run-20220930

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, 2022


☐			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 October 28, 2022, the number of shares of the registrant’s common stock outstanding was 213,103,719.

Table of Contents


		Page

	Special Note Regarding Forward-Looking Statements	2
	Selected Risks Affecting our Business	4
Item 1.	Financial Statements (Unaudited)	6
	Consolidated Balance Sheets	6
	Consolidated Statements of Operations	8
	Consolidated Statements of Comprehensive Income (Loss)	9
	Consolidated Statements of Redeemable Noncontrolling Interests and Equity	10
	Consolidated Statements of Cash Flows	12
	Notes to Consolidated Financial Statements	14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50

	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	87
Item 6.	Exhibits	87
	Signatures	89

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The discussion in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “goals,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” “likely,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the potential impact of volatile or rising interest rates on our interest expense;

•the availability of rebates, tax credits and other financial incentives, and decreases to federal solar tax credits;

•our industry’s, and specifically our, continued ability to manage costs (including, but not limited to, equipment costs) associated with solar service offerings;

•regulatory and policy development and changes;

•our ability to manage our supply chains and distribution channels and the impact of natural disasters, geopolitical conflicts, the COVID-19 pandemic, and other events beyond our control;

•the sufficiency of our cash, investment fund commitments and available borrowings to meet our anticipated cash needs;

•our need and ability to raise capital, refinance existing debt, and finance our operations and solar energy systems from new and existing investors;

•our investment in research and development and new product offerings;

•determinations by the Internal Revenue Service of the fair market value of our solar energy systems;

•the retail price of utility-generated electricity or electricity from other energy sources;

•our business plan and our ability to effectively manage our growth, including our rate of revenue growth;

•our ability to further penetrate existing markets, expand into new markets and our expectations regarding market growth (including, but not limited to, expected cancellation rates);

•our expectations concerning relationships with third parties, including the attraction, retention and continued existence of qualified solar partners;

•the impact of seasonality on our business;

•our strategic partnerships and investments and the expected benefits of such partnerships and investments;

•the potential effects of the COVID-19 pandemic, including its variants, on our business and operations, results of operations and financial position;

•our ability to realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and risk that the integration of these acquisitions may disrupt our business and management;

•the expected benefits and potential value created by the merger with Vivint Solar for our stockholders;

•the inherent risks, costs and uncertainties associated with integrating the businesses in the merger with Vivint Solar successfully and risks of not achieving all or any of the anticipated benefits of the merger with Vivint Solar, or the risk that the anticipated benefits of the acquisition may not be fully realized or take longer to realize than expected;

•our ability to protect our intellectual property and customer data, as well as to maintain our brand;

•the willingness of and ability of our solar partners to fulfill their respective warranty and other contractual obligations;

•our ability to renew or replace expiring, canceled or terminated Customer Agreements at favorable rates or on a long-term basis;

•the ability of our solar energy systems to operate or deliver energy for any reason, including if interconnection or transmission facilities on which we rely become unavailable;

•our expectations regarding certain performance objectives and the renewal rates and purchase value of our solar energy systems after expiration of our Customer Agreements;

•the calculation of certain of our key financial and operating metrics and accounting policies; and

•our ability to capitalize on the market opportunities created by the electrification of the U.S. economy with renewable energy.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. These risks and uncertainties may be amplified by evolving economic and regulatory conditions, including increasing or volatile interest rates. The extent to which these risks and uncertainties impact our business, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous factors, including, but not limited to, the duration, rapidity, and intensity of these conditions, how widespread their impact is and will continue to be on our industry, and how quickly and to what extent more predictable and stable economic conditions resume. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission (the “SEC”) as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

SELECTED RISKS AFFECTING OUR BUSINESS

Investing in our common stock involves numerous risks, including the risks described in “Part II, Item 1A. Risk Factors”, of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations and prospects.

Selected Risks Related to the Solar Industry

•The solar energy industry is an emerging market which is constantly evolving and may not develop to the size or at the rate we expect.

•We have historically benefited from declining costs in our industry, and our business and financial results may be harmed not only as a result of any increases in costs associated with our solar service offerings but also any failure of these costs to continue to decline as we currently expect. If we do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired.

•We face competition from traditional energy companies as well as solar and other renewable energy companies.

Selected Risks Related to Our Operating Structure and Financing Activities

•We need to raise capital to finance the continued growth of our operations and solar service business. If capital is not available to us on acceptable terms, as and when needed, our business and prospects would be materially and adversely impacted. In addition, our business is affected by general economic conditions and related uncertainties affecting markets in which we operate. Volatility in current economic conditions could adversely impact our business, including our ability to raise financing.

•Volatility and increases in interest rates raise our cost of capital and may adversely impact our business.

•We expect to incur substantially more debt in the future, which could intensify the risks to our business.

Selected Risks Related to Regulation and Policy

•We rely on certain utility rate structures, such as net metering, to offer competitive pricing to customers in all of our current markets, and changes to such policies, such as those currently under consideration by the California Public Utilities Commission, may significantly reduce demand for electricity from our solar service offerings.

•Electric utility statutes and regulations and changes to such statutes or regulations may present technical, regulatory and economic barriers to the purchase and use of our solar service offerings that may significantly reduce demand for such offerings.

•Regulations and policies related to rate design could deter potential customers from purchasing our solar service offerings, reduce the value of the electricity our systems produce, and reduce any savings that our customers could realize from our solar service offerings.

Selected Risks Related to Our Business Operations

•Our growth depends in part on the success of our relationships with third parties, including our solar partners.

•We and our solar partners depend on a limited number of suppliers of solar panels, batteries, and other system components to adequately meet anticipated demand for our solar service offerings. Any shortage, bottlenecks, delay, detentions or component price change from these suppliers, or the acquisition of any of these suppliers by a competitor, could result in sales and installation delays, cancellations and loss of market share.

•If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.

•The COVID-19 pandemic, including its variants, has had and could continue to have an adverse impact on our business, operations and the markets and communities in which we operate. Efforts to mitigate or contain the pandemic and the resulting weakened economic conditions may disrupt and adversely affect our business.

•We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt our business and our management.

•A failure to hire and retain a sufficient number of employees and service providers in key functions would constrain our growth and our ability to timely complete customers' Projects and successfully manage customer accounts.

•Regulators may limit the type of electricians qualified to install and service our solar and battery systems in California, which may result in workforce shortages, operational delays, and increased costs.

•Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of our common stock.

•Our actual financial results may differ materially from any guidance we may publish from time to time.

Selected Risks Related to Taxes and Accounting

•Our ability to provide our solar service offerings to customers on an economically viable basis depends in part on our ability to finance these systems with fund investors who seek particular tax and other benefits.

•If the Internal Revenue Service makes determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our fund investors, and our business, financial condition and prospects may be materially and adversely affected.

•Our business currently depends on the availability of utility rebates, tax credits and other benefits, tax exemptions and exclusions, and other financial incentives, on the federal, state, and/or local levels. We may be adversely affected by changes in, or interpretation of the application of, these laws or other incentives to us, and the expiration, elimination or reduction of these benefits could adversely impact our business.

If we are unable to adequately address these and other risks we face, our business may be harmed.

Sunrun Inc.

Consolidated Balance Sheets

(In Thousands, Except Share Par Values)

(Unaudited)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash	$	672,083	$	617,634
Restricted cash	283,822		232,649
Accounts receivable (net of allowances for credit losses of $12,452 and $11,035 as of September 30, 2022 and December 31, 2021, respectively)	218,837		146,037

Inventories	589,094		506,819
Prepaid expenses and other current assets	116,192		44,580
Total current assets	1,880,028		1,547,719
Restricted cash	148		148
Solar energy systems, net	10,573,591		9,459,696
Property and equipment, net	63,698		56,886
Intangible assets, net	8,868		12,891
Goodwill	4,280,169		4,280,169
Other assets	1,761,556		1,125,743
Total assets (1)	$	18,568,058	$	16,483,252
Liabilities and total equity
Current liabilities:
Accounts payable	$	275,057	$	288,108
Distributions payable to noncontrolling interests and redeemable noncontrolling interests	38,125		31,582
Accrued expenses and other liabilities	401,141		364,136
Deferred revenue, current portion	146,098		111,739
Deferred grants, current portion	8,268		8,302
Finance lease obligations, current portion	11,786		10,901
Non-recourse debt, current portion	185,800		190,186
Pass-through financing obligation, current portion	16,230		7,166
Total current liabilities	1,082,505		1,012,120
Deferred revenue, net of current portion	860,887		761,872
Deferred grants, net of current portion	199,433		206,615
Finance lease obligations, net of current portion	16,643		11,314
Convertible senior notes	392,310		390,618
Line of credit	505,967		211,066
Non-recourse debt, net of current portion	6,901,087		5,711,020
Pass-through financing obligation, net of current portion	291,685		314,231
Other liabilities	141,374		190,056
Deferred tax liabilities	122,930		101,753
Total liabilities (1)	10,514,821		8,910,665
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests	609,479		594,973
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 200,000 shares as of September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of September 30, 2022 and December 31, 2021; issued and outstanding, 212,954 and 208,176 shares as of September 30, 2022 and December 31, 2021, respectively	21		21
Additional paid-in capital	6,432,240		6,330,344
Accumulated other comprehensive income (loss)	78,463		(73,050)
Retained deficit	107,777		(2,579)
Total stockholders’ equity	6,618,501		6,254,736
Noncontrolling interests	825,257		722,878
Total equity	7,443,758		6,977,614
Total liabilities, redeemable noncontrolling interests and total equity	$	18,568,058	$	16,483,252

1)The Company’s consolidated assets as of September 30, 2022 and December 31, 2021 include $9,353,167 and $8,381,220, 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, 2022 and December 31, 2021 of $8,526,271 and $7,605,769, respectively; cash as of September 30, 2022 and December 31, 2021 of $340,122 and $377,044, respectively; restricted cash as of September 30, 2022 and December 31, 2021 of $77,423 and $70,346, respectively; accounts receivable, net as of September 30, 2022 and December 31, 2021 of $72,125 and $55,714, respectively; inventories as of September 30, 2022 and December 31, 2021 of $63,307 and 93,604, respectively; prepaid expenses and other current assets as of September 30, 2022 and December 31, 2021 of $9,599 and $1,519, respectively; and other assets as of September 30, 2022 and December 31, 2021 of $264,320 and $177,224, respectively. The Company’s consolidated liabilities as of September 30, 2022 and December 31, 2021 include $2,138,229 and $2,152,492, respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of September 30, 2022 and December 31, 2021 of $20,611 and $26,042, respectively; distributions payable to noncontrolling interests and redeemable noncontrolling interests as of September 30, 2022 and December 31, 2021 of $38,126 and $31,582, respectively; accrued expenses and other current liabilities as of September 30, 2022 and December 31, 2021 of $27,994 and $31,036, respectively; deferred revenue as of September 30, 2022 and December 31, 2021 of $599,643 and $530,385, respectively; deferred grants as of September 30, 2022 and December 31, 2021 of $0 and $25,634, respectively; non-recourse debt as of September 30, 2022 and December 31, 2021 of $1,437,366 and $1,482,608, respectively; and other liabilities as of September 30, 2022 and December 31, 2021 of $14,489 and $25,205, 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,
	2022		2021		2022		2021
Revenue:
Customer agreements and incentives	$	271,211	$	231,869	$	740,789	$	625,939
Solar energy systems and product sales	360,695		206,896		971,481		548,786
Total revenue	631,906		438,765		1,712,270		1,174,725
Operating expenses:
Cost of customer agreements and incentives	209,539		174,457		613,878		512,073
Cost of solar energy systems and product sales	311,782		172,538		854,105		458,208
Sales and marketing	193,992		171,462		556,346		442,174
Research and development	4,398		5,602		16,794		16,624
General and administrative	47,099		51,290		140,126		199,836
Amortization of intangible assets	1,341		1,341		4,023		4,029
Total operating expenses	768,151		576,690		2,185,272		1,632,944
Loss from operations	(136,245)		(137,925)		(473,002)		(458,219)
Interest expense, net	(117,214)		(89,096)		(312,513)		(238,365)
Other income (expenses), net	97,953		(4,332)		263,784		18,462
Loss before income taxes	(155,506)		(231,353)		(521,731)		(678,122)
Income tax expense (benefit)	—		9,980		—		(19,058)
Net loss	(155,506)		(241,333)		(521,731)		(659,064)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(366,066)		(265,462)		(632,087)		(618,160)
Net income (loss) attributable to common stockholders	$	210,560	$	24,129	$	110,356	$	(40,904)
Net income (loss) per share attributable to common stockholders
Basic	$	0.99	$	0.12	$	0.52	$	(0.20)
Diluted	$	0.96	$	0.11	$	0.51	$	(0.20)
Weighted average shares used to compute net income (loss) per share attributable to common stockholders
Basic	212,696		206,103		210,609		204,355
Diluted	220,850		213,016		218,662		204,355

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,
	2022		2021		2022		2021
Net income (loss) attributable to common stockholders	$	210,560	$	24,129	$	110,356	$	(40,904)
Unrealized gain (loss) on derivatives, net of income taxes	38,545		(968)		150,751		17,620
Adjustment for net (gain) loss on derivatives recognized into earnings, net of income taxes	(5,808)		4,731		762		11,454
Other comprehensive income	32,737		3,763		151,513		29,074
Comprehensive income (loss)	$	243,297	$	27,892	$	261,869	$	(11,830)

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Three Months Ended September 30, 2022 and 2021

(In Thousands)

(Unaudited)


	Three Months Ended September 30, 2022
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income		Retained Deficit		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at June 30, 2022	$	639,740		211,943	$	21		$	6,403,716	$	45,726	$	(102,783)	$	6,346,680	$	826,221	$	7,172,901

Exercise of stock options	—			596	—			4,717		—		—		4,717		—		4,717
Issuance of restricted stock units, net of tax withholdings	—			415	—			—		—		—		—		—		—

Stock-based compensation	—			—	—			25,487		—		—		25,487		—		25,487
Contributions from noncontrolling interests and redeemable noncontrolling interests	—			—	—			—		—		—		—		393,799		393,799
Distributions to noncontrolling interests and redeemable noncontrolling interests	(18,247)			—	—			—		—		—		—		(35,191)		(35,191)
Net (loss) income	(12,014)			—	—			—		—		210,560		210,560		(354,052)		(143,492)

Acquisition of noncontrolling interests	—			—	—			(1,680)		—		—		(1,680)		(5,520)		(7,200)
Other comprehensive income, net of taxes	—			—	—			—		32,737		—		32,737		—		32,737
Balance at September 30, 2022	$	609,479		212,954	$	21		$	6,432,240	$	78,463	$	107,777	$	6,618,501	$	825,257	$	7,443,758


	Three Months Ended September 30, 2021
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Income		Retained Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at June 30,2021	$	599,313		205,374	$	21		$	6,226,069	$	(81,444)	$	11,811	$	6,156,457	$	736,336	$	6,892,793

Exercise of stock options	—			483	—			4,343		—		—		4,343		—		4,343
Issuance of restricted stock units, net of tax withholdings	—			1,030	—			—		—		—		—		—		—

Stock-based compensation	—			—	—			41,980		—		—		41,980		—		41,980
Contributions from noncontrolling interests and redeemable noncontrolling interests	90,000			—	—			—		—		—		—		234,342		234,342
Distributions to noncontrolling interests and redeemable noncontrolling interests	(15,104)			—	—			—		—		—		—		(37,124)		(37,124)
Net (loss) income	(58,453)			—	—			—		—		24,129		24,129		(207,009)		(182,880)

Acquisition of noncontrolling interest	(18,855)			—	—			(7,562)		—		—		(7,562)		(8,146)		(15,708)
Other comprehensive income, net of taxes	—			—	—			—		3,763		—		3,763		—		3,763
Balance at September 30, 2021	$	596,901		206,887	$	21		$	6,264,830	$	(77,681)	$	35,940	$	6,223,110	$	718,399	$	6,941,509

Sunrun Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

Nine Months Ended September 30, 2022 and 2021

(In Thousands)

(Unaudited)


	Nine Months Ended September 30, 2022
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Income		Retained Deficit		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at December 31, 2021	$	594,973		208,176	$	21		$	6,330,344	$	(73,050)	$	(2,579)	$	6,254,736	$	722,878	$	6,977,614

Exercise of stock options	—			1,547	—			12,210		—		—		12,210		—		12,210
Issuance of restricted stock units, net of tax withholdings	—			2,532	—			—		—		—		—		—		—
Shares issued in connection with the Employee Stock Purchase Plan	—			699	—			10,345		—		—		10,345		—		10,345
Stock-based compensation	—			—	—			98,784		—		—		98,784		—		98,784
Contributions from noncontrolling interests and redeemable noncontrolling interests	100,019			—	—			—		—		—		—		825,531		825,531
Distributions to noncontrolling interests and redeemable noncontrolling interests	(50,451)			—	—			—		—		—		—		(108,197)		(108,197)
Net (loss) income	(35,062)			—	—			—		—		110,356		110,356		(597,025)		(486,669)

Acquisition of noncontrolling interests	—			—	—			(19,443)		—		—		(19,443)		(17,930)		(37,373)
Other comprehensive income, net of taxes	—			—	—			—		151,513		—		151,513		—		151,513
Balance at September 30, 2022	$	609,479		212,954	$	21		$	6,432,240	$	78,463	$	107,777	$	6,618,501	$	825,257	$	7,443,758


	Nine Months Ended September 30, 2021
	Redeemable Noncontrolling Interests		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Income		Retained Earnings			Total Stockholders' Equity		Noncontrolling Interests		Total Equity
				Shares			Amount
Balance at December 31, 2020	$	560,461		201,406	$	20		$	6,107,802	$	(106,755)	)	$	76,844	$	6,077,911	$	650,999	$	6,728,910

Exercise of stock options	—			1,832	—			16,587		—			—		16,587		—		16,587
Issuance of restricted stock units, net of tax withholdings	—			3,206	1			—		—			—		1		—		1
Shares issued in connection with the Employee Stock Purchase Plan	—			443	—			6,761		—			—		6,761		—		6,761
Stock-based compensation	—			—	—			168,970		—			—		168,970		—		168,970
Contributions from noncontrolling interests and redeemable noncontrolling interests	157,127			—	—			—		—			—		—		743,205		743,205
Distributions to noncontrolling interests and redeemable noncontrolling interests	(47,318)			—	—			—		—			—		—		(99,441)		(99,441)
Net loss	(49,942)			—	—			—		—			(40,904)		(40,904)		(568,218)		(609,122)
Capped call transaction	—			—	—			(28,000)		—			—		(28,000)		—		(28,000)
Acquisition of noncontrolling interests	(23,427)			—	—			(7,290)		—			—		(7,290)		(8,146)		(15,436)
Other comprehensive income, net of taxes	—			—	—			—		29,074			—		29,074		—		29,074
Balance at September 30, 2021	$	596,901		206,887	$	21		$	6,264,830	$	(77,681)		$	35,940	$	6,223,110	$	718,399	$	6,941,509

Sunrun Inc.

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Operating activities:
Net loss	$	(521,731)	$	(659,064)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, net of amortization of deferred grants	331,856		286,001
Deferred income taxes	—		(18,709)
Stock-based compensation expense	88,702		160,754

Interest on pass-through financing obligations	15,079		16,288
Reduction in pass-through financing obligations	(31,105)		(32,160)
Unrealized gain on derivatives	(191,818)		(24,677)
Other noncash items	26,368		63,333
Changes in operating assets and liabilities:
Accounts receivable	(87,307)		(90,170)
Inventories	(82,275)		(161,474)
Prepaid and other assets	(283,715)		(273,948)
Accounts payable	(14,763)		120,412
Accrued expenses and other liabilities	72,801		27,953
Deferred revenue	133,788		49,632
Net cash used in operating activities	(544,120)		(535,829)
Investing activities:
Payments for the costs of solar energy systems	(1,481,556)		(1,186,330)
Purchase of equity investment	(75,000)		—
Purchases of property and equipment, net	(10,820)		(11,640)
Net cash used in investing activities	(1,567,376)		(1,197,970)
Financing activities:

Proceeds from line of credit	1,018,967		526,980
Repayment of line of credit	(724,066)		(548,356)
Proceeds from issuance of convertible senior notes, net of capped call transaction	—		371,998
Proceeds from issuance of non-recourse debt	2,381,630		1,691,255
Repayment of non-recourse debt	(1,166,720)		(753,046)
Payment of debt fees	(42,282)		(42,757)
Proceeds from pass-through financing and other obligations, net	1,451		7,857
Repayment of pass-through financing obligation	—		(18,050)
Payment of finance lease obligations	(10,489)		(9,243)
Contributions received from noncontrolling interests and redeemable noncontrolling interests	925,550		900,332
Distributions paid to noncontrolling interests and redeemable noncontrolling interests	(152,105)		(142,036)
Acquisition of noncontrolling interest	(37,373)		(41,572)
Net proceeds related to stock-based award activities	22,555		23,350

Net cash provided by financing activities	2,217,118		1,966,712

Net change in cash and restricted cash	105,622		232,913
Cash and restricted cash, beginning of period	850,431		708,208
Cash and restricted cash, end of period	$	956,053	$	941,121
Supplemental disclosures of cash flow information
Cash paid for interest	$	209,723	$	169,737
Cash paid for income taxes	$	—	$	—
Supplemental disclosures of noncash investing and financing activities
Purchases of solar energy systems and property and equipment included in accounts payable and accrued expenses	$	52,246	$	56,818
Right-of-use assets obtained in exchange for new finance lease liabilities	$	17,000	$	9,424

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

Sunrun Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Organization

Sunrun Inc. (“Sunrun” or the “Company”) was formed in 2007. The Company is engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States.

Sunrun acquires customers directly and through relationships with various solar and strategic partners (“Partners”). The Projects are constructed either by Sunrun or by Sunrun’s Partners and are owned by the Company. Sunrun’s customers enter into an agreement to utilize the solar energy system (“Customer Agreement”) which typically has an initial term of 20 or 25 years. Sunrun monitors, maintains and insures the Projects. The Company also sells solar energy systems and products, such as panels and racking and solar leads generated to customers.

The Company has formed various subsidiaries (“Funds”) to finance the development of Projects. These Funds, structured as limited liability companies, obtain financing from outside investors and purchase or lease Projects from Sunrun under master purchase or master lease agreements. The Company currently utilizes three legal structures in its investment Funds, which are referred to as: (i) pass-through financing obligations, (ii) partnership-flips and (iii) joint venture (“JV”) inverted leases.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2021. The results of the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2022 or other future periods.

The consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries, including Funds, in which the Company has a controlling financial interest. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity. However, a controlling financial interest may also exist in entities, such as variable interest entities (“VIEs”), through arrangements that do not involve controlling voting interests. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810 (“ASC 810”) Consolidation, the Company consolidates any VIE of which it is the primary beneficiary. The primary beneficiary, as defined in ASC 810, is the party that has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it continues to be the primary beneficiary. The consolidated financial statements reflect the assets and liabilities of VIEs that are consolidated. All intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company regularly makes estimates and assumptions, including, but not limited to, revenue recognition constraints that result in variable consideration, the discount rate used to adjust the promised amount of consideration for the effects of a significant financing component, the estimates that affect the collectability of accounts receivable, the valuation of inventories, the useful lives of solar energy systems, the useful lives of property and equipment, the valuation and useful lives of intangible assets, the effective interest rate used to amortize pass-through financing obligations, the discount rate uses for operating and financing leases, the fair value of contingent consideration, the fair value of investments in equity securities, the fair value of assets acquired and liabilities assumed in a business combination, the valuation of stock-based compensation, the determination of valuation allowances associated with deferred tax assets, the fair value of debt instruments disclosed and the redemption value of redeemable noncontrolling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Actual results may differ from such estimates.

Segment Information

The Company has one operating segment with one business activity, providing solar energy services and products to customers. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who manages operations on a consolidated basis for purposes of allocating resources. When evaluating performance and allocating resources, the CODM reviews financial information presented on a consolidated basis.

Revenue from external customers (including, but not limited to homeowners) for each group of similar products and services is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Customer agreements	$	234,219	$	194,924	$	656,724	$	549,689
Incentives	36,992		36,945		84,065		76,250
Customer agreements and incentives	271,211		231,869		740,789		625,939

Solar energy systems	241,697		127,936		651,010		307,408
Products	118,998		78,960		320,471		241,378
Solar energy systems and product sales	360,695		206,896		971,481		548,786
Total revenue	$	631,906	$	438,765	$	1,712,270	$	1,174,725

Revenue from Customer Agreements includes payments by customers for the use of the system as well as utility and other rebates assigned by the customer to the Company in the Customer Agreement. Revenue from incentives includes revenue from the sale of commercial investment tax credits ("Commercial ITCs") and solar renewable energy credits (“SRECs”).

Cash and Restricted Cash

Restricted cash represents amounts related to obligations under certain financing transactions and future replacement of solar energy system components.

The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows. Cash and restricted cash consists of the following (in thousands):


	Nine Months Ended September 30,
	2022		2021
Beginning of period:
Cash	$	617,634	$	519,965
Restricted cash, current and long-term	232,797		188,243
Total	$	850,431	$	708,208

End of period:
Cash	$	672,083	$	717,593
Restricted cash, current and long-term	283,970		223,528
Total	$	956,053	$	941,121

Accounts Receivable

Accounts receivable consist of amounts due from customers, as well as state and utility rebates due from government agencies and utility companies. Under Customer Agreements, the customers typically assign incentive rebates to the Company.

Accounts receivable, net, consists of the following (in thousands):

September 30, 2022

December 31, 2021

Customer receivables