy systems, are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Factors that we consider in deciding when to perform an impairment review would include significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. Recoverability of these assets is measured by comparison of the carrying value of each asset group to the future undiscounted cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life. During the three months ended March 31, 2025 and 2024, there were no indicators of impairment and therefore no cash flow analysis was performed.

Previous wording

The calculation of HLBV does not require estimates since each HLBV calculation is based upon the liquidation provisions of each fund’s contractual agreement. The calculation of the redeemable noncontrolling interest balance involves estimates such as a discount rate used in net present value calculations, and customer default rates. If the assumptions used for each of these were 10% higher, the impact to the aggregate redeemable noncontrolling interest balance as of September 30, 2024 would be a reduction of $21.6 million.

Current wording

The calculation of HLBV does not require estimates since each HLBV calculation is based upon the liquidation provisions of each fund’s contractual agreement. The calculation of the redeemable noncontrolling interest balance involves estimates such as a discount rate used in net present value calculations, and customer default rates. If the assumptions used for each of these were 10% higher, the impact to the aggregate redeemable noncontrolling interest balance as of March 31, 2025 would be a reduction of $22.4 million.

Previous wording

Customer Agreements and Incentives. The $241.6 million increase in Revenue from Customer Agreements was primarily due to new systems placed in service in the period from October 1, 2023 through September 30, 2024, plus a full nine months of revenue recognized in 2024 for systems placed in service in the first nine months of 2023 versus only a partial amount of such revenue related to the period in which the assets were in service in 2023. Revenue from incentives consisted primarily of sales of SRECs. The $9.9 million increase related to the timing and volume of SREC sales, which were responsive to market conditions.

Current wording

Customer Agreements and Incentives. The $77.2 million increase in Revenue from Customer Agreements was primarily due to new systems placed in service in the period from April 1, 2024 through March 31, 2025, plus a full three months of revenue recognized in 2025 for systems placed in service in the first three months of 2024 versus only a partial amount of such revenue related to the period in which the assets were in service in 2024. Revenue from incentives consisted primarily of sales of SRECs. The $2.7 million increase related to the timing and volume of SREC sales which were responsive to market conditions.

Previous wording

Solar Energy Systems and Product Sales. Revenue from solar energy systems sales decreased by $399.3 million compared to the prior year primarily due to an increase in the proportion of customers choosing to enter into a Customer Agreement versus purchasing a system outright using a loan, likely due to increased interest rates. Product sales decreased by $76.2 million, primarily due to the lower average sales price of solar energy products, as well as lower sales volume of solar energy products to installers of solar energy systems compared to the prior year, due to easing of supply chain constraints and wind-down of AEE business.

Current wording

Solar Energy Systems and Product Sales. Revenue from solar energy systems sales decreased by $25.0 million compared to the prior year primarily due to an increase in the proportion of customers choosing to enter into a Customer Agreement versus purchasing a system outright using a loan, likely due to increased interest rates. Product sales decreased by $8.9 million, primarily due to the lower average sales price of solar energy products, as well as lower sales volume of solar energy products to installers of solar energy systems compared to the prior year, due to easing of supply chain constraints.

Previous wording

Cost of Customer Agreements and Incentives. The $87.2 million increase in Cost of customer agreements and incentives was primarily due to the new systems placed in service in the period from October 1, 2023 through September 30, 2024, plus a full nine months of costs recognized in 2024 for systems placed in service in the nine months of 2023 versus only a partial amount of such expenses related to the period in which the assets were in service in 2023.

Current wording

Cost of Customer Agreements and Incentives. The $39.1 million increase in Cost of Customer Agreements and Incentives was primarily due to the new systems placed in service in the period from April 1, 2024 through March 31, 2025, plus a full three months of costs recognized in 2025 for systems placed in service in the three months of 2024 versus only a partial amount of such expenses related to the period in which the assets were in service in 2024.

Previous wording

The Cost of customer agreements and incentives decreased to 76% of revenue from customer agreements and incentives during the three months ended September 30, 2024, from 90% during the three months ended September 30, 2023. This decrease is primarily due to customer pricing increases catching up to costs.

Current wording

The Cost of customer agreements and incentives decreased to 77% of customer agreements and incentives revenue during the three months ended March 31, 2025, from 83% during the three months ended March 31, 2024. This decrease is primarily due to customer pricing increases catching up to costs.

Previous wording

Cost of Solar Energy Systems and Product Sales. The $109.0 million decrease in Cost of solar energy systems and product sales was primarily due to the corresponding net decrease in the solar energy systems and product sales discussed above.

Current wording

Cost of Solar Energy Systems and Product Sales. The $59.4 million decrease in Cost of solar energy systems and product sales was primarily due to the corresponding net decrease in the solar energy systems and product sales discussed above.

Previous wording

The Cost of solar energy systems and product sales increased to 102% of revenue from solar energy systems and product sales during the nine months ended September 30, 2024, from 94% during the nine months ended September 30, 2023, primarily as the result of a $22.1 million increase in inventory reserves recorded in the first quarter of fiscal 2024 related to the wind-down of the AEE Solar operations.

Current wording

The Cost of solar energy systems and product sales decreased to 96% of revenue from solar energy systems and product sales during the three months ended March 31, 2025, from 115% during the three months ended March 31, 2024, primarily as the result of a$22.1 million increase in inventory reserves related to the wind-down of the AEE Solar operations during the three months ended March 31, 2024, with no such comparable activity in the three months ended March 31, 2025.

Previous wording

Sales and Marketing Expense. The $13.9 million decrease in Sales and marketing expense was primarily attributable to decreases in headcount driving lower employee compensation and costs to acquire customers through our sales lead generating partners. Included in Sales and marketing expense is $20.9 million and $13.5 million of amortization of costs to obtain Customer Agreements for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Sales and Marketing Expense. The $6.3 million decrease in Sales and marketing expense was primarily attributable to decreases in headcount driving lower employee compensation and costs to acquire customers through our sales lead generating partners. Included in Sales and marketing expense is $22.1 million and $17.0 million of amortization of costs to obtain Customer Agreements for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Research and Development Expense. The $3.1 million increase in Research and development expense was primarily attributable to an increase in headcount driving higher employee compensation costs.

Current wording

Research and Development Expense. The $2.1 million decrease in Research and development expense was primarily attributable to a decrease in support related consulting costs.

Previous wording

General and Administrative Expense. The $9.1 million increase in General and administrative expenses was primarily related to an increase in information technology related consulting costs, when compared to the nine months ended September 30, 2023.

Current wording

General and Administrative Expense. The $6.5 million increase in General and administrative expenses was primarily attributable to increases related to information technology related consulting costs.

Previous wording

Interest Expense, net. The increase in Interest expense, net of $44.3 million was primarily related to additional non-recourse debt entered into subsequent to September 30, 2023. Included in net interest expenseis$8.8 million and $7.9 million of non-cash interest recognized under Customer Agreements that have a significant financing component for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Interest Expense, net. The increase in interest expense, net of $35.3 million was primarily related to additional non-recourse debt entered into subsequent to March 31, 2024. Included in net interest expenseis $9.3 million and $7.5 million of non-cash interest recognized under Customer Agreements that have a significant financing component for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Other (Expense) Income, net. The decrease in other income, net of $160.3 million related primarily to losses on derivatives.

Current wording

Other (Expense) Income, net. The decrease in other (expense) income, net of $135.3 million related primarily to losses on derivatives recognized in the three months ended March 31, 2025, as well as to a $30.9 million gain on extinguishment of debt mainly related to the repurchase of convertible senior notes recognized during the three months ended March 31, 2024, with no such comparable activity in the three months ended March 31, 2025.

Previous wording

The increase in income tax (benefit) expense of $43.6 million is primarily attributable to increased losses allocable to the controlling interest (excluding the goodwill impairment charge in 2023), increased benefit from transferring investment tax credits, and increased expense related to the valuation allowance on federal net operating losses in the current year compared to prior year.

Current wording

The increase in income tax benefit of $108.3 million is primarily attributable to increased benefit from transferring investment tax credits.

Previous wording

Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was primarily the result of an addition of 7 new investment funds since September 30, 2023, for which the HLBV method was used in determining the amount of net loss attributable to noncontrolling interests. Investment funds generally allocate more loss to the noncontrolling interest in the first several years after fund formation.

Current wording

Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was primarily the result of an addition of eight new investment funds since March 31, 2024, for which the HLBV method was used in determining the amount of net loss attributable to noncontrolling interests. Investment funds generally allocate more loss to the noncontrolling interest in the first several years after fund formation.

Previous wording

As of September 30, 2024, we had cash of $533.9 million, which consisted of cash held in checking and savings accounts with financial institutions. We finance our operations mainly through a variety of financing fund arrangements that we have formed with fund investors, cash generated from our sources of revenue and borrowings from secured credit facilities arrangements with syndicates of banks and from secured, long-term non-recourse loan arrangements. In 2023, we received $1.0 billion of new commitments on secured credit facilities arrangements with syndicates of banks and $0.8 billion of commitments from secured, long-term non-recourse loan arrangements. Our principal uses of cash are funding our business, including the costs of acquisition and installation of solar energy systems, satisfaction of our obligations under our debt instruments and other working capital requirements. As of September 30, 2024, we had outstanding borrowings of $392.5 million on our $447.5 million credit facility maturing in March 2027. In February 2024, we amended one of our subsidiary’s senior secured credit facility to, among other things, increase the total commitments from $1.8 billion to $2.4 billion and extend the maturity date from April 2025 to April 2028. In July 2024, we amended the same senior secured credit facility to increase total commitments from $2.4 billion to $2.6 billion. In February 2024, we amended our bank line of credit to, among other things, reduce the total commitments from $600.0 million to $447.5 million, and to extend the maturity date from January 2025 to November 2025. As of September 30, 2024, this maturity date was automatically extended to March 1, 2027, due to us maintaining funds on deposit in a collateral account equal to an amount sufficient to repay at the scheduled maturity all of our 0% Senior Convertible Notes due 2026 that are outstanding as of September 30, 2024 and being otherwise in compliance with our quarter-end liquidity covenant.

Current wording

As of March 31, 2025, we had cash of $604.9 million, which consisted of cash held in checking and savings accounts with financial institutions. We finance our operations mainly through a variety of financing fund arrangements that we have formed with fund investors, cash generated from our sources of revenue and borrowings from secured credit facilities arrangements with syndicates of banks and from secured, long-term non-recourse loan arrangements. In 2024, we received $3.4 billion of new commitments on secured credit facilities arrangements and $1.5 billion of commitments from secured, long-term non-recourse loan arrangements. Our principal uses of cash are funding our business, including the costs of acquisition and installation of solar energy systems, satisfaction of our obligations under our debt instruments and other working capital requirements. As of March 31, 2025, we had outstanding borrowings of $358.5 million on our $447.5 million credit facility maturing in March 2027. In February 2024, we amended one of our subsidiary’s senior secured credit facility to, among other things, increase the total commitments from $1.8 billion to $2.4 billion and extend the maturity date from April 2025 to April 2028. In July 2024, we amended the same senior secured credit facility to increase total commitments from $2.4 billion to $2.6 billion. In February 2024, we amended our bank line of credit to, among other things, reduce the total commitments from $600.0 million to $447.5 million, and to extend the maturity date from January 2025 to November 2025. As of September 30, 2024, this maturity date was automatically extended to March 1, 2027, due to us maintaining funds on deposit in a collateral account equal to an amount sufficient to repay at the scheduled maturity all of our 0% Senior Convertible Notes due 2026 that are outstanding as of September 30, 2024 and being otherwise in compliance with our quarter-end liquidity covenant.

Previous wording

Additionally, we have purchase commitments, which have the ability to be canceled without significant penalties, with multiple suppliers to purchase $125.4 million of photovoltaic modules, inverters and batteries by the end of the first quarter of 2025. In February 2024, we issued $475.0 million of convertible senior notes with a maturity date of March 1, 2030, for net proceeds of approximately $470.1 million. Our business model requires substantial outside financing arrangements to grow the business and facilitate the deployment of additional solar energy systems. The solar energy systems that are operational are expected to generate a positive return rate over the term of the Customer Agreement, typically 20 or 25 years. However, in order to grow, we will continue to be dependent on financing from outside parties. If financing is not available to us on acceptable terms if and when needed, we may be required to reduce planned spending, which could have a material adverse effect on our operations. While there can be no assurances, we anticipate raising additional required capital from new and existing investors. We believe our cash, investment fund commitments and available borrowings as further described below will be sufficient to meet our anticipated cash needs for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and available credit via our credit facilities. The following table summarizes our cash flows for the periods indicated:

Current wording

Additionally, we have purchase commitments, which have the ability to be canceled without significant penalties, with multiple suppliers to purchase $422.4 million of batteries by the end of the fourth quarter of 2025. In February 2024, we issued $475.0 million of convertible senior notes with a maturity date of March 1, 2030, for net proceeds of approximately $470.1 million. Our business model requires substantial outside financing arrangements to grow the business and facilitate the deployment of additional solar energy systems. The solar energy systems that are operational are expected to generate a positive return rate over the term of the Customer Agreement, typically 20 or 25 years. However, in order to grow, we will continue to be dependent on financing from outside parties. If financing is not available to us on acceptable terms if and when needed, we may be required to reduce planned spending, which could have a material adverse effect on our operations. While there can be no assurances, we anticipate raising additional required capital from new and existing investors. We believe our cash, investment fund commitments and available borrowings as further described below will be sufficient to meet our anticipated cash needs for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and available credit via our credit facilities. The following table summarizes our cash flows for the periods indicated:

Previous wording

During the nine months ended September 30, 2024, we used $507.8 million in net cash from operating activities. The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs. During the nine months ended September 30, 2024, our operating cash outflows were $344.1 million from our net loss excluding non-cash and non-operating items. Changes in working capital resulted in a net cash outflow of $163.7 million.

Current wording

During the three months ended March 31, 2025, we used $104.2 million in net cash from operating activities. The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs. During the three months ended March 31, 2025, our operating cash outflows were $86.3 million from our net loss excluding non-cash and non-operating items. Changes in working capital resulted in a net cash outflow of $17.9 million.

Previous wording

During the nine months ended September 30, 2023, we used $704.7 million in net cash from operating activities. The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs. During the nine months ended September 30, 2023, our operating cash outflows were $481.2 million from our net loss excluding non-cash and non-operating items. Changes in working capital resulted in a net cash inflow of $223.5 million.

Current wording

During the three months ended March 31, 2024, we used $143.1 million in net cash from operating activities. The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs. During the three months ended March 31, 2024, our operating cash outflows were $151.0 million from our net loss excluding non-cash and non-operating items. Changes in working capital resulted in a net cash inflow of $7.9 million.

Previous wording

During the nine months ended September 30, 2024, we used $1.9 billion in cash in investing activities. The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.

Current wording

During the three months ended March 31, 2025, we used $655.0 million in cash in investing activities. The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.

Previous wording

During the nine months ended September 30, 2023, we used $2.0 billion in cash in investing activities. The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.

Current wording

During the three months ended March 31, 2024, we used $535.4 million in cash in investing activities. The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.

Previous wording

During the nine months ended September 30, 2023, we generated $2.7 billion from financing activities. This was primarily driven by $1.8 billion in net proceeds from debt, $945.7 million in net proceeds from fund investors, $14.2 million in net proceeds from stock-based awards activity, and $4.0 million in proceeds from state tax credits, net of recapture, offset by $46.3 million in acquisition of noncontrolling interests and $16.8 million in repayments under finance lease obligations.

Current wording

During the three months ended March 31, 2025, we generated $790.7 million from financing activities. This was primarily driven by $195.6 million in net proceeds from fund investors, $626.3 million in net proceeds from debt (which includes $72.9 million of normal amortization for existing debt), offset by $6.5 million in repayments under finance lease obligations.