Sunrun Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Acquisitions

Acquisitions

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Vivint Solar, Inc.

On October 8, 2020, the Company acquired Vivint Solar, a leading full-service residential solar provider in the United States, at an estimated purchase price of $5.0 billion, pursuant to an Agreement and Plan of Merger, dated as of July 6, 2020, by and among the Company, Vivint Solar and Viking Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which Merger Sub merged with and into Vivint Solar, with Vivint Solar continuing as the surviving corporation (the “Merger”). As a result of the Merger, Vivint Solar became a direct wholly owned subsidiary of the Company.

The calculation of the purchase price is as follows (in thousands, except for share, per share and ratio amounts):


Vivint Solar outstanding common stock at October 8, 2020	126,313,816
Exchange ratio	0.55
Number of Sunrun shares issued	69,472,599
Per share price of Sunrun common stock at October 8, 2020	$	70.54
Fair value of Sunrun common stock issued	4,900,597
Fair value of replacement Sunrun stock options and restricted stock units	136,919
Purchase price	$	5,037,516

Transaction costs of $25.5 million were expensed as incurred in general and administrative expense in the Company's consolidated statements of operations.

The results of Vivint Solar have been included in the Company's consolidated financial statements since the acquisition date. For the year ended December 31, 2020, the revenue and net loss from Vivint Solar recognized in the Company's consolidated statement of operations were $81.3 million and $167.7 million, respectively.

Fair values assigned to assets acquired and liabilities assumed are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives and the expected future cash flows and related discount rates, can materially impact the Company's results of operations. Specifically, the Company used discounted cash flow models to value the solar energy systems and the noncontrolling interests in subsidiaries. Inputs used for the models were Level 3 inputs and included the amount of cash flows, the expected period of the cash flows and the discount rates. The fair value of the assumed debt instruments was based on rates offered for debt with similar maturities and terms on October 8, 2020 and its fair value fell under the Level 2 hierarchy.

The fair value of the assets acquired and liabilities assumed was finalized during 2021 and resulted in no additional adjustments. The following table sets forth the purchase accounting for Vivint Solar’s identifiable tangible and intangible assets acquired and liabilities assumed, with the excess recorded as goodwill (in thousands):


Assets acquired:
Cash and cash equivalents	$	433,217
Accounts receivable	29,207
Inventories	70,028
Solar energy systems	2,979,304
Property and equipment	19,308
Intangible assets	3,900
Restricted cash, current and non-current	104,025
Prepaid expenses and other assets, current and non-current	110,402
Total assets acquired	3,749,391
Liabilities assumed:
Accrued liabilities, accounts payable and distributions payable	177,092
Finance lease obligations, current and non-current	8,408
Deferred revenue, current and long-term	32,604
Debt, current and long-term	2,191,831
Pass-through financing obligation, current and non-current	4,759
Long-term deferred tax liability	92,792
Other long-term liabilities	101,764
Total liabilities assumed	2,609,250
Net assets acquired, excluding goodwill	1,140,141
Redeemable non-controlling interests in subsidiaries	58,300
Non-controlling interests in subsidiaries	229,400
Total other	287,700
Total purchase price	5,037,516
Goodwill	$	4,185,075

Goodwill represents a significant portion of the purchase price for Vivint Solar and is primarily attributable to the acquired assembled workforce and expected synergies from combining operations. Goodwill is not expected to be deductible for tax purposes.

The following table shows selected unaudited pro forma condensed combined total revenue and earnings of the Company after giving effect to the Merger. The selected unaudited pro forma condensed combined total revenue and earnings for the twelve months ended December 31, 2020 and 2019 give effect to the Merger if it occurred on January 1, 2019, the first day of the Company’s 2019 fiscal year (in thousands).


	Year Ended December 31,
	2020		2019
Total revenues	$	1,234,352	$	1,198,759
Net loss	$	(971,554)	$	886,774

The unaudited pro forma financial information includes adjustments to give effect to pro forma events that are directly attributable to the acquisition. The pro forma financial information includes adjustments to amortization and depreciation for solar energy systems, share based compensation, the effect of acquisition on deferred costs and revenues and noncontrolling interests, and transaction costs related to the acquisition. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations of future periods. The unaudited pro forma financial information does not give effect to the potential impact of current financial conditions, regulatory matters, or any anticipated synergies, operating efficiencies, or cost savings that may be associated with the acquisition.