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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-08 · 205 added, 133 removed, 328 unchanged (51% of the section changed)

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

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

We generate recurring income from net investment income from our portfolio, from income through our residual ownership in securitization and co-investment structures, and from asset management and other services.

We also generate income through gain-on-sale securitization transactions, broker/dealer and other services.

We are internally managed by an executive team that has extensive relevant industry knowledge and experience, and a team of over 150 clean energy investment, operating, and technical professionals.

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• originated by programmatic clients.

We completed approximately $706 million of transactions during the three months ended March 31, 2025, compared to approximately $562 million during the same period in 2024.

As of March 31, 2025, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $7.1 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of March 31, 2025, our Portfolio consisted of over 600 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 $189 million and $894 million of transactions during the three and six months ended June 30, 2025, respectively, compared to approximately $260 million and $822 million during the same period in 2024, respectively.

As of June 30, 2025 we held approximately $7.2 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of June 30, 2025, our Portfolio consisted of over 600 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 March 31, 2025, we managed approximately $7.4 billion in assets in these securitization trusts or vehicles that are not consolidated on our balance sheet.

When combined with our Portfolio, as of March 31, 2025, we manage approximately $14.5 billion of assets which we refer to as our “Managed Assets”.

As of June 30, 2025, we managed approximately $7.4 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, 2025, we manage approximately $14.6 billion of assets which we refer to as our “Managed Assets”.

Our equity investments in energy transition assets and infrastructure projects are operated by various renewable energy companies or by joint ventures in which we participate.

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In addition, certain of our debt issuances meet the environmental eligibility criteria for green bonds as defined by the International Capital Markets Association’s Green Bond Principles, which we believe makes our debt more attractive for certain investors compared to such offerings that do not qualify under these principles.

We have an active strategic partnership with KKR where we have each committed to invest $1 billion into eligible projects, and we may consider further use of similar structures to allow us to expand the investments that we make or to manage our Portfolio diversification.

We have an active strategic partnership with KKR where we jointly invest in eligible projects, and we may consider further use of similar structures to allow us to expand the investments that we make or to manage our Portfolio diversification.

We have a large and active pipeline of potential new opportunities that are in various stages of our underwriting process.

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There can be no assurance with regard to any specific terms of such pipeline transactions or that any or all of the transactions in our pipeline will be completed.

As of March 31, 2025, our pipeline consisted of more than $5.5 billion in new equity, debt and real estate opportunities.

Of our pipeline, approximately 49% is related to BTM assets and 30% is related to GC assets, with the remainder related to FTN.

As of June 30, 2025, our pipeline consisted of more than $6.0 billion in new equity, debt and real estate opportunities.

Of our pipeline, approximately 43% is related to BTM assets, 27% is related to GC assets, and 22% are related to FTN assets, with the remainder related to “Next Frontier” assets, which represent opportunities in burgeoning markets where potential investments align with our investment strategy.

As part of our investment process, we calculate the ratio of the estimated first year of metric tons of carbon emissions avoided by our investments divided by the capital invested to quantify the carbon impact of our investments.

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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 March 31, 2025.

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 $7.1 billion as of March 31, 2025 and included approximately $3.4 billion of BTM assets, approximately $2.7 billion of GC assets, and approximately $1.0 billion of FTN assets.

Approximately 54% of our Portfolio consisted of unconsolidated equity investments in renewable energy related projects.

Approximately 39% consisted of fixed-rate receivables and debt securities, which are classified as investments on our balance sheet, approximately 5% consisted of floating-rate receivables, and 2% of our Portfolio was real estate leased to renewable energy projects under lease agreements.

Our Portfolio consisted of over 600 transactions with an average size of $11 million and the weighted average remaining life of our Portfolio (excluding match-funded transactions) of approximately 16 years as of March 31, 2025.

The table below provides details on the interest rate and maturity of our receivables and debt securities as of March 31, 2025:

Our Portfolio totaled approximately $7.2 billion as of June 30, 2025 and included approximately $3.5 billion of BTM assets, approximately $2.7 billion of GC assets, and approximately $1.0 billion of FTN assets.

Approximately 55% of our Portfolio consisted of equity method investments in renewable energy related projects.

Approximately 38% consisted of fixed-rate receivables and debt securities, approximately 5% consisted of floating-rate receivables, and 2% of our Portfolio was real estate leased to renewable energy projects under lease agreements.

Our Portfolio consisted of over 600 transactions with an average size of $10 million and the weighted average remaining life of our Portfolio (excluding match-funded transactions) of approximately 16 years as of June 30, 2025.

Our Portfolio consisted of the following asset classes as of June 30, 2025:

The table below provides details on the interest rate and maturity of our receivables and debt securities as of June 30, 2025:

Balance Maturity

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Receivables, net of allowance 3,026

Fixed-rate investments, interest rates less than 5.00% per annum 7 2033 to 2047

Total receivables and investments $ 2,968

Fixed-rate debt securities, interest rates less than 5.00% per annum

7 2033 to 2047

Fixed-rate debt securities, interest rates 9.50% or greater per annum

Total receivables and debt securities

(1) Excludes receivables held for sale of $43 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 short-term commercial paper issuances and revolving credit facilities, the average outstanding balances, income earned, the interest expense incurred, and average yield or cost.

The table below presents, for the receivables, debt securities, and real estate related holdings of our Portfolio and our interest-bearing liabilities inclusive of our short-term commercial paper issuances and revolving 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 March 31,

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

2025 2024 2025 2024

(dollars in millions)

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Average interest rate of receivables 8.4 % 8.3 % 8.5 % 8.3 %

Interest income, investments $ — $ —

Average balance of investments $ 8 $ 8

Average interest rate of investments 4.4 % 10.5 %

Interest income, debt securities

$ — $ — $ — $ —

Average balance of debt securities

$ 10 $ 9 $ 9 $ 9

Average interest rate of debt securities

5.3 % 4.5 % 4.9 % 7.5 %

Rental income $ — $ — $ — $ 2

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Average yield on real estate 11.1 % 11.1 % 11.1 % 8.3 %

Average balance of receivables, investments, and real estate $ 3,052 $ 3,287

Average yield from receivables, investments, and real estate 8.7 % 8.5 %

Average balance of receivables, debt securities, and real estate

$ 3,166 $ 3,052 $ 3,126 $ 3,165

Average yield from receivables, debt securities, and real estate

8.4 % 8.3 % 8.5 % 8.3 %

Interest expense (1)

$ 69 $ 60 $ 134 $ 121

Average balance of debt $ 4,776 $ 4,218 $ 4,666 $ 4,299

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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 March 31, 2025:

The following table provides a summary of our anticipated principal repayments for our receivables and debt securities as of June 30, 2025:

Principal payment due by Period

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Receivables (excluding allowance) $ 3,081 $ 321 $ 1,340 $ 938 $ 482

Investments 7 1 1 3 2

Debt securities

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 March 31, 2025,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of March 31, 2025,

• the anticipated maturity dates of our receivables and debt securities and the weighted average yield for each range of maturities as of June 30, 2025,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of June 30, 2025,

• the Performance Ratings of our Portfolio, and

• the receivables on non-accrual status.

For information on our securitization assets relating to our securitization trusts, see Note 5 to our financial statements in this Form 10-Q.

The securitization assets do not have a contractual maturity date and the underlying securitized assets have contractual maturity dates until 2059.

For information on our retained interests in securitization trusts, see Note 5 to our financial statements in this Form 10-Q.

These assets do not have a contractual maturity date and the underlying securitized assets have contractual maturity dates until 2059.

Results of Operations

Comparison of the Three Months Ended March 31, 2025 vs.

Three Months Ended March 31, 2024

Three months ended March 31,

Comparison of the Three Months Ended June 30, 2025 vs.

Three Months Ended June 30, 2024

Three months ended June 30,

2025 2024 $ Change % Change

(dollars in thousands)

Interest income $ 66,394 $ 68,692 $ (2,298) (3) %

Rental income 83 1,846 (1,763) (96) %

Interest and rental income

$ 67,441 $ 62,862 $ 4,579 7 %

Gain on sale of assets 7,829 25,795 (17,966) (70) %

Securitization asset income 6,999 4,898 2,101 43 %

Other Income 4,797 1,769 3,028 171 %

Management fees and retained interest income

8,988 5,218 3,770 72 %

Origination fee and other income

1,427 642 785 122 %

Total Revenue 85,685 94,517 (8,832) (9) %

Interest expense 79,746 59,530 20,216 34 %

Provision for loss on receivables and securitization assets 3,812 2,022 1,790 89 %

Provision for loss on receivables and retained interests in securitization trusts

1,038 (4,198) 5,236 (125) %

Compensation and benefits 18,131 20,814 (2,683) (13) %

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Net income (loss) $ 99,795 $ 26,944 $ 72,851 270 %

• Net income decreased by $66 million due to a decrease in revenue of $9 million, a decrease in income from equity method investments of $71 million and an increase in total expenses of $9 million, partially offset by a $22 million decrease in income tax expense.

• Total revenue decreased by $9 million due to a $10 million decrease in gain on sale income, the result of a change in the mix and volume of assets being securitized.

Interest income decreased by $2 million due to a lower outstanding balance due to the contribution of receivables to a co-investment structure.

Other income increased by $3 million due to fees recognized on the origination of assets within a co-investment structure.

• Interest expense increased by $3 million primarily due to a larger average outstanding debt balance.

We recorded a $4 million provision for loss on receivables and securitization assets, driven primarily by changes in macroeconomic assumptions used to predict future credit losses.

• Compensation and benefits expenses increased by $4 million primarily due to the acceleration of share-based compensation related to those employees who met the age and years of service criteria of our retirement policy in the current period.

• Income (loss) from equity method investments using HLBV allocations decreased by $71 million primarily due to (a) lower mark-to-market income compared to the prior period related to power purchase agreements held by certain of the projects in which we have invested, (b) increased income tax expense recognized by an equity method investee in the current period, offset by (c) higher allocations in the current period of income related to tax credits allocated to other investors in solar projects.

• Income tax expense decreased by $22 million primarily due to lower pre-tax book income.

• Net income increased by $73 million due primarily to an increase in income from equity method investments of $131 million, offset by a decrease in revenue of $9 million, an increase in total expenses of $21 million, and a $28 million increase in income tax expense.

• Total revenue decreased by $9 million due to an $18 million decrease in gain on sale income, the result of a change in the mix and timing of assets being securitized.

Interest and rental income increased by $5 million due to higher asset yields on a higher average asset balance.

Management fees and retained interest income increased by $4 million due to additional assets added to a co-investment structure.

Origination fee and other income increased by $1 million due to fees recognized on the origination of assets within a co-investment structure.

• Interest expense increased by $20 million due to the write-off of debt issuance costs and fees incurred associated with the repurchase of the 2026 and 2027 notes in the amount of $11 million, as well as to a larger average outstanding debt balance and a higher average interest rate.

We recorded a $1 million provision for loss on receivables and retained interests in securitization trusts, driven primarily by changes in loan specific assumptions used to calculate reserves for certain receivables.

• Compensation and benefits expenses decreased by $3 million primarily due to the prior period acceleration of share-based compensation related to those employees who met the age and years of service criteria of our retirement policy which did not recur in the current period.

• Income (loss) from equity method investments increased by $131 million primarily due to higher HLBV allocations in the current period of income related to tax credits allocated to other investors in solar projects, as those tax credits reduced the tax equity investors ongoing claim on the net assets of the project.

• Income tax expense increased by $28 million primarily due to higher pre-tax book income.

Comparison of the Six Months Ended June 30, 2025 vs.

Six Months Ended June 30, 2024

Six Months Ended June 30,

2025 2024 $ Change % Change

(dollars in thousands)

Interest and rental income

$ 133,918 $ 133,400 $ 518 — %

Gain on sale of assets 26,497 54,405 (27,908) (51) %

Management fees and retained interest income

15,987 10,116 5,871 58 %

Origination fee and other income

6,224 2,411 3,813 158 %

Total Revenue 182,626 200,332 (17,706) (9) %

Interest expense 144,424 121,403 23,021 19 %

Provision for loss on receivables and retained interests in securitization trusts

4,850 (2,177) 7,027 (323) %

Compensation and benefits 43,110 41,490 1,620 4 %

General and administrative 15,874 17,007 (1,133) (7) %

Total expenses 208,258 177,723 30,535 17 %

Income (loss) before equity method investments (25,632) 22,609 (48,241) (213) %

Income (loss) from equity method investments 245,667 185,424 60,243 32 %

Income (loss) before income taxes 220,035 208,033 12,002 6 %

Income tax (expense) benefit (62,055) (56,541) (5,514) 10 %

Net income (loss) $ 157,980 $ 151,492 $ 6,488 4 %

• Net income increased by $6 million due to an increase in income from equity method investments of $60 million, offset by a decrease in total revenue of $18 million, an increase in total expenses of $31 million and an increase in income tax expense of $6 million.

• Total revenue decreased by $18 million due to a $28 million decrease in gain on sale of assets, driven by a change in the mix and timing of assets being securitized, including the balance sheet rotation of certain land and government receivable assets in the prior period which did not recur.

This was partially offset by increases to management fees and retained interest income and origination fee and other income, due to higher fees recognized due to increased investment in a co-investment structure.

• Interest expense increased by $23 million primarily due to the write-off of debt issuance costs and fees incurred associated with the repurchase of the 2026 and 2027 notes in the amount of $11 million, as well as a larger average outstanding debt balance and a higher average interest rate.

We recorded a provision for loss on receivables of $5 million driven primarily by changes in macroeconomic assumptions used to predict future credit losses.

• Income from equity method investments increased by $60 million primarily due to allocations of income related to tax credits allocated to other investors in solar projects, as those tax credits reduced the tax equity investors ongoing claim on the net assets of the project.

• Income tax expense increased by $6 million primarily due to larger income before income taxes driven primarily by income from equity method investments discussed above.

Non-GAAP Financial Measures

We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our performance:

(1) adjusted earnings, (2) adjusted net investment income, (3) managed assets, and (4) adjusted cash from operations plus other portfolio collections.

(1) adjusted earnings, (2) adjusted recurring net investment income, (3) managed assets, and (4) adjusted cash from operations plus other portfolio collections.

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.

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Adjusted Earnings

We calculate adjusted earnings as GAAP net income (loss) excluding non-cash equity 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, or non-cash tax charges and the earnings attributable to our non-controlling interest of our Operating Partnership.

We calculate adjusted earnings as GAAP net income (loss) excluding non-cash equity 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, non-cash tax charges and the earnings attributable to our non-controlling interest of our Operating Partnership.

We also make an adjustment to eliminate our portion of fees we earn from related-party co-investment structures, and for our equity method investments in the renewable energy projects as described below.

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Certain of our equity method investments in renewable energy and energy efficiency projects are structured using typical partnership “flip” structures where the investors with cash distribution preferences receive a pre-negotiated return consisting of priority distributions from the project cash flows, in many cases, along with tax attributes.

Tax equity investors typically realize a large portion of their return through an allocation of the majority of tax attributes, such as tax depreciation and tax credits, as such credits are realized by the project.

Once this preferred return is achieved, the partnership “flips” and the common equity investor, often the operator or sponsor of the project, receives more of the cash flows through its equity interests while the previously preferred investors retain an ongoing residual interest.

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Under GAAP, we account for these equity method investments utilizing the HLBV method.

Under this method, we recognize income or loss based on the change in the amount each partner would receive, typically based on the negotiated profit and loss allocation, if the assets were liquidated at book value, after adjusting for any distributions or contributions made during such quarter.

The HLBV allocations of income or loss may be impacted by the receipt of tax attributes, as tax equity investors are allocated losses in proportion to the tax benefits received, while the sponsors of the project are allocated gains of a similar amount.

The investment tax credit available for election in solar projects is a one-time credit realized in the quarter when the project is considered operational for tax purposes and is fully allocated under HLBV in that period (subject to an impairment test), while the production tax credit required for wind projects and electable for solar projects is a ten year credit and thus is allocated under HLBV over a ten year period.

Under this method, we recognize income or loss based on the change in the amount each partner would receive if the assets were liquidated at book value, after adjusting for any distributions or contributions made during such quarter.

The amount received in a liquidation is typically based on the negotiated profit and loss allocation, which may differ from the allocation of distributable cash in any given period.

The amount allocated to a tax equity investor during the hypothetical liquidation is typically reduced over time as tax attributes are allocated to them and they achieve portions of their preferred return.

Accordingly, tax equity investors are allocated losses as they receive tax benefits, while the sponsors of the project and other investors subordinate to tax equity are allocated gains of a similar amount.

Tax equity investors can generally elect either investment tax credits or production tax credits, which are each recognized over different time periods.

This results in different HLBV income profiles despite the fact that cash allocations are typically not directly impacted by such a tax credit election.

In addition, the agreed upon allocations of the project’s cash flows may differ materially from the profit and loss allocation used for the HLBV calculations in a given period.

We also consider the impact of any OTTI in determining our income from equity method investments.

The cash distributions for those equity method investments where we apply HLBV are segregated into a return on and return of capital on our cash flow statement based on the cumulative income (loss) that has been allocated using the HLBV method.

However, as a result of the application of the HLBV method, including the impact of tax allocations, the high levels of depreciation and other non-cash expenses that are common to renewable energy projects and the differences between the agreed upon profit and loss and the cash flow allocations, the distributions and thus the economic returns (i.e.

return on capital) achieved from the investment are often significantly different from the income or loss that is allocated to us under the HLBV method in any one period.

Thus, in calculating adjusted earnings, for certain of these investments where there are characteristics as described above, we further adjust GAAP net income (loss) to take into account our calculation of the return on capital based upon the underwritten investment rate as adjusted to reflect the performance of the project and the cash distributed.

understand the economic performance of these investments where HLBV income can differ substantially from the economic returns in any one period.

The application of the HLBV method described above, results in GAAP income or loss in any one period that is often significantly different from the economic returns achieved from the investment in any one period as a result of the impact of tax allocations, the high levels of depreciation and other non-cash expenses that are common to renewable energy projects and the differences between the agreed upon profit and loss and the cash flow allocations.

Thus, in calculating adjusted earnings, we adjust GAAP net income (loss) for certain of our investments where there are characteristics as described above to take into account our calculation of the return on capital (based upon the underwritten investment rate), as adjusted to reflect the performance of the project and the cash distributed.

In calculating the underwritten investment rate, we make certain assumptions, including the timing and amounts of cash flows generated by our investments, which may differ from actual results, and may update this yield to reflect our most current estimates of project performance.

We believe this equity method investment adjustment to our GAAP net income (loss) in calculating our adjusted earnings measure is an important supplement to the income (loss) from equity method investments as determined under GAAP that helps investors understand the economic performance of these investments where HLBV income can differ substantially from the economic returns in any one period.

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 months ended March 31, 2025 and 2024.

Three months ended March 31,

The following table provides results related to our equity method investments for the three and six months ended June 30, 2025 and 2024.

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

2025 2024 2025 2024

(in millions)

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In addition, our methodology for calculating adjusted earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported adjusted 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 adjusted earnings for the three months ended March 31, 2025 and 2024.

Three Months Ended March 31,

The table below provides a reconciliation of our GAAP net income (loss) to adjusted earnings for the three and six months ended June 30, 2025 and 2024.

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

2025 2024 2025 2024

(dollars in thousands, except per share amounts)

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(157,680) (26,874) (245,667) (185,424)

Equity method investments earnings adjustment (2)

Adjusted income from equity method investments (2)

79,094 59,291 148,956 114,753

Elimination of proportionate share of fees earned from co-investment structures (3)

(1,572) (111) (4,275) (111)

Equity-based expenses 5,595 8,282 18,272 17,341

Provision for loss on receivables (4)

1,038 (4,198) 4,850 (2,177)

Loss (gain) on debt modification or extinguishment 10,557 — 10,878 —

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Current year earnings attributable to non-controlling interest

1,350 404 2,923 1,926

Adjusted earnings

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(2) This is a non-GAAP adjustment to reflect the return on capital of our equity method investments as described above.

(3) This adjustment is to eliminate the intercompany portion of fees received from co-investment structures that for GAAP net income is included in the Equity method income line item.

Since we remove GAAP Equity method income for purposes of our Adjusted Earnings metric, we add back the elimination through this adjustment.

(4) In addition to these provisions, in the three months ended March 31, 2024, we concluded that an equity method investment, along with certain loans we had made to this investee, were not recoverable.

(3) This adjustment is to eliminate the intercompany portion of both up-front origination fees and ongoing asset management received from co-investment structures that for GAAP net income is included in the Equity method income line item.

Since we remove GAAP Equity method income for purposes of our Adjusted Earnings metric, we add back the eliminations through this adjustment.

(4) In addition to these provisions, in the six months ended June 30, 2024, we concluded that an equity method investment, along with certain loans we had made to this investee, were not recoverable.

The equity method investment and loans had a carrying value of $0 due to the losses already recognized through GAAP income from equity method investments as a result of operating losses sustained by the investee.

We have excluded this

write-off from Adjusted earnings, as this investment was an investment in a corporate entity which is not a part of our current investment strategy and is immaterial to our Portfolio.

We have excluded this write-off from Adjusted earnings, as this investment was an investment in a corporate entity which is not a part of our current investment strategy and

is immaterial to our Portfolio.

The loss associated with this investment is included in our Average Annual Realized Loss on Managed Assets metric disclosed below.

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

Adjusted Net Investment Income

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

We calculate adjusted net investment income as shown in the table below by adjusting GAAP-based net investment income for those earnings adjustments that are applicable to adjusted net 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.

Our management also uses adjusted net investment income in this way.

Our non-GAAP adjusted net investment income measure may not be comparable to similarly titled measures used by other companies.

For further information on the adjustments between GAAP-based net investment income and adjusted net investment income, see the discussion above related to Adjusted Earnings.

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

Three Months Ended March 31,

Adjusted Recurring Net Investment Income

We have a Portfolio of investments that we finance using a combination of debt and equity, and we also generate recurring income from our retained interests in securitization trusts and from ongoing management fees from our securitization trusts and our co-investment vehicle.

We calculate adjusted recurring net investment income as shown in the table below by adjusting GAAP-based net investment income for those earnings adjustments that are applicable to adjusted recurring net 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 and from our asset management activities.

Our management also uses adjusted recurring net investment income in this way.

Our non-GAAP adjusted recurring net investment income measure may not be comparable to similarly titled measures used by other companies.

This measure also differs from our previously reported “Adjusted Net Investment Income”, as Adjusted Net Investment Income did not include Management fees and retained interest income.

For further information on the adjustments between GAAP-based net investment income and adjusted recurring net investment income, see the discussion above related to Adjusted Earnings.

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

2025 2024 2025 2024

(in thousands)

Interest income $ 66,394 $ 68,692

Rental income 83 1,846

GAAP-based investment revenue 66,477 70,538

Interest and rental income

$ 67,441 $ 62,862 $ 133,918 $ 133,400

Management fees and retained interest income

8,988 5,218 15,987 10,116

Interest expense (79,746) (59,530) (144,424) (121,403)

GAAP-based net investment income 1,800 8,666

Equity method earnings adjustment 69,863 55,462

GAAP-based net investment income (loss) (1)

(3,317) 8,550 5,481 22,113

Adjusted income from equity method investments (2)

79,094 59,291 148,956 114,753

Loss (gain) on debt modification or extinguishment 10,557 — 10,878 —

Amortization of real estate intangibles 3 3 7 174

Adjusted net investment income $ 71,986 $ 64,299

Elimination of proportionate share of management fees earned from co-investment structures (3)

(1,013) (111) (1,763) (111)

Adjusted recurring net investment income

$ 85,324 $ 67,733 $ 163,559 $ 136,929

(1) GAAP-based net investment income (loss) as reported in previous periods was not defined to include Management fees and retained interest income.

It has been included here in comparative periods to reflect the new definition.

(2) This is a non-GAAP adjustment to reflect the return on capital of our equity method investments as described above.

(3) GAAP net income includes an elimination of the intercompany portion of management fees received from co-investment structures in the Equity method income line item.

Since GAAP Equity method income is not a component of this metric, we include the elimination of the management fee through this adjustment.

Managed Assets

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

(in millions)

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Receivables held-for sale 43 76

Real estate 3 3

Investments 7 7

Real estate and debt securities

GAAP-based Portfolio 7,168 6,594

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Managed Assets $ 14,619 $ 13,703

(1) Total assets in co-investment structures are $989 million as of March 31, 2025 .

Not included in this amount is an additional $225 million related to closed transactions not yet funded as of March 31, 2025.

(1) Total assets in co-investment structures are $1.1 billion as of June 30, 2025 .

Not included in this amount is an additional $310 million related to closed transactions not yet funded as of June 30, 2025.

The following shows our Managed Assets by asset class as of June 30, 2025:

Adjusted Cash from Operations plus Other Portfolio Collections

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Although there is also not a directly comparable GAAP measure that demonstrates how we consider cash available for dividend payment, below is a reconciliation of this measure to Net cash provided by operating activities.

Adjusted Cash from Operations plus Other Portfolio Collections also differs from Net cash provided by (used in) investing activities in that it excludes many of the uses of cash used in our investing activities such as Equity method investments, Purchases of and investments in receivables, Purchases of investments, and Collateral provided to and received from hedge counterparties.

Adjusted Cash from Operations plus Other Portfolio Collections also differs from Net cash provided by (used in) investing activities in that it excludes many of the uses of cash used in our investing activities such as Equity method investments, Purchases of and investments in receivables, Purchases of debt securities, and Collateral provided to and received from hedge counterparties.

In addition, Adjusted Cash from Operations plus Other Portfolio Collections is not comparable to Net cash provided by (used in) financing activities in that it excludes many of our financing activities such as proceeds from common stock issuances and borrowings and repayments of unsecured debt.

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Management uses Cash available for reinvestment in this way, and we believe that our investors use it in a similar fashion.

For the year ended, For the year ended, For the three months ended, For the three months ended, For the TTM ended,

December 31, 2023 December 31, 2024 March 31, 2025 March 31, 2024 March 31, 2025

For the year ended, For the year ended, For the six months ended, For the six months ended, For the TTM ended,

December 31, 2023 December 31, 2024 June 30, 2025 June 30, 2024 June 30, 2025

(in thousands)

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Proceeds from sales of land — 115,767 — 115,767 —

Principal collections from investments (2)

Principal collections from debt securities (2)

3,805 47 253 (75) 375

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— 5,478 — — 5,478

Proceeds from sales of investments and securitization assets — 5,390 — — 5,390

Proceeds from sales of debt securities and retained interests in securitization trusts

— 5,390 — — 5,390

Principal payments on non-recourse debt (21,606) (72,989) (4,950) (69,958) (7,981)

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(2) Included in Other in the cash provided (used in) investing activities section of our statement of cash flows.

For the year ended, For the year ended, For the three months ended, For the three months ended, For the TTM ended,

December 31, 2023 December 31, 2024 March 31, 2025 March 31, 2024 March 31, 2025

For the year ended, For the year ended, For the six months ended, For the six months ended, For the TTM ended,

December 31, 2023 December 31, 2024 June 30, 2025 June 30, 2024 June 30, 2025

(in thousands)

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(138,418) (172,679) (128,739) (90,836) (210,582)

Securitization asset and other income 26,506 33,044 9,474 6,757 35,761

Management fees and retained interest income and origination fees and other income

26,506 33,044 20,919 9,988 43,975

Principal payments on non-recourse debt (21,606) (72,989) (4,950) (69,958) (7,981)

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(1) Includes cash from the sale of assets on our balance sheet as well as securitization transactions.

(2) For the year ended December 31, 2024, and the TTM ended March 31, 2025, interest paid includes a $20 million benefit from the settlement of a derivative which was designated as a cash flow hedge.

(2) For the six months and TTM ended June 30, 2025, interest paid includes an $18 million benefit from the settlement of a derivative which was designated as a cash flow hedge.

For the six months and TTM ended June 30, 2024, interest paid includes a $19 million benefit from the settlement of a derivative which was designated as a cash flow hedge.

Other Metrics

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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 $7.1 billion as of March 31, 2025.

Unlevered portfolio yield was 8.3% as of March 31, 2025 and 8.3% as of December 31, 2024.

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 March 31, 2025.

Our Portfolio Yield measure may not be comparable to similarly titled measures used by other companies.

Our Portfolio totaled approximately $7.2 billion as of June 30, 2025.

Unlevered portfolio yield was 8.3% as of June 30, 2025 and 8.3% as of December 31, 2024.

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, 2025.

Average Annual Realized Loss on Managed Assets

Average Annual Realized Loss on Managed Assets represents the average annual rate of our incurred losses, calculated as the amount of realized losses incurred in each year as a percentage of each year’s average annual Managed Assets.

This metric is calculated over the ten year period ending March 31, 2025.

Incurred losses include both realized losses on equity method investments and realized credit losses on receivables and investments.

This metric is calculated over the ten year period ending June 30, 2025.

Incurred losses include both realized losses on equity method investments and realized credit losses on receivables and debt securities.

Although there is not a direct comparable GAAP measure, we have presented average annual recognized loss on Managed Assets as calculated under GAAP for comparison.

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Our management uses it in this way and we believe that our investors use it in a similar fashion to evaluate our investment performance, and as such, we believe that its disclosure is useful to our investors.

The table below shows these metrics as of March 31, 2025 is:

The table below shows these metrics as of June 30, 2025 is:

Average Annual Recognized Loss (GAAP) on Managed Assets

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Below is a summary of our available liquidity by source:

As of March 31, 2025

As of June 30, 2025

(in millions)

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(1) As a credit enhancement for our Standalone Commercial Paper Notes, we reserve capacity under our unsecured revolving credit facility for the principal amount of any outstanding Standalone Commercial Paper Notes.

As of March 31, 2025, that reserved capacity was $431 million, and we have presented the capacity under our unsecured revolving credit facility of $1,541 million as reduced by that amount.

Capital markets activity during the three months ended March 31, 2025

During the three months ended March 31, 2025, we increased the available capacity available under our unsecured revolving credit facility to $1.55 billion, adding two additional banks.

We also issued $47 million in equity.

As discussed in Note 8 to our financial statements in this Form 10-Q, we entered into a strategic partnership with KKR called CarbonCount Holdings 1, LLC (“CCH1”), under which we each have committed to invest $1 billion in eligible projects over an 18 month period, of which $497 million remains to be funded by each of us as of March 31, 2025.

The commitment period was extended to 30 months in May 2025.

As of June 30, 2025, that reserved capacity was $357 million, and we have presented the capacity under our unsecured revolving credit facility of $1.5 billion as reduced by that amount.

Capital markets activity during the six months ended June 30, 2025

During the six months ended June 30, 2025, we increased the available capacity available under our unsecured revolving credit facility to $1.55 billion, adding two additional banks.

We issued $600 million of senior unsecured notes due 2031 and $400 million of senior unsecured notes due 2035, and used proceeds of the notes to complete a cash tender offer to repurchase $400 million and $300 million of senior unsecured notes due 2026 and 2027 respectively.

We repaid $220 million of Convertible Notes with existing liquidity, and issued $120 million in equity.

As discussed in Note 8 to our financial statements in this Form 10-Q, we entered into a strategic partnership with KKR called CarbonCount Holdings 1, LLC (“CCH1”), under which we each have committed to invest $1 billion in eligible projects over an 18 month period, of which $476 million remains to be funded by each of us as of June 30, 2025.

The commitment period was extended to 30 months in May 2025 to allow additional time to invest the proceeds of senior notes to be issued by CCH1.

Such senior notes allow CCH1 to invest in assets in amounts incremental to commitments of the investors.

Maturities of recourse debt obligations

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

As of March 31, 2025, the maturity profile of our long-term recourse debt obligations is shown in the table below.

As of June 30, 2025, the maturity profile of our long-term recourse debt obligations is shown in the table below.

Amounts exclude $357 million principal amount of commercial paper notes which mature in 2025, as we have reserved capacity under our credit facility for such amounts as described above.

(1) The Convertible Notes due in 2025 were repaid subsequent to March 31, 2025 with proceeds from our unsecured revolving credit facility.

Additional borrowings and financial leverage management

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The decision as to how we finance specific assets or groups of assets is largely driven by risk, portfolio, and financial management considerations, including the potential for gain on sale or fee income, the overall interest rate environment, prevailing credit spreads, the terms of available financing, and financial market conditions.

During periods of market

disruptions, certain sources of financing may be more readily accessible than others which may impact our financing decisions.

During periods of market disruptions, certain sources of financing may be more readily accessible than others which may impact our financing decisions.

Over time, as market conditions change, we may use other forms of debt and equity in addition to these financing arrangements.

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

As shown in the table below, our debt to equity ratio was approximately 1.9 to 1 as of March 31, 2025, below our current board-approved leverage limit of up to 2.5 to 1.

Our percentage of fixed rate debt including the impact of our interest rate derivatives was approximately 95% as of March 31, 2025, which is at the top of our targeted fixed rate debt percentage range of 75% to 100%.

As shown in the table below, our debt to equity ratio was approximately 1.8 to 1 as of June 30, 2025, below our current board-approved leverage limit of up to 2.5 to 1.

Our percentage of fixed rate debt including the impact of our interest rate derivatives was approximately 97% as of June 30, 2025, which is at upper-end of 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:

March 31, 2025 % of Total December 31, 2024 % of Total

June 30, 2025 % of Total December 31, 2024 % of Total

(dollars in millions) (dollars in millions)

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While we generally intend to hold our target assets that we do not securitize upon acquisition as long term investments, certain of our investments may be sold in order to manage our interest rate risk and liquidity needs, to meet other operating objectives and to adapt to market conditions.

The timing and impact of future sales of receivables and investments, if any, cannot be predicted with any certainty.

The timing and impact of future sales of receivables and debt securities, if any, cannot be predicted with any certainty.

We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise.

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Sources and Uses of Cash

We had approximately $84 million and $150 million of unrestricted cash, cash equivalents, and restricted cash as of March 31, 2025 and December 31, 2024, respectively.

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024.

We had approximately $104 million and $150 million of unrestricted cash, cash equivalents, and restricted cash as of June 30, 2025 and December 31, 2024, respectively.

The following table summarizes our cash flows for the six months ended June 30, 2025 and 2024.

See our statements of cash flows for full details on the components of each category of cash flows.

As discussed above, Adjusted cash from operations plus other portfolio collections was $39 million for the three months ended March 31, 2025.

For the three months ended,

March 31, 2025 March 31, 2024

As discussed above, Adjusted cash from operations plus other portfolio collections was $242 million for the six months ended June 30, 2025.

For the six months ended,

June 30, 2025 June 30, 2024

(in millions)

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Discussion of changes in cash provided by (used in) operating activities

Cash provided by (used in) operating activities for the three months ended March 31, 2025 was $58 million lower than the same period ended March 31, 2024.

Net income was $66 million lower in the current period, offset by higher adjustments to net income of $8 million when compared to the prior period.

Cash provided by (used in) operating activities for the six months ended June 30, 2025 was $46 million higher than the same period ended June 30, 2024.

Net income was $6 million higher in the current period, and there were higher adjustments to net income of $40 million when compared to the prior period.

Discussion of changes in cash provided by (used in) investing activities

Cash used in investing activities for the three months ended March 31, 2025 was $254 million higher than the same period ended March 31, 2024.

We invested $120 million more in equity method investments and collected $101 million less in principal from receivables in the period ended March 31, 2025 than the same period in the prior year.

In the prior year, we sold $116 million of real estate, which did not recur in the current period.

Cash provided by (used in) investing activities for the six months ended June 30, 2025 was $569 million lower than the same period ended June 30, 2024.

We invested $131 million more in equity method investments and collected $299 million less in principal from receivables in the period ended June 30, 2025 than the same period in the prior year.

In the prior year, we sold $116 million of real estate, which did not recur in the current period, and sold $91 million fewer receivables in the current period.

These changes were offset by $60 million less invested in receivables than in the same period in the prior year.

Discussion of changes in cash provided by (used in) financing activities

Cash provided by financing activities for the three months ended March 31, 2025 was $243 million higher than the same period ended March 31, 2024.

We had higher net borrowings from our revolving credit facility and commercial paper notes of $496 million compared to the prior period, which was partially offset by no issuances of non-recourse debt or senior unsecured notes in the current period.

Cash provided by (used in) financing activities for the six months ended June 30, 2025 was $390 million higher than the same period ended June 30, 2024.

We had higher net borrowings from our revolving credit facility and commercial paper notes of $262 million compared to the prior period.

We had higher net borrowings from senior unsecured notes of $91 million in the current period.

In the prior period, we had higher net repayments of $300 million principal related to term loans than in the current period.

These amounts were offset by $200 million principal payments on Convertible Notes made in the current period.

Supplemental Guarantor Information

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

Other than our securitization assets (including any outstanding servicer advances) of approximately $280 million as of March 31, 2025, that may be at risk in the event of defaults or prepayments in our securitization trusts and certain limited guarantees 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 retained interests in securitization trusts (including any outstanding servicer advances) of approximately $272 million as of June 30, 2025, that may be at risk in the event of defaults or prepayments in our securitization trusts and certain limited guarantees 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.

We have made certain loans to equity method investees which we describe in Note 6 to our financial statements in this Form 10-Q.

In connection with some of our transactions, we have provided certain limited guarantees to other transaction participants covering the accuracy of certain limited representations, warranties or covenants and provided an indemnity against certain losses from “bad acts” including fraud, failure to disclose a material fact, theft, misappropriation, voluntary bankruptcy or unauthorized transfers.

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Book Value Considerations

As of March 31, 2025, we carried only our investments, residual assets in securitized financial assets, and derivatives at fair value on our balance sheet.

As of June 30, 2025, we carried only our debt securities, retained interests in securitization trusts, 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, residual assets in securitized financial assets, and derivatives that are carried on our balance sheet at fair value as of March 31, 2025, 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 and cash collected from such assets.

Other than our debt securities, retained interests in securitization trusts, and derivatives that are carried on our balance sheet at fair value as of June 30, 2025, 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 and cash collected from such assets.

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