What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-17 · 171 added, 321 removed, 1260 unchanged (28% of the section changed)

12 unchanged sentences

We have audited the accompanying consolidated balance sheets of Sunrun Inc.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, redeemable noncontrolling interests and stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), redeemable noncontrolling interests and stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2010.

San Francisco, California

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accounts receivable, net as of December 31, 2022 and 2021 were $ 66,847 and $ 55,714 , respectively;

inventories as of December 31, 2021 and December 31, 2020 of $ 93,604 and $ 23,306 ;

inventories as of December 31, 2022 and 2021 of $ 193,836 and $ 93,604 , respectively;

prepaid expenses and other current assets as of December 31, 2022 and 2021 were $ 12,698 and $ 1,519 , respectively and other assets as of December 31, 2022 and 2021 were $ 287,771 and $ 177,224 , respectively.

6 unchanged sentences

non-recourse debt as of December 31, 2022 and 2021 of $ 1,489,407 and $ 1,482,608 , respectively;

and other liabilities as of December 31, 2021 and December 31, 2020 of $ 25,205 and $ 31,745 , respectively.

and other liabilities as of December 31, 2022 and 2021 of $ 15,260 and $ 25,205 , respectively.

The accompanying notes are an integral part of these consolidated financial statements.

22 unchanged sentences

( 1,023,022 ) ( 901,107 ) ( 453,554 )

Net (loss) income attributable to common stockholders $ ( 79,423 ) $ ( 173,394 ) $ 26,335

Net (loss) income per share attributable to common stockholders

Net income (loss) attributable to common stockholders $ 173,377 $ ( 79,423 ) $ ( 173,394 )

Net income (loss) per share attributable to common stockholders

Basic $ 0.82 $ ( 0.39 ) $ ( 1.24 )

Diluted $ 0.80 $ ( 0.39 ) $ ( 1.24 )

Weighted average shares used to compute net loss per share attributable to common stockholders

Weighted average shares used to compute net income (loss) per share attributable to common stockholders

Basic 211,347 205,132 139,606

1 unchanged sentence

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

1 unchanged sentence

2022 2021 2020

Net (loss) income attributable to common stockholders $ ( 79,423 ) $ ( 173,394 ) $ 26,335

Net income (loss) attributable to common stockholders $ 173,377 $ ( 79,423 ) $ ( 173,394 )

Unrealized gain (loss) on derivatives, net of income taxes 140,805 18,496 ( 63,445 )

Adjustment for net loss (gain) on derivatives recognized into earnings, net of income taxes 15,209 9,443 ( 594 )

Adjustment for net (gain) loss on derivatives recognized into earnings, net of income taxes ( 646 ) 15,209 9,443

Other comprehensive income (loss) 140,159 33,705 ( 54,002 )

Comprehensive loss $ ( 45,718 ) $ ( 227,396 ) $ ( 22,554 )

Comprehensive income (loss) $ 313,536 $ ( 45,718 ) $ ( 227,396 )

The accompanying notes are an integral part of these consolidated financial statements.

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Distributions to redeemable noncontrolling interests and noncontrolling interests ( 37,453 ) — — — — — — ( 69,060 ) ( 69,060 )

Net (loss) income ( 234,386 ) — — — — 26,335 26,335 ( 182,971 ) ( 156,636 )

Net loss ( 243,542 ) — — — — ( 173,394 ) ( 173,394 ) ( 210,012 ) ( 383,406 )

Shares issued in connection with a subscription agreement — 2,075 — 75,000 — — 75,000 — 75,000

Acquisition of Vivint Solar 58,300 69,472 7 5,037,516 — — 5,037,523 229,400 5,266,923

Acquisition of noncontrolling interest ( 7,500 ) — — 3,542 — — 3,542 — 3,542

Repurchase of common stock — ( 369 ) — — — ( 5,000 ) ( 5,000 ) — ( 5,000 )

Other comprehensive loss, net of taxes — — — — ( 54,002 ) — ( 54,002 ) — ( 54,002 )

Balance - December 31, 2020 560,461 201,406 20 6,107,802 ( 106,755 ) 76,844 6,077,911 650,999 6,728,910

Cumulative effect of adoption of new ASU (No.

2018-02) — — — — — ( 1,228 ) ( 1,228 ) — ( 1,228 )

Exercise of stock options — 2,046 — 19,326 — — 19,326 — 19,326

5 unchanged sentences

Net loss ( 35,908 ) — — — — ( 79,423 ) ( 79,423 ) ( 865,199 ) ( 944,622 )

Shares issued in connection with a subscription agreement — 2,075 — 75,000 — — 75,000 — 75,000

Acquisition of Vivint Solar 58,300 69,472 7 5,037,516 — — 5,037,523 229,400 5,266,923

Capped call transaction — — — ( 28,000 ) — — ( 28,000 ) — ( 28,000 )

Acquisition of noncontrolling interest ( 23,427 ) — — ( 7,453 ) — — ( 7,453 ) ( 8,386 ) ( 15,839 )

Other comprehensive loss, net of taxes — — — — ( 54,002 ) — ( 54,002 ) — ( 54,002 )

Other comprehensive income, net of taxes — — — — 33,705 — 33,705 — 33,705

Balance - December 31, 2021 594,973 208,176 21 6,330,344 ( 73,050 ) ( 2,579 ) 6,254,736 722,878 6,977,614

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( 67,732 ) — — — — — — ( 150,369 ) ( 150,369 )

Net loss ( 35,908 ) — — — — ( 79,423 ) ( 79,423 ) ( 865,199 ) ( 944,622 )

Capped call transaction — — — ( 28,000 ) — — ( 28,000 ) — ( 28,000 )

Net (loss) income ( 5,558 ) — — — — 173,377 173,377 ( 1,017,464 ) ( 844,087 )

Acquisition of noncontrolling interests ( 1,069 ) — — ( 16,063 ) — — ( 16,063 ) ( 19,557 ) ( 35,620 )

14 unchanged sentences

Reduction in pass-through financing obligations ( 41,164 ) ( 42,309 ) ( 39,188 )

Unrealized gain on derivatives ( 184,904 ) ( 21,686 ) ( 453 )

Other noncash items 53,651 82,286 51,040

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Business combination, net of cash acquired — — 537,242

Purchase of equity method investment — ( 65,356 ) —

Purchase of equity investment ( 75,000 ) — ( 65,356 )

Purchases of property and equipment, net ( 18,203 ) ( 8,576 ) ( 3,095 )

8 unchanged sentences

Payment of debt fees ( 62,994 ) ( 53,793 ) ( 14,083 )

Proceeds from pass-through financing and other obligations 10,032 8,701 9,140

Early repayment of pass-through financing obligations ( 18,050 ) — ( 7,597 )

Proceeds from pass-through financing and other obligations, net 3,645 10,032 8,701

Repayment of pass-through financing obligation — ( 18,050 ) —

Payment of finance lease obligations ( 14,146 ) ( 12,352 ) ( 10,578 )

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Distributions paid to noncontrolling interests and redeemable noncontrolling interests ( 217,633 ) ( 196,466 ) ( 111,223 )

Acquisition of noncontrolling interests ( 41,955 ) ( 2,694 ) ( 4,600 )

Acquisition of noncontrolling interest ( 42,571 ) ( 41,955 ) ( 2,694 )

Net proceeds related to stock-based award activities 32,863 36,141 48,664

Proceeds from shares issued in connection with a subscription agreement — — 75,000

Repurchase of common stock — — ( 5,000 )

Net cash provided by financing activities 3,037,451 2,645,594 1,160,740

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Notes to Consolidated Financial Statements

(“Sunrun” or the “Company”) was originally formed in 2007 as a California limited liability company and was converted into a Delaware corporation in 2008.

The Company is engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States.

(“Sunrun” or the “Company”) was formed in 2007 and is engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States.

Sunrun acquires customers directly and through relationships with various solar and strategic partners (“Partners”).

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The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The Company regularly makes estimates and assumptions, including, but not limited to, revenue recognition constraints that result in variable consideration, the discount rate used to adjust the promised amount of consideration for the effects of a significant financing component, the estimates that affect the collectability of accounts receivable, the valuation of inventories, the useful lives of solar energy systems, the useful lives of property and equipment, the valuation and useful lives of intangible assets, the effective interest rate used to amortize pass-through financing obligations, the discount rate uses for operating and financing leases, the fair value of contingent consideration, the fair value of assets acquired and liabilities assumed in a business combination, the valuation of stock-based compensation, the determination of valuation allowances associated with deferred tax assets, the fair value of debt instruments disclosed and the redemption value of redeemable noncontrolling

Notes to Consolidated Financial Statements — Continued

The Company regularly makes estimates and assumptions, including, but not limited to, revenue recognition constraints that result in variable consideration, the discount rate used to adjust the promised amount of consideration for the effects of a significant financing component, the estimates that affect the collectability of accounts receivable, the valuation of inventories, the useful lives of solar energy systems, the useful lives of property and equipment, the valuation and useful lives of intangible assets, the effective interest rate used to amortize pass-through financing obligations, the discount rate uses for operating and financing leases, the valuation of stock-based compensation, the determination of valuation allowances associated with deferred tax assets, the fair value of debt instruments disclosed and the redemption value of redeemable noncontrolling interests.

The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable.

Actual results may differ from such estimates.

Notes to Consolidated Financial Statements — Continued

Segment Information

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Total $ 953,023 $ 850,431 $ 708,208

As a result of the acquisition of Vivint Solar on October 8, 2020, cash and restricted cash increased by $ 537.2 million.

Notes to Consolidated Financial Statements — Continued

Accounts Receivable

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The Company maintains allowances for the applicable portion of receivables using the expected credit loss model.

The Company estimates expected credit losses from doubtful accounts based upon the expected collectability of all accounts receivables, which takes into account the number of days past due, collection history, identification of specific customer exposure, current economic trends, and management’s expectation of future economic conditions.

Notes to Consolidated Financial Statements — Continued

economic trends, and management’s expectation of future economic conditions.

Once a receivable is deemed to be uncollectible, it is written off.

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Customer receivables $ 218,712 $ 147,371

Rebates and other receivables 9,701 2,279

Other receivables 8,924 9,701

Allowance for credit losses ( 13,381 ) ( 11,035 )

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Solar energy systems under construction will be depreciated as solar energy systems subject to signed Customer Agreements when the respective systems are completed and interconnected.

Notes to Consolidated Financial Statements — Continued

Property and Equipment, net

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Repairs and maintenance are expensed as incurred.

Notes to Consolidated Financial Statements — Continued

Property and equipment is depreciated on a straight-line basis over the following periods:

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Customer relationships 5 - 10 years

Developed technology 5 years

Trade names 5 - 8 years

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When assessing goodwill for impairment, the Company uses qualitative and if necessary, quantitative methods in accordance with FASB ASC Topic 350, Goodwill .

The Company also considers its enterprise value and if necessary, discounted cash flow model, which involves assumptions and

The Company also considers its enterprise value and if necessary, discounted cash flow model, which involves assumptions and estimates, including the Company’s future financial performance, weighted average cost of capital and interpretation of currently enacted tax laws.

Notes to Consolidated Financial Statements — Continued

estimates, including the Company’s future financial performance, weighted average cost of capital and interpretation of currently enacted tax laws.

Circumstances that could indicate impairment and require the Company to perform a quantitative impairment test include a significant decline in the Company’s financial results, a significant decline in the Company’s enterprise value relative to its net book value, a sustained decline in our stock price, or an unanticipated change in competition or the Company’s market share and a significant change in the Company’s strategic plans.

Circumstances that could indicate impairment and require the Company to perform a quantitative impairment test include significant declines in the Company’s financial results or enterprise value relative to its net book value or a sustained decline in the Company's stock price below its book value, coupled with declines in valuations for comparable public companies or acquisition premiums.

As of October 1, 2022, the Company concluded that the fair value of the Company exceeded its carrying value.

Since December 31, 2021, the trading price of the Company’s common stock has generally declined.

A sustained decrease in the Company’s stock price is one of the qualitative factors to be considered as part of an impairment test when evaluating whether events or changes in circumstances may indicate that it is more likely than not that a potential goodwill impairment exists.

The Company will continue monitoring the analysis of the qualitative and quantitative factors used as a basis for the goodwill impairment test during fiscal year 2023.

Deferred Revenue

6 unchanged sentences

Under Customer Agreements:

Payments received $ 645,439 $ 614,906

Payments received, net $ 840,771 $ 645,439

Financing component balance 65,326 58,517

1 unchanged sentence

Under SREC contracts:

Payments received 161,575 126,793

Payments received, net 179,416 161,575

Financing component balance 10,460 8,080

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The annual recognition on these existing contracts will gradually decline over the midpoint of the Customer Agreements over the following 10 years as the typical 20 - or 25 -year initial term expires on individual Customer Agreements.

Notes to Consolidated Financial Statements — Continued

Deferred Grants

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The Company records the grants as deferred grants and recognizes the benefit on a straight-line basis over the estimated depreciable life of the associated assets as a reduction in Cost of customer agreements and incentives.

Notes to Consolidated Financial Statements — Continued

Warranty Accrual

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The Company recognizes all derivative instruments on the balance sheet at their fair value.

Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive loss if a derivative is designated as part of a hedge transaction.

The ineffective portion of the hedge, if any, is immediately recognized in earnings and are included in other (expenses) income, net in the consolidated statements of operations.

Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income if a derivative is designated as part of a hedge transaction.

The ineffective portion of the hedge, if any, is immediately recognized in earnings and are included in other income (expenses), net in the consolidated statements of operations.

The Company uses derivative financial instruments, primarily interest rate swaps, to manage its exposure to interest rate risks on its syndicated term loans, which are recognized on the balance sheet at their fair values.

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In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the derivative instrument is carried at its fair market value on the balance sheet with the changes in fair value recognized in current period earnings.

The remaining balance in accumulated other comprehensive loss associated with the derivative that has been discontinued is not recognized in the income statement unless it is probable that the forecasted transaction will not occur.

Such amounts are recognized in earnings when earnings are affected by the hedged transaction.

The remaining balance in accumulated other

Notes to Consolidated Financial Statements — Continued

comprehensive income associated with the derivative that has been discontinued is not recognized in the income statement unless it is probable that the forecasted transaction will not occur.

Such amounts are recognized in earnings when earnings are affected by the hedged transaction.

Fair Value of Financial Instruments

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Revenue Recognition

The Company recognizes revenue when control of goods or services is transferred to its customers, in an amount that reflects the consideration it expected to be entitled to in exchange for those goods or services.

The Company recognizes revenue when control of goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

Customer agreements and incentives

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Customer Agreements typically have an initial term of 20 or 25 years.

After the initial contract term, Customer Agreements typically automatically renew on an annual basis.

After the initial contract term, Customer Agreements typically automatically renew annually or for five years .

SREC revenue arises from the sale of environmental credits generated by solar energy systems and is generally recognized upon delivery of the SRECs to the counterparty or upon reporting of the electricity generation.

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In those circumstances, the contract contains a significant financing component.

When adjusting the promised amount of consideration for a significant financing component, the Company uses the discount rate that would be reflected in a separate financing transaction between the entity and its customer at contract inception and recognizes the revenue amount on a straight-line basis over the term of the Customer Agreement, and interest expense using the effective interest rate method.

When adjusting the promised amount of consideration for a significant financing component, the

Notes to Consolidated Financial Statements — Continued

Company uses the discount rate that would be reflected in a separate financing transaction between the entity and its customer at contract inception and recognizes the revenue amount on a straight-line basis over the term of the Customer Agreement, and interest expense using the effective interest rate method.

Consideration from customers is considered variable due to the performance guarantee under Customer Agreements and liquidating damage provisions under SREC contracts in the event minimum deliveries are not achieved.

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For RSUs granted to non-employees that vest upon the satisfaction of a performance condition, the Company starts recognizing expense on the RSUs when the performance condition is met.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period adjusted to include the effect of potentially dilutive securities.

Potentially dilutive securities are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive.

Noncontrolling Interests and Redeemable Noncontrolling Interests

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Redeemable noncontrolling interests are reported using the greater of their carrying value as determined by the HLBV method or their estimated redemption value at each reporting date.

Notes to Consolidated Financial Statements — Continued

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements and tax returns.

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It defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more likely than not” to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50% likely to be realized.

Management has analyzed the

Notes to Consolidated Financial Statements — Continued

Company’s inventory of tax positions with respect to all applicable income tax issues for all open tax years (in each respective jurisdiction).

Management has analyzed the Company’s inventory of tax positions with respect to all applicable income tax issues for all open tax years (in each respective jurisdiction).

The Company sells solar energy systems to the Funds.

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The Company is not dependent on any single customer.

The Company’s customers under Customer Agreements are primarily located in California, Arizona, New Jersey, Hawaii, New York, Maryland and Massachusetts.

The Company’s customers under Customer Agreements are primarily located in California, Arizona, New Jersey, New York, Maryland and Massachusetts.

The loss of a customer would not adversely impact the Company’s operating results or financial position.

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Accounting standards adopted January 1, 2020:

In February 2018, the FASB issued Accounting Standards Update ("ASU") No.

2018-02, Income Statement -- Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

The Company adopted ASU No.

2018-02 effective January 1, 2019, which resulted in an adjustment of $ 0.7 million for the reclassification, as reflected in its consolidated statement of redeemable noncontrolling interests and equity.

The Company uses the aggregate portfolio approach when reclassifying stranded tax effects from accumulated other comprehensive income.

In June 2016, the FASB issued ASU No.

2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting , which is intended to align the accounting for share-based payment awards issued to employees and nonemployees, however, this amendment does not apply to instruments issued in a financing transaction nor to equity instruments granted to a customer under a contract in the scope of Topic 606.

Currently, performance conditions are recognized once the performance conditions are met.

Under this new amendment, equity-classified nonemployee share-based payments will be measured at the grant-date fair value and will be recognized based on the probable outcome of the performance conditions.

This ASU is effective for fiscal periods beginning after December 15, 2018.

The Company adopted ASU No.

2018-07 effective January 1, 2019, and there was no material impact to its consolidated financial statements.

In July 2018, the FASB issued ASU No.

2018-09, Codification Improvements .

This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification.

The majority of the amendments in ASU 2018-09 are effective for periods beginning after December 15, 2018.

The Company adopted ASU No.

2018-09 effective January 1, 2019, and there was no material impact to its consolidated financial statements.

Notes to Consolidated Financial Statements — Continued

Accounting standards adopted January 1, 2020:

In June 2016, the FASB issued ASU No.

2016-13, Measurement of Credit Losses on Financial Instruments , which replaces the current incurred loss impairment methodology with a current expected credit losses model.

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2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements as part of its disclosure framework project.

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure

Notes to Consolidated Financial Statements — Continued

requirements on fair value measurements as part of its disclosure framework project.

Under this amendment, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy.

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This ASU is effective for fiscal periods beginning after December 15, 2021.

The Company adopted ASU 2020-06 effective January 1, 2021, and applied this guidance to the convertible senior notes issued in January 2021, see Note 8 Indebtedness , which allowed the Company to account for the notes and their underlying

Notes to Consolidated Financial Statements — Continued

conversion feature as a liability.

There was no other impact to the Company’s consolidated financial statements as a result of this adoption.

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This ASU is available for adoption as of the beginning of the interim period that includes March 12, 2020 through December 31, 2022, as contract modifications or hedging relationships entered into or evaluated after December 31, 2022 are excluded unless an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

For the Company’s cash flow hedges in which the designated hedged risk is LIBOR or another rate that is expected to be discontinued, the Company has adopted the portion of the guidance that allows it to assert that it remains probable that the hedged forecasted transaction will occur.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which defers the sunset date from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

For the Company’s cash flow hedges in which the designated hedged risk is LIBOR or another rate that is expected to be discontinued, the

Notes to Consolidated Financial Statements — Continued

Company adopted upon issuance of ASU 2020-04 the portion of the guidance that allows it to assert that it remains probable that the hedged forecasted transaction will occur.

The Company adopted the remainder of this guidance effective January 1, 2021, and there was no impact to its consolidated financial statements.

Accounting standards to be adopted:

Accounting standards adopted January 1, 2022:

In October 2021, the FASB issued ASU No.

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2021-04, Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) , which requires issuers to account for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange.

This ASU is effective for fiscal periods beginning after December 15, 2021.

The Company is currently evaluating this guidance and the impact it may have on the Company’s consolidated financial statements.

Omni Energy, LLC

In July 2019, the Company acquired a specified customer pipeline and assembled workforce from Omni Energy, LLC (“Omni”), an existing solar integrator with multi-family solar project origination and development capabilities.

The purchase consideration for the assets acquired was approximately $ 23.5 million, consisting of $ 2.7 million in cash upfront and $ 20.8 million representing the fair value of contingent consideration based upon new solar system installations through 2022.

The Company estimated the fair value of the contingent consideration at the acquisition date using a probability-weighted discounted cash flow methodology.

The estimated range of outcomes (undiscounted) was from $ 17.7 million to $ 28.9 million.

The total fair value of the assets acquired of $ 23.5 million is comprised of an intangible asset related to customer relationships of $ 14.2 million with estimated useful life of five years , and goodwill of $ 9.3 million.

Customer relationships were valued with level 3 inputs.

The Company reassessed the valuation assumptions each reporting period, with any changes in the fair value accounted for in sales and marketing expense within the consolidated statements of operations.

During the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 4.7 million, $ 6.0 million and $ 2.3 million, respectively, of sales and marketing expense related to the changes in fair value.

The fair value of the contingent consideration as of December 31, 2021 and 2020 was nil and $ 4.7 million, respectively.

The fair value of the assets acquired and liabilities assumed was finalized during 2020 and resulted in no additional adjustments.

Notes to Consolidated Financial Statements — Continued

Goodwill represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed.

Goodwill recorded is primarily attributable to the acquired assembled workforce and synergies achieved through the elimination of redundant costs.

There was no revenue contributed from the acquired business to the Company, as measured from the date of the acquisition through December 31, 2019.

The portion of the total expenses and net income associated with the acquired business was not separately identifiable due to the integration with the Company’s operations.

Due to the nature of the acquisition, the operations acquired and the related unaudited pro forma information are immaterial.

The Company adopted ASU 2021-04 effective January 1, 2022, and there was no impact to its consolidated financial statements.

Accounting standards to be adopted:

In October 2022, the FASB issued ASU No.

2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations , which requires entities to disclose the key terms of supplier finance programs they use in connection with the purchase of goods and services along with information about their obligations under these programs, including a rollforward of those obligations.

This ASU is effective for fiscal periods beginning after December 15, 2022, with early adoption permitted.

The Company is currently evaluating this guidance and the impact it may have on its financial statement disclosures.

Vivint Solar, Inc.

10 unchanged sentences

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

Notes to Consolidated Financial Statements — Continued

The results of Vivint Solar have been included in the Company's consolidated financial statements since the acquisition date.

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$ — $ 8,247 $ — $ 8,247

Notes to Consolidated Financial Statements — Continued

December 31, 2021

5 unchanged sentences

Total $ — $ 83,873 $ — $ 83,873

Contingent consideration:

$ — $ — $ 4,653 $ 4,653

Total $ — $ — $ 4,653 $ 4,653

The above balances are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets, except for nil and $ 0.1 million as of December 31, 2021 and 2020, respectively, which is recorded in prepaid and other assets and $ 23.0 million and $ 23.9 million as of December 31, 2021 and 2020, respectively, which is recorded in accrued expenses and other liabilities.

Notes to Consolidated Financial Statements — Continued

The above balances are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets, except for $ 55.0 million and nil as of December 31, 2022 and 2021, respectively, which is recorded in prepaid and other current assets and nil and $ 23.0 million as of December 31, 2022 and 2021, respectively, which is recorded in accrued expenses and other liabilities.

The Company determines the fair value of its interest rate swaps using a discounted cash flow model that incorporates an assessment of the risk of non-performance by the interest rate swap counterparty and an evaluation of the Company’s credit risk in valuing derivative instruments.

The valuation model uses various inputs including contractual terms, interest rate curves, credit spreads and measures of volatility.

The Company recorded contingent consideration in connection with a business combination, which is dependent on the achievement of specified deployment milestones associated with the number of solar energy systems installed through 2022.

The Company determined the fair value of the contingent consideration using a probability-weighted expected return methodology that considers the timing and probabilities of achieving these milestones and uses discount rates that reflect the appropriate cost of capital.

Contingent consideration was valued with level 3 inputs.

The Company reassesses the valuation assumptions each reporting period, with any changes in the fair value accounted for in the consolidated statements of operations.

The following table summarizes the activity of Level 3 contingent consideration balance in the year ended December 31, 2021 (in thousands):

Balance recorded in connection with business acquisition $ 11,809

Gains recognized in earnings within sales and marketing expense ( 6,030 )

Payable for solar systems that have met deployment milestones ( 1,126 )

Balance at December 31, 2020

Change in fair value recognized in earnings within sales and marketing expense ( 4,653 )

Balance at December 31, 2021

Notes to Consolidated Financial Statements — Continued

Inventories consist of the following (in thousands):

4 unchanged sentences

$ 783,904 $ 506,819

As of January 1, 2020, the federal government offers a Commercial ITC of 26%, which is reduced from 30%, under Section 48(a) of the Internal Revenue Code of 1986, as amended, for the installation of certain solar power facilities owned for business purposes.

The Internal Revenue Service (“IRS”) provided taxpayers a safe harbor opportunity to retain access to the pre-2020 30% tax credit amount through specific rules released in Notice 2018-59.

The Company sought to avail itself of this safe harbor by incurring certain costs and taking title in the year the Company took delivery, for tax purposes, of the underlying inventory and/or by performing physical work on components that will be installed in solar facilities.

There was approximately $ 11.0 million and $ 37.5 million at December 31, 2021 and 2020, respectively, of inventory that would qualify for a 30% tax credit.

Solar Energy Systems, net

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The depreciation expense was reduced by the amortization of deferred grants of $ 8.3 million, $ 8.3 million and $ 8.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Notes to Consolidated Financial Statements — Continued

Property and Equipment, net

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and Vivint Solar.

The change in the carrying value of goodwill is as follows (in thousands):

Balance—January 1, 2019 $ 87,543

Acquisition of Omni (Note 3) 7,551

Balance—December 31, 2019 95,094

Acquisition of Vivint Solar (Note 3) 4,185,075

Balance—December 31, 2020 and 2021 $ 4,280,169

The Company performs its annual impairment test of goodwill on October 1 of each fiscal year or whenever events or circumstances change or occur that would indicate that goodwill might be impaired.

The Company has determined that it has one reporting unit and performs its annual impairment test of goodwill on October 1 of each fiscal year or whenever events or circumstances change or occur that would indicate that goodwill might be impaired.

As of October 1, 2022, the Company conducted its annual goodwill impairment test, based on a qualitative assessment.

The test concluded that no impairment had occurred.

Since December 31, 2021, the price of the Company’s common stock has declined.

A sustained decrease in the price of the Company’s common stock is one of the qualitative factors to be considered as part of an impairment test when evaluating whether events or changes in circumstances may indicate that it is more likely than not that a potential goodwill impairment exists.

The Company will continue monitoring the analysis of the qualitative and quantitative factors used as a basis for the goodwill impairment test during fiscal year 2022.

The Company has determined that it has one reporting unit.

There was no impairment of goodwill during the years ended December 31, 2021, 2020 and 2019, respectively.

There was no impairment of goodwill during the years ended December 31, 2022, 2021 and 2020.

Intangible assets, net as of December 31, 2022 consist of the following (in thousands, except weighted average remaining life):

1 unchanged sentence

Customer relationships $ 32,770 $ ( 25,336 ) $ 7,434 1.8

Developed technology 6,820 ( 6,820 ) — —

Trade names 6,990 ( 6,897 ) 93 0.3

4 unchanged sentences

$ 32,770 $ ( 20,346 ) $ 12,424 2.7

Developed technology

6,990 ( 6,523 ) 467 1.3

$ 39,760 $ ( 26,869 ) $ 12,891

$ 46,580 $ ( 28,318 ) $ 18,262

The Company recorded amortization of intangible assets expense of $ 5.4 million, $ 5.4 million and $ 5.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

7 unchanged sentences

Operating lease right-of-use assets 104,759 92,707

Equity method investment 63,826 65,356

Equity investment 186,197 63,826

Other assets 229,640 127,862

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The total estimated transaction value is then recognized over the term of the Customer Agreement.

The amount of unbilled receivables increases while cumulative billings for an individual Customer Agreement are less than the cumulative revenue recognized for that Customer Agreement.

Conversely, the amount of unbilled receivables decreases when the actual cumulative billings becomes higher than the cumulative revenue recognized.

The amount of unbilled receivables increases while billings for an individual Customer Agreement are less than the revenue recognized for that Customer Agreement.

Conversely, the amount of unbilled receivables decreases once the billings become higher than the amount of revenue recognized in the period.

At the end of the initial term of a Customer Agreement, the cumulative amounts recognized as revenue and billed to date are the same, therefore the unbilled receivable balance for an individual Customer Agreement will be zero.

As a result of the adoption of ASU No.

2016-13, an allowance for credit loss on unbilled receivables was established as of January 1, 2020.

The Company applies an estimated loss-rate in order to determine the current expected credit loss for unbilled receivables.

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Accrued interest 63,595 38,665

Accrued professional fees 11,330 15,834

Other accrued expenses 209,943 200,334

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Bank line of credit (4)

$ 211,066 $ 230,660 $ — 3.40 % 3.53 % LIBOR + 3.25 %

$ 505,158 $ 211,066 $ 40,000 6.01 % 3.40 % SOFR + 3.25 %

0 % Convertible Senior Notes (5)

$ 400,000 $ — $ — — % N/A — % February 2026

$ 400,000 $ 400,000 $ — — % — % — % February 2026

Total recourse debt 905,158 611,066 40,000

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1,560,002 1,301,600 85,000 6.49 % 2.23 % LIBOR + 2.00 % - 3.00 %;

March 2024 - October 2027

SOFR + 1.88 % - 3.10 %

April 2025 - December 2029

Senior non-revolving loans 1,680,444 921,038 — 6.00 % 3.66 % 4.66 % - 4.70 %;

LIBOR + 1.75 % - 2.50 %;

SOFR + 1.85 % - 1.90 %

April 2024 - November 2040

Subordinated revolving and delayed draw loans (7)

LIBOR + 9.00 %

March 2024 - October 2032

Subordinated loans (9)

333,800 221,464 22,200 9.58 % 9.06 % 8.75 %;

LIBOR + 9.00 % SOFR + 3.50 % - 9.10 %

April 2024 - December 2030

Subordinated loans 1,442,336 959,852 — 8.76 % 8.46 % 7.00 % - 10.50 %;

LIBOR + 6.75 %

May 2023 - January 2042

November 2025 - January 2042

Securitized loans 2,531,465 2,466,389 — 3.87 % 3.59 % 2.27 % - 5.31 %

August 2023 - January 2057

July 2024 - July 2057

Total non-recourse debt 7,548,047 5,870,343 107,200

Unamortized debt premium, net 30,863 53,154 —

Unamortized debt (discount) premium, net ( 46,938 ) 30,863 —

Total non-recourse debt, net 7,501,109 5,901,206 107,200

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See Note 12, Derivatives for hedge rates.

(3) Ranges shown reflect fixed interest rate and rates using LIBOR, as applicable.

(4) This syndicated working capital facility with banks has a total commitment up to $ 250.0 million and is secured by substantially all of the unencumbered assets of the Company, as well as ownership interests in certain subsidiaries of the Company.

Loans under this facility bear interest at LIBOR + 3.25 % per annum or Base Rate + 2.25 % per annum.

The Base Rate is the highest of the Federal Funds Rate + 0.50 %, the Prime Rate, or

LIBOR + 1.00 %.

Subject to various restrictive covenants, such as the completion and presentation of audited consolidated financial statements, maintaining a minimum unencumbered liquidity of at least $ 25.0 million at the end of each calendar month, maintaining quarter end liquidity to be at least $ 35.0 million, and maintaining a minimum interest coverage ratio of 3.50 or greater, measured quarterly as of the last day of each quarter.

(3) Ranges shown reflect fixed interest rate and rates using LIBOR or SOFR, as applicable.

(4) The former working capital facility was terminated in January 2022 and was replaced by this syndicated working capital facility with banks has a total commitment up to $ 600.0 million and is secured by substantially all of the unencumbered assets of the Company, as well as ownership interests in certain subsidiaries of the Company.

Borrowings under the Facility may be designated as Base Rate Loans or Term SOFR Loans,

subject to certain terms and conditions under the Credit Agreement.

Base Rate Loans accrue interest at a rate per year equal to 2.25 % plus the highest of (a) the federal funds rate plus 0.50 %, (b) the interest rate determined from time to time by the Administrative Agent as its prime rate and notified to the Company, (c) the Adjusted Term SOFR Rate (defined below) for a one-month interest period in effect on such day (or if such day is not a business day, the immediately preceding business day) plus 1.00 % and (d) 0.00 %.

Term SOFR Loans accrue interest at a rate per annum equal to (a) 3.25 % plus (b) the greater of (i) 0.00 % and (ii) the sum of (x) the forward-looking term rate for a period comparable to the applicable available tenor based on SOFR that is published by CME Group Benchmark Administration Ltd or a successor for the applicable interest period and (y) (1) if the applicable interest period is one month, 0.11448 %, (2) if the applicable interest period is three months, 0.26161 % or (c) if the applicable interest period is six months, 0.42826 % (the rate pursuant to clause (b), the “Adjusted Term SOFR Rate”).

This facility is subject to various restrictive covenants, such as the completion and presentation of audited consolidated financial statements, maintaining a minimum modified interest coverage ratio, a minimum modified current ratio, a maximum modified leverage ratio, and a minimum unencumbered cash balance, in each case, tested quarterly.

The Company was in compliance with all debt covenants as of December 31, 2022.

Please refer to Note 22 Subsequent Events regarding the new credit facility entered into in January 2022.

(5) These convertible senior notes ("Notes") will not bear regular interest, and the principal amount of the notes will not accrete.

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The debt discount recorded on the Notes is being amortized to interest expense at an effective interest rate of 0.57 %.

As of December 31, 2021, $ 2.1 million of the debt discount was amortized to interest expense.

As of December 31, 2022, $ 4.3 million of the debt discount was amortized to interest expense inception to date.

In connection with the offering of the Notes, the Company entered into privately negotiated capped call transactions (“Capped Calls”) with certain of the initial purchasers and/or their respective affiliates at a cost of approximately $ 28.0 million.

The Capped Calls are classified as equity and were recorded to additional paid-in-capital within stockholders’ equity as of December 31, 2021.

The Capped Calls are classified as equity and were recorded to additional paid-in-capital within stockholders’ equity as of March 31, 2021.

The Capped Calls each have an initial strike price of approximately $ 117.91 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes.

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The final components of the Capped Calls are scheduled to expire on January 29, 2026.

None of the conversion criteria has been met as of December 31, 2022.

(6) Certain loans under this category are part of project equity transactions.

(7) Under a loan within this category, the Company may incur up to an aggregate principal amount of $ 100.0 million in revolver borrowings.

Borrowings under this revolving loan may be designated as base rate loans or LIBOR loans, subject to certain terms and conditions.

Base rate loans accrue interest at a rate per year equal to 2.25 % plus the highest of (i) the federal funds rate plus 0.50 %, (ii) Bank of America, N.A.’s published “prime rate,” and (iii) LIBOR rate plus 1.00 %, subject to a 0.00 % floor.

LIBOR loans accrue interest at a rate per annum equal to 3.25 % plus the fluctuating rate of interest equal to LIBOR or a comparable successor rate approved by the administrative agent, subject to a 0.00 % floor.

In addition to customary covenants for these type of facilities, the Company is subject to financial covenants and is required to have unencumbered cash and cash equivalents at the end of each fiscal quarter of at least the greater of (i) $ 30.0 million and (ii) the amount of unencumbered liquidity to be maintained by Vivint Solar, Inc.

a wholly owned subsidiary of the Company, in accordance with any loan documents governing recourse debt facilities of Vivint Solar Inc.

As of September 30, 2021, this facility was terminated.

(7) Pursuant to the terms of the aggregation facilities within this category the Company may draw up to an aggregate principal amount of $ 2.2 billion in revolver borrowings depending on the available borrowing base at the time.

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2025 1,640,421

2026 1,238,875

2027 1,156,718

Thereafter 3,534,166

Subtotal 8,453,205

Debt premium 21,481

Debt discount, net ( 54,056 )

Total $ 8,399,149

1 unchanged sentence

The Company uses interest rate swaps to hedge variable interest payments due on certain of its term loans and aggregation facility.

These swaps allow the Company to incur fixed interest rates on these loans and receive payments based on variable interest rates with the swap counterparty based on the one or three month LIBOR on the notional amounts over the life of the swaps.

These swaps allow the Company to incur fixed interest rates on these loans and receive payments based on variable interest rates with the swap counterparty based on the three month LIBOR or SOFR (daily, one month, three month) on the notional amounts over the life of the swaps.

The interest rate swaps have been designated as cash flow hedges.

The credit risk adjustment associated with these swaps is the risk of non-performance by the counterparties to the contracts.

In the year ended December 31, 2021, the hedge relationships on the Company’s interest rate swaps have been assessed as highly effective as the quarterly assessment performed determined changes in cash flows of the derivative instruments have been highly effective in offsetting the changes in the cash flows of the hedged items, are expected to be highly effective in the future and the critical terms of the interest rate swaps match the critical terms of the underlying forecasted hedged transactions.

In the quarter ended December 31, 2022, the hedge relationships on the Company’s interest rate swaps have been assessed as highly effective as the quarterly assessment performed determined changes in cash flows of the derivative instruments have been highly effective in offsetting the changes in the cash flows of the hedged items, are expected to be highly effective in the future and the critical terms of the interest rate swaps match the critical terms of the underlying forecasted hedged transactions.

Accordingly, changes in the fair value of these derivatives are recorded as a component of accumulated other comprehensive income, net of income taxes.

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Total derivative assets & liabilities $ 169,580 $ — $ 169,580 $ 3,218,042

(1) Comprised of 61 interest rate swaps which effectively fix the LIBOR portion of interest rates on outstanding balances of certain loans under the senior and securitized sections of the debt footnote table (see Note 11, Indebtedness ) at 0.57 % to 3.18 % per annum.

These swaps mature from August 31, 2022 to January 31, 2043.

(1) Comprised of 72 interest rate swaps which effectively fix the LIBOR or SOFR portion of interest rates on outstanding balances of certain loans under the senior and securitized sections of the debt footnote table (see Note 11, Indebtedness ) at 0.57 % to 4.11 % per annum.

These swaps mature from April 30, 2024 to January 31, 2043.

As of December 31, 2021, the information related to these offsetting arrangements were as follows (in thousands):

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Total derivative assets & liabilities $ ( 57,200 ) $ — $ ( 57,200 ) $ 2,499,152

The losses (gains) on derivatives designated as cash flow hedges recognized into OCI, before tax effect, consisted of the following (in thousands):

The gains on derivatives designated as cash flow hedges recognized into OCI, before tax effect, consisted of the following (in thousands):

Year Ended December 31,

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Interest rate swaps

Losses (gains) reclassified from AOCI into income $ 21,517 $ — $ 12,971 $ — $ ( 785 ) $ —

(Gains) losses reclassified from AOCI into income $ ( 2,407 ) $ — $ 21,517 $ — $ 12,971 $ —

Derivatives not designated as cash flow hedges:

1 unchanged sentence

Gains recognized into income — ( 189,710 ) — ( 21,387 ) — ( 2,911 )

Total losses (gains) $ 21,517 $ ( 21,387 ) $ 12,971 $ ( 2,911 ) $ ( 785 ) $ —

Total (gains) losses $ ( 2,407 ) $ ( 189,710 ) $ 21,517 $ ( 21,387 ) $ 12,971 $ ( 2,911 )

All amounts in Accumulated other comprehensive income (loss) ("AOCI") in the consolidated statements of redeemable noncontrolling interests and equity relate to derivatives, refer to the consolidated statements of comprehensive loss.

The net (losses) gains on derivatives includes the tax effect of $ 12.9 million, $ 19.4 million and $ 17.7 million for the twelve months ended December 31, 2021, 2020 and 2019, respectively.

During the next 12 months, the Company expects to reclassify $ 18.6 million of net losses on derivative instruments from accumulated other comprehensive income to earnings.

There were twelve undesignated derivative instruments recorded by the Company as of December 31, 2021.

The net gains (losses) on derivatives includes the tax effect of $ 34.9 million, $ 12.9 million and $ 19.4 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively.

During the next 12 months, the Company expects to reclassify $ 32.4 million of net gains on derivative instruments from accumulated other comprehensive income to earnings.

There were seventeen undesignated derivative instruments recorded by the Company as of December 31, 2022.

Pass-Through Financing Obligations

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The Company also sells the rights and related value attributable to the Commercial ITC to these investors.

Under these financing obligation arrangements, wholly owned subsidiaries of the Company finance the cost of solar energy systems with investors for an initial term of typically 22 years, and one fund with an initial term of 7 years.

The solar energy systems are subject to Customer Agreements with an initial term of typically 20 or 25 years that automatically renew on an annual basis.

Under these financing obligation arrangements, wholly owned subsidiaries of the Company finance the cost of solar energy systems with investors for an initial term of 22 years, and one fund for 7 years.

The solar energy systems are subject to Customer Agreements with an initial term of typically 20 or 25 years that automatically renew annually or for five years .

These solar energy systems are reported under the line item solar energy systems, net in the consolidated balance sheets.

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The Company accounts for the payments received from the investors under the financing obligation arrangements as borrowings by recording the proceeds received as financing obligations on its consolidated balance sheets, and cash provided by financing activities in its consolidated statement of cash flows.

These financing obligations are reduced over a period of approximately 22 years, or over 7 years in the case of one fund, by customer payments under the Customer Agreements, U.S.

Treasury grants (where applicable),) and proceeds from the contracted resale of SRECs as they are received by the investor.

These financing obligations are reduced over a period of approximately 22 years, or over 7 years in the case of one fund, by customer payments under the Customer Agreements, and proceeds from the contracted resale of SRECs as they are received by the investor.

In addition, funds paid for the Commercial ITC value upfront are initially recorded as a refund liability and recognized as revenue as the associated solar energy system reaches PTO.

The Commercial ITC value is reflected in cash provided by operations on the consolidated statement of cash flows.

The Company accounts for the

Customer Agreements and any related U.S.

Treasury grants as well as the resale of SRECs consistent with the Company’s revenue recognition accounting policies as described in Note 2, Summary of Significant Accounting Policies.

The Commercial ITC value is reflected in cash provided by

operations on the consolidated statement of cash flows.

The Company accounts for the Customer Agreements, as well as the resale of SRECs consistent with the Company’s revenue recognition accounting policies as described in Note 2, Summary of Significant Accounting Policies.

Interest is calculated on the financing obligations using the effective interest rate method.

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Deferred grants, net of current portion

24,637 25,891

Non-recourse debt, net of current portion 1,449,513 1,441,324

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During a specific period of time (the “Call Periods”), the Company has the right to call all membership units of the related redeemable noncontrolling interests.

The carrying value of redeemable noncontrolling interests was greater than the redemption value except for ten and fifteen Funds at December 31, 2021 and 2020, respectively, where the carrying value has been adjusted to the redemption value.

Notes to Consolidated Financial Statements — Continued

Stockholders’ Equity

Convertible Preferred Stock

Notes to Consolidated Financial Statements — Continued

The Company did not have any convertible preferred stock issued and outstanding as of December 31, 2022 and 2021.

9 unchanged sentences

2015 Employee Stock Purchase Plan

10,071 11,270

Options outstanding

1 unchanged sentence

49,898 55,467

Stock Repurchase Program

In November 2019, the Company's board of directors approved a stock repurchase program authorizing the Company to repurchase up to $ 50.0 million of its common stock from time to time over the next three years .

Stock repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as the Company considers appropriate and in accordance with applicable regulations of the Securities and Exchange Commission.

The timing of repurchases and the number of shares repurchased will depend on a variety of factors including price, regulatory requirements, and other market conditions.

The Company may limit, amend, suspend, or terminate the stock repurchase program at any time without prior notice.

Any shares repurchased under the program will be returned to the status of authorized, but unissued shares of common stock.

During 2019, the Company repurchased 368,996 shares for approximately $ 5.0 million.

There were no such repurchases in 2021 and 2020.

Notes to Consolidated Financial Statements — Continued

Stock-Based Compensation

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As of December 31, 2022, the Company had not granted restricted stock or other equity awards (other than options) under the 2013 Plan.

2014 Equity Incentive Plan

In August 2014, the Board approved Sunrun's 2014 Equity Incentive Plan (“Sunrun 2014 Plan”).

An aggregate of 947,342 shares of common stock is reserved for issuance under the Sunrun 2014 Plan.

The Sunrun 2014 Plan was adopted to accommodate a broader transaction with a sales entity and to allow for similar transactions in the future.

In July 2015, the Board approved an increase in the number of shares of common stock reserved to 1,197,342 .

As of July 2015, the Company granted all 1,197,342 restricted stock units (“RSUs”) available under the Sunrun 2014 Plan.

Sunrun-VSI 2014 Equity Incentive Plan

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As of December 31, 2022, a total of 9.5 million shares of common stock were available for grant under the Sunrun-VSI 2014 Plan, subject to adjustment in the case of certain events.

In addition, any shares that otherwise would be returned to the Omnibus Plan (as defined below) as the result of the expiration or termination of stock options may be added to the Sunrun-VSI 2014 Plan.

In addition, any shares that otherwise would be returned to the Omnibus Plan (as defined below) as the result of the expiration or termination of stock

Notes to Consolidated Financial Statements — Continued

options may be added to the Sunrun-VSI 2014 Plan.

The number of shares available to grant under the Sunrun-VSI 2014 Plan is subject to an annual increase on the first day of each year.

2013 Omnibus Incentive Plan

Vivint Solar’s 2013 Omnibus Incentive Plan (the “Omnibus Plan”) was terminated in connection with the adoption of the Vivint Solar 2014 Plan in September 2014, and accordingly no additional shares are available for issuance under the Omnibus Plan.

The Omnibus Plan will continue to govern outstanding awards granted under the plan.

The stock options outstanding under the Omnibus Plan have a ten-year contractual period.

Long-term Incentive Plan

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Participants in the LTIP are allocated a portion of the LTIP Pools relative to the performance of other participants on a measurement date that is determined once performance conditions are met.

The Merger Agreement provided that the LTIP awards outstanding immediately prior to the Closing Date were cancelled and terminated and that subsequent to the Closing Date, each holder of a cancelled LTIP award would be granted an RSU award to be settled in shares of

Notes to Consolidated Financial Statements — Continued

Sunrun common stock, with the number of shares underlying such award calculated as if the LTIP performance hurdles were achieved, with the Closing Date as the determination date.

The Merger Agreement provided that the LTIP awards outstanding immediately prior to the Closing Date were canceled and terminated and that subsequent to the Closing Date, each holder of a canceled LTIP award would be granted an RSU award to be settled in shares of Sunrun common stock, with the number of shares underlying such award calculated as if the LTIP performance hurdles were achieved, with the Closing Date as the determination date.

As a result, approximately 1.5 million shares of the Company common stock were awarded as RSUs to LTIP participants with a grant date equal to the Closing Date.

These RSUs vest in three equal installments, subject to the grantee’s continued provision of services to the Company.

One-third vested 30 days after the Closing Date, one-third vested nine months after the Closing Date, and one-third will vest 18 months after the Closing Date.

One-third vested 30 days after the Closing Date, one-third vested nine months after the Closing Date, and one-third vested 18 months after the Closing Date.

As of December 31, 2022, there are no remaining shares available for grant under the LTIP.

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The automatic increase of the number of shares available for issuance under the 2015 Plan is equal to the least of 10 million shares, 4 % of the outstanding shares of common stock as of the last day of the Company’s immediately preceding fiscal year or such other amount as the Board of Directors may determine.

In 2021 and 2020, an additional 8,056,251 and 4,738,048 shares, respectively, were reserved for issuance under the 2015 Plan pursuant to the automatic increase provision.

In 2022 and 2021, an additional nil and 8,056,251 shares, respectively, were reserved for issuance under the 2015 Plan pursuant to the automatic increase provision.

Stock options granted to employees generally have a maximum term of ten-years and vest over a four-year period from the date of grant;

4 unchanged sentences

25 % vest at the end of one year , and 75 % vest quarterly over the remaining three years .

Notes to Consolidated Financial Statements — Continued

Stock Options

4 unchanged sentences

Outstanding at December 31, 2020 8,019 $ 10.35 6.87 $ 473,371

Assumed through acquisition 2,565 10.23

( 1,977 ) 8.88

Cancelled ( 462 ) 9.36

Canceled ( 426 ) 24.70

Outstanding at December 31, 2021 6,257 13.60 6.19 140,326

( 1,401 ) 8.04

Cancelled ( 426 ) 24.70

Canceled ( 581 ) 28.17

Outstanding at December 31, 2022 5,217 $ 16.08 5.68 $ 58,784

1 unchanged sentence

Options vested and expected to vest at December 31, 2022 5,217 $ 16.08 5.68 $ 58,784

There were no unvested exercisable shares as of the year ended December 31, 2021 and 2020, which are subject to a repurchase option held by the Company at the original exercise price.

These options became fully vested during the year ended December 31, 2020.

Notes to Consolidated Financial Statements — Continued

The weighted-average grant-date fair value of stock options granted during the year ended December 31, 2022, 2021 and 2020 were $ 17.21 , $ 27.72 and $ 9.33 per share, respectively.

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Treasury zero-coupon issue with a term that approximates the expected life of the option grant.

For stock options granted in the year ended December 31, 2021, 2020 and 2019, the Company considered the volatility data of a group of publicly traded peer companies in its industry.

For stock options granted in the year ended December 31, 2022, the expected volatility was calculated based on the Company’s average historical volatilities and for the stock options granted in the year ended December 31, 2021 and 2020, the Company considered the volatility data of a group of publicly traded peer companies in its industry.

The Company accounts for forfeitures as they occur and, as such, reverses compensation cost previously recognized in the period the award is forfeited, for an award that is forfeited before completion of the requisite service period .

Restricted Stock Units

Notes to Consolidated Financial Statements — Continued

The following table summarizes the activity for all RSUs under all of the Company’s equity incentive plans for the years ended December 31, 2022 and 2021 (shares in thousands):

1 unchanged sentence

Unvested balance at December 31, 2020 7,103 $ 40.17

Assumed through acquisition 3,033 70.54

( 3,755 ) 42.70

Cancelled / forfeited

( 946 ) 32.08

Canceled / forfeited ( 855 ) 34.05

Unvested balance at December 31, 2021 4,485 42.73

( 2,968 ) 40.31

Cancelled / forfeited

( 855 ) 34.05

Canceled / forfeited ( 1,475 ) 35.85

Unvested balance at December 31, 2022 4,542 $ 31.60

1 unchanged sentence

The Company has issued warrants for up to 846,943 shares of its common stock to certain strategic partners (calculated using the respective quarter of grant's closing stock price).

The exercise price of each warrant is $ 0.01 per share, and 69,309 warrants were exercised during the year ended December 31, 2021.

During the year ended

Notes to Consolidated Financial Statements — Continued

December 31, 2021, the Company recognized stock-based compensation expense of $ 10.7 million under time-based warrants.

The exercise price of each warrant is $ 0.01 per share, and 346,269 and 69,309 warrants were exercised during the years ended December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, the Company recognized stock-based compensation expense of $ 4.3 million and $ 10.7 million, respectively, under time-based warrants.

Employee Stock Purchase Plan

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The ESPP provides for an automatic increase of the number of shares available for issuance under the ESPP on the first day of each fiscal year beginning on January 1, 2016, equal to the least of 5 million shares, 2 % of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year, or such other amount as may be determined by the Board of Directors.

In 2021 and 2020, the Board of Directors authorized an additional 4,028,125 and 2,369,024 shares, respectively, reserved for issuance under the ESPP.

In 2022 and 2021, the Board of Directors authorized an additional nil and 4,028,125 shares, respectively, reserved for issuance under the ESPP.

Stock-Based Compensation Expense

12 unchanged sentences

$ 110,633 $ 211,000 $ 170,587

Notes to Consolidated Financial Statements — Continued

During the years ended December 31, 2022 and 2021, stock-based compensation expense capitalized to the Company’s consolidated balance sheet was $ 12.4 million and $ 10.9 million, respectively.

6 unchanged sentences

In the year ended December 31, 2022, the Company recognized compensation cost of $ 4.6 million for modifications due to accelerated vesting of unvested outstanding shares for 30 grantees.

Notes to Consolidated Financial Statements — Continued

The Sunrun 401(k) Plan and the Vivint Solar 401(k) Plan are deferred salary arrangements under Section 401(k) of the Internal Revenue Code.

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2022 2021 2020

$ — $ — $ ( 454 )

Foreign — — ( 1,422 )

5 unchanged sentences

$ 2,291 $ 9,271 $ ( 60,573 )

Notes to Consolidated Financial Statements — Continued

The following table represents a reconciliation of the statutory federal rate and the Company’s effective tax rate for the periods presented:

9 unchanged sentences

1.03 0.29 ( 2.98 )

ASC 740-10 Reserve — — ( 0.11 )

( 1.42 ) ( 0.82 ) ( 0.77 )

2 unchanged sentences

0.27 % 0.95 % ( 8.81 ) %

Notes to Consolidated Financial Statements — Continued

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

18 unchanged sentences

Deferred tax liabilities

Interest rate derivatives 20,613 —

Capitalized costs to obtain a contract 266,697 171,219

6 unchanged sentences

As of December 31, 2021, the Company has an investment tax credit carryforward of approximately $ 75.5 million and California enterprise zone credits of approximately $ 1.0 million.

Notes to Consolidated Financial Statements — Continued

Generally, utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code (IRC) of 1986, as amended and similar state provisions.

The Company performed an analysis to determine whether an ownership change under Section 382 of the Code had occurred and determined that no ownership changes were identified as of December 31, 2021.

The Company performed an analysis to determine whether an ownership change under IRC section 382 had occurred and determined that no ownership changes were identified as of December 31, 2022.

Vivint Solar, Inc.

5 unchanged sentences

The Company has concluded that it is more likely than not that the benefit from certain federal and state tax credits and net operating loss carryforwards will not be realized.

In recognition of this risk, the Company has provided a valuation allowance of $ 136.7 million on the deferred tax assets relating to these federal and state tax credits and net operating loss carryforwards which is an increase of $ 45.4 million in 2021.

In recognition of this risk, the Company has provided a valuation allowance of $ 61.7 million on the deferred tax assets relating to these federal and state tax credits and net operating loss carryforwards which is a decrease of $ 75.0 million in 2022.

The Company sells solar energy systems to investment Funds.

As the investment Funds are consolidated by the Company, the gain on the sale of the assets has been eliminated in the consolidated financial statements.

Notes to Consolidated Financial Statements — Continued

However, this gain is recognized for tax reporting purposes.

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In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable.

The statute of limitations for the tax returns varies by jurisdictions.

The statute of limitations for the tax returns varies by jurisdiction.

The Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

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As a result of the acquisition of Vivint Solar, the Company established an unrecognized tax benefit of $ 1.0 million as of December 31, 2022, 2021 and 2020 that, if recognized, would impact the Company’s effective tax rate.

The change in unrecognized tax benefits during 2021, 2020 and 2019, excluding penalties and interest, is as follows:

For the Year Ended December 31,

2021 2020 2019

Unrecognized tax benefits at beginning of the year $ 961 $ — $ 647

Reversal of prior year unrecognized tax benefits due to the expiration of the statute of limitations

Increases in unrecognized tax benefits as a result of tax positions taken during the prior period — 961 —

Unrecognized tax benefits at end of the year $ 961 $ 961 $ —

The Internal Revenue Service (“IRS”) audited one of the Company’s investment funds covered by the Company’s 2018 insurance policy in an audit involving a review of the fair market value determination of solar energy systems.

There have been no changes in unrecognized tax benefits during the year ended December 31, 2022.

The IRS is auditing one of the Company’s tax equity investors, relating to an investment fund covered by the Company’s 2018 insurance policy in an audit involving a review of the fair market value determination of solar energy systems.

The Company is unable to determine if this audit will result in an adverse final determination at this time.

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Due to the Company’s net losses, substantially all of its federal, state and local income tax returns since inception are still subject to audit.

Notes to Consolidated Financial Statements — Continued

The following table summarizes the tax years that remain open and subject to examination by the tax authorities in the most significant jurisdictions in which the Company operates:

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State 2018 - 2022

Notes to Consolidated Financial Statements — Continued

Net Operating Loss Carryforwards

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The Company entered into purchase commitments, which have the ability to be canceled without significant penalties, with multiple suppliers to purchase $ 360.1 million of photovoltaic modules, inverters and batteries by the end of 2023.

Notes to Consolidated Financial Statements — Continued

Warranty Accrual

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The Company makes and revises these estimates based on the number of solar energy systems under warranty, the Company’s historical experience with warranty claims, assumptions on warranty claims to occur over a systems’ warranty period and the Company’s estimated replacement costs.

Notes to Consolidated Financial Statements — Continued

warranty is provided for solar energy systems sold and leased.

A warranty is provided for solar energy systems sold.

However, for the solar energy systems under Customer Agreements, the Company does not accrue a warranty liability because those systems are owned by consolidated subsidiaries of the Company.

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Commercial ITC Indemnification

The Company is contractually committed to compensate certain investors for any losses that they may suffer in certain limited circumstances resulting from reductions in Commercial ITCs.

The Company is contractually committed to compensate its investors for any losses that they may suffer in certain limited circumstances resulting from reductions in Commercial ITCs, including any reduction in depreciable basis.

Generally, such obligations would arise as a result of reductions to the value of the underlying solar energy systems as assessed by the Internal Revenue Service (the “IRS”).

The Company set the purchase prices and claimed values based on fair market values determined with the assistance of an independent third-party appraisal with respect to the systems that generate Commercial ITCs that are passed-through to, and claimed by, the Fund investors.

In April 2018, the Company purchased an insurance policy providing for certain payments by the insurers in the event there is a final determination (including a judicial determination) that reduced the Commercial ITCs claimed in respect of solar energy systems sold or transferred to most Funds through April 2018, or later, in the case of Funds added to the policy after such date.

In general, the policy indemnifies the Company and related parties for additional taxes (including penalties and interest) owed in respect of lost Commercial ITCs, gross-up costs and expenses incurred in defending such claim, subject to negotiated exclusions from, and limitations to, coverage.

The Company set the purchase prices and claimed values based on fair market values determined with the assistance of an independent third-party appraisal with respect to the systems that generate Commercial ITCs (and the associated depreciable basis) that are passed-through to, and claimed by, the Fund investors.

In April 2018, the Company purchased an insurance policy providing for certain payments by the insurers in the event there is a final determination (including a judicial determination) that reduced the Commercial ITCs and depreciation claimed in respect of solar energy systems sold or transferred to most Funds through April 2018, or later, in the case of Funds added to the policy after such date.

In general, the policy indemnifies the Company and related parties for additional taxes (including penalties and interest) owed in respect of lost Commercial ITCs, depreciation, gross-up costs and expenses incurred in defending such claim, subject to negotiated exclusions from, and limitations to, coverage.

The Company purchased similar additional insurance policies in January 2021 and in October 2022.

At each balance sheet date, the Company assesses and recognizes, when applicable, the potential exposure from this obligation based on all the information available at that time, including any audits undertaken by the IRS.

One of the Company's investors was being audited by the IRS in an audit involving a review of the fair market value determination of the Company's solar energy systems in the investment fund, which is covered by the Company's 2018 insurance policy.

The Company is unable to determine if this audit will result in an adverse final determination at this time.

The IRS is auditing one of our investors in an audit involving a review of the fair market value determination of our solar energy systems in the investment fund, which is covered by the Company’s 2018 insurance policy.

If this audit results in an adverse final determination, we may be subject to an indemnity obligation to our investor, which may result in certain limited out-of-pocket costs and potential increased insurance premiums in the future.

The Company is subject to certain legal proceedings, claims, investigations and administrative proceedings in the ordinary course of its business.

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Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

In October 2019, two shareholders filed separate putative class actions in the U.S.

District Court for the Eastern District of New York ( Crumrine v.

Vivint Solar, Inc.

) purportedly on behalf of themselves and all others similarly situated.

The lawsuits purport to allege violations of Federal Securities Laws.

In March 2020, the court consolidated the two actions and appointed lead plaintiffs and lead counsel to represent the alleged putative class.

Subsequently, in December 2020, the Eastern District of New York transferred the actions to the District of Utah, where they are now pending.

Vivint Solar disputes the allegations in the complaint.

While Vivint Solar believes that the claims against it are without merit, in view of the cost and risk of continuing to defend the action, Vivint Solar mediated the action with plaintiffs on May 19, 2021, and reached an agreement to resolve the action on a class-wide basis for $ 1.25 million.

A portion of the $ 1.25 million will be covered by insurance proceeds, and the Company accrued approximately $ 750,000 as of June 30, 2021.

As of December 31, 2021, the accrual was adjusted to $ 550,000 , because of the portion of the $ 1.25 million settlement that will be covered by insurance proceeds.

On November 30, 2021, the court granted preliminary approval of the class action settlement.

The Company deposited its portion of the settlement proceeds into an escrow account managed by the class action claims administrator on January 27, 2022.

The court has scheduled the final approval hearing for May 5, 2022.

In December 2019, ten customers who signed residential power purchase agreements named Vivint Solar in a putative class action lawsuit captioned Dekker v.

Vivint Solar, Inc.

Cal.), alleging that the agreements contain unlawful termination fee provisions.

The Company disputes the allegations in the complaint.

On January 17, 2020, the Company moved to compel arbitration with respect to nine of the ten plaintiffs whose contracts included arbitration provisions.

The court issued an order compelling eight plaintiffs to pursue their claims in arbitration but subsequently rescinded the order as to certain plaintiffs.

The Court of Appeals for the Ninth Circuit has since reversed the court’s order rescinding its order compelling certain plaintiffs to arbitrate.

At this time, one plaintiff's claims remain pending before the court as a putative class action, and other plaintiffs’ claims are in arbitration or have otherwise been resolved on an individual basis.

In the putative class action that remains pending before the

Notes to Consolidated Financial Statements — Continued

court, the plaintiff filed a motion for class certification, and Vivint Solar is opposing that motion and a hearing is scheduled to be held on February 25, 2022.

The Company is unable to estimate a range of loss, if any, at this time.

In March 2020, a shareholder filed a derivative action captioned Oyola-Rivera v.

Allred (DE Chancery Court) against various officers and directors of Vivint Solar, Inc., alleging that they breached their duties of loyalty, care, and good faith.

Vivint Solar, Inc.

is named as a nominal defendant.

The defendants dispute the allegations in the complaint.

During the fourth quarter of 2021, the shareholder agreed to dismiss the action without the need for any payment or other undertakings by the defendants or Vivint Solar, Inc.

On December 7, 2021, the court granted the parties’ stipulated request for dismissal and dismissed the action.

On December 2, 2020, the California Contractors State License Board (the “CSLB”) filed an administrative proceeding against the Company and certain of its officers related to an accident that occurred during an installation by one of the Company’s channel partners, Horizon Solar Power, which holds its own license with the CSLB.

On November 8, 2021, the parties entered into a stipulated settlement imposing citations and withdrawing the administrative proceeding with additional conditions.

The Company has consistently denied wrongdoing concerning the allegations in the administrative proceeding and made no admissions of wrongdoing incident to the settlement.

In addition to the matters discussed above, in the normal course of business, the Company has from time to time been named as a party to various legal claims, actions and complaints.

In the normal course of business, the Company has from time to time been named as a party to various legal claims, actions, or complaints.

While the outcome of these matters cannot currently be predicted with certainty, the Company does not currently believe that the outcome of any of these claims will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations or cash flows.

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The Company evaluates the adequacy of its legal reserves based on its assessment of many factors, including interpretations of the law and assumptions about the future outcome of each case based on available information.

Net (Loss) Income Per Share

Basic net (loss) income per share is computed by dividing net (loss) income attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period adjusted to include the effect of potentially dilutive securities.

Potentially dilutive securities are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive.

Notes to Consolidated Financial Statements — Continued

The computation of the Company’s basic and diluted net (loss) income per share is as follows (in thousands, except per share amounts):

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Potentially dilutive securities are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive.

The computation of the Company’s basic and diluted net income (loss) per share is as follows (in thousands, except per share amounts):

Years Ended December 31,

2022 2021 2020

Net (loss) income attributable to common stockholders $ ( 79,423 ) $ ( 173,394 ) $ 26,335

Weighted average shares used to compute net (loss) income per share attributable to common stockholders, basic 205,132 139,606 116,397

Net income (loss) attributable to common stockholders $ 173,377 $ ( 79,423 ) $ ( 173,394 )

Debt discount amortization 2,258 — —

Net Income (loss) available to common stockholders

$ 175,635 $ ( 79,423 ) $ ( 173,394 )

Weighted average shares used to compute net income (loss) per share attributable to common stockholders, basic 211,347 205,132 139,606

Weighted average effect of potentially dilutive shares to purchase common stock

Weighted average shares used to compute net (loss) income per share attributable to common stockholders, diluted 205,132 139,606 123,876

Net (loss) income per share attributable to common stockholders

Weighted average shares used to compute net income (loss) per share attributable to common stockholders, diluted 219,157 205,132 139,606

Net income (loss) per share attributable to common stockholders

$ 0.82 $ ( 0.39 ) $ ( 1.24 )

$ 0.80 $ ( 0.39 ) $ ( 1.24 )

The following shares were excluded from the computation of diluted net income per share as the impact of including those shares would be anti-dilutive (in thousands):

The following shares were excluded from the computation of diluted net income (loss) per share as the impact of including those shares would be anti-dilutive (in thousands):

Year Ended December 31,

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2,863 1,448 1,493

Capped Calls for Senior Convertible Notes 3,128 — —

Convertible Senior Notes (if converted) — 3,128 —

4,524 5,375 2,779

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The Company provided a reserve of $ 1.9 million and $ 1.4 million as of December 31, 2022 and 2021, respectively, related to advances to direct-sales professionals who have terminated their employment agreement with the Company.

Subsequent Events

On January 25, 2022, the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”), effective as of January 24, 2022, with certain financial institutions for which KeyBank National Association is acting as administrative agent (the “Administrative Agent”) and Silicon Valley Bank is acting as collateral agent, under which the Company may incur revolving loans and obtain letter of credit extensions in an aggregate amount of up to $ 425.0 million, including a letter of credit sublimit of up to $ 100.0 million (collectively, the “Facility”), which may be used for general corporate purposes.

The maximum amount of advances under the Facility is capped by an available borrowing base that values certain assets of the Company on a formulaic basis.

The Facility contains an uncommitted accordion feature pursuant to which the Facility may be upsized to an amount not exceeding $ 600.0 million.

The Facility matures on January 27, 2025.

As further described below, the Facility refinances the Company’s existing corporate bank line of credit.

Borrowings under the Facility may be designated as Base Rate Loans or Term SOFR Loans, subject to certain terms and conditions under the Credit Agreement.

The Company’s obligations under the Credit Agreement are guaranteed by certain subsidiaries of the Company.

The Credit Agreement includes customary events of default as defined in agreement.

In addition, the Company is required to maintain a minimum modified interest coverage ratio, a minimum modified current ratio, a maximum modified leverage ratio, and a minimum unencumbered cash balance, in each case, tested quarterly.

Concurrently with the execution of the Credit Agreement, the Company’s existing corporate bank line of credit was terminated.

The existing corporate bank line of credit permitted the Company to incur revolving loans and obtain letter of credit extensions in an aggregate amount of up to $ 250.0 million.

Loans under the existing corporate bank line of credit were permitted to be drawn from time to time, and letters of credit were permitted to be issued, in each case, for general corporate purposes.

Proceeds from the Facility were used to pay off the outstanding principal, interest and fees under the existing corporate bank line of credit, in an aggregate amount of approximately $ 211.1 million.

As a result, the corporate bank line of credit was reclassified as a noncurrent liability as of December 31, 2021.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data