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 September 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)

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 November 8, 2019, the number of shares of the registrant’s common stock outstanding was 118,057,617.

Table of Contents



		Page

Item 1	Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income (Loss)	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	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 5.	Other Information	77
Item 6.	Exhibits	77
	Signatures	78

Sunrun Inc.

Consolidated Balance Sheets

(In Thousands, Except Share Par Values)

(Unaudited)



	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash	$	324,698		$	226,625
Restricted cash	48,566			77,626
Accounts receivable (net of allowances for doubtful accounts of $2,737 and $2,228 as of September 30, 2019 and December 31, 2018, respectively)	75,352			66,435
State tax credits receivable	—			2,697
Inventories	109,777			79,467
Prepaid expenses and other current assets	8,847			8,563
Total current assets	567,240			461,413
Restricted cash	148			148
Solar energy systems, net	4,333,387			3,820,017
Property and equipment, net	56,804			34,893
Intangible assets, net	21,067			10,088
Goodwill	95,094			87,543
Other assets	398,278			335,685
Total assets ⁽¹⁾	$	5,472,018		$	4,749,787
Liabilities and total equity
Current liabilities:
Accounts payable	$	169,893		$	131,278
Distributions payable to noncontrolling interests and redeemable noncontrolling interests	16,808			15,847
Accrued expenses and other liabilities	121,720			98,636
Deferred revenue, current portion	61,336			47,407
Deferred grants, current portion	7,957			7,885
Finance lease obligations, current portion	11,152			9,193
Non-recourse debt, current portion	29,402			35,484
Pass-through financing obligation, current portion	10,744			26,461
Total current liabilities	429,012			372,191
Deferred revenue, net of current portion	651,727			544,218
Deferred grants, net of current portion	214,411			221,739
Finance lease obligations, net of current portion	14,822			9,992
Recourse debt	239,035			247,000
Non-recourse debt, net of current portion	1,776,872			1,466,438
Pass-through financing obligation, net of current portion	329,255			337,282
Other liabilities	166,873			48,210
Deferred tax liabilities	67,823			93,633
Total liabilities ⁽¹⁾	3,889,830			3,340,703
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests	336,586			126,302
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 200,000 shares as of September 30, 2019 and December 31, 2018; no shares issued and outstanding as of September 30, 2019 and December 31, 2018	—			—
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of September 30, 2019 and December 31, 2018; issued and outstanding, 117,924 and 113,149 shares as of September 30, 2019 and December 31, 2018, respectively	12			11
Additional paid-in capital	755,771			722,429
Accumulated other comprehensive loss	(72,920		)	(3,124		)
Retained earnings	243,966			229,391
Total stockholders’ equity	926,829			948,707
Noncontrolling interests	318,773			334,075
Total equity	1,245,602			1,282,782
Total liabilities, redeemable noncontrolling interests and total equity	$	5,472,018		$	4,749,787

The Company’s consolidated assets as of September 30, 2019 and December 31, 2018 include $3,332,199 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 September 30, 2019 and December 31, 2018 of $3,045,779 and $2,712,377, respectively; cash as of September 30, 2019 and December 31, 2018 of $178,289 and $105,494, respectively; restricted cash as of September 30, 2019 and December 31, 2018 of $4,544 and $2,071, respectively; accounts receivable, net as of September 30, 2019 and December 31, 2018 of $19,208 and $18,539, respectively; prepaid expenses and other current assets as of September 30, 2019 and December 31, 2018 of $549 and $387, respectively; and other assets as of September 30, 2019 and December 31, 2018 of $83,830 and $66,427, respectively. The Company’s consolidated liabilities as of September 30, 2019 and December 31, 2018 include $734,988 and $660,758, respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of September 30, 2019 and December 31, 2018 of $14,464 and $12,136, respectively; distributions payable to noncontrolling interests and redeemable noncontrolling interests as of September 30, 2019 and December 31, 2018 of $16,466 and $15,797, respectively; accrued expenses and other current liabilities as of September 30, 2019 and December 31, 2018 of $9,676 and $7,122, respectively; deferred revenue as of September 30, 2019 and December 31, 2018 of $446,041 and $396,920, respectively; deferred grants as of September 30, 2019 and December 31, 2018 of $28,330 and $29,229, respectively; non-recourse debt as of September 30, 2019 and December 31, 2018 of $196,113 and $190,711, respectively; and other liabilities as of September 30, 2019 and December 31, 2018 of $23,898 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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenue:
Customer agreements and incentives	$	96,249		$	114,572		$	288,538		$	273,167
Solar energy systems and product sales	119,293			90,388			326,103			246,694
Total revenue	215,542			204,960			614,641			519,861
Operating expenses:
Cost of customer agreements and incentives	67,359			63,195			207,446			175,540
Cost of solar energy systems and product sales	92,031			76,179			256,178			205,026
Sales and marketing	77,478			56,758			203,469			150,074
Research and development	6,435			4,604			18,464			13,552
General and administrative	31,059			26,720			93,166			87,743
Amortization of intangible assets	1,524			1,051			3,231			3,153
Total operating expenses	275,886			228,507			781,954			635,088
Loss from operations	(60,344		)	(23,547		)	(167,313		)	(115,227		)
Interest expense, net	43,911			34,482			127,560			94,552
Other expenses (income), net	3,110			(4,517		)	9,254			(5,701		)
Loss before income taxes	(107,365		)	(53,512		)	(304,127		)	(204,078		)
Income tax (benefit) expense	5,169			(5,988		)	(102		)	6,593
Net loss	(112,534		)	(47,524		)	(304,025		)	(210,671		)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(141,524		)	(44,628		)	(317,860		)	(243,216		)
Net income (loss) attributable to common stockholders	$	28,990		$	(2,896	)	$	13,835		$	32,545
Net income (loss) per share attributable to common stockholders
Basic	$	0.25		$	(0.03	)	$	0.12		$	0.30
Diluted	$	0.23		$	(0.02	)	$	0.11		$	0.28
Weighted average shares used to compute net income (loss) per share attributable to common stockholders
Basic	117,652			111,134			115,790			109,351
Diluted	125,151			120,396			123,645			116,052

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

Sunrun Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income (loss) attributable to common stockholders	$	28,990		$	(2,896	)	$	13,835		$	32,545
Other comprehensive (loss) income:
Unrealized (loss) gain on derivatives, net of income taxes	(25,178		)	8,495			(68,301		)	30,328
Interest expense (income) on derivatives recognized into earnings, net of income taxes	212			(697		)	(755		)	(2,352		)
Other comprehensive (loss) income	(24,966		)	7,798			(69,056		)	27,976
Comprehensive income (loss)	$	4,024		$	4,902		$	(55,221	)	$	60,521

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Three Months Ended September 30, 2019 and 2018

(In Thousands)

(Unaudited)



	Three Months Ended September 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 June 30,2019	$	278,539		—	$	—	117,199	$	11	$	748,512		$	(47,954	)	$	214,976	$	915,545		$	293,542		$	1,209,087
Exercise of stock options	—			—	—		507	—		2,766			—			—		2,766			—			2,766
Issuance of restricted stock units, net of tax withholdings	—			—	—		218	1		(2,361		)	—			—		(2,360		)	—			(2,360		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		—	—		—			—			—		—			—			—
Stock-based compensation	—			—	—		—	—		6,854			—			—		6,854			—			6,854
Contributions from noncontrolling interests and redeemable noncontrolling interests	196,182			—	—		—	—		—			—			—		—			45,002			45,002
Distributions to noncontrolling interests and redeemable noncontrolling interests	(3,466		)	—	—		—	—		—			—			—		—			(14,184		)	(14,184		)
Net (loss) income	(134,669		)	—	—		—	—		—			—			28,990		28,990			(6,855		)	22,135
Acquisition of noncontrolling interest	—			—	—		—	—		—			—			—		—			1,268			1,268
Other comprehensive loss, net of taxes	—			—	—		—	—		—			(24,966		)	—		(24,966		)	—			(24,966		)
Balance at September 30, 2019	$	336,586		—	$	—	117,924	$	12	$	755,771		$	(72,920	)	$	243,966	$	926,829		$	318,773		$	1,245,602



	Three Months Ended September 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 June 30, 2018	$	129,929		—	$	—	110,487		$	11	$	704,146		$	16,084	$	238,175		$	958,416		$	286,905		$	1,245,321
Exercise of stock options	—			—	—		1,027		—		5,792			—		—			5,792			—			5,792
Issuance of restricted stock units, net of tax withholdings	—			—	—		139		—		(3,032		)	—		—			(3,032		)				(3,032		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		(1	)	—		—			—		—			—						—
Stock-based compensation	—			—	—		—		—		5,740			—		—			5,740						5,740
Contributions from noncontrolling interests and redeemable noncontrolling interests	9,236			—	—		—		—		—			—		—			—			71,000			71,000
Distributions to noncontrolling interests and redeemable noncontrolling interests	(2,783		)	—	—		—		—		—			—		—			—			(14,966		)	(14,966		)
Net loss	(18,914		)	—	—		—		—		—					(2,896		)	(2,896		)	(25,714		)	(28,610		)
Other comprehensive loss, net of taxes	—			—	—		—		—		—			2,772		—			2,772			—			2,772
Balance at September 30, 2018	$	117,468		—	$	—	111,652		$	11	$	712,646		$	18,856	$	235,279		$	966,792		$	317,225		$	1,284,017

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Nine Months Ended September 30, 2019 and 2018

(In Thousands)

(Unaudited)



	Nine Months Ended September 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	—			—	—		3,288	—		17,982			—			—		17,982			—			17,982
Issuance of restricted stock units, net of tax withholdings	—			—	—		901	1		(8,534		)	—			—		(8,533		)	—			(8,533		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		586	—		3,397			—			—		3,397			—			3,397
Stock-based compensation	—			—	—		—	—		19,420			—			—		19,420			—			19,420
Contributions from noncontrolling interests and redeemable noncontrolling interests	397,956			—	—		—	—		—			—			—		—			173,539			173,539
Distributions to noncontrolling interests and redeemable noncontrolling interests	(10,144		)	—	—		—	—		—			—			—		—			(43,711		)	(43,711		)
Net (loss) income	(177,528		)	—	—		—	—		—			—			13,835		13,835			(140,332		)	(126,497		)
Acquisition of noncontrolling interest	—			—	—		—	—		1,077			—			—		1,077			(4,798		)	(3,721		)
Other comprehensive loss, net of taxes	—			—	—		—	—		—			(69,056		)	—		(69,056		)	—			(69,056		)
Balance at September 30, 2019	$	336,586		—	$	—	117,924	$	12	$	755,771		$	(72,920	)	$	243,966	$	926,829		$	318,773		$	1,245,602



	Nine Months Ended September 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	—			—	—		2,556	—		13,860			—			—		13,860			—			13,860
Issuance of restricted stock units, net of tax withholdings	—			—	—		1,345	—		(7,910		)	—			—		(7,910		)	—			(7,910		)
Shares issued in connection with the Employee Stock Purchase Plan	—			—	—		401	—		1,755			—			—		1,755			—			1,755
Stock-based compensation	—			—	—		—	—		21,991			—			—		21,991			—			21,991
Contributions from noncontrolling interests and redeemable noncontrolling interests	60,683			—	—		—	—		—			—			—		—			187,021			187,021
Distributions to noncontrolling interests and redeemable noncontrolling interests	(8,168		)	—	—		—	—		—			—			—		—			(44,362		)	(44,362		)
Net (loss) income	(58,848		)	—	—		—	—		—			—			32,545		32,545			(184,368		)	(151,823		)
Other comprehensive loss, net of taxes	—			—	—		—	—		—			22,969			—		22,969			—			22,969
Balance at September 30, 2018	$	117,468		—	$	—	111,652	$	11	$	712,646		$	18,856		$	235,279	$	966,792		$	317,225		$	1,284,017

Sunrun Inc.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)