Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37511

Sunrun Inc.

(Exact name of registrant as specified in its charter)



Delaware		26-2841711
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

225 Bush Street, Suite 1400

San Francisco, California 94104

(Address of principal executive offices and Zip Code)

(415) 580-6900

(Registrant’s telephone number, including area code)

595 Market Street, 29th Floor

San Francisco, California 94105

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	RUN	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 5, 2019, the number of shares of the registrant’s common stock outstanding was 117,607,477.

Table of Contents



		Page

Item 1	Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Redeemable Noncontrolling Interests and Equity	6
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 5.	Other Information	74
Item 6.	Exhibits	74
	Signatures	76

Sunrun Inc.

Consolidated Balance Sheets

(In Thousands, Except Share Par Values)

(Unaudited)



	June 30, 2019			December 31, 2018
Assets
Current assets:
Cash	$	299,537		$	226,625
Restricted cash	54,182			77,626
Accounts receivable (net of allowances for doubtful accounts of $2,627 and $2,228 as of June 30, 2019 and December 31, 2018, respectively)	77,846			66,435
State tax credits receivable	—			2,697
Inventories	89,829			79,467
Prepaid expenses and other current assets	8,692			8,563
Total current assets	530,086			461,413
Restricted cash	148			148
Solar energy systems, net	4,149,883			3,820,017
Property and equipment, net	50,419			34,893
Intangible assets, net	8,382			10,088
Goodwill	87,543			87,543
Other assets	380,919			335,685
Total assets ⁽¹⁾	$	5,207,380		$	4,749,787
Liabilities and total equity
Current liabilities:
Accounts payable	$	153,206		$	131,278
Distributions payable to noncontrolling interests and redeemable noncontrolling interests	16,444			15,847
Accrued expenses and other liabilities	104,328			98,636
Deferred revenue, current portion	59,818			47,407
Deferred grants, current portion	8,029			7,885
Finance lease obligations, current portion	11,206			9,193
Recourse debt, current portion	239,035			—
Non-recourse debt, current portion	35,158			35,484
Pass-through financing obligation, current portion	10,666			26,461
Total current liabilities	637,890			372,191
Deferred revenue, net of current portion	643,613			544,218
Deferred grants, net of current portion	217,013			221,739
Finance lease obligations, net of current portion	14,363			9,992
Recourse debt	—			247,000
Non-recourse debt, net of current portion	1,688,989			1,466,438
Pass-through financing obligation, net of current portion	329,968			337,282
Other liabilities	113,992			48,210
Deferred tax liabilities	73,926			93,633
Total liabilities ⁽¹⁾	3,719,754			3,340,703
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests	278,539			126,302
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 200,000 shares as of June 30, 2019 and December 31, 2018; no shares issued and outstanding as of June 30, 2019 and December 31, 2018	—			—
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of June 30, 2019 and December 31, 2018; issued and outstanding, 117,199 and 113,149 shares as of June 30, 2019 and December 31, 2018, respectively	11			11
Additional paid-in capital	748,512			722,429
Accumulated other comprehensive loss	(47,954		)	(3,124		)
Retained earnings	214,976			229,391
Total stockholders’ equity	915,545			948,707
Noncontrolling interests	293,542			334,075
Total equity	1,209,087			1,282,782
Total liabilities, redeemable noncontrolling interests and total equity	$	5,207,380		$	4,749,787

The Company’s consolidated assets as of June 30, 2019 and December 31, 2018 include $3,163,835 and $2,905,295, respectively, in assets of variable interest entities (“VIEs”) that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, as of June 30, 2019 and December 31, 2018 of $2,901,211 and $2,712,377, respectively; cash as of June 30, 2019 and December 31, 2018 of $167,194 and $105,494, respectively; restricted cash as of June 30, 2019 and December 31, 2018 of $681 and $2,071, respectively; accounts receivable, net as of June 30, 2019 and December 31, 2018 of $19,762 and $18,539, respectively; prepaid expenses and other current assets as of June 30, 2019 and December 31, 2018 of $387 and $387, respectively; and other assets as of June 30, 2019 and December 31, 2018 of $74,600 and $66,427, respectively. The Company’s consolidated liabilities as of June 30, 2019 and December 31, 2018 include $710,912 and $660,758, respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of June 30, 2019 and December 31, 2018 of $8,512 and $12,136, respectively; distributions payable to noncontrolling interests and redeemable noncontrolling interests as of June 30, 2019 and December 31, 2018 of $16,257 and $15,797, respectively; accrued expenses and other current liabilities as of June 30, 2019 and December 31, 2018 of $7,742 and $7,122, respectively; deferred revenue as of June 30, 2019 and December 31, 2018 of $444,141 and $396,920, respectively; deferred grants as of June 30, 2019 and December 31, 2018 of $28,679 and $29,229, respectively; non-recourse debt as of June 30, 2019 and December 31, 2018 of $188,088 and $190,711, respectively; and other liabilities as of June 30, 2019 and December 31, 2018 of $17,493 and $8,843, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

Sunrun Inc.

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue:
Customer agreements and incentives	$	92,439		$	91,605		$	192,289		$	158,595
Solar energy systems and product sales	112,156			78,933			206,810			156,306
Total revenue	204,595			170,538			399,099			314,901
Operating expenses:
Cost of customer agreements and incentives	70,594			57,769			140,087			112,345
Cost of solar energy systems and product sales	86,348			64,268			164,147			128,847
Sales and marketing	70,038			49,237			125,991			93,316
Research and development	6,555			5,052			12,029			8,948
General and administrative	33,044			28,130			62,107			61,023
Amortization of intangible assets	814			1,051			1,707			2,102
Total operating expenses	267,393			205,507			506,068			406,581
Loss from operations	(62,798		)	(34,969		)	(106,969		)	(91,680		)
Interest expense, net	42,309			31,872			83,649			60,070
Other expenses (income), net	1,388			508			6,144			(1,184		)
Loss before income taxes	(106,495		)	(67,349		)	(196,762		)	(150,566		)
Income tax (benefit) expense	(1,910		)	4,378			(5,271		)	12,581
Net loss	(104,585		)	(71,727		)	(191,491		)	(163,147		)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(103,292		)	(79,136		)	(176,336		)	(198,588		)
Net (loss) income attributable to common stockholders	$	(1,293	)	$	7,409		$	(15,155	)	$	35,441
Net (loss) income per share attributable to common stockholders
Basic	$	(0.01	)	$	0.07		$	(0.13	)	$	0.33
Diluted	$	(0.01	)	$	0.06		$	(0.13	)	$	0.31
Weighted average shares used to compute net (loss) income per share attributable to common stockholders
Basic	115,765			109,559			114,843			108,510
Diluted	115,765			117,067			114,843			113,930

The accompanying notes are an integral part of these consolidated financial statements.

Sunrun Inc.

Consolidated Statements of Comprehensive (Loss) Income

(In Thousands)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net (loss) income attributable to common stockholders	$	(1,293	)	$	7,409		$	(15,155	)	$	35,441
Other comprehensive (loss) income:
Unrealized (loss) gain on derivatives, net of income taxes	(26,109		)	5,662			(43,122		)	21,833
Interest expense (income) on derivatives recognized into earnings, net of income taxes	21			(422		)	(968		)	(1,636		)
Other comprehensive (loss) income	(26,088		)	5,240			(44,090		)	20,197
Comprehensive (loss) income	$	(27,381	)	$	12,649		$	(59,245	)	$	55,638

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Three Months Ended June 30, 2019 and 2018

(In Thousands)

(Unaudited)



	Three Months Ended June 30, 2019
	Redeemable Noncontrolling Interests			Preferred Stock			Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Stockholders' Equity			Noncontrolling Interests			Total Equity
	Redeemable Noncontrolling Interests			Shares	Amount		Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Stockholders' Equity			Noncontrolling Interests			Total Equity
Balance at March 31, 2019	$	137,616		—	$	—	114,739	$	11	$	730,126		$	(21,866	)	$	216,269		$	924,540		$	377,571		$	1,302,111
Exercise of stock options	—			—	—		1,642	—		10,938			—			—			10,938			—			10,938
Issuance of restricted stock units, net of tax withholdings	—			—	—		232	—		(2,732		)	—			—			(2,732		)	—			(2,732		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		586	—		3,397			—			—			3,397			—			3,397
Stock-based compensation	—			—	—		—	—		6,783			—			—			6,783			—			6,783
Contributions from noncontrolling interests and redeemable noncontrolling interests	170,164			—	—		—	—		—			—			—			—			7,998			7,998
Distributions to noncontrolling interests and redeemable noncontrolling interests	(3,552		)	—	—		—	—		—			—			—			—			(14,424		)	(14,424		)
Net loss	(25,689		)	—	—		—	—		—			—			(1,293		)	(1,293		)	(77,603		)	(78,896		)
Other comprehensive loss, net of taxes	—			—	—		—	—		—			(26,088		)	—			(26,088		)	—			(26,088		)
Balance at June 30, 2019	$	278,539		—	$	—	117,199	$	11	$	748,512		$	(47,954	)	$	214,976		$	915,545		$	293,542		$	1,209,087



	Three Months Ended June 30, 2018
	Redeemable Noncontrolling Interests			Preferred Stock			Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders' Equity			Noncontrolling Interests			Total Equity
	Redeemable Noncontrolling Interests			Shares	Amount		Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders' Equity			Noncontrolling Interests			Total Equity
Balance at March 31, 2018	$	133,524		—	$	—	108,681	$	11	$	693,077		$	10,825	$	230,766	$	934,679		$	356,549		$	1,291,228
Exercise of stock options	—			—	—		1,087	—		6,160			—		—		6,160			—			6,160
Issuance of restricted stock units, net of tax withholdings	—			—	—		317	—		(2,394		)	—		—		(2,394		)				(2,394		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		402	—		1,755			—		—		1,755						1,755
Stock-based compensation	—			—	—		—	—		5,548			—		—		5,548						5,548
Contributions from noncontrolling interests and redeemable noncontrolling interests	20,344			—	—		—	—		—			—		—		—			3,520			3,520
Distributions to noncontrolling interests and redeemable noncontrolling interests	(2,777		)	—	—		—	—		—			—		—		—			(15,190		)	(15,190		)
Net (loss) income	(21,162		)	—	—		—	—		—					7,409		7,409			(57,974		)	(50,565		)
Other comprehensive loss, net of taxes	—			—	—		—	—		—			5,259				5,259			—			5,259
Balance at June 30, 2018	$	129,929		—	$	—	110,487	$	11	$	704,146		$	16,084	$	238,175	$	958,416		$	286,905		$	1,245,321

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Six Months Ended June 30, 2019 and 2018

(In Thousands)

(Unaudited)



	Six Months Ended June 30, 2019
	Redeemable Noncontrolling Interests			Preferred Stock			Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Stockholders' Equity			Noncontrolling Interests			Total Equity
	Redeemable Noncontrolling Interests			Shares	Amount		Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Stockholders' Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2018	$	126,302		—	$	—	113,149	$	11	$	722,429		$	(3,124	)	$	229,391		$	948,707		$	334,075		$	1,282,782
Cumulative effect of adoption of new ASU (No. 2018-02)	—			—	—		—	—		—			(740		)	740			—			—			—
Exercise of stock options	—			—	—		2,781	—		15,216			—			—			15,216			—			15,216
Issuance of restricted stock units, net of tax withholdings	—			—	—		683	—		(6,173		)	—			—			(6,173		)	—			(6,173		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		586	—		3,397			—			—			3,397			—			3,397
Stock-based compensation	—			—	—		—	—		12,566			—			—			12,566			—			12,566
Contributions from noncontrolling interests and redeemable noncontrolling interests	201,774			—	—		—	—		—			—			—			—			128,537			128,537
Distributions to noncontrolling interests and redeemable noncontrolling interests	(6,678		)	—	—		—	—		—			—			—			—			(29,527		)	(29,527		)
Net loss	(42,859		)	—	—		—	—		—			—			(15,155		)	(15,155		)	(133,477		)	(148,632		)
Acquisition of noncontrolling interest	—			—	—		—	—		1,077			—			—			1,077			(6,066		)	(4,989		)
Other comprehensive loss, net of taxes	—			—	—		—	—		—			(44,090		)	—			(44,090		)	—			(44,090		)
Balance at June 30, 2019	$	278,539		—	$	—	117,199	$	11	$	748,512		$	(47,954	)	$	214,976		$	915,545		$	293,542		$	1,209,087



	Six Months Ended June 30, 2018
	Redeemable Noncontrolling Interests			Preferred Stock			Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders' Equity			Noncontrolling Interests			Total Equity
	Redeemable Noncontrolling Interests			Shares	Amount		Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders' Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2017	$	123,801		—	$	—	107,350	$	11	$	682,950		$	(4,113	)	$	202,734	$	881,582		$	358,934		$	1,240,516
Exercise of stock options	—			—	—		1,529	—		8,068			—			—		8,068			—			8,068
Issuance of restricted stock units, net of tax withholdings	—			—	—		1,206	—		(4,878		)	—			—		(4,878		)	—			(4,878		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		402	—		1,755			—			—		1,755			—			1,755
Stock-based compensation	—			—	—		—	—		16,251			—			—		16,251			—			16,251
Contributions from noncontrolling interests and redeemable noncontrolling interests	51,447			—	—		—	—		—			—			—		—			116,021			116,021
Distributions to noncontrolling interests and redeemable noncontrolling interests	(5,385		)	—	—		—	—		—			—			—		—			(29,396		)	(29,396		)
Net (loss) income	(39,934		)	—	—		—	—		—			—			35,441		35,441			(158,654		)	(123,213		)
Other comprehensive loss, net of taxes	—			—	—		—	—		—			20,197			—		20,197			—			20,197
Balance at June 30, 2018	$	129,929		—	$	—	110,487	$	11	$	704,146		$	16,084		$	238,175	$	958,416		$	286,905		$	1,245,321

Sunrun Inc.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)



	Six Months Ended June 30,
	2019			2018
Operating activities:
Net loss	$	(191,491	)	$	(163,147	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization, net of amortization of deferred grants