What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 82 added, 84 removed, 334 unchanged (33% of the section changed)

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With more than $11 billion in managed assets, our vision is that every investment improves our climate future.

Our investments take many forms, including equity, joint ventures, land ownership, lending, and other financing transactions.

Our investments take many forms, including equity, joint ventures, real estate, commercial and government receivables or securities, and other financing transactions.

In addition to Net Investment Income from our portfolio, we also generate ongoing fees through gain-on-sale securitization transactions, asset management, and other services.

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For GC assets, the off-takers or counterparties may be utility or electric users who have entered into contractual commitments, such as power purchase agreements (“PPAs”), to purchase power produced by a renewable energy project at a specified price with potential price escalators for a portion of the project’s estimated life.

We completed approximately $426 million and $815 million of transactions during the three and six months ended June 30, 2023, respectively, compared to approximately $340 million and $671 million during the same periods in 2022, respectively.

As of June 30, 2023, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $4.9 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of June 30, 2023, our Portfolio consisted of over 350 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 $973 million and $1.8 billion of transactions during the three and nine months ended September 30, 2023, respectively, compared to approximately $273 million and $944 million during the same periods in 2022, respectively.

As of September 30, 2023, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $5.5 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of September 30, 2023, our Portfolio consisted of over 460 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, 2023, we managed approximately $5.8 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, 2023, we manage approximately $10.7 billion of assets which we refer to as our “Managed Assets”.

We make our investments utilizing a variety of structures including:

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

• commercial and government receivables or securities;

• real estate.

As of September 30, 2023, we managed approximately $6.0 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, 2023, we manage approximately $11.5 billion of assets which we refer to as our “Managed Assets”.

Our equity investments are operated by various renewable energy companies or by joint ventures in which we participate.

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Our debt investments in various renewable energy or other sustainable infrastructure projects or portfolios of projects are generally secured by the installed improvements or other real estate rights.

Our energy efficiency debt investments are usually assigned the payment stream from the project savings and other contractual rights, often using our pre-existing master purchase agreements with the ESCOs.

Our energy efficiency debt investments are usually assigned

the payment stream from the project savings and other contractual rights, often using our pre-existing master purchase agreements with the ESCOs.

We also own, both directly and through equity investments, land which is leased under long-term agreements to renewable energy projects, where our investment returns are typically senior to most project costs, debt, and equity.

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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, 2023, our pipeline consisted of more than $5.0 billion in new equity, debt and real estate opportunities.

As of September 30, 2023, our pipeline consisted of more than $5.0 billion in new equity, debt and real estate opportunities.

Of our pipeline, approximately 49% is related to BTM assets and 36% is related to GC assets, with the remainder related to FTN.

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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, 2023.

Various uncertainties 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.

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Our Portfolio

Our Portfolio totaled approximately $4.9 billion as of June 30, 2023 and included approximately $2.5 billion of BTM assets and approximately $2.1 billion of GC assets, and approximately $0.3 billion of FTN assets.

Our Portfolio totaled approximately $5.5 billion as of September 30, 2023 and included approximately $2.7 billion of BTM assets and approximately $2.0 billion of GC assets, and approximately $0.8 billion of FTN assets.

Approximately 44% of our Portfolio consisted of unconsolidated equity investments in renewable energy related projects.

Approximately 46% consisted of fixed-rate commercial and government receivables and debt securities, which are classified as investments on our balance sheet, and 7% of our Portfolio was real estate leased to renewable energy projects under lease agreements.

Our Portfolio consisted of over 350 transactions with an average size of $13 million and the weighted average remaining life of our Portfolio (excluding match-funded transactions) of approximately 18 years as of June 30, 2023.

The table below provides details on the interest rate and maturity of our receivables and debt securities as of June 30, 2023:

Approximately 47% consisted of fixed-rate commercial and government receivables and debt securities, which are classified as investments on our balance sheet, approximately 4% consisted of floating-rate commercial receivables, and 5% of our Portfolio was real estate leased to renewable energy projects under lease agreements.

Our Portfolio consisted of over 460 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, 2023.

The table below provides details on the interest rate and maturity of our receivables and debt securities as of September 30, 2023:

Balance Maturity

(in millions)

Floating rate receivable, interest rate of 9.66% per annum

$ 213 2026 to 2026

Fixed-rate receivables, interest rates less than 5.00% per annum 105 2025 to 2047

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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,

2023 2022 2023 2022

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(1) Excludes any 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 June 30, 2023:

The following table provides a summary of our anticipated principal repayments for our receivables and investments as of September 30, 2023:

Payment due by Period

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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, 2023,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of June 30, 2023,

• the anticipated maturity dates of our receivables and investments and the weighted average yield for each range of maturities as of September 30, 2023,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of September 30, 2023,

• the Performance Ratings of our Portfolio, and

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Results of Operations

Comparison of the Three Months Ended June 30, 2023 vs.

Three Months Ended June 30, 2022

Three months ended June 30,

Comparison of the Three Months Ended September 30, 2023 vs.

Three Months Ended September 30, 2022

Three months ended September 30,

2023 2022 $ Change % Change

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Rental income 6,039 6,609 (570) (9) %

Gain on sale of receivables and investments 14,791 19,664 (4,873) (25) %

Securitization income 4,330 2,798 1,532 55 %

Gain on sale of assets 22,405 14,490 7,915 55 %

Securitization asset income 5,620 4,403 1,217 28 %

Other Income 1,492 345 1,147 332 %

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Interest expense 43,295 29,556 13,739 46 %

Provision for loss on receivables 806 8,064 (7,258) (90) %

Provision for loss on receivables and securitization assets 9,792 (2,463) 12,255 (498) %

Compensation and benefits 16,296 12,933 3,363 26 %

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Net income (loss) $ 21,647 $ 34,941 $ (13,294) (38) %

• Net income increased by $32 million due to an increase in equity method investments income of $22 million, $12 million increase in total revenue, and a $2 million decrease in total expenses, partially offset by a $3 million decrease in income tax benefit.

• Total revenue increased by $12 million due to a $16 million increase in interest income and securitization income, driven by a higher average Portfolio balance and by higher Managed Assets.

This was partially offset by decreases in gain on sale and other income, driven by a change in the mix and volume of assets being securitized.

• Net income decreased by $13 million due to a decrease in equity method investments income of $28 million and an increase in total expenses of $28 million, offset by a $30 million increase in total revenue, and a $13 million increase in income tax benefit (expense).

• Total revenue increased by $30 million due to a $21 million increase in interest income and securitization asset income, driven by a higher average Portfolio balance and by higher Managed Assets.

Gain on sale and other income increased by $9 million, driven by a change in the mix and volume of assets being securitized, which included the balance sheet rotation of certain land assets.

• Interest expense increased by $14 million primarily due to a larger average outstanding debt balance and a higher average interest rate.

We recorded a $1 million provision for loss on receivables, driven primarily by loans and loan commitments made during the quarter offset partially by the release of an allowance on loans which we collected in full.

• Compensation and benefits and general and administrative expenses decreased by $6 million primarily due to higher share-based compensation recognized in the prior year for certain awards to employees eligible for retirement, offset partially by a one-time transaction related payment.

• Income (loss) from equity method investments using HLBV allocations increased by $22 million primarily due to 2022 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 which did not recur.

• Income tax benefit decreased by $3 million primarily due to the increase in GAAP net income before taxes.

Comparison of the Six Months Ended June 30, 2023 vs.

Six Months Ended June 30, 2022

Six Months Ended June 30,

We recorded a $10 million provision for loss on receivables and securitization assets, driven primarily by loans and loan commitments made during the quarter along with a provision on our securitization assets based on changes in our estimated cash flows due to prepayments on certain of the assets that have been securitized.

• Compensation and benefits and general and administrative expenses increased by $2 million primarily due to growth of the company.

• Income (loss) from equity method investments using HLBV allocations decreased by $28 million primarily due to fewer tax attributes recognized by tax equity investors in our projects than in the prior year, which decreased our allocation of HLBV income.

• Income tax benefit (expensed) increased by $13 million primarily due to future tax benefits generated by our taxable REIT subsidiaries.

Comparison of the Nine Months Ended September 30, 2023 vs.

Nine Months Ended September 30, 2022

Nine Months Ended September 30,

2023 2022 $ Change % Change

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Rental income 19,013 19,716 (703) (4) %

Gain on sale of receivables and investments 30,510 36,762 (6,252) (17) %

Securitization income 7,762 5,540 2,222 40 %

Gain on sale of assets 52,915 51,252 1,663 3 %

Securitization asset income 13,381 9,943 3,438 35 %

Other Income 2,353 2,614 (261) (10) %

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Net income (loss) $ 59,767 $ 62,107 $ (2,340) (4) %

• Net income increased by $11 million due to an increase in total revenue of $22 million and an increase in income tax benefit of $6 million, offset by an increase in total expenses of $14 million and a decrease in income from equity method investments of $3 million.

• Net income decreased by $2 million due to a decrease in income from equity method investments of $31 million and an increase in total expenses of $42 million, offset by an increase in total revenue of $52 million and an increase in income tax benefit (expense) of $19 million.

• Total revenue increased by $52 million due to a $51 million increase in interest income and securitization income driven by a higher average Portfolio balance and by higher Managed Assets.

Gain on sale of receivables and investments and other income decreased by $8 million due to a change in the mix of assets being securitized and fewer fee generating opportunities.

• Interest expense increased by $35 million primarily due to a larger average outstanding debt balance and a higher average interest rate.

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• Income from equity method investments decreased by $31 million primarily due fewer tax attributes recognized by tax equity investors in our projects than in the prior year, which decreased our allocation of HLBV income.

• Income tax benefit increased by $6 million due to a decrease in our estimated annual effective tax rate.

• Income tax benefit increased by $19 million due to future tax benefits generated by our taxable REIT subsidiaries.

Non-GAAP Financial Measures

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Distributable Earnings

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.

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 have acquired equity investments in portfolios of projects which have the majority of the distributions payable to more senior investors in the first few years of the project.

The following table provides results related to our equity method investments for the three and six months ended June 30, 2023 and 2022.

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, 2023 and 2022.

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

2023 2022 2023 2022

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Cash collected $ 24 $ 80 $ 47 $ 132

(1) Cash collected includes $9 million during the three and nine months ended September 30, 2023 and $64 million during the three and nine months ended September 30, 2022 related to the issuance of debt by three of our equity method investees, the repayment of which we have guaranteed.

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, 2023 and 2022.

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

The table below provides a reconciliation of our GAAP net income (loss) to distributable earnings for the three and nine months ended September 30, 2023 and 2022.

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

2023 2022 2023 2022

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9,792 (2,463) 12,481 6,222

Loss (gain) on debt modification or extinguishment — — — —

Amortization of intangibles

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We have excluded the write off from Distributable earnings due to the infrequent occurrence of credit losses as well as the unique nature of the receivables, as the assignment of land lease payments from wind projects represent a small portion of our total portfolio.

(3) Distributable earnings per share are based on 99,581,898 and 96,441,450 shares for the three and six months ended June 30, 2023, respectively, and 88,994,421 and 88,100,480 shares for the three and six months ended June 30, 2022, 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.

(3) Distributable earnings per share are based on 110,290,640 and 101,046,485 shares for the three and nine months ended September 30, 2023, respectively, and 89,635,572 and 88,612,178 shares for the three and nine months ended September 30, 2022, 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 issuances related to share based compensation units in the amount we believe is reasonably certain to vest.

As it relates to Convertible Notes, we will assess the market characteristics around the instrument to

determine if it is more akin to debt or equity based on the value of the underlying shares compared to the conversion price.

If the instrument is more debt-like then we will include any related interest expense and exclude the underlying shares issuable upon conversion of the instrument.

As it relates to Convertible Notes, we will assess the market characteristics around the instrument to determine if it is more akin to debt or equity based on the value of the underlying shares compared to the conversion price.

If the instrument is more debt-like then we will include any related interest expense and exclude the underlying shares issuable upon conversion of the

If the instrument is more equity-like and is more dilutive when treated as equity then we will exclude any related interest expense and include the weighted average shares underlying the instrument.

We will consider the impact of any capped calls in assessing whether an instrument is equity-like or debt like.

Distributable Net Investment Income

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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,

2023 2022 2023 2022

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in millions)

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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 $4.9 billion as of June 30, 2023.

Unlevered portfolio yield was 7.7% as of June 30, 2023 and 7.5% as of December 31, 2022.

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, 2023.

Our Portfolio totaled approximately $5.5 billion as of September 30, 2023.

Unlevered portfolio yield was 7.9% as of September 30, 2023 and 7.5% as of December 31, 2022.

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, 2023.

Environmental Metrics

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We then determine the metric tons of carbon emissions avoided per thousand dollars of investments, in a calculation we refer to as CarbonCount, which enables us to measure the impact our investments have on avoiding carbon emissions.

We estimate that our investments originated during the quarter ended June 30, 2023, will avoid annual carbon emissions by approximately 147,000 metric tons, equating to a CarbonCount® of 0.31.

We estimate that our investments originated during the quarter ended September 30, 2023, will avoid annual carbon emissions by approximately 127,000 metric tons, equating to a CarbonCount® of 0.14.

We estimate that our investments made since 2013 have cumulatively avoided annual carbon emissions by over 23 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, 2023, with unrestricted cash balances of $127 million, an unsecured revolving credit facility with an unused capacity of $665 million, and $4 million of available capacity in our secured revolving credit facilities.

As of June 30, 2023, we had used the available $100 million capacity in our green commercial paper program.

We have adequate liquidity as of September 30, 2023, with unrestricted cash balances of $156 million, an unsecured revolving credit facility with an unused capacity of $355 million, and $50 million of available capacity in our green commercial paper program.

During 2023, we have issued $465 million in equity.

As of June 30, 2023, we had $399 million of non-recourse borrowings, $1.8 billion of senior unsecured notes, $378 million in term loans, and $344 million of Convertible Notes outstanding.

During the quarter ended September 30, 2023, we issued our 2028 Exchangeable Notes with a principal amount of $403 million, with the proceeds in part used to payoff the 2023 Convertible Notes at maturity.

As of September 30, 2023, we had $170 million of non-recourse borrowings, $1.8 billion of senior unsecured notes, $573 million in term loans, and $603 million of Convertible Notes outstanding.

For further information, see Note 8 to our financial statements of this Form 10-Q.

We also use off-balance sheet securitization transactions with large institutional investors such as life insurance companies, where we transfer the assets we originate to securitization trusts or other bankruptcy remote special purpose funding vehicles that are not consolidated on our balance sheet.

As of June 30, 2023, the outstanding balance of our assets financed through the use of these off-balance sheet transactions was approximately $5.8 billion.

As of September 30, 2023, the outstanding balance of our assets financed through the use of these off-balance sheet transactions was approximately $6.0 billion.

In addition to general operational obligations, which are typically paid as incurred, and dividends and distributions, which are declared by our board of directors quarterly, we have future cash needs related to the payments due at maturity on our Senior Unsecured Notes, and loans under our term loan facility and the balances of our short-term commercial paper issuances and revolving credit facilities.

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The maturity profile of our recourse debt obligations are as follows:

(1) Credit facility maturities reflect the July 2023 amendment of our Secured credit facility.

We plan to raise additional equity capital and continue to use fixed and floating rate borrowings, which may be in the form of short-term commercial paper issuances, revolving credit facilities, recourse or non-recourse debt, convertible or exchangeable securities, repurchase agreements, and public and private debt issuances as a means of financing our business.

We may raise additional equity capital and will continue to use fixed and floating rate borrowings, which may be in the form of short-term commercial paper issuances, revolving credit facilities, recourse or non-recourse debt, convertible or exchangeable securities, repurchase agreements, and public and private debt issuances as a means of financing our business.

We also expect to use both on-balance sheet and off-balance sheet securitizations.

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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, and the interest rate environment.

As shown in the table below, our debt to equity ratio was approximately 1.6 to 1 as of June 30, 2023, below our current board-approved leverage limit of up to 2.5 to 1.

Our percentage of fixed rate debt was approximately 97% as of June 30, 2023, 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 1.7 to 1 as of September 30, 2023, below our current board-approved leverage limit of up to 2.5 to 1.

Our percentage of fixed rate debt was approximately 88% as of September 30, 2023, which is within our targeted fixed rate debt percentage range of 75% to 100%.

Our targeted fixed rate debt range allows for percentages as low as 70% on a short term basis if we intend to repay or swap floating rate borrowings in the near term.

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

June 30, 2023 % of Total December 31, 2022 % of Total

September 30, 2023 % of Total December 31, 2022 % of Total

(dollars in millions) (dollars in millions)

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(1) Floating-rate borrowings include borrowings under our floating-rate credit facilities and commercial paper issuances with less than six months original maturity, to the extent such borrowings are not hedged using interest rate swaps.

(2) Included in Fixed-rate debt is the present notional value of debt that is hedged using interest rate swaps and collars.

(2) Fixed-rate debt includes the impact of our interest rate swaps and collars on debt that is otherwise floating.

Debt excludes securitizations that are not consolidated on our balance sheet.

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Sources and Uses of Cash

We had approximately $152 million and $176 million of unrestricted cash, cash equivalents, and restricted cash as of June 30, 2023 and December 31, 2022, respectively.

We had approximately $170 million and $176 million of unrestricted cash, cash equivalents, and restricted cash as of September 30, 2023 and December 31, 2022, respectively.

Cash flows relating to operating activities

Net cash provided by operating activities was approximately $66 million for the six months ended June 30, 2023, driven primarily by net income of $38 million plus adjustments for non-cash and other items of $28 million.

The non-cash and other adjustments consisted of increases of $11 million related to equity-based compensation, $8 million of depreciation and amortization, $3 million related to provision for loss on receivables, and $52 million in changes in receivables held-for-sale.

These were partially offset by decreases of $6 million related to equity method investments, $13 million related to gains on securitizations, $15 million related to portfolio accrued interest, and $12 million related to changes in accounts payable and accrued expenses and other.

Net cash used in operating activities was approximately $27 million for the six months ended June 30, 2022, driven primarily by net income of $27 million offset by adjustments for non-cash and other items of $54 million.

The non-cash and other adjustments consisted of $52 million in changes in receivables held-for-sale, decreases of $12 million related to equity method investments, $15 million related to gains on securitizations, $7 million related to portfolio accrued interest, and $4 million related to other items.

These decreases were partially offset by increases of $16 million related to equity-based compensation, $8 million of depreciation and amortization, $3 million related to changes in accounts payable and accrued expenses, and $9 million related to provision for loss on receivables.

Net cash provided by operating activities was approximately $92 million for the nine months ended September 30, 2023, driven primarily by net income of $60 million and adjustments for non-cash and other items of $32 million.

The non-cash and other adjustments consisted of increases of $15 million related to equity-based compensation, $12 million of depreciation and amortization, $12 million related to provision for loss on receivables, $40 million in changes in receivables held-for-sale, and $14 million related to changes in accounts payable and accrued expenses and other items.

These were partially offset by decreases of $1 million related to equity method investments, $34 million related to gains on securitizations, and $26 million related to portfolio accrued interest.

Net cash provided by operating activities was approximately $64 million for the nine months ended September 30, 2022, driven primarily by net income of $62 million plus adjustments for non-cash and other items of $2 million.

The non-cash and other adjustments consisted of increases of $18 million related to equity-based compensation, $12 million of depreciation and amortization, $28 million related to changes in accounts payable and accrued expenses, $6 million related to provision for loss on receivables, and $5 million in changes in receivables held-for-sale.

These were partially offset by decreases of $26 million related to equity method investments, $25 million related to gains on securitizations, $10 million related to portfolio accrued interest, and $6 million related to other items.

Cash flows relating to investing activities

Net cash used in investing activities was approximately $688 million for the six months ended June 30, 2023.

We made $330 million of investments in receivables and fixed rate debt-securities, made collateral deposits of $14 million, and made $430 million of equity method investments.

Net cash used in investing activities was approximately $1.4 billion for the nine months ended September 30, 2023.

We made $1.0 billion of investments in receivables and fixed rate debt-securities, made collateral deposits of $14 million, and made $583 million of equity method investments.

We collected $167 million of principal payments from receivables and fixed rate debt-securities, $20 million from equity method investments in excess of income recognized to date under GAAP, and $8 million from the sale of receivables and investments.

Net cash used in investing activities was approximately $256 million for the six months ended June 30, 2022.

Net cash used in investing activities was approximately $254 million for the nine months ended September 30, 2022.

We made $340 million of investments in receivables and fixed rate debt-securities, made $144 million of equity method investments and purchased $5 million of real estate.

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Cash flows relating to financing activities

Net cash provided by financing activities was approximately $598 million for the six months ended June 30, 2023.

We received $467 million from our credit facilities, $358 million of net proceeds from issuances of common stock and $100 million of net proceeds from the issuance of green commercial paper notes, which were offset by $235 million of payments on credit facilities, $10 million of principal prepayments on non-recourse debt, $5 million in principal payments on our term loan, $1 million for withholding requirements resulting from the vesting of employee shares and payments of $76 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $336 million for the six months ended June 30, 2022.

We received $200 million from the issuance of Convertible Notes, $100 million from our credit facilities, $78 million of net proceeds from issuances of common stock and $50 million of net proceeds from the issuance of green commercial paper notes, which were offset by $14 million of principal prepayments on non-recourse debt, $8 million for financing costs, $3 million for withholding requirements resulting from the vesting of employee shares and payments of $67 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $1.3 billion for the nine months ended September 30, 2023.

We received $777 million from our credit facilities, $465 million of net proceeds from issuances of common stock, $403 million from the issuance of convertible notes, $200 million from the issuance of a term loan, $50 million of net proceeds from the issuance of green commercial paper notes, and collected $106 million of hedge collateral, which were offset by $342 million of payments on credit facilities, $144 million of principal payments on convertible notes, $15 million of principal prepayments on non-recourse debt, $10 million in principal payments on our term loan, $1 million for withholding requirements resulting from the vesting of employee shares, $38 million for premiums on capped calls related to the issuance of convertible notes, $13 million for payment of financing costs, and payments of $118 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $237 million for the nine months ended September 30, 2022.

We received $200 million from the issuance of Convertible Notes, $100 million from our credit facilities, $127 million of net proceeds from issuances of common stock and $50 million of net proceeds from the issuance of green commercial paper notes, which were offset by $100 million of payments on credit facilities, $22 million of principal prepayments on non-recourse debt, $8 million for financing costs, $3 million for withholding requirements resulting from the vesting of employee shares and payments of $107 million of dividends, distributions and other items.

Off-Balance Sheet Arrangements

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 $206 million as of June 30, 2023, 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 $190 million as of September 30, 2023, 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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Book Value Considerations

As of June 30, 2023, we carried only our investments, residual assets in securitized financial assets, and derivatives at fair value on our balance sheet.

As of September 30, 2023, we carried only our investments, residual assets in securitized financial assets, and derivatives 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, 2023, 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, adjusted for income or loss recognized on such assets.

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, 2023, 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, adjusted for income or loss recognized on such assets.

Other than the allowance for current expected credit losses applied to our commercial and governmental 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