run-ex991_14.htm

SAN FRANCISCO, August 11, 2016, Sunrun (Nasdaq: RUN), the largest dedicated residential solar company in the United States, today announced financial results for the second quarter ended June 30, 2016.

“We are pleased with our performance in the second quarter as we continue to grow and create customer value in 2016,” said Lynn Jurich, Sunrun’s chief executive officer. “We deployed 65 MW in Q2 while improving creation costs over 10% compared to the first quarter and delivering $51 million of NPV. We believe we are well positioned to continue to build growth and customer value that will differentiate us as the leader in bringing local clean energy direct to consumers.”

In the second quarter of 2016, total MW deployed increased to 65 MW from 42 MW in the second quarter of 2015, a 54% year-over-year increase.

Pre-tax project value per watt was $4.61, compared to $4.51 in the first quarter of 2016. Creation cost was $3.67 per watt in the second quarter of 2016 compared to $4.11 in the first quarter of 2016.

NPV created in the second quarter of 2016 was $51 million, compared to $21 million in the first quarter of 2016. Estimated nominal contracted payments remaining as of June 30, 2016 totaled $2.7 billion, up $812 million or 42% since June 30, 2015. Estimated retained value as of June 30, 2016 was $1.7 billion, up $503 million, or 41%, since June 30, 2015.

As of August 10, 2016, with the upsizes of our previously announced back-leverage aggregation facility and working capital facility, we have increased our total capacity to meet expected project finance needs through Q1 2017.

Total revenue grew to $122.5 million in the second quarter of 2016, up $49.8 million, or 69% from the second quarter of 2015. Operating leases and incentives revenue grew 32% year-over-year to $45.4 million. Solar energy systems and product sales grew 102% year-over-year to $77.1 million.

Total cost of revenue was $100.2 million, an increase of 62% year-over-year. Total operating expenses were $171.0 million, an increase of 44% year-over-year.

Net income available to common stockholders was $32.6 million in the second quarter of 2016, compared to net income of $13.1 million in the first quarter of 2016, and $0.0 million net income in the second quarter of 2015.

GAAP diluted net earnings per share available to common shareholders was $0.31 per share.

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.

For 2016, we expect deployments in the range of 270 to 280 MW, focusing primarily on delivering NPV of above $1 per watt in the second half of the year.

Sunrun is hosting a conference call for analysts and investors to discuss its second quarter 2016 results and outlook for its third quarter and full year of 2016 at 2:00 p.m. Pacific Time today, August 11, 2016. A live audio webcast of the conference call along with supplemental financial information will be accessible via the “Investor Relations” section of the Company’s website at http://investors.sunrun.com. The conference call can also be accessed live over the phone by dialing (877) 470-1078 (domestic) or (615) 247-0087 (international) using ID #53418080. A replay will be available following the call via the Sunrun Investor Relations website or for one week at the following numbers (855) 859-2056 (domestic) or (404) 537-3406 (international) using ID #53418080.

Sunrun (Nasdaq: RUN) is the largest dedicated residential solar company in the United States with a mission to create a planet run by the sun. Since establishing the solar as a service model in 2007, Sunrun continues to lead the industry in providing clean energy to homeowners with little to no upfront cost and at a savings to traditional electricity rates. The company designs, installs, finances, insures, monitors and maintains the solar panels on a homeowner's roof, while families receive predictable pricing for 20 years or more. For more information please visit: www.sunrun.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, including statements regarding our future financial and operating guidance, operational and financial results such as growth, value creation, MW bookings and deployments, estimates of nominal contracted payments remaining, estimated retained value, project value, estimated creation costs and NPV, and the assumptions related to the calculation of the foregoing metrics, as well as our expectations regarding our growth and financing capacity. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to: the availability of additional financing on acceptable terms; changes in the retail prices of traditional utility generated electricity; changes in policies and regulations including net metering and interconnection limits or caps; the availability of rebates, tax credits and other incentives; the availability of solar panels and other raw materials; our limited operating history, particularly as a new public company; our ability to attract and retain our relationships with third parties, including our solar partners; our ability to meet the covenants in our investment funds and debt facilities; and such other risks identified in the reports that we file with the U.S. Securities and Exchange Commission, or SEC, from time to time. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

	June 30, 2016		December 31, 2015
	(Unaudited)
Assets
Current assets:
Cash	$	207,220	$	203,864
Restricted cash		10,037		9,203
Accounts receivable (net of allowances for doubtful accounts of $977 and $1,641 as of June 30, 2016 and December 31, 2015, respectively)		56,572		60,275
State tax credits receivable		—		9,198
Inventories		88,207		71,258
Prepaid expenses and other current assets		12,380		5,917
Total current assets		374,416		359,715
Restricted cash		6,117		8,094
Solar energy systems, net		2,282,729		1,992,021
Property and equipment, net		53,348		44,866
Intangible assets, net		20,602		22,705
Goodwill		87,543		87,543
Prepaid tax asset		278,602		190,146
Other assets		33,487		29,502
Total assets	$	3,136,844	$	2,734,592
Liabilities and total equity
Current liabilities:
Accounts payable	$	93,681	$	104,133
Distributions payable to noncontrolling interests and redeemable noncontrolling interests		8,515		8,144
Accrued expenses and other liabilities		52,015		49,146
Deferred revenue, current portion		65,745		59,726
Deferred grants, current portion		14,383		13,949
Capital lease obligations, current portion		11,371		8,951
Long-term non-recourse debt, current portion		6,368		4,722
Lease pass-through financing obligation, current portion		4,301		3,710
Total current liabilities		256,379		252,481
Deferred revenue, net of current portion		579,590		559,066
Deferred grants, net of current portion		212,768		220,784
Capital lease obligations, net of current portion		16,916		15,042
Recourse debt		242,400		197,000
Long-term non-recourse debt, net of current portion		505,918		333,042
Lease pass-through financing obligation, net of current portion		139,873		153,188
Other liabilities		12,165		7,144
Deferred tax liabilities		278,661		190,146
Total liabilities		2,244,670		1,927,893
Redeemable noncontrolling interests		163,520		147,139
Stockholders’ equity		606,858		554,069
Noncontrolling interests		121,796		105,491
Total equity		728,654		659,560
Total liabilities, redeemable noncontrolling interests and total equity	$	3,136,844	$		2,734,592

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenue:
Operating leases and incentives	$	45,394		$	34,458		$	79,934		$	56,766
Solar energy systems and product sales		77,144			38,232			141,347			65,601
Total revenue		122,538			72,690			221,281			122,367
Operating expenses:
Cost of operating leases and incentives		38,608			27,067			76,708			48,444
Cost of solar energy systems and product sales		61,600			34,624			119,112			59,954
Sales and marketing		43,716			33,976			86,904			58,902
Research and development		2,373			2,492			4,836			4,779
General and administrative		23,614			19,677			46,862			39,983
Amortization of intangible assets		1,051			1,051			2,103			1,593
Total operating expenses		170,962			118,887			336,525			213,655
Loss from operations		(48,424	)		(46,197	)		(115,244	)		(91,288	)
Interest expense, net		13,063			8,433			24,578			15,563
Loss on early extinguishment of debt		—			431			—			431
Other expenses (income), net		30			1,019			(502	)		1,318
Loss before income taxes		(61,517	)		(56,080	)		(139,320	)		(108,600	)
Income tax expense (benefit)		3,210			(6,215	)		3,210			(6,215	)
Net loss		(64,727	)		(49,865	)		(142,530	)		(102,385	)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests		(97,370	)		(57,405	)		(188,307	)		(91,930	)
Net income (loss) attributable to common stockholders	$	32,643		$	7,540		$	45,777		$	(10,455	)
Less: Net income allocated to participating securities		—			(7,540	)		—			—
Net income (loss) available to common stockholders	$	32,643		$	—		$	45,777		$	(10,455	)

Net income (loss) per share available to common stockholders
Basic	$	0.32		$	—		$	0.45		$	(0.41	)
Diluted	$	0.31		$	—		$	0.44		$	(0.41	)
Weighted average shares used to compute net income (loss) per share available to common stockholders
Basic		101,969			26,215			101,621			25,322
Diluted		104,768			26,215			104,494			25,322

	Six Months Ended June 30,
	2016			2015
Operating activities:
Net loss	$	(142,530	)	$	(102,385	)
Adjustments to reconcile net loss to net cash used in operating activities:
Noncash losses		2,510			431
Depreciation and amortization, net of amortization of deferred grants		46,564			32,673
Bad debt expense		414			739
Interest on lease pass-through financing		6,019			7,177
Noncash tax expense (benefit)		3,210			(6,215	)
Noncash interest expense		5,335			4,443
Stock-based compensation expense		8,647			6,421
Reduction in lease pass-through financing obligations		(9,491	)		(10,379	)
Changes in operating assets and liabilities:
Accounts receivable		3,884			(4,216	)
Inventories		(16,839	)		(13,890	)
Prepaid and other assets		(2,760	)		(8,615	)
Accounts payable		(9,889	)		22,751
Accrued expenses and other liabilities		3,218			6,209
Deferred revenue		3,295			20,254
Net cash used in operating activities		(98,413	)		(44,602	)

Investing activities:
Payments for the costs of solar energy systems, leased and to be leased		(332,472	)		(257,806	)
Purchases of property and equipment		(8,208	)		(4,688	)
Business acquisition, net of cash acquired		(5,000	)		(14,575	)
Net cash used in investing activities		(345,680	)		(277,069	)

Financing activities:
Proceeds from state tax credits, net of recapture		9,123			5,120
Proceeds from recourse debt		257,400			143,000
Repayment of recourse debt		(212,000	)		(49,224	)
Proceeds from non-recourse debt		189,746			10,200
Repayment of non-recourse debt		(16,543	)		(5,732	)
Payment of debt fees		(12,277	)		(2,801	)
Proceeds from lease pass-through financing obligations		12,805			52,034
Contributions received from noncontrolling interests and redeemable noncontrolling interests		239,621			155,662
Distributions paid to noncontrolling interests and redeemable noncontrolling interests		(18,257	)		(13,717	)
Proceeds from exercises of stock options, net of withholding taxes on restricted stock units and issuance of shares in connection with the Employee Stock Purchase Plan		3,616			2,387
Offering costs paid related to initial public offering		(437	)		(4,722	)
Payment of capital lease obligations		(6,416	)		(1,472	)
Change in restricted cash		1,068			(4,608	)
Net cash provided by financing activities		447,449			286,127

Net increase (decrease) in cash		3,356			(35,544	)
Cash, beginning of period		203,864			152,154
Cash, end of period	$	207,220		$	116,610

Creation Cost includes (i) certain installation and general and administrative costs after subtracting the gross margin on solar energy systems and product sales divided by watts deployed during the measurement period and (ii) certain sales and marketing expenses under new Customer Agreements, net of cancellations during such period divided by the related watts booked.

Customers refers to residential customers with solar energy systems that are installed or under contract to install, net of cancellations.

Customer Agreements refers to, collectively, solar power purchase agreements and solar leases.

Estimated Nominal Contracted Payments Remaining equals the sum of the remaining cash payments that Customers are expected to pay over the initial terms of their Customer Agreements (not including the value of any renewal or system purchase at the end of the initial contract term, but including estimated uncollected prepayments), for systems contracted as of the measurement date.

Estimated Retained Value represents the estimated nominal contracted payments remaining (discounted at 6%), less substantially all value from solar renewable energy credits (“SRECs”) prior to July 1, 2015. It also includes a discounted (at 6%) estimate of the value of the solar system purchase or contract renewal at the end of the initial term. Estimated retained value is calculated as the discounted cash flows less estimated distributions to investors in consolidated joint ventures and less estimated operating, maintenance and administrative expenses for systems contracted as of the measurement date. We do not deduct amounts we are obligated to pass through to investors in lease pass-throughs, as we consider those obligations debt obligations.

Estimated Retained Value Under Energy Contract represents the net cash flows during the initial (typically 20 year) term of our Customer Agreements (less substantially all value from SRECs prior to July 1, 2015).

Estimated Retained Value of Purchase or Renewal is the forecasted net present value we would receive upon or following the expiration of the initial contract term (either in the form of cash payments during any applicable renewal period or a system purchase at the end of the initial term).

Estimated Retained Value Per Watt is calculated by dividing the estimated retained value as of the measurement date by the aggregate nameplate capacity of solar energy systems deployed with executed Customer Agreements as of such date.

MW Booked represents the aggregate megawatt production capacity of our solar energy systems sold to customers or subject to an executed Customer Agreement, net of cancellations.

MW Deployed represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to executed Customer Agreements, for which we have (i) confirmation that the systems are installed on the roof, subject to final inspection or (ii) in the case of certain system installations by our partners, accrued at least 80% of the expected project cost.

NPV equals unlevered net present value multiplied by leased megawatts deployed in period.

Project Value represents the value of upfront and future payments by customers, the benefits received from utility and state incentives, as well as the present value of net proceeds derived through investment funds. Specifically, project value is calculated as the sum of the following items (all measured on a per-watt basis with respect to megawatts deployed under Customer Agreements during the period): (i) estimated retained value, (ii) utility or upfront state incentives, (iii) upfront payments from customers for deposits and partial or full prepayments of amounts otherwise due under Customer Agreements and which are not already included in estimated retained value and (iv) finance proceeds from tax equity investors. Project value includes contracted SRECs for all periods after July 1, 2015. Project value does not include cash true-up payments or the value of asset contributions in lieu of cash true-up payments made to investment fund investors, the cumulative impact of which is expected to be immaterial in 2016.

Unlevered NPV equals the difference between project value and estimated creation cost on a per watt basis.

	As of June 30,
	2016		2015
MW Booked		74		61
MW Deployed		65		42
Cumulative MW Deployed		721		473
Estimated Nominal Contracted Payments Remaining (in millions)	$	2,729	$	1,917
Estimated Retained Value under Energy Contract (in millions)	$	1,163	$	808
Estimated Retained Value of Purchase or Renewal (in millions)	$	563	$	415
Estimated Retained Value (in millions)(1)	$	1,725	$	1,223
Estimated Retained Value (per watt)	$	2.30	$	2.39

	Three Months Ended June 30,
	2016		2015
Project Value (per watt)	$	4.61	$	5.00(2)
Creation Cost (3)(per watt)	$	3.67	$	4.08
Unlevered NPV (per watt)	$	0.94	$	0.92
NPV (in millions)	$	51	$	37