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home / articles / RUN - Sunrun Reports Third Quarter 2023 Financial Results | Benzinga


RUN - Sunrun Reports Third Quarter 2023 Financial Results | Benzinga

  • 131% year-over-year growth in Storage Capacity Installed as storage attachment rates surge to 33% of installations; recent storage attachment rates exceeding 40% nationally on new sales

    Solar Energy Capacity Installed of 258.2 Megawatts in Q3, reaching 6.5 Gigawatts of Networked Solar Energy Capacity

    Net Subscriber Value of $11,030; pro-forma for full ITC adder and lower current equipment prices, Net Subscriber Value was $14,793 in Q3

    Net Earning Assets increases $130 million, reaching $4.6 billion, including a $31 million increase in Total Cash compared to Q2

    Lowering full-year growth guidance for Solar Capacity Installed as we transition to a storage-first company; introducing Storage Capacity Installed guidance, reflecting rapid growth

    SAN FRANCISCO, Nov. 01, 2023 (GLOBE NEWSWIRE) -- Sunrun (NASDAQ:RUN), the nation's leading provider of residential solar, storage and energy services, today announced financial results for the quarter ended September 30, 2023.

    "We have sharpened our focus on cash generation and continue to execute a customer-first, sustainable growth strategy that does not require equity funding. We are using challenges from this macroeconomic environment to accelerate our leadership position and tighten our operations," said Mary Powell, Sunrun's Chief Executive Officer. "We are fundamentally and rapidly transitioning to a storage-first company, to offer the most pro-consumer product, expand our margins, and lay the foundation for increased value streams from our growing fleet of networked storage systems."

    "We have taken deliberate go-to-market optimization actions, including repositioning geographic mix, sales route mix and product mix as we transition to a storage-first company. These actions, coupled with a relentless focus on cost discipline and productivity across the organization, help us maximize long-term value creation and position us for meaningful cash generation," said Danny Abajian, Sunrun's Chief Financial Officer.

    Third Quarter Updates

    • Storage attachment rates accelerating: Storage attachment rates reached over 33% in Q3, nearly double the rate in Q2, with 176 Megawatt hours installed during the quarter. Recent sales activities are above 40% nationally, with California exceeding 85% of all new customers including storage with the solar system. Sunrun has now installed more than 76,000 solar and storage systems, representing over 1.1 Gigawatt hours of stored energy capacity.
    • Launching premium add-on storage offering in California: Sunrun announced today it is launching an add-on storage offering, using a premium battery product that seamlessly integrates with customers' existing solar systems to provide either partial- or whole-home backup power during grid outages. In addition, the batteries allow customers to maximize their use of solar energy by capturing and storing electricity generated during the day and utilizing it during peak evening hours when utility rates are highest.
    • Strong capital markets execution: On September 28, Sunrun completed a record-setting $715 million securitization of residential solar and battery systems, marking the largest transaction of its kind in the industry. The securitization was structured with two tranches of A-rated notes, with the A-1 notes marketed in a public asset-backed securitization, while the A-2 notes were privately placed. Strong investor demand enabled the A-1 notes to be upsized by $100 million, and also resulted in a spread of 240bps, which was an improvement of 25bps from Sunrun's previous public securitization transaction in May of this year. Subsequent to the securitization, Sunrun raised an additional $253 million of subordinated subsidiary-level non-recourse financing.
    • Expanding our leadership team to focus on customer value realization and unlocking additional efficiencies: Sunrun recently announced the appointments of Dr. Marcus Mueller as Vice President of Generation, and Rachit Srivastava as Head of Artificial Intelligence (AI). Dr. Mueller, who was previously with Tesla Energy, will guide Sunrun's asset performance and grid services, and will help introduce new storage solutions for customers. Mr. Srivastava, who previously led machine learning and data science for Cockroach Labs, will steer Sunrun's AI strategy, aiming to enhance customer value, efficiency, and personalization across products. Both of these appointments emphasize Sunrun's focus on innovation, electrification, and enhancing customer relationships with the goal of enhancing a clean energy lifestyle.
    • Fast Company names Sunrun a Brand That Matters: Sunrun was recently recognized by Fast Company on its third annual Brands That Matter list, for achieving cultural relevance through compelling branding, ingenuity and business impact with communities. Fast Company attributed Sunrun's success to its focus on innovative solutions for energy needs and delivering a unique customer experience.
    • PG&E Grid Services: Sunrun just concluded our dispatching season on the largest residential power plant of its kind in the United States. The program provided consistent, reliable capacity to support the grid by dispatching every day during peak times from August through October, with more than 8,500 customers participating. The program "Peak Power Rewards" with PG&E provided nearly 30 Megawatts to the grid and Sunrun and PG&E are in active discussions to upsize the fleet and program in the future.

    Key Operating Metrics

    In the third quarter of 2023, Customer Additions were 33,806, including 29,303 Subscriber Additions. As of September 30, 2023, Sunrun had 903,270 Customers, including 754,087 Subscribers. Customers grew 19% in the third quarter of 2023 compared to the third quarter of 2022.

    Annual Recurring Revenue from Subscribers was over $1.2 billion as of September 30, 2023. The Average Contract Life Remaining of Subscribers was 17.8 years as of September 30, 2023.

    Subscriber Value was $47,068 in the third quarter of 2023 while Creation Cost was $36,038. Net Subscriber Value was $11,030 in the third quarter of 2023. Total Value Generated was $323 million in the third quarter of 2023. On a pro-forma basis assuming an 8% discount rate, consistent with current capital costs, Subscriber Value was $40,753 and Net Subscriber Value was $4,715 in the third quarter of 2023. Commencing in the third quarter, Subscriber Value includes benefits obtained from the energy communities ITC adder for systems deployed during the quarter, but does not include value we may receive from other ITC adders.

    We expect to realize additional value from Subscriber Additions in Q3 that we anticipate will be eligible for additional adders, which could add $2,249 per Subscriber, subject to final rules and government application processes and procedures. These critical ITC adders will make solar more affordable and accessible to a broader consumer population. Additionally, hardware costs for key items such as modules, inverters and batteries are falling significantly based on current procurement activities, and are expected to provide additional benefits of $1,514 in future periods. While these cost tailwinds do not benefit Q3 deployments, we have provided the impact of the cost benefits we expect to achieve in future periods as we work through higher-cost inventory. Pro-forma for these benefits, at a 6% discount rate, Net Subscriber Value was $14,793 in Q3. Adjusted for an 8% discount rate, but including the full ITC adder benefits and cost deflation, pro-forma Net Subscriber Value was $8,478 in Q3.

    Gross Earning Assets as of September 30, 2023, were $13.3 billion. Net Earning Assets were $4.6 billion, which included $952 million in total cash, as of September 30, 2023.

    Storage Capacity Installed was 175.6 Megawatt hours in the third quarter of 2023. This represents a 68% sequential increase from the 104.7 Megawatt hours of Storage Capacity Installed in the second quarter of 2023 and 131% year over year increase from the 76.0 Megawatt hours of Storage Capacity Installed in the third quarter of 2022

    Solar Energy Capacity Installed was 258.2 Megawatts in the third quarter of 2023. Solar Energy Capacity Installed for Subscribers was 229.0 Megawatts in the third quarter of 2023.

    Networked Solar Energy Capacity was 6,462 Megawatts as of September 30, 2023. Networked Solar Energy Capacity for Subscribers was 5,428 Megawatts as of September 30, 2023. Networked Storage Capacity was 1.1 Gigawatt hours as of September 30, 2023.

    The solar systems we deployed in Q3 are expected to offset the emission of 5.2 million metric tons of CO2 over the next thirty years. Over the last twelve months, Sunrun's systems are estimated to have offset 3.6 million metric tons of CO2.

    Outlook

    Sunrun is sharpening its focus on cash generation and continues to execute a customer-first, sustainable growth strategy that does not require equity funding. As a result, we are dramatically increasing installations of storage systems, which provides for increased margins and value creation opportunities over time, but also presents near-term impacts as we shift operations. Management believes these adjustments will deliver the strongest value creation for Sunrun, including delivering meaningful Cash Generation faster than a strategy that only prioritizes volume growth.

    Given our strategy to be a storage-first company to extend our differentiation and increase customer value, in addition to launching battery retrofit offerings, we are introducing guidance for Storage Capacity Installed.

    Storage Capacity Installed is expected to be in a range of 180 to 200 Megawatt hours in Q4. This range represents approximately 108% to 131% growth year over year. For the full-year 2023, this range represents 71% to 78% growth year over year.

    Solar Energy Capacity Installed is expected to be in a range of 220 to 245 megawatts in Q4. This represents full-year 2023 growth of approximately 2% to 5% compared to our prior guidance range of 10% to 15% growth for the full-year 2023.

    Net Subscriber Value is expected to be stable in Q4. Fixed cost absorption pressures offset many benefits from higher storage mix in Q4. An increasing mix of storage, meaningful hardware cost deflation tailwinds and forthcoming ITC adder value is expected to provide material uplift to our Net Subscriber Values in 2024.

    Third Quarter 2023 GAAP Results

    Total revenue was $563.2 million in the third quarter of 2023, down $68.7 million, or 11%, from the third quarter of 2022. Customer agreements and incentives revenue was $316.5 million, an increase of $45.3 million, or 17%, compared to the third quarter of 2022. Solar energy systems and product sales revenue was $246.7 million, a decrease of $114.0 million, or 32%, compared to the third quarter of 2022. The increasing mix of Subscribers results in less upfront revenue recognition, as revenue is recognized over the life of the Customer Agreement which is typically 20 or 25 years.

    Total cost of revenue was $518.0 million, a decrease of 1% year-over-year. Total operating expenses, excluding the non-cash impairment of goodwill, were $752.7 million, a decrease of 2% year-over-year.

    During the third quarter of 2023, Sunrun recorded a non-cash goodwill impairment charge of approximately $1.2 billion. Due to the decline in our stock price, we wrote down our goodwill from $ 4.3 billion to $3.1 billion. The goodwill primarily arose following the stock-for-stock acquisition of Vivint Solar in October 2020, with the majority arising from and determined based on the market capitalizations at the time of the acquisition. The company recorded a non-cash goodwill impairment charge of $1.2 billion, or $5.32 per basic share, in our Consolidated Statement of Operations for the third quarter of 2023.

    Net loss attributable to common stockholders was $1,069.5 million, or $4.92 per basic and diluted share, in the third quarter of 2023. Pro-forma to exclude the non-cash goodwill impairment charge, non-GAAP net income would have been $88.5 million or $0.40 per diluted share in the third quarter of 2023.

    Financing Activities

    As of November 1, 2023, closed transactions and executed term sheets provide us with expected tax equity to fund approximately 235 Megawatts of Solar Energy Capacity Installed for Subscribers beyond what was deployed through September 30, 2023. As of September 30, 2023 Sunrun also had $555 million available in its $1.8 billion non-recourse senior revolving warehouse facility to fund over 195 Megawatts of Solar Energy Capacity Installed for Subscribers.

    Conference Call Information

    Sunrun is hosting a conference call for analysts and investors to discuss its third quarter 2023 results and business outlook at 2:00 p.m. Pacific Time today, November 1, 2023. A live audio webcast of the conference call along with supplemental financial information will be accessible via the "Investor Relations" section of Sunrun's website at https://investors.sunrun.com. The conference call can also be accessed live over the phone by dialing (877) 407-5989 (toll free) or (201) 689-8434 (toll). An audio replay will be available following the call on the Sunrun Investor Relations website for approximately one month.

    About Sunrun

    Sunrun Inc. (NASDAQ:RUN) revolutionized the solar industry in 2007 by removing financial barriers and democratizing access to locally-generated, renewable energy. Today, Sunrun is the nation's leading provider of clean energy as a subscription service, offering residential solar and storage with no upfront costs. Sunrun's innovative products and solutions can connect homes to the cleanest energy on earth, providing them with energy security, predictability, and peace of mind. Sunrun also manages energy services that benefit communities, utilities, and the electric grid while enhancing customer value. Discover more at www.sunrun.com

    Non-GAAP Information

    This press release includes references to certain non-GAAP financial measures, such as non-GAAP net (loss) income and non-GAAP net (loss) income per share. We believe that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of current period performance on a comparable basis with prior periods. Our management uses these non-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to the GAAP financial measures presented in this press release and our financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

    Non-GAAP net (loss) income is defined as GAAP net (loss) income adjusted by the non-cash goodwill impairment charge. Management believes the exclusion of this non-cash and non-recurring item provides useful supplemental information to investors and facilitates the analysis of its operating results and comparison of operating results across reporting periods.

    Forward Looking Statements

    This communication contains forward-looking statements related to Sunrun (the "Company") within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements related to: the Company's financial and operating guidance and expectations; the Company's business plan, trajectory, expectations, market leadership, competitive advantages, operational and financial results and metrics (and the assumptions related to the calculation of such metrics); the Company's momentum in its business strategies including its ESG efforts, expectations regarding market share, total addressable market, customer value proposition, market penetration, financing activities, financing capacity, product mix, and ability to manage cash flow and liquidity; the growth of the solar industry; trends or potential trends within the solar industry, our business, customer base, and market; the Company's ability to derive value from the anticipated benefits of partnerships, new technologies, and pilot programs; anticipated demand, market acceptance, and market adoption of the Company's offerings, including new products, services, and technologies; the Company's strategy to be a storage-first company; the ability to increase margins based on a shift in product focus; expectations regarding the growth of home electrification, electric vehicles, virtual power plants, and distributed energy resources; the Company's ability to manage suppliers, inventory, and workforce; supply chains and regulatory impacts affecting supply chains; the Company's leadership team and talent development; the legislative and regulatory environment of the solar industry and the potential impacts of proposed, amended, and newly adopted legislation and regulation on the solar industry and our business; the ongoing expectations regarding the Company's storage and energy services businesses and anticipated emissions reductions due to utilization of the Company's solar systems; and factors outside of the Company's control such as macroeconomic trends, bank failures, public health emergencies, natural disasters, acts of war, terrorism, geopolitical conflict, or armed conflict / invasion, and the impacts of climate change. These statements are not guarantees of future performance; they reflect the Company's current views with respect to future events and are based on assumptions and estimates and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. The risks and uncertainties that could cause the Company's results to differ materially from those expressed or implied by such forward-looking statements include: the Company's continued ability to manage costs and compete effectively; the availability of additional financing on acceptable terms; worldwide economic conditions, including slow or negative growth rates and inflation; volatile or rising interest rates; changes in policies and regulations, including net metering, interconnection limits, and fixed fees, or caps and licensing restrictions and the impact of these changes on the solar industry and our business; the Company's ability to attract and retain the Company's business partners; supply chain risks and associated costs; realizing the anticipated benefits of past or future investments, partnerships, strategic transactions, or acquisitions, and integrating those acquisitions; the Company's leadership team and ability to attract and retain key employees; changes in the retail prices of traditional utility generated electricity; the availability of rebates, tax credits and other incentives; the availability of solar panels, batteries, and other components and raw materials; the Company's business plan and the Company's ability to effectively manage the Company's growth and labor constraints; the Company's ability to meet the covenants in the Company's investment funds and debt facilities; factors impacting the home electrification and solar industry generally, and such other risks and uncertainties identified in the reports that we file with the U.S. Securities and Exchange Commission from time to time. All forward-looking statements used herein are based on information available to us as of the date hereof, and we assume no obligation to update publicly these forward-looking statements for any reason, except as required by law.

    Citations to industry and market statistics used herein may be found in our Investor Presentation, available via the "Investor Relations" section of Sunrun's website at https://investors.sunrun.com.


    Consolidated Balance Sheets
    (In Thousands)

     
    September 30, 2023
     
    December 31, 2022
     
     
     
     
    Assets
     
     
     
    Current assets:
     
     
     
    Cash
    $
    643,787
     
    $
    740,508
    Restricted cash
     
    308,010
     
     
    212,367
    Accounts receivable, net
     
    188,892
     
     
    214,255
    Inventories
     
    661,801
     
     
    783,904
    Prepaid expenses and other current assets
     
    126,028
     
     
    146,609
    Total current assets
     
    1,928,518
     
     
    2,097,643
    Restricted cash
     
    148
     
     
    148
    Solar energy systems, net
     
    12,528,617
     
     
    10,988,361
    Property and equipment, net
     
    128,015
     
     
    67,439
    Intangible assets, net
     
    1,273
     
     
    7,527
    Goodwill
     
    3,122,168
     
     
    4,280,169
    Other assets
     
    2,318,376
     
     
    1,827,518
    Total assets
    $
    20,027,115
     
    $
    19,268,805
    Liabilities and total equity
     
     
     
    Current liabilities:
     
     
     
    Accounts payable
    $
    296,453
     
    $
    339,166
    Distributions payable to noncontrolling interests and redeemable noncontrolling interests
     
    32,697
     
     
    32,050
    Accrued expenses and other liabilities
     
    381,453
     
     
    406,466
    Deferred revenue, current portion
     
    128,894
     
     
    183,719
    Deferred grants, current portion
     
    8,211
     
     
    8,252
    Finance lease obligations, current portion
     
    18,611
     
     
    11,444
    Non-recourse debt, current portion
     
    540,517
     
     
    157,810
    Pass-through financing obligation, current portion
     
    16,432
     
     
    16,544
    Total current liabilities
     
    1,423,268
     
     
    1,155,451
    Deferred revenue, net of current portion
     
    1,025,890
     
     
    912,254
    Deferred grants, net of current portion
     
    193,754
     
     
    201,094
    Finance lease obligations, net of current portion
     
    56,472
     
     
    17,302
    Convertible senior notes
     
    394,583
     
     
    392,882
    Line of credit
     
    517,248
     
     
    505,158
    Non-recourse debt, net of current portion
     
    8,785,196
     
     
    7,343,299
    Pass-through financing obligation, net of current portion
     
    280,974
     
     
    289,011
    Other liabilities
     
    138,058
     
     
    140,290
    Deferred tax liabilities
     
    137,294
     
     
    133,047
    Total liabilities
     
    12,952,737
     
     
    11,089,788
    Redeemable noncontrolling interests
     
    683,449
     
     
    609,702
    Total stockholders' equity
     
    5,611,108
     
     
    6,708,122
    Noncontrolling interests
     
    779,821
     
     
    861,193
    Total equity
     
    6,390,929
     
     
    7,569,315
    Total liabilities, redeemable noncontrolling interests and total equity
    $
    20,027,115
     
    $
    19,268,805



    Consolidated Statements of Operations
    (In Thousands, Except Per Share Amounts)

     
    Three Months Ended September 30,
     
    Nine Months Ended September 30,
     
     
    2023
     
     
     
    2022
     
     
     
    2023
     
     
     
    2022
     
    Revenue:
     
     
     
     
     
     
     
    Customer agreements and incentives
    $
    316,528
     
     
    $
    271,211
     
     
    $
    865,151
     
     
    $
    740,789
     
    Solar energy systems and product sales
     
    246,653
     
     
     
    360,695
     
     
     
    878,072
     
     
     
    971,481
     
    Total revenue
     
    563,181
     
     
     
    631,906
     
     
     
    1,743,223
     
     
     
    1,712,270
     
    Operating expenses:
     
     
     
     
     
     
     
    Cost of customer agreements and incentives
     
    283,742
     
     
     
    209,539
     
     
     
    789,334
     
     
     
    613,878
     
    Cost of solar energy systems and product sales
     
    234,274
     
     
     
    311,782
     
     
     
    824,830
     
     
     
    854,105
     
    Sales and marketing
     
    176,349
     
     
     
    193,992
     
     
     
    574,061
     
     
     
    556,346
     
    Research and development

    Full story available on Benzinga.com

  • Stock Information

    Company Name: Sunrun Inc.
    Stock Symbol: RUN
    Market: NASDAQ
    Website: sunrun.com

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