run-20200630

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, 2020


☐			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 August 6, 2020, the number of shares of the registrant’s common stock outstanding was 123,174,691.

Table of Contents


		Page

Item 1	Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive 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	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	51

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 5.	Other Information	88
Item 6.	Exhibits	88
	Signatures	91

Sunrun Inc.

Consolidated Balance Sheets

(In Thousands, Except Share Par Values)

(Unaudited)


	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash	$	269,569	$	269,577
Restricted cash	84,515		93,504
Accounts receivable (net of allowances for doubtful accounts of $2,337 and $3,151 as of June 30, 2020 and December 31, 2019, respectively)	60,000		77,728
State tax credits receivable	—		6,466
Inventories	210,507		260,571
Prepaid expenses and other current assets	13,649		25,984
Total current assets	638,240		733,830
Restricted cash	148		148
Solar energy systems, net	4,774,425		4,492,615
Property and equipment, net	47,839		56,708
Intangible assets, net	16,892		19,543
Goodwill	95,094		95,094
Other assets	432,404		408,403
Total assets ⁽¹⁾	$	6,005,042	$	5,806,341
Liabilities and total equity
Current liabilities:
Accounts payable	$	99,895	$	223,356
Distributions payable to noncontrolling interests and redeemable noncontrolling interests	17,751		16,062
Accrued expenses and other liabilities	187,891		148,497
Deferred revenue, current portion	78,750		77,643
Deferred grants, current portion	8,274		8,093
Finance lease obligations, current portion	8,065		10,064
Non-recourse debt, current portion	105,381		35,348
Pass-through financing obligation, current portion	11,292		11,031
Total current liabilities	517,299		530,094
Deferred revenue, net of current portion	663,797		651,856
Deferred grants, net of current portion	213,956		218,568
Finance lease obligations, net of current portion	8,547		12,895
Recourse debt	236,435		239,485
Non-recourse debt, net of current portion	2,081,725		1,980,107
Pass-through financing obligation, net of current portion	326,278		327,974
Other liabilities	227,984		141,401
Deferred tax liabilities	36,834		65,964
Total liabilities ⁽¹⁾	4,312,855		4,168,344
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests	450,682		306,565
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 200,000 shares as of June 30, 2020 and December 31, 2019; no shares issued and outstanding as of June 30, 2020 and December 31, 2019	—		—
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of June 30, 2020 and December 31, 2019; issued and outstanding, 122,307 and 118,451 shares as of June 30, 2020 and December 31, 2019, respectively	12		12
Additional paid-in capital	806,702		766,006
Accumulated other comprehensive loss	(127,264)		(52,753)
Retained earnings	208,717		251,466
Total stockholders’ equity	888,167		964,731
Noncontrolling interests	353,338		366,701
Total equity	1,241,505		1,331,432
Total liabilities, redeemable noncontrolling interests and total equity	$	6,005,042	$	5,806,341

1)The Company’s consolidated assets as of June 30, 2020 and December 31, 2019 include $3,948,923 and $3,521,202, 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, 2020 and December 31, 2019 of $3,557,831 and $3,259,712, respectively; cash as of June 30, 2020 and December 31, 2019 of $155,239 and $133,362, respectively; restricted cash as of June 30, 2020 and December 31, 2019 of $12,411 and $2,746, respectively; accounts receivable, net as of June 30, 2020 and December 31, 2019 of $25,530 and $21,956, respectively; inventories as of June 30, 2020 and December 31, 2019 of $94,175 and 15,721, respectively; prepaid expenses and other current assets as of June 30, 2020 and December 31, 2019 of $1,480 and $554, respectively; and other assets as of June 30, 2020 and December 31, 2019 of $102,257 and $87,151, respectively. The Company’s consolidated liabilities as of June 30, 2020 and December 31, 2019 include $894,449 and $774,564, respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of June 30, 2020 and December 31, 2019 of $14,306 and $11,531, respectively; distributions payable to noncontrolling interests and redeemable noncontrolling interests as of June 30, 2020 and December 31, 2019 of $17,701 and $16,012, respectively; accrued expenses and other current liabilities as of June 30, 2020 and December 31, 2019 of $14,095 and $10,740, respectively; deferred revenue as of June 30, 2020 and December 31, 2019 of $506,486 and $482,138, respectively; deferred grants as of June 30, 2020 and December 31, 2019 of $27,516 and $28,034, respectively; non-recourse debt as of June 30, 2020 and December 31, 2019 of $277,416 and $206,476, respectively; and other liabilities as of June 30, 2020 and December 31, 2019 of $36,929 and $19,633, 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,
	2020		2019		2020		2019
Revenue:
Customer agreements and incentives	$	106,095	$	92,439	$	205,219	$	192,289
Solar energy systems and product sales	75,199		112,156		186,806		206,810
Total revenue	181,294		204,595		392,025		399,099
Operating expenses:
Cost of customer agreements and incentives	83,422		70,594		161,699		140,087
Cost of solar energy systems and product sales	63,746		86,348		155,344		164,147
Sales and marketing	69,701		70,038		139,971		125,991
Research and development	4,971		6,555		9,017		12,029
General and administrative	41,756		33,044		69,830		62,107
Amortization of intangible assets	1,167		814		2,650		1,707
Total operating expenses	264,763		267,393		538,511		506,068
Loss from operations	(83,469)		(62,798)		(146,486)		(106,969)
Interest expense, net	50,721		42,309		100,645		83,649
Other expenses, net	148		1,388		98		6,144
Loss before income taxes	(134,338)		(106,495)		(247,229)		(196,762)
Income tax expense (benefit)	211		(1,910)		(3,131)		(5,271)
Net loss	(134,549)		(104,585)		(244,098)		(191,491)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(120,987)		(103,292)		(202,577)		(176,336)
Net loss attributable to common stockholders	$	(13,562)	$	(1,293)	$	(41,521)	$	(15,155)
Net loss per share attributable to common stockholders
Basic	$	(0.11)	$	(0.01)	$	(0.35)	$	(0.13)
Diluted	$	(0.11)	$	(0.01)	$	(0.35)	$	(0.13)
Weighted average shares used to compute net loss per share attributable to common stockholders
Basic	120,279		115,765		120,201		114,843
Diluted	120,279		115,765		120,201		114,843

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

Sunrun Inc.

Consolidated Statements of Comprehensive Loss

(In Thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net loss attributable to common stockholders	$	(13,562)	$	(1,293)	$	(41,521)	$	(15,155)
Other comprehensive (loss) income:
Unrealized loss on derivatives, net of income taxes	(2,632)		(26,109)		(75,175)		(43,122)
Interest income (expense) on derivatives recognized into earnings, net of income taxes	419		21		664		(968)
Other comprehensive loss	(2,213)		(26,088)		(74,511)		(44,090)
Comprehensive loss	$	(15,775)	$	(27,381)	$	(116,032)	$	(59,245)

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Three Months Ended June 30, 2020 and 2019

(In Thousands)

(Unaudited)


	Three Months Ended June 30, 2020
	Redeemable Noncontrolling Interests		Preferred Stock							Common Stock							Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests	Total Equity
				Shares			Amount		Shares			Amount
Balance at March 31, 2020	$	415,693	—		$	—		120,123		$	12		$	775,233	$	(125,051)	$	222,279	$	872,473	$	326,191	$	1,198,664

Exercise of stock options	—		—		—			388		—			2,709		—		—		2,709		—		2,709
Issuance of restricted stock units	—		—		—			1,467		—			2,504		—		—		2,504		—		2,504
Shares issued in connection with the Employee Stock Purchase Plan	—		—		—			329		—			3,737		—		—		3,737		—		3,737
Stock-based compensation	—		—		—			—		—			22,519		—		—		22,519		—		22,519
Contributions from noncontrolling interests and redeemable noncontrolling interests	169,048		—		—			—		—			—		—		—		—		34,997		34,997
Distributions to noncontrolling interests and redeemable noncontrolling interests	(8,013)		—		—			—		—			—		—		—		—		(12,909)		(12,909)
Net (loss) income	(126,046)		—		—			—		—			—		—		(13,562)		(13,562)		5,059		(8,503)

Other comprehensive loss, net of taxes	—		—		—			—		—			—		(2,213)		—		(2,213)		—		(2,213)
Balance at June 30, 2020	$	450,682	—		$	—		122,307		$	12		$	806,702	$	(127,264)	$	208,717	$	888,167	$	353,338	$	1,241,505


	Three Months Ended June 30, 2019
	Redeemable Noncontrolling Interests		Preferred Stock							Common Stock							Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests	Total Equity
				Shares			Amount		Shares			Amount
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

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Six Months Ended June 30, 2020 and 2019

(In Thousands)

(Unaudited)


	Six Months Ended June 30, 2020
	Redeemable Noncontrolling Interests		Preferred Stock							Common Stock							Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests	Total Equity
				Shares			Amount		Shares			Amount
Balance at December 31, 2019	$	306,565	—		$	—		118,451		$	12		$	766,006	$	(52,753)	$	251,466	$	964,731	$	366,701	$	1,331,432
Cumulative effect of adoption of new ASU (No. 2016-13)	—		—		—			—		—			—		—		(1,228)		(1,228)		—		(1,228)
Exercise of stock options	—		—		—			1,397		—			8,658		—		—		8,658		—		8,658
Issuance of restricted stock units, net of tax withholdings	—		—		—			2,130		—			(1,026)		—		—		(1,026)		—		(1,026)
Shares issued in connection with the Employee Stock Purchase Plan	—		—		—			329		—			3,737		—		—		3,737		—		3,737
Stock-based compensation	—		—		—			—		—			29,327		—		—		29,327		—		29,327
Contributions from noncontrolling interests and redeemable noncontrolling interests	319,952		—		—			—		—			—		—		—		—		54,997		54,997
Distributions to noncontrolling interests and redeemable noncontrolling interests	(15,097)		—		—			—		—			—		—		—		—		(26,521)		(26,521)
Net loss	(160,738)		—		—			—		—			—		—		(41,521)		(41,521)		(41,839)		(83,360)
Acquisition of noncontrolling interest	—		—		—			—		—					—		—		—		—		—
Other comprehensive loss, net of taxes	—