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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
OR
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)
Delaware26-2841711
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareRUNNasdaq 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 filerAccelerated filer
     
Non-accelerated filerSmaller 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
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

1


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;
2



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.


3


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.
4


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.
5



Sunrun Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Par Values)
(Unaudited)
September 30, 2022December 31, 2021
Assets
Current assets:
Cash$672,083 $617,634 
Restricted cash283,822 232,649 
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 
Inventories589,094 506,819 
Prepaid expenses and other current assets116,192 44,580 
Total current assets1,880,028 1,547,719 
Restricted cash148 148 
Solar energy systems, net10,573,591 9,459,696 
Property and equipment, net63,698 56,886 
Intangible assets, net8,868 12,891 
Goodwill4,280,169 4,280,169 
Other assets1,761,556 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 liabilities401,141 364,136 
Deferred revenue, current portion146,098 111,739 
Deferred grants, current portion8,268 8,302 
Finance lease obligations, current portion11,786 10,901 
Non-recourse debt, current portion185,800 190,186 
Pass-through financing obligation, current portion16,230 7,166 
Total current liabilities1,082,505 1,012,120 
Deferred revenue, net of current portion860,887 761,872 
Deferred grants, net of current portion199,433 206,615 
Finance lease obligations, net of current portion16,643 11,314 
Convertible senior notes392,310 390,618 
Line of credit505,967 211,066 
Non-recourse debt, net of current portion6,901,087 5,711,020 
Pass-through financing obligation, net of current portion291,685 314,231 
Other liabilities141,374 190,056 
Deferred tax liabilities122,930 101,753 
Total liabilities (1)
10,514,821 8,910,665 
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests609,479 594,973 
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 capital6,432,240 6,330,344 
Accumulated other comprehensive income (loss)78,463 (73,050)
Retained deficit107,777 (2,579)
Total stockholders’ equity6,618,501 6,254,736 
Noncontrolling interests825,257 722,878 
Total equity7,443,758 6,977,614 
Total liabilities, redeemable noncontrolling interests and total equity$18,568,058 $16,483,252 


6







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.
7


Sunrun Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue:
Customer agreements and incentives$271,211 $231,869 $740,789 $625,939 
Solar energy systems and product sales360,695 206,896 971,481 548,786 
Total revenue631,906 438,765 1,712,270 1,174,725 
Operating expenses:
Cost of customer agreements and incentives209,539 174,457 613,878 512,073 
Cost of solar energy systems and product sales
311,782 172,538 854,105 458,208 
Sales and marketing193,992 171,462 556,346 442,174 
Research and development4,398 5,602 16,794 16,624 
General and administrative47,099 51,290 140,126 199,836 
Amortization of intangible assets1,341 1,341 4,023 4,029 
Total operating expenses768,151 576,690 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), net97,953 (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
Basic212,696 206,103 210,609 204,355 
Diluted220,850 213,016 218,662 204,355 

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

8


Sunrun Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net income (loss) attributable to common stockholders$210,560 $24,129 $110,356 $(40,904)
Unrealized gain (loss) on derivatives, net of income taxes38,545 (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 income32,737 3,763 151,513 29,074 
Comprehensive income (loss)$243,297 $27,892 $261,869 $(11,830)

9


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 StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Retained
Deficit
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
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 StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Retained
Earnings
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
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 


10


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 StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Retained
Deficit
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
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 StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Retained
Earnings
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
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 
11


Sunrun Inc.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months Ended September 30,
20222021
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 grants331,856 286,001 
Deferred income taxes (18,709)
Stock-based compensation expense88,702 160,754 
Interest on pass-through financing obligations15,079 16,288 
Reduction in pass-through financing obligations(31,105)(32,160)
Unrealized gain on derivatives(191,818)(24,677)
Other noncash items26,368 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 liabilities72,801 27,953 
Deferred revenue133,788 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 credit1,018,967 526,980 
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 debt2,381,630 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, net1,451 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 interests925,550 900,332 
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 activities22,555 23,350 
Net cash provided by financing activities2,217,118 1,966,712 
Net change in cash and restricted cash105,622 232,913 
Cash and restricted cash, beginning of period850,431 708,208 
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 

12


The accompanying notes are an integral part of these consolidated financial statements.
13


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.
14


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,
2022202120222021
Customer agreements$234,219 $194,924 $656,724 $549,689 
Incentives36,992 36,945 84,065 76,250 
Customer agreements and incentives271,211 231,869 740,789 625,939 
Solar energy systems241,697 127,936 651,010 307,408 
Products118,998 78,960 320,471 241,378 
Solar energy systems and product sales360,695 206,896 971,481 548,786 
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.
15


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,
  20222021
Beginning of period:
   Cash $617,634 $519,965 
   Restricted cash, current and long-term232,797 188,243 
Total$850,431 $708,208 
End of period:
   Cash $672,083 $717,593 
   Restricted cash, current and long-term283,970 223,528 
Total$956,053 $941,121 
Accounts Receivable
Accounts receivable consist of amounts due from customers, as well as state and utility rebates due from government agencies and utility companies. Under Customer Agreements, the customers typically assign incentive rebates to the Company.
Accounts receivable, net, consists of the following (in thousands):
  September 30, 2022 December 31, 2021
Customer receivables$