What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-06 · 94 added, 91 removed, 313 unchanged (37% of the section changed)

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For GC assets, the off-taker or counterparty may be a utility or electric user who has entered into a contractual commitment, such as a power purchase agreement (“PPA”), to purchase power produced by a renewable energy project at a minimum price with potential price escalators for a portion of the project’s estimated life.

We completed approximately $509 million and $697 million of transactions during the three and six months ended June 30, 2021, respectively, compared to approximately $178 million and $364 million during the same period in 2020.

As of June 30, 2021, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $3.0 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of June 30, 2021, our Portfolio consisted of over 225 assets and we seek to manage the diversity of our Portfolio by, among other factors, project type, project operator, type of investment, type of technology, transaction size, geography, obligor and maturity.

We completed approximately $359 million and $1.1 billion of transactions during the three and nine months ended September 30, 2021, respectively, compared to approximately $716 million and $1.1 billion during the same period in 2020.

As of September 30, 2021, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $3.2 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of September 30, 2021, our Portfolio consisted of over 260 assets and we seek to manage the diversity of our Portfolio by, among other factors, project type, project operator, type of investment, type of technology, transaction size, geography, obligor and maturity.

For those transactions that we choose not to hold on our balance sheet, we transfer all or a portion of the economics of the transaction, typically using securitization trusts, to institutional investors in exchange for cash and/or residual interests in the assets and in some cases, ongoing fees.

As of June 30, 2021, we managed approximately $5.0 billion in assets in these securitization trusts or vehicles that are not consolidated on our balance sheet.

When combined with our Portfolio, as of June 30, 2021, we manage approximately $8.0 billion of assets which we refer to as our "Managed Assets".

As of September 30, 2021, we managed approximately $5.0 billion in assets in these securitization trusts or vehicles that are not consolidated on our balance sheet.

When combined with our Portfolio, as of September 30, 2021, we manage approximately $8.2 billion of assets which we refer to as our “Managed Assets”.

We make our investments utilizing a variety of structures including:

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We also own, directly or through equity investments, or manage over 31,000 acres of land that are leased under long-term agreements to over 60 renewable energy projects, where our investment returns are typically senior to most project costs, debt, and equity.

We often make investments where we hold preferred or mezzanine position in a project which is subordinated to project debt and/or preferred forms of equity.

We often make investments where we hold preferred or mezzanine position in a project that is subordinated to project debt and/or preferred forms of equity.

Investing greater than 10% of our assets in any individual project requires the approval of a majority of our independent directors.

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Our pipeline of transactions that could potentially close in the next 12 months consists of opportunities in which we will be the lead originator as well as opportunities in which we may participate with other institutional investors.

As of June 30, 2021, our pipeline consisted of more than $3.0 billion in new equity, debt and real estate opportunities.

As of September 30, 2021, our pipeline consisted of more than $3.0 billion in new equity, debt and real estate opportunities.

Of our pipeline, 52% is related to BTM assets and 35% is related to GC assets, with the remainder related to other sustainable infrastructure.

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Government or the International Energy Administration to an estimate of a project’s energy production or savings to compute an estimate of metric tons of carbon emissions avoided.

Refer to Environmental Metrics below for a discussion of the carbon emissions avoided as a result of our investments.

Refer to “MD&A — Environmental Metrics” below for a discussion of the carbon emissions avoided as a result of our investments.

In addition to carbon, we also consider other environmental attributes, such as water use reduction, stormwater remediation benefits and stream restoration benefits.

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Factors Impacting our Operating Results

We expect that our results of operations will be affected by a number of factors and will primarily depend on the size of our Portfolio, including the mix of transactions which we hold in our Portfolio, the income we receive from securitizations, syndications and other services, our Portfolio’s credit risk profile, changes in market interest rates, commodity prices, federal, state and/or municipal governmental policies, general market conditions in local, regional and national economies, our ability to qualify as a REIT and maintain our exemption from registration as an investment company under the 1940 Act, the impacts of climate change, and the impact of the novel coronavirus (COVID-19).

We expect that our results of operations will be affected by a number of factors and will primarily depend on the size of our Portfolio, including the mix of transactions that we hold in our Portfolio, the income we receive from securitizations, syndications and other services, our Portfolio’s credit risk profile, changes in market interest rates, commodity prices, federal, state and/or municipal governmental policies, general market conditions in local, regional and national economies, our ability to qualify as a REIT and maintain our exemption from registration as an investment company under the 1940 Act, the impacts of climate change and the impact of the novel coronavirus (COVID-19).

We provide a summary of the factors impacting our operating results in our 2020 Form 10-K under MD&A – Factors Impacting our Operating Results.

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Understanding our accounting policies and the extent to which we make judgments and estimates in applying these policies is integral to understanding our financial statements.

We believe the estimates and assumptions used in preparing our financial statements and related footnotes are reasonable and supportable based on the best information available to us as of June 30, 2021.

The uncertainty surrounding COVID-19 may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and, as a result, actual results may vary significantly from estimates.

Various uncertainties, including those surrounding COVID-19, may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and, as a result, actual results may vary significantly from estimates.

We have identified the following accounting policies as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition.

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Our Portfolio

Our Portfolio totaled approximately $3.0 billion as of June 30, 2021 and included approximately $1.5 billion of BTM assets and approximately $1.5 billion of GC assets.

Our Portfolio totaled approximately $3.2 billion as of September 30, 2021 and included approximately $1.7 billion of BTM assets and approximately $1.5 billion of GC assets.

Approximately 43% consisted of fixed-rate government and commercial receivables and debt securities, which are classified as investments, on our balance sheet.

Approximately 45% of our Portfolio consisted of unconsolidated equity investments in renewable energy related projects and approximately 12% of our Portfolio was real estate leased to renewable energy projects under lease agreements.

Our Portfolio consisted of over 225 transactions with an average size of $13 million and the weighted average remaining life of our Portfolio (excluding match-funded transactions) of approximately 17 years as of June 30, 2021.

Our Portfolio included the following as of June 30, 2021:

Our Portfolio consisted of over 260 transactions with an average size of $12 million and the weighted average remaining life of our Portfolio (excluding match-funded transactions) of approximately 17 years as of September 30, 2021.

Our Portfolio included the following as of September 30, 2021:

• equity investments in either preferred or common structures in unconsolidated entities;

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• investments in debt securities of renewable energy or energy efficiency projects.

The table below provides details on the interest rate and maturity of our receivables and debt securities as of June 30, 2021:

The table below provides details on the interest rate and maturity of our receivables and debt securities as of September 30, 2021:

Balance Maturity

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Fixed-rate receivables, interest rates from 5.00% to 6.50% per annum 95 2022 to 2056

Fixed-rate receivables, interest rates greater than 6.50% per annum (1)

1,010 2021 to 2069

Fixed-rate receivables, interest rates greater than 6.50% per annum 1,182 2021 to 2069

Receivables 1,390

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Total receivables and investments $ 1,369

(1) Excludes receivables held-for-sale of $9 million

The table below presents, for the debt investments and real estate related holdings of our Portfolio and our interest-bearing liabilities inclusive of our credit facilities, the average outstanding balances, income earned, the interest expense incurred, and average yield or cost.

Our earnings from our equity method investments are not included in this table.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Interest expense (1)

$ 27 $ 26 $ 79 $ 66

Average balance of debt $ 2,532 $ 1,926 $ 2,264 $ 1,663

Average cost of debt 4.3 % 5.4 % 4.7 % 5.3 %

The following table provides a summary of our anticipated principal repayments for our receivables and investments as of June 30, 2021:

(1) Excludes loss on debt modification or extinguishment included in interest expense in our income statement.

The following table provides a summary of our anticipated principal repayments for our receivables and investments as of September 30, 2021:

Payment due by Period

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Receivables (excluding allowance) $ 1,390 $ 120 $ 194 $ 542 $ 534

$ 1,194 $ 139 $ 185 $ 390 $ 480

Investments 18 1 2 3 12

(1) Excludes receivables held-for-sale of $9 million.

See Note 6 to our financial statements in this Form 10-Q for information on:

• the anticipated maturity dates of our receivables and investments and the weighted average yield for each range of maturities as of June 30, 2021,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of June 30, 2021,

• the anticipated maturity dates of our receivables and investments and the weighted average yield for each range of maturities as of September 30, 2021,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of September 30, 2021,

• the Performance Ratings of our Portfolio, and

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Results of Operations

Comparison of the Three Months Ended June 30, 2021 vs.

Three Months Ended June 30, 2020

Three months ended June 30,

Comparison of the Three Months Ended September 30, 2021 vs.

Three Months Ended September 30, 2020

Three months ended September 30,

2021 2020 $ Change % Change

(dollars in millions)

(dollars in thousands)

Interest income $ 26,236 $ 23,508 $ 2,728 12 %

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Net income (loss) $ ( 3,099 ) $ 21,277 $ (24,376) (115) %

• Net income increased by $4 million due to an increase of $10 million in total revenue and an increase in equity method investments income of $23 million, offset by a $22 million increase in total expenses and a $7 million increase in income tax expense.

• Net income decreased by $24 million due to a decrease in equity method investments income (loss) of $24 million and a $5 million increase in total expenses, offset by a $4 million change in income tax (expense) benefit.

These results do not reflect the non-GAAP distributable earnings adjustments discussed in the non-GAAP financial measures section below.

• Total revenue increased by $10 million due to a $1 million increase in interest income resulting from a higher average Portfolio balance and rate and a $9 million increase in gain on sale and fee income primarily from a change in mix of assets being securitized, partially offset by lower fee generating activities.

• Interest expense increased by $19 million due primarily to a one-time loss on the redemption of senior unsecured notes, as well as additional expense due to a higher outstanding debt balance.

• Total revenue was consistent period over period.

A $3 million increase in interest income, driven primarily by a higher average Portfolio balance and rate, was offset by lower gain on sale and fee income, driven by a change in the mix of assets being securitized and lower advisory fee generating opportunities.

• Interest expense increased by $1 million primarily due to a higher average outstanding debt balance.

We recorded a $1 million provision for loss on receivables as a result of loans and loan commitments made during the quarter.

• Compensation and benefits expense increased by $3 million as a result of an increase in our employee headcount and compensation.

• Income from equity method investments increased by $23 million primarily due to new investments which were not in the portfolio in the prior period.

• Income tax expense increased by $7 million primarily due to the increased HLBV income described above.

Comparison of the Six Months Ended June 30, 2021 vs.

Six Months Ended June 30, 2020

Six months ended June 30, 2021

General and administrative expenses increased by $1 million due to additional investment in corporate infrastructure.

• Income (loss) from equity method investments using HLBV allocations decreased by $24 million primarily due to the impact of increasing power prices and the resulting unrealized mark to market losses on economic hedges used by some of our projects to reduce the impact of power price fluctuations.

• Income tax (expense) benefit changed by $4 million primarily due to lower net income (loss) in the current period.

Comparison of the Nine Months Ended September 30, 2021 vs.

Nine Months Ended September 30, 2020

Nine months ended September 30, 2021

2021 2020 $ Change % Change

(dollars in millions)

(dollars in thousands)

Interest income $ 76,352 $ 71,046 $ 5,306 7 %

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These results do not reflect the non-GAAP distributable earnings adjustments discussed in the non-GAAP financial measures section below.

• Total revenue increased by $22 million due to a $3 million increase in interest income resulting from a higher average Portfolio balance and rate and a $19 million increase in gain on sale and fee income primarily from a change in mix of assets being securitized, partially offset by lower fee generating activities.

• Interest expense increased by $28 million due to a one time loss on the redemption of senior unsecured notes, as well as additional expense due to a larger outstanding debt balance.

• Total revenue increased by $21 million due to a $5 million increase in interest income resulting from a higher average Portfolio balance and rate and a $16 million increase in gain on sale and fee income primarily from a change in mix of assets being securitized, partially offset by lower advisory fee generating opportunities.

• Interest expense increased by $30 million due to a one time loss on the redemption of senior unsecured notes, as well as additional expense from a larger average outstanding debt balance.

We recorded a provision for loss on receivables of $3 million due to loans and loan commitments made during the year.

• Compensation and benefits expense increased by $13 million as a result of an increase in our employee headcount, compensation and one-time employee-related costs.

General and administrative expenses increased by $3 million due primarily to an increase in the size of the company.

• Income from equity method investments increased by $61 million primarily due to new investments which were not in the portfolio in the prior period.

• Income tax expense increased by $12 million primarily due to the increased HLBV income described above.

General and administrative expenses increased by $4 million due to additional investment in corporate infrastructure and charitable donations.

• Income from equity method investments increased by $37 million primarily due to new investments which were not in the portfolio in the prior period offset by the impact of increasing power prices and the resulting unrealized mark to market losses on economic hedges used by some of our projects to reduce the impact of power price fluctuations.

• Income tax (expense) benefit increased by $9 million primarily due to the increased HLBV income described above.

Non-GAAP Financial Measures

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(1) distributable earnings, (2) distributable net investment income, and (3) managed assets.

These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as measures of our operating performance.

These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as measures of our operating

These non-GAAP financial measures, as calculated by us, may not be comparable to similarly named financial measures as reported by other companies that do not define such terms exactly as we define such terms.

Distributable Earnings

modification or extinguishment of debt facilities, any one-time acquisition related costs or non-cash tax charges and the earnings attributable to our non-controlling interest of our Operating Partnership.

We calculate distributable earnings as GAAP net income (loss) excluding non-cash equity compensation expense, provisions for loss on receivables, amortization of intangibles, non-cash provision (benefit) for taxes, losses or (gains) from modification or extinguishment of debt facilities, any one-time acquisition related costs or non-cash tax charges and the earnings attributable to our non-controlling interest of our Operating Partnership.

We also make an adjustment to our equity method investments in the renewable energy projects as described below.

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We believe a non-GAAP measure, such as distributable earnings, that adjusts for the items discussed above is and has been a meaningful indicator of our economic performance and is useful to our investors as well as management in evaluating our performance as it relates to expected dividend payments over time.

As a REIT, we are required to distribute substantially all of our taxable income to investors in the form of dividends and is a principal focus of our investors.

As a REIT, we are required to distribute substantially all of our taxable income to investors in the form of dividends, which is a principal focus of our investors.

Additionally, we believe that our investors also use distributable earnings, or a comparable supplemental performance measure, to evaluate and compare our performance to that of our peers, and as such, we believe that the disclosure of distributable earnings is useful to our investors.

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We believe this equity method investment adjustment to our GAAP net income (loss) in calculating our distributable earnings measure is an important supplement to the HLBV income allocations determined under GAAP for an investor to understand the economic performance of these investments where HLBV income can differ substantially from the economic returns.

The following table provides results related to our equity method investments for the three and six months ended June 30, 2021 and 2020.

Three months ended June 30, Six months ended June 30,

The following table provides results related to our equity method investments for the three and nine months ended September 30, 2021 and 2020.

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

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Distributable earnings does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), or an indication of our cash flow from operating activities (determined in accordance with GAAP), or a measure of our liquidity, or an indication of funds available to fund our cash needs, including our ability to make cash distributions.

In addition, our methodology for calculating distributable earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported distributable earnings may not be comparable to similar metrics reported by other companies.

The table below provides a reconciliation of our GAAP net income (loss) to distributable earnings for the three and six months ended June 30, 2021 and 2020.

Three Months Ended June 30, Six Months Ended June 30,

In addition, our methodology for calculating distributable earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures.

Accordingly, our reported distributable earnings may not be comparable to similar metrics reported by other companies.

The table below provides a reconciliation of our GAAP net income (loss) to distributable earnings for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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$ 34,787 $ 0.41 $ 27,746 $ 0.36 $ 118,036 $ 1.42 $ 88,175 $ 1.19

(1) This is the GAAP diluted earnings per share and is the most comparable GAAP measure to our distributable earnings per share.

(2) Distributable earnings per share are based on 82,832,735 shares and 82,723,380 shares for the three and six months ended June 30, 2021 and 74,543,045 shares and 72,095,539 shares for the three and six months ended June 30, 2020, respectively, which represents the weighted average number of fully-diluted shares outstanding including our restricted stock awards, restricted stock units, long-term incentive plan units, and the non-controlling interest in our Operating Partnership.

(1) The per share data reflects GAAP diluted earnings per share and is the most comparable GAAP measure to our distributable earnings per share.

(2) Distributable earnings per share are based on 83,912,769 shares and 83,118,733 shares for the three and nine months ended September 30, 2021 and 77,041,509 shares and 73,819,517 shares for the three and nine months ended September 30, 2020, respectively, which represents the weighted average number of fully-diluted shares outstanding including our restricted stock awards, restricted stock units, long-term incentive plan units, and the non-controlling interest in our Operating Partnership.

We include any potential common stock issuance in this calculation related to our convertible notes using the treasury stock method and any potential common stock issuances related to share based compensation units in the amount we believe is reasonably certain to vest.

To the extent a convertible note is converted during the period, we include its dilution using the treasury stock method until the date of conversion, after which we include the shares issued upon conversion.

We believe the use of the treasury stock method is an appropriate representation of the potential dilution when considering the economic behaviors of the holders of the instrument.

Distributable Net Investment Income

We have a portfolio of investments in climate solutions which we finance using a combination of debt and equity.

We calculate distributable net investment income by adjusting GAAP-based net investment income for those distributable earnings adjustments described above which impact investment income.

We have a portfolio of investments in climate solutions that we finance using a combination of debt and equity.

We calculate distributable net investment income by adjusting GAAP-based net investment income for those distributable earnings adjustments described above that impact investment income.

We believe that this measure is useful to investors as it shows the recurring income generated by our Portfolio after the associated interest cost of debt financing.

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The following is a reconciliation of our GAAP-based net investment income to our distributable net investment income:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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The following is a reconciliation of our GAAP-based Portfolio to our Managed Assets:

June 30, 2021 December 31, 2020

(dollars in millions)

September 30, 2021 December 31, 2020

(in millions)

Equity method investments $ 1,468 $ 1,280

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Commercial receivables, net of allowance 1,225 965

Receivables held-for sale 9 —

Real estate 357 359

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Our management uses portfolio yield this way and we believe that our investors use it in a similar fashion to evaluate certain characteristics of our Portfolio compared to our peers, and as such, we believe that the disclosure of portfolio yield is useful to our investors.

Our Portfolio totaled approximately $3.0 billion as of June 30, 2021.

Unlevered portfolio yield was 7.7% and 7.6% as of June 30, 2021 and December 31, 2020, respectively.

See Note 6 to our financial statements and MD&A - Our Business in this Form 10-Q for additional discussion of the characteristics of our portfolio as of June 30, 2021.

Our Portfolio totaled approximately $3.2 billion as of September 30, 2021.

Unlevered portfolio yield was 7.6% as of both September 30, 2021 and December 31, 2020.

See Note 6 to our financial statements and MD&A - Our Business in this Form 10-Q for additional discussion of the characteristics of our portfolio as of September 30, 2021.

Environmental Metrics

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Government or the International Energy Administration to an estimate of a project’s energy production or savings to compute an estimate of metric tons of carbon emissions avoided.

We estimate that our investments originated during the quarter ended June 30, 2021, will avoid annual carbon emissions by approximately 115,000 metric tons, equating to a CarbonCount® of 0.23.

We estimate that our investments originated during the quarter ended September 30, 2021, will avoid annual carbon emissions by approximately 101,000 metric tons, equating to a CarbonCount® of 0.30.

We estimate that our investments made since 2013 have cumulatively avoided annual carbon emissions by over 17 million metric tons.

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We finance our investments primarily with non-recourse or recourse debt, equity and off-balance sheet securitization structures.

We have adequate liquidity as of June 30, 2021, with unrestricted cash balances of $583 million, an unsecured revolving credit facility with an unused capacity of $375 million and $67 million of available capacity in our secured revolving credit facilities.

We have adequate liquidity as of September 30, 2021, with unrestricted cash balances of $413 million, an unsecured revolving credit facility with an unused capacity of $375 million, and $75 million of available capacity in our secured revolving credit facilities.

During 2021, in addition to entering into our $400 million unsecured revolving credit facility, we have issued $152 million in equity, and issued $1 billion in senior unsecured notes, with $500 million being used to redeem our 2024 senior unsecured notes.

As of June 30, 2021, we had $453 million of non-recourse borrowings.

$136 million of our 2022 senior convertible notes were converted into equity in the third quarter, representing a non-cash settlement of those notes.

In the third quarter we established our $100 million CarbonCount (c) Green Commercial Paper Notes Program, offering us another potential short-term liquidity source.

As of September 30, 2021, we had $449 million of non-recourse borrowings.

We have $1.8 billion of senior unsecured notes and $158 million of convertible notes outstanding.

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We have continued to complete gain on sale securitization transactions with large institutional investors such as life insurance companies.

As of June 30, 2021, the outstanding principal balance of our assets financed through the use of these off-balance sheet transactions was approximately $5.0 billion.

As of September 30, 2021, the outstanding principal balance of our assets financed through the use of these off-balance sheet transactions was approximately $5.0 billion.

In addition to general operational obligations, which are typically paid as incurred, and dividends, which are declared by our board of directors quarterly, we will have future cash needs related to the maturity of the non-amortizing balances of our Senior Unsecured Notes and the balances of our credit facilities.

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The amount of financial leverage we may deploy for particular assets will depend upon the availability of particular types of financing and our assessment of the credit, liquidity, price volatility and other risks of those assets, the interest rate environment and the credit quality of our financing counterparties.

As shown in the table below, our debt to equity ratio was approximately 1.9 to 1 as of June 30, 2021, below our current board-approved leverage limit of 2.5 to 1.

Our percentage of fixed rate debt was approximately 98% as of June 30, 2021, which is within our targeted fixed rate debt percentage range of 75% to 100%.

As shown in the table below, our debt to equity ratio was approximately 1.6 to 1 as of September 30, 2021, below our current board-approved leverage limit of 2.5 to 1.

Our percentage of fixed rate debt was approximately 99% as of September 30, 2021, which is within our targeted fixed rate debt percentage range of 75% to 100%.

The calculation of our fixed-rate debt and financial leverage is shown in the chart below:

June 30, 2021 % of Total December 31, 2020 % of Total

September 30, 2021 % of Total December 31, 2020 % of Total

(dollars in millions) (dollars in millions)

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Sources and Uses of Cash

We had approximately $609 million and $310 million of unrestricted cash, cash equivalents, and restricted cash as of June 30, 2021 and December 31, 2020, respectively.

We had approximately $439 million and $310 million of unrestricted cash, cash equivalents, and restricted cash as of September 30, 2021 and December 31, 2020, respectively.

Cash flows relating to operating activities

Net cash used in operating activities was approximately $2 million for the six months ended June 30, 2021, driven primarily by net income of $68 million offset by adjustments for non-cash and other items of $70 million.

The non-cash and other adjustments consisted of decreases of $63 million related to equity method investments, $9 million related to purchases of receivables held-for-sale, $27 million related to gains on securitizations, and $4 million related to other items.

These decreases were partially offset by a loss on debt extinguishment of $15 million and by increases of $10 million related to equity-based compensation, $7 million of depreciation and amortization, and $1 million related to provision for loss on receivables.

Net cash provided by operating activities was approximately $40 million for the six months ended June 30, 2020, driven primarily by net income of $36 million and adjustments for non-cash and other items of $4 million.

The non-cash and other adjustments consisted of increases of $3 million related to provision for loss on receivables, $19 million related to equity method investments, $2 million of depreciation and amortization, $3 million of amortization of financing costs, and $8 million related to equity-based compensation.

These were offset by $20 million related to gains on securitizations and $11 million related to changes in accounts payable and accrued expenses and other items.

Net cash provided by operating activities was approximately $22 million for the nine months ended September 30, 2021, driven primarily by net income of $65 million offset by adjustments for non-cash and other items of $43 million.

The non-cash and other adjustments consisted of decreases of $46 million related to equity method investments, $38 million related to gains on securitizations, $10 million related to portfolio accrued interest, and $3 million related to other items.

These decreases were partially offset by a loss on debt extinguishment of $15 million and by increases of $14 million related to equity-based compensation, $11 million of depreciation and amortization, $11 million related to changes in accounts payable and accrued expenses, and $3 million related to provision for loss on receivables.

Net cash provided by operating activities was approximately $52 million for the nine months ended September 30, 2020, driven primarily by net income of $58 million and adjustments for non-cash and other items of $6 million.

The non-cash and other adjustments consisted of increases of $6 million related to provision for loss on receivables, $14 million related to equity method investments, $3 million of depreciation and amortization, $6 million of amortization of financing costs, $6 million in accounts payable and accrued expenses, and $12 million related to equity-based compensation.

These were offset by $28 million related to gains on securitizations and $25 million related to other items.

Cash flows relating to investing activities

Net cash used in investing activities was approximately $199 million for the six months ended June 30, 2021.

We made $202 million of investments in receivables and fixed rate debt-securities, funded escrow accounts for $12 million and made $137 million of equity method investments.

We collected $51 million of principal payments from receivables and fixed rate debt-securities, $91 million from the sales of financial assets, $8 million from equity method investments in excess of income recognized to date under GAAP and received $2 million from escrow accounts and other items.

Net cash provided by investing activities was approximately $14 million for the six months ended June 30, 2020.

We made $81 million of investments in receivables and fixed rate debt-securities, funded escrow accounts for $7 million and made $150 million of equity method investments.

We collected $74 million from equity method investments representing the return

of capital determined under GAAP, $62 million from receivables and fixed rate debt-securities, $110 million from the sales of financial assets, and received $6 million from escrow accounts and other items.

Net cash used in investing activities was approximately $388 million for the nine months ended September 30, 2021.

We made $412 million of investments in receivables and fixed rate debt-securities, made $156 million of equity method investments, and funded escrow accounts for $12 million.

We collected $91 million from the sales of financial assets, $88 million of principal payments from receivables and fixed rate debt-securities, $11 million from equity method investments in excess of income recognized to date under GAAP and received $2 million from escrow accounts and other items.

Net cash used in investing activities was approximately $138 million for the nine months ended September 30, 2020.

We made $115 million of investments in receivables and fixed rate debt-securities, funded escrow accounts for $8 million and made

$323 million of equity method investments.

We collected $91 million from equity method investments representing the return of capital determined under GAAP, $97 million from receivables and fixed rate debt-securities, $110 million from the sales of financial assets, and received $10 million from escrow accounts and other items.

Cash flows relating to financing activities

Net cash provided by financing activities was approximately $500 million for the six months ended June 30, 2021.

We received $1 billion from the issuance of senior unsecured notes, $103 million of net proceeds from issuances of common stock, and $25 million of borrowings from credit facilities, which were offset by $514 million related to the redemption of senior unsecured notes, $26 million of principal prepayments on non-recourse debt, $15 million for debt issuance costs, $3 million of principal payments on credit facilities, $14 million for withholding requirements resulting from the vesting of employee shares and paid $56 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $410 million for the six months ended June 30, 2020.

We borrowed $126 million from our credit facilities, had non-recourse debt borrowings of $16 million, issued $400 million of senior unsecured notes, and received $159 million of net proceeds from issuances of common stock.

Net cash provided by financing activities was approximately $495 million for the nine months ended September 30, 2021.

We received $1 billion from the issuance of senior unsecured notes, $152 million of net proceeds from issuances of common stock, and $25 million of borrowings from credit facilities, which were offset by $500 million related to the redemption of senior unsecured notes, $30 million of principal prepayments on non-recourse debt, $23 million of principal payments on credit facilities, $18 million for debt issuance costs, $14 million for the payment of redemption premium on retirement of the senior unsecured notes, $14 million for withholding requirements resulting from the vesting of employee shares and paid $83 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $885 million for the nine months ended September 30, 2020.

We borrowed $126 million from our credit facilities, had non-recourse debt borrowings of $16 million, issued $771 million of senior unsecured notes and $144 million of convertible notes, and received $188 million of net proceeds from issuances of common stock.

We made $119 million of principal payments on non-recourse debt, $135 million of principal payments on credit facilities, paid $17 million for withholding requirements as a result of the vesting of employee shares and paid $89 million of dividends, distributions and other items.

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We have relationships with non-consolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate the sale of securitized assets.

Other than our securitization assets (including any outstanding servicer advances) of approximately $194 million as of June 30, 2021, that may be at risk in the event of defaults or prepayments in our securitization trusts and as discussed below, and except as disclosed in Note 9 to our financial statements in this Form 10-Q, we have not guaranteed any obligations of non-consolidated entities or entered into any commitment or intent to provide additional funding to any such entities.

Other than our securitization assets (including any outstanding servicer advances) of approximately $204 million as of September 30, 2021, that may be at risk in the event of defaults or prepayments in our securitization trusts and as discussed below, and except as disclosed in Note 9 to our financial statements in this Form 10-Q, we have not guaranteed any obligations of non-consolidated entities or entered into any commitment or intent to provide additional funding to any such entities.

A more detailed description of our relations with non-consolidated entities can be found in Note 2 to our financial statements in this Form 10-Q.

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To the extent that we generate taxable income, distributions to our stockholders generally will be taxable as ordinary income, although all or a portion of such distributions may be designated by us as a qualified dividend or capital gain.

Beginning in 2018 (and through taxable years ending in 2025), a deduction is permitted for certain pass-through business

income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), which will allow U.S.

Beginning in 2018 (and through taxable years ending in 2025), a deduction is permitted for certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), which will allow U.S.

individuals, trusts and estates to deduct up to 20% of such amounts, subject to certain limitations, resulting in an effective maximum U.S.

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Book Value Considerations

As of June 30, 2021, we carried only our investments and residual assets in securitized financial assets at fair value on our balance sheet.

As of September 30, 2021, we carried only our investments and residual assets in securitized financial assets at fair value on our balance sheet.

As a result, in reviewing our book value, there are a number of important factors and limitations to consider.

Other than our investments and the residual assets in securitized financial assets that are carried on our balance sheet at fair value as of June 30, 2021, the carrying value of our remaining assets and liabilities are calculated as of a particular point in time, which is largely determined at the time such assets and liabilities were added to our balance sheet using a cost basis in accordance with GAAP.

Other than our investments and the residual assets in securitized financial assets that are carried on our balance sheet at fair value as of September 30, 2021, the carrying value of our remaining assets and liabilities are calculated as of a particular point in time, which is largely determined at the time such assets and liabilities were added to our balance sheet using a cost basis in accordance with GAAP.

Other than the allowance for current expected credit losses applied to our government and commercial receivables, our remaining assets and liabilities do not incorporate other factors that may have a significant impact on their value, most notably any impact of business activities, changes in estimates, or changes in general economic conditions, interest rates or commodity prices since the dates the assets or liabilities were initially recorded.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis