SPRUCE POWER HOLDING CORP
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
SPRU$1.63+28.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001628280-24-023626
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001628280-24-037238
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 53 previous paragraphs and 69 current paragraphs.
37 unchanged; 14 reworded; 17 added; 2 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 2 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
The results of operations related to our Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net income (loss) from discontinued operations in our unaudited condensed consolidated statements of operations. As a result, the continuing operational results reflect the operations related to our corporate functions and the results of operations for Legacy Spruce Power since its acquisition on September 9, 2022.
Current report
Revenues decreased by $0.3 million, or 1.5%, to $22.5 million in the three months ended June 30, 2024 from $22.8 million for the three months ended June 30, 2023. The decrease was primarily due to a decrease in SREC revenues during the three months ended June 30, 2024.
Current report
Selling, general and administrative expenses increased by $0.7 million, or 4.5%, to $16.7 million in the three months ended June 30, 2024 from $16.0 million for the three months ended June 30, 2023. The increase was primarily due to higher compensation expenses of $2.2 million, which included one-time severance costs of $1.9 million recognized in the current period upon separation of the Former CEO from the Company effective April 12, 2024. This increase was partially offset by a reduction of $1.8 million in legal expenses for the three months ended June 30, 2024 resulting from the settlement of certain Legacy XL legal proceedings. Selling, general and administrative expenses related to the Drivetrain and XL Grid operations are included in net income (loss) from discontinued operations.
Current report
Gain on asset disposal increased by $0.2 million, or 25.8%, to $1.0 million in the three months ended June 30, 2024 from $0.8 million for the three months ended June 30, 2023. The increase is primarily due to a $0.2 million gain recognized during the three months ended June 30, 2024 for insurance proceeds related to the Maui fires, see Note 13. Commitments and Contingencies to the accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
Interest expense, net decreased by $2.9 million, or 27.4%, to $7.6 million in the three months ended June 30, 2024, from $10.5 million for the three months ended June 30, 2023. The decrease is primarily due to a gain of $3.6 million recognized during the current period associated with the settlement of the Company’s interest rate swaps related to the SP4 Facility (see Note 9. Interest Rate Swaps to the accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), which was partially offset by an increase in interest expense of $0.6 million during the current period.
Current report
Comparison of the Six Months Ended June 30, 2024 and 2023
Current report
Revenues and Cost of Revenues
Current report
Revenues decreased by $0.1 million, or 0.3%, to $40.8 million in the six months ended June 30, 2024 from $40.9 million for the six months ended June 30, 2023. The decrease is primarily due to a $0.1 million decrease in other revenues during the current period.
Current report
Cost of revenues increased by $2.6 million, or 15.6%, to $19.0 million in the six months ended June 30, 2024 from $16.4 million for the six months ended June 30, 2023. The increase is primarily due to an increase in certain operation and maintenance costs. Cost of revenues related to our Drivetrain and XL Grid operations are included in net income (loss) from discontinued operations.
Current report
Selling, General and Administrative
Current report
Gain on Asset Disposal
Current report
Interest Income
Current report
Interest income increased by $5.1 million, or 90.4%, to $10.6 million in the six months ended June 30, 2024 from $5.6 million for the six months ended June 30, 2023. The increase is primarily due to two full quarters of interest income related to the SEMTH Acquisition, which was completed in March 2023, recognized in the current period as compared to the prior period.
Current report
Interest Expense, net
Current report
Interest expense, net decreased by $1.1 million, or 5.6%, to $18.5 million in the six months ended June 30, 2024 from $19.6 million for the six months ended June 30, 2023. The decrease is primarily due to a gain of $3.6 million recognized during the current period due to settlement of the Company’s interest rate swaps related to the settlement of SP4 Facility, partially offset by incremental expenses of $2.6 million associated with two full quarters of interest expense related to the SP4 Facility assumed in connection with the SEMTH acquisition completed in 2023.
Current report
Other (Income) Expense, net
Current report
Other income, net was $3.6 million for the six months ended June 30, 2024, a decrease of $1.0 million from an expense of $4.6 million for the six months ended June 30, 2023. The decrease is primarily due to an unfavorable settlement of interest swaps recognized in the prior period.
Removed paragraphs (2)
Previous report
Revenues increased by $0.2 million, or 1.1%, to $18.3 million in the three months ended March 31, 2024 from $18.1 million for the three months ended March 31, 2023. The increase was primarily due to incremental revenues associated with the Tredegar acquisition completed in August 2023.
Previous report
Interest expense, net increased by $1.8 million, or 19.4%, to $10.9 million in the three months ended March 31, 2024, from $9.2 million for the three months ended March 31, 2023. The increase is primarily the result of a full quarter of SEMTH interest expense recognized in the current period and the SP2 Facility amendment completed concurrently in August 2023 with the Tredegar acquisition.
Reworded paragraphs (14)
Previous wording
Spruce Power is a leading owner and operator of distributed solar energy assets across the United States, owning cash flows from approximately 75,000 home solar assets and contracts across the United States and making renewable energy more accessible to everyone. We generate revenues primarily through the sale of electricity generated by its home solar energy systems to homeowners pursuant to long-term agreements that obligate our subscribers to make recurring monthly payments, and the servicing of those agreements for other institutional owners of home solar energy systems. In addition, we also earn interest income from the investment made under the master lease with SS Holdings 2017, LLC and its subsidiaries ("SEMTH").
Current wording
Spruce Power is a leading owner and operator of distributed solar energy assets across the United States, owning cash flows from approximately 75,000 home solar assets and contracts across the United States and making renewable energy more accessible to everyone. We generate revenues primarily through the sale of electricity generated by our home solar energy systems to homeowners pursuant to long-term agreements that obligate our subscribers to make recurring monthly payments, and the servicing of those agreements for other institutional owners of home solar energy systems. In addition, we also earn interest income from the investment made under the master lease with SS Holdings 2017, LLC and its subsidiaries ("SEMTH").
Previous wording
We are a leading owner and operator of distributed solar energy assets across the United States, offering subscription-based solutions to homeowners for rooftop solar energy storage and other energy-related products. Additionally, we provide servicing functions for its assets and customers, as well as for other institutional owners of home solar energy systems. Our operating results and ability to grow its business over time could be impacted by certain factors and trends that affect our industry, as well as elements of our strategy, such as:
Current wording
We are a leading owner and operator of distributed solar energy assets across the United States, offering subscription-based solutions to homeowners for rooftop solar energy storage and other energy-related products. Additionally, we provide servicing functions for our assets and customers, as well as for other institutional owners of home solar energy systems. Our operating results and ability to grow its business over time could be impacted by certain factors and trends that affect our industry, as well as elements of our strategy, such as:
Previous wording
Our future growth depends significantly on its ability to acquire operating home solar energy systems “in-bulk” from other companies. Industry data suggests there is a substantial existing base of operating home solar energy systems, providing us opportunities to pursue acquisitions. Over the long-term, the continued ability to pursue acquisitions is dependent on development of distributed energy assets, namely home solar energy systems, by third parties. This development may be impacted by numerous factors that influence homeowner demand for home solar energy systems including but not limited to macroeconomic dynamics, climate change impacts, and government policy and incentives.
Current wording
Our future growth depends significantly on our ability to acquire operating home solar energy systems “in-bulk” from other companies. Industry data suggests there is a substantial existing base of operating home solar energy systems, providing us opportunities to pursue acquisitions. Over the long-term, the continued ability to pursue acquisitions is dependent on development of distributed energy assets, namely home solar energy systems, by third parties. This development may be impacted by numerous factors that influence homeowner demand for home solar energy systems including but not limited to macroeconomic dynamics, climate change impacts, and government policy and incentives.
Previous wording
Cost of revenues increased by $1.0 million, or 12.9%, to $8.9 million in the three months ended March 31, 2024 from $7.9 million for the three months ended March 31, 2023. The increase was attributed to certain operation and maintenance costs, including an increase in meter upgrade spend. Cost of revenues related to our Drivetrain and XL Grid operations are included in net loss from discontinued operations.
Current wording
Cost of revenues increased by $1.5 million, or 18.0%, to $10.1 million in the three months ended June 30, 2024 from $8.6 million for the three months ended June 30, 2023. The increase was primarily attributed to an increase in operating and maintenance costs. Cost of revenues related to our Drivetrain and XL Grid operations are included in net income (loss) from discontinued operations.
Previous wording
Interest income increased by $3.0 million, or 129.1%, to $5.4 million in the three months ended March 31, 2024 from $2.4 million for the three months ended March 31, 2023. The increase is primarily due to interest income of $3.5 million associated with the SEMTH acquisition completed in March 2023, slightly offset by a $0.5 million decrease in interest income earned on investments in U.S. Treasury securities.
Current wording
Interest income increased by $2.0 million, or 62.3%, to $5.3 million in the three months ended June 30, 2024 from $3.2 million for the three months ended June 30, 2023. The increase is due to incremental interest income of $2.4 million associated with the SEMTH Master Lease, slightly offset by a $0.4 million decrease in interest income earned on investments in U.S. Treasury securities during the current period.
Previous wording
Other income, net was $6.7 million for the three months ended March 31, 2024, an increase of $12.0 million from an expense of $5.3 million for the three months ended March 31, 2023. The increase is primarily the result of change in fair value of our interest rate swap agreements.
Current wording
Other (income) expense, net was a $3.1 million expense for the three months ended June 30, 2024, a decrease of $13.1 million from an income of $10.0 million for the three months ended June 30, 2023. The decrease is primarily the result of change in fair value of our interest rate swap agreements.
Previous wording
Selling, general and administrative expenses decreased by $2.2 million, or 14.3%, to $13.5 million in the three months ended March 31, 2024 from $15.7 million for the three months ended March 31, 2023. The decrease is primarily due to higher legal expenses related to Legacy XL legal matters, higher compensation and severance charges and related expenses resulting from Legacy XL restructuring actions for the three months ended March 31, 2023. Selling, general and administrative expenses related to the Drivetrain and XL Grid operations are included in net loss from discontinued operations.
Current wording
Selling, general and administrative expenses decreased by $1.5 million, or 4.8%, to $30.2 million in the six months ended June 30, 2024 from $31.7 million for the six months ended June 30, 2023. The decrease is primarily due to decreases in legal costs associated with Legacy XL legal matters and certain professional services, partially offset by one-time severance costs of $1.9 million recognized in the current period upon separation of the Former CEO from the Company effective April 12, 2024. Selling, general and administrative expenses related to the Drivetrain and XL Grid operations are included in net income (loss) from discontinued operations.
Previous wording
Gain on asset disposal decreased by $2.2 million, or 83.0%, to $0.5 million in the three months ended March 31, 2024 from $2.7 million for the three months ended March 31, 2023. The decrease is primarily the result of updated valuation reports and adjustments to provisional amounts assigned to gain on asset disposal recognized during the three months ended March 31, 2023.
Current wording
Gain on asset disposal decreased by $2.0 million, or 57.9%, to $1.5 million in the six months ended June 30, 2024 from $3.5 million for the six months ended June 30, 2023. The decrease is primarily the result of updated valuation reports and adjustments to provisional amounts assigned to gain on asset disposal recognized in the prior period, partially offset by a $0.2 million gain recognized in the current period for insurance proceeds related to the Maui fires.
Previous wording
Our cash requirements depend on many factors, including the execution of its business strategy. We remains focused on carefully managing costs, including capital expenditures, maintaining a strong balance sheet, and ensuring adequate liquidity. Our primary cash needs are for debt service, acquisition of solar systems, operating expenses, working capital and capital expenditures to support the growth in its business. Working capital is impacted by the timing and extent of the business needs. As of March 31, 2024, we had net working capital of $125.0 million, including cash and cash equivalents and restricted cash of $149.7 million.
Current wording
Our cash requirements depend on many factors, including the execution of our business strategy. We remain focused on carefully managing costs, including capital expenditures, maintaining a strong balance sheet, and ensuring adequate liquidity. Our primary cash needs are for debt service, acquisition of solar systems, operating expenses, working capital and capital expenditures to support the growth of our business. Working capital is impacted by the timing and extent of the business needs. As of June 30, 2024, we had net working capital of $125.1 million, including cash and cash equivalents and restricted cash of $150.2 million.
Previous wording
With the acquisition of Legacy Spruce Power in September 2022, we assumed all of the outstanding non-recourse debt of Legacy Spruce Power, which had a principal balance of $542.5 million on the date of the acquisition. With the SEMTH acquisition in the first quarter of 2023, we assumed$125.0 millionof non-recourse debt. In addition, during the third quarter of 2023, we entered into a second amendment to our existing SP2 Facility, resulting in incremental term loans of approximately $21.4 million, proceeds of which were used to primarily fund the Tredegar acquisition. As of March 31, 2024, we had$613.5 million of non-recourse debt, including current portions. We are required to complete debt service coverage ratio calculations on a quarterly basis as part of our debt covenants. All debt covenant requirements were satisfied as of March 31, 2024.
Current wording
With the acquisition of Legacy Spruce Power in September 2022, we assumed all of the outstanding non-recourse debt of Legacy Spruce Power, which had a principal balance of $542.5 million on the date of the acquisition. With the SEMTH acquisition in the first quarter of 2023, we assumed$125.0 millionof non-recourse debt, which was repaid in full in June 2024, see Note 8. Non-Recourse Debt to the accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. During the third quarter of 2023, we entered into a second amendment to our existing SP2 Facility, resulting in incremental term loans of approximately $21.4 million, proceeds of which were used to primarily fund the Tredegar acquisition.
Previous wording
Based on our current liquidity, management believes that no additional capital will be needed to execute its current business plan over the next 12 months. We continually evaluates our cash needs to raise additional funds or seek alternative sources to invest in growth opportunities and other purposes.
Current wording
During the second quarter of 2024, we obtained new term loans in the aggregate principal amount of$130.0 million, the proceeds of which were primarily used to repay$125.0 million related to the SEMTH acquisition. As of June 30, 2024, we had$612.9 million of aggregate non-recourse debt, including current portions. We are required to complete debt service coverage ratio calculations on a quarterly basis as part of our debt covenants. All debt covenant requirements were satisfied as of June 30, 2024. Based on our current liquidity, management believes that no additional capital will be needed to execute its current business plan over the next 12 months. We continually evaluate our cash needs to raise additional funds or seek alternative sources to invest in growth opportunities and other purposes.
Previous wording
The net cash used in continuing operations for the three months ended March 31, 2024 consists of the operations of Legacy Spruce Power, Tredegar assets acquired, corporate costs and certain other costs that were not allocated to our discontinued operations.
Current wording
The net cash used in continuing operations for the six months ended June 30, 2024 consists of the Company’s corporate costs and certain other costs that were not allocated to our discontinued operations.
Previous wording
Cash provided by investing activity related to continuing operations for the three months ended March 31, 2024 primarily includes $4.5 million of proceeds from the SEMTH investment and $1.3 million of proceeds from the sale of solar energy systems.
Current wording
Cash provided by investing activity related to continuing operations for the six months ended June 30, 2024 primarily includes $10.8 million of proceeds from the SEMTH investment and $2.9 million of proceeds from the sale of solar energy systems.
Previous wording
The net cash used in financing activities related to continuing operations for the three months ended March 31, 2024 primarily includes $6.7 million for the repayment of non-recourse debt.
Current wording
The net cash used in financing activities related to continuing operations for the six months ended June 30, 2024 primarily includes $136.8 million for the repayment of the Company’s long term non-recourse debt, partially offset by new long term non-recourse debt obtained via the SET Facility of $130.0 million.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Information with respect to our unaudited condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023 are presented below: