What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-21 compared with 2023-02-22 · 117 added, 88 removed, 386 unchanged (35% of the section changed)

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Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

We provide clean, solar energy to customers at a significant savings compared to traditional utility energy.

We provide clean, solar energy and energy storage to customers at a significant savings compared to traditional utility energy.

We have been selling solar energy to residential customers through a variety of offerings since we were founded in 2007.

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For example, with the insights provided by our technology, we can offer competitive pricing to customers with homes that have favorable characteristics, such as roofs that allow for easy installation, high electricity consumption, or low shading, effectively passing through the cost savings we are able to achieve on these installations to the customer.

Our ability to offer Customer Agreements depends in part on our ability to finance the purchase and installation of the solar energy systems by monetizing the resulting customer cash flows and related commercial investment tax credits (“Commercial ITCs”), accelerated tax depreciation and other incentives from governments and local utilities.

Our ability to offer Customer Agreements depends in part on our ability to finance the purchase and installation of the solar energy systems by monetizing the resulting customer cash flows and related Commercial ITCs, accelerated tax depreciation and other incentives from governments and local utilities.

We monetize these incentives under tax equity investment funds, which are generally structured as non-recourse project financings.

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Customer cancellation rates can change over time and vary between markets.

The Opportunity of Home Electrification and Storage Solutions to Build a Clean, Resilient Grid

Market & Macroeconomic Environment

Our business and financial performance also depend on worldwide economic conditions.

We face global macroeconomic challenges, particularly in light of increases and volatility in interest rates, uncertainty in markets, inflationary trends, navigating complex and evolving regulatory and tax frameworks, and the dynamics of the global trade environment.

During the twelve months ended December 31, 2023, we observed market uncertainty, increasing inflationary pressures, rising interest rates, the market impacts of proposed or newly enacted regulatory frameworks in markets within which we do business and within our industry, supply constraints, and bank failures.

In particular, rising interest rates, including recent historic increases starting in 2021, have resulted and may continue to result in a decrease in our advance rates, reducing the proceeds we receive from certain investment funds.

Because our financing structure is sensitive to volatility in interest rates, higher rates increase our cost of capital and may decrease the amount of capital available to us to finance the deployment of new solar energy systems.

These market dynamics, some of which we expect will continue into the foreseeable future, have impacted and may continue to impact our business and financial results.

In December 2022, California made changes to its net metering policy by adopting NBT, which presents a significant change to the rate structure for new California customers, and has partially limited the financial attractiveness of our offerings in certain regions of the state, particularly for solar-only systems.

However, under this new policy, the value proposition of storage offerings is significantly enhanced.

We believe that California will be predominantly a solar plus storage market going forward and the vast majority of California sales now consist of either our Sunrun Shift product or our backup battery offerings.

As the demand for solar plus storage offerings grows, we anticipate facing additional operational challenges associated with the complexity of deploying storage solutions.

For example, solar plus storage offerings tend to have longer cycle times due to factors such as lengthened permitting and inspection times and potential need of a main panel upgrade.

Any such factors that extend the timeframes from customer signature to installation have historically resulted in increased operational challenges and correspondingly lower realization rates, and any future instances may continue to do so.

Accordingly, this may adversely affect our financial performance, as well as the timing and magnitude of our installations and the recognition of the associated revenue.

Under the new NBT framework, the value proposition of our products is best understood when customers compare the combined costs of their utility bill along with their Sunrun solar and storage bill, due to the impact of time-of-use rates and export rates.

The solar industry in California is adjusting from selling based on the value of solar-only to a more complicated rate design with NBT.

We believe the best customer offering is one that pairs solar and storage, although it may be more confusing to customers when compared to solar-only offers from competitors.

This dynamic may result in less sales efficacy so long as customers continue to be presented with inferior, but simpler, solar-only offerings and as a result, may harm our business, financial condition, and results of operations, and may also harm the reputation of the solar industry in California at large.

Since implementation of NBT, originations in California have continued to be below levels prior to the transition for us and across the residential solar industry.

Without further increases in originations, our new installations in California may continue to decline compared to prior periods, which could have a material adverse effect on our business operations and financial performance.

We have also recently seen new market entrants paying significantly higher turnkey prices and sales commissions than prevailing industry norms.

Although we believe this to be an economically unsustainable practice, in the short term, it has contributed to increased competition in the industry.

The Opportunity of Home Electrification and a Clean, Resilient Grid

The United States is on the precipice of a once-in-a-generation transformation of our energy system.

The decarbonization of the American economy will require powering our energy supply, including our homes, appliances and automobiles, with clean energy.

Sunrun’s next goal and chapter of growth is to be the go-to company for clean

energy and storage solutions, and reliable home electrification, providing our customers with affordable renewable energy throughout their homes and our communities with a cleaner, more resilient grid.

We believe Sunrun will be uniquely positioned as the leading national provider of solar and storage energy subscription offerings, making our clean energy services more accessible to even more communities.

We intend to pursue these opportunities on a variety of fronts.

For instance, in May 2020, we announced a partnership with Ford Motor Company to be the preferred installer for Ford’s Charge Station Pro and Intelligent Backup Power System, debuting with the all-electric F-150 Lightning.

Under the partnership, we co-developed Ford's Home Integration System, including the bi-directional inverter, which enables the F-150 Lightning to serve as a reliable home backup energy source by powering the home during an outage event.

Through this partnership, customers in participating markets have the opportunity to install a solar and battery system on their home, enabling them to power their household with clean, affordable energy and charge their truck with the power of the sun.

We also continue to pursue the development of our grid services business, creating virtual power plants that lead to a cleaner, more resilient grid.

Sunrun’s next goal and chapter of growth is to be the go-to company for clean and reliable home electrification, providing our customers with affordable renewable energy throughout their homes and our communities with a cleaner, more resilient grid.

We intend to pursue these opportunities on a variety of fronts, and we continue to pursue the development of our grid services business, creating virtual power plants that lead to a cleaner, more resilient grid.

In collaboration with grid managers, we can deploy our battery systems where they will add the most value for utilities, the grid, and customers.

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Additionally, we believe our omni-channel model and geographic reach provides us with the capabilities to execute on these opportunities in a variety of markets.

We also believe that energy storage offerings will play an increasingly important role and be a key part of the customer value proposition.

Robust storage offerings will enable a variety of grid services and grid reliability benefits.

They will also play a crucial role in markets like California where time-of-use and net-billing policies mean that optimizing when power is consumed during the day is key to providing the most customer value.

To further expand such future upsell and retrofit opportunities, from time to time, we may pursue acquisitions of previously installed solar systems.

While we do not expect such acquisitions to represent a material portion of our growth on an annual basis, we plan to pursue such transactions opportunistically.

For instance, in the third quarter of fiscal 2021, we completed a strategic transaction that added approximately 2,000 Customers and 13 MW of Networked Solar Energy Capacity.

In sum, we believe the electrification of the U.S.

economy with renewable energy presents an unprecedented economic opportunity, as well as our country’s best path to achieving net zero emissions by 2050.

Through these electrification, storage, and grid services opportunities, we aim to be the consumer brand synonymous with repowering our customers’ homes with renewable energy and providing a pathway to a cleaner, healthier future.

Macroeconomic Environment

Our business and financial performance also depend on worldwide economic conditions.

Throughout fiscal 2022, we observed market uncertainty, increasing inflationary pressures, supply constraints and the ongoing and rippling effects from the COVID-19 pandemic.

These market dynamics, which we expect will continue into the foreseeable future, have and may continue to impact our business and financial results, including costs and revenues.

Through these electrification opportunities and our grid services business, we aim to be the consumer brand synonymous with repowering our customers’ homes with renewable energy and providing a pathway to a cleaner, healthier future.

Investment Funds

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These assets are attractive to fund investors due to the long-term, recurring nature of the cash flows generated by our Customer Agreements, the high credit scores of our customers, the fact that energy is a non-discretionary good and our low loss rates.

In addition, fund investors can receive attractive after-tax returns from our investment funds due to their ability to utilize

Commercial ITCs, accelerated depreciation and certain government or utility incentives associated with the funds’ ownership of solar energy systems.

In addition, fund investors can receive attractive after-tax returns from our investment funds due to their ability to utilize Commercial ITCs, accelerated depreciation and certain government or utility incentives associated with the funds’ ownership of solar energy systems.

As of December 31, 2023, we had 64 active investment funds, which are described below.

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These consolidated joint ventures are usually redeemable at our option and, in certain cases, at the investor’s option.

If redemption is at our option or the consolidated joint ventures are not redeemable, we record the investor’s interest as a noncontrolling interest and account for the interest using the hypothetical liquidation at book value (“HLBV”) method.

If the investor has the option to put their interest to us, we record the investor’s interest as a redeemable noncontrolling interest at the greater of the HLBV and the redemption value.

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Balance sheet classification Pass-through financing obligation Redeemable noncontrolling interests and noncontrolling interests Redeemable noncontrolling interests

Revenue from Commercial ITCs Recognized on the PTO date None None

Revenue from Commercial ITCs Recognized on the permission to operate date None None

Method of calculating investor interest Effective interest rate method Greater of HLBV or redemption value Greater of HLBV or redemption value

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Pass-Through Financing Obligations.

In this investment fund structure, we and the fund investor each utilize separate entities to facilitate the pass-through of the Commercial ITC or U.S.

Treasury grants to the fund investors.

In this investment fund structure, we and the fund investor each utilize separate entities to facilitate the pass-through of the Commercial ITC to the fund investors.

We contribute solar energy systems to an “owner” entity in exchange for interests in the owner entity, and the fund investors contribute cash to a “tenant” entity in exchange for interests in the tenant entity.

Under our pass-through financing obligation structure, in accordance with the provisions of FASB, Accounting Standards Codification Topic 810 (“ASC 810”) Consolidation , we have determined that we are the primary beneficiary of the owner entity, and accordingly, we consolidate that entity.

Under our pass-through financing obligation structure, in accordance with the provisions of FASB, Accounting Standards Codification (“ASC”) Topic 810, Consolidation , we have determined that we are the primary beneficiary of the owner entity, and accordingly, we consolidate that entity.

We have also determined that we are not the primary beneficiary of the tenant entity, and accordingly, we do not consolidate that entity.

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After the fund investor receives its contractual rate of return or after the specified time period, we receive substantially all of the value attributable to the remaining customer payments and SREC sales.

Included within the Partnership Flips is the project equity financing we entered into in December 2016.

We pooled and transferred our interests in certain financing funds into a special purpose entity (“SPE”) with a new investor.

We did not recognize a gain or loss on the transfer of its interests in the financing funds and continue to consolidate the financing funds.

The SPE’s assets and cash flows are not available to our other creditors, and the investor has no recourse to our other assets.

Under our partnership flip structures, we have determined that we control the partnership entity which is a variable interest entity (“VIE”), and accordingly we consolidate the entity and record the investor’s interest as either noncontrolling interests or redeemable noncontrolling interests in our consolidated balance sheets.

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Since Sunrun has the power to control both the owner and tenant entities, both entities are included in our consolidated financial statements.

We also have one JV inverted lease fund whereby we have a pro rata interest in the entity and we account for the noncontrolling interest’s share of income on a pro rata basis.

Accordingly, the noncontrolling interest of this fund is carried on our balance sheet at the cumulative amount of capital contributions, reduced by cumulative distributions paid to the investor, as well as the pro rata share of their income.

Under our JV inverted lease structure, we have determined that we control each VIE, and accordingly we consolidate the entity and record investor’s interest as a noncontrolling interest or redeemable noncontrolling interest.

For all of our partnership flips and JV inverted leases, the redeemable noncontrolling interest is carried on our balance sheet at the greater of the redemption value or the amount calculated under the HLBV method.

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• Networked Solar Energy Capacity represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to executed Customer Agreements (i) for which we have confirmation that the systems are installed on the roof, subject to final inspection;

(ii) in the case of certain system installations by our partners, for which we have accrued at least 80% of the expected project cost (inclusive of acquisitions of installed systems), or (iii) for multi-family and any other systems that have reached NTP, measured on the percentage of the project that has been completed based on expected project cost.

(ii) in the case of certain system installations by our partners, for which we have accrued at least 80% of the expected project cost (inclusive of acquisitions of installed systems), or (iii) for multi-family and any other systems that have reached Notice to Proceed (“NTP”), measured on the percentage of the project that has been completed based on expected project cost.

Systems that have met these criteria are considered to be deployed.

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Factors that could impact Gross Earning Assets include, but are not limited to, customer payment defaults, or declines in utility rates or early termination of a contract in certain circumstances, including prior to installation.

We believe it is useful for investors to evaluate the future expected cash flows from all customers that have been deployed through the respective measurement date, less estimated costs to maintain such systems and estimated distributions to tax equity partners in consolidated joint venture partnership flip structures, and distributions to project equity investors.

structures, and distributions to project equity investors.

Various assumptions are made when calculating these metrics.

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As of December 31,

2023 2022 (1)

(in thousands)

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Gross Earning Assets $ 14,166,520 $ 12,425,539

(1) The Gross Earning Assets as of December 31, 2022 reflect the application of a 5% unlevered discount rate, which is consistent with the discount rate used during that period.

If we had applied an unlevered discount rate of 6% as of December 31, 2022, the Gross Earning Assets Contracted Period would have been $8,151,849 and the Gross Earning Assets Renewal Period would have been $2,918,950.

The tables below provide a range of Gross Earning Asset amounts if different default, discount and purchase and renewal assumptions were used.

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Solar Energy Systems and Product Sales.

Solar energy systems sales are comprised of revenue from the sale of solar energy systems directly to customers.

Solar energy systems sales are revenue from the sale of solar energy systems directly to customers.

We generally recognize revenue from solar energy systems sold to customers when the solar energy system passes inspection by the authority having jurisdiction, which inspection generally occurs after installation but prior to PTO, at which time we have met the performance obligation in the contract.

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

Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount may be impaired.

Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may be impaired.

We have determined that we operate as one reporting unit and our goodwill is tested for impairment at the enterprise level.

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A sustained decrease in the price of our 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.

As of October 1, 2022, we concluded that our fair value exceeded our carrying value.

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

In performing the assessment, we performed a qualitative assessment and determined there were no indicators of impairment.

To corroborate this conclusion, we compared the carrying value of our one reporting unit to our market capitalization and concluded that there was no goodwill impairment during the years ended December 31, 2022, 2021 and 2020.

During the third quarter of fiscal 2023, consistent with other industry peers, our stock price continued to decline resulting in a decline in our market capitalization after consideration of a control premium below the book value of equity.

We performed an interim quantitative assessment as of September 30, 2023 related to the recoverability of our goodwill for our one reporting unit.

We estimated the fair value of our reporting unit primarily based on consideration of an income approach analysis.

Under the income approach, our future cash flows were estimated and present valued based on a discount rate reflecting a market participant risk-adjusted rate of return.

As of September 30, 2023, we concluded that the fair value of our one reporting unit did not exceed its carrying value with consideration of a control premium and recorded an impairment charge of $ 1.2 billion in our consolidated statements of operations.

For our interim quantitative assessment of goodwill as of September 30, 2023, we estimated the fair value of our one reporting unit and compared that fair value to its recorded carrying value.

The assumptions and estimates used in the assessment include, among others, estimated future net annual contracted cash flows under our existing long term customer agreements, as well as future growth estimates which rely on management judgements.

We also compared the total invested capital (including market capitalization) to the fair value of our reporting unit to assess the reasonableness of fair value after consideration of a control premium based on observable comparable company transactions.

We utilized varying discount rates depending on the risk associated and sensitivity with differing cash flow projections.

Holding all other assumptions constant, a 50 basis point increase in the discount rate assumptions would have increased the goodwill impairment charge by approximately $0.5 billion.

Should, among other events and circumstances, industry conditions deteriorate, the outlook for future operating results and cash flow decline or regulations change, costs of equity or debt capital increase, valuations for comparable public companies or comparable acquisition valuations decrease, or our market capitalization experience a further sustained decline below its book value, we may need to further reassess the recoverability of goodwill in future periods.

Given the inherent estimation uncertainty in assumptions underlying a discounted cash flow analysis, actual conditions may differ materially from the Company’s estimates, which could result in additional impairment charges.

As of October 1, 2023, we conducted our annual goodwill impairment test.

The test concluded that no additional impairment had occurred during the fourth quarter of 2023.

To corroborate this conclusion, we compared the carrying value of our one reporting unit to our enterprise market capitalization after consideration of a reasonable control premium and concluded that there was no goodwill impairment during the fourth quarter of 2023.

Impairment of Long-Lived Assets

The carrying amounts of our long-lived assets, including solar energy systems and definite-lived intangible assets, are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated.

The carrying values of our long-lived assets, including solar energy systems, are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated.

Factors that we consider in deciding when to perform an impairment review would include significant negative industry or economic trends, and significant changes or planned changes in our use of the assets.

Recoverability of these assets is measured by comparison of the carrying amount of each asset group to the future undiscounted cash flows the asset is expected to generate over its remaining life.

Recoverability of these assets is measured by comparison of the carrying value of each asset group to the future undiscounted cash flows the asset is expected to generate over its remaining life.

If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.

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We recognize the effect of tax rate and law changes on deferred taxes in the reporting period in which the legislation is enacted.

We sell solar energy systems to the investment funds.

We sell solar energy systems to investment funds.

As the investment funds are consolidated by us, the gain on the sale of the solar energy systems is not recognized in the consolidated financial statements.

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We account for the income tax consequences of these intra-entity transfers, both current and deferred, as a component of income tax expense and deferred tax liability, net during the period in which the transfers occur.

We account for investment tax credits as a reduction of income tax expense in the year in which the credits arise.

We account for investment tax credits as a reduction of income tax expense in the year in which the credits arise ( i.e.

the flow-through method).

We determine 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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Any residual purchase price is recorded as goodwill.

The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to the solar energy systems acquired as part of our acquisition of Vivint Solar.

Significant estimates in valuing certain tangible and intangible assets include but are not limited to discount rates.

Significant estimates in valuing certain tangible assets include but are not limited to discount rates.

These estimates are inherently uncertain and unpredictable.

See Note 3, Acquisition to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Noncontrolling Interests and Redeemable Noncontrolling Interests

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General and administrative 221,067 194,611

Amortization of intangible assets 5,364 5,370

Goodwill impairment

Total operating expenses 4,238,456 2,983,614

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Interest expense, net (652,989) (445,819)

Other income, net 260,657 22,628

Other (expense) income, net

(63,900) 260,657

Loss before income taxes (2,695,532) (847,354)

Income tax expense 2,291 9,271

Income tax (benefit) expense

(12,691) 2,291

Net loss (2,682,841) (849,645)

Net loss attributable to noncontrolling interests and redeemable noncontrolling interests (1,078,344) (1,023,022)

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

Net income (loss) per share attributable to common stockholders

Net (loss) income attributable to common stockholders

$ (1,604,497) $ 173,377

Net (loss) income per share attributable to common stockholders

Basic $ (7.41) $ 0.82

Diluted $ (7.41) $ 0.80

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

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

Basic 216,642 211,347

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The $204.8 million increase in Revenue from Customer Agreements was primarily due to new systems placed in service in 2023 and a full year of revenue recognized in 2023 for systems placed in service in 2022 versus only a partial amount of such revenue related to the period in which the assets were in service in 2022.

Revenue from incentives, which primarily consisted of the sale of SRECs, increased by $9.4 million when compared to the prior year related to the timing and volume of SREC sales which were responsive to market conditions.

Revenue from incentives, which primarily consisted of the sale of SRECs, decreased by $1.1 million when compared to the prior year related to the timing and volume of SREC sales which were responsive to market conditions.

Solar Energy Systems and Product Sales .

Revenue from solar energy systems sales increased by $442.6 million compared to the prior year primarily due to an overall increased demand for solar energy systems in the marketplace, particularly through retail partners.

Additionally, the average price of system sales increased 12% from the prior year period.

Product sales increased by $112.4 million compared to the prior year primarily due to an overall increased demand for solar energy related products and services in the marketplace, and to a lesser extent, price increases on various solar products sold to resellers.

Revenue from solar energy systems sales decreased by $257.5 million compared to the prior year primarily due to an increase in the proportion of customers choosing to enter into a Customer Agreement versus purchasing a system outright using a loan, likely due to increased interest rates.

Product sales decreased by $7.8 million compared to the prior year primarily due to the lower average sales price of solar energy products, as well as lower sales volume of solar energy products to installers of solar energy systems compared to the prior year, due to easing of supply chain constraints.

Operating Expenses

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General and administrative expense 221,067 194,611 26,456 14 %

Amortization of intangible assets 5,364 5,370 (6) — %

Goodwill impairment

1,158,000 — 1,158,000 100 %

Total operating expenses $ 4,238,456 $ 2,983,614 $ 1,254,842 42 %

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The $233.0 million increase in Cost of customer agreements and incentives was primarily due to the new systems placed in service in 2023, plus a full year of costs recognized in 2023 for systems placed in service in 2022 versus only a partial amount of such expenses related to the period in which the assets were in service in 2022.

The Cost of customer agreements and incentives remained relatively consistent at 86% of customer agreements and incentives revenue during 2022, when compared with 85% in the prior year period.

The Cost of customer agreements and incentives increased to 91% of customer agreements and incentives revenue during 2023, from 86% in the prior year.

This increase is primarily due to a higher proportion of customers choosing to enter into Customer Agreements versus purchasing a system outright.

Customer Agreements fulfillment incurs upfront non-capitalizable costs for building the system which do not recur during the agreement period over which the revenue is recognized.

Cost of Solar Energy Systems and Product Sales .

There was a $512.2 million increase in Cost of solar energy systems and product sales which was primarily due to the corresponding net increase in the solar energy systems and product sales discussed above.

The Cost of solar energy systems and product sales increased to 88% of solar energy systems and product sales revenue during 2022, when compared with 85% in the prior year period, primarily as a result of increased demand for solar energy related products and services in the marketplace.

There was a $158.9 million decrease in Cost of solar energy systems and product sales, which was primarily due to the corresponding net decrease in the solar energy systems and product sales discussed above.

The Cost of solar energy systems and product sales increased to 95% of solar energy systems and product sales revenue during 2023, when compared with 88% in the prior year, primarily as a result of sales price increases lagging cost increases, as well as volume pricing granted in our distribution business.

Sales and Marketing Expense.

The $122.4 million increase in Sales and marketing expense was primarily attributable to increases in headcount driving higher employee compensation and costs to acquire customers through our sales lead generating partners.

Additionally, there was an increase of $4.4 million in severance related costs incurred during 2022.

The $4.6 million decrease in Sales and marketing expense was primarily attributable to decreases in headcount driving lower employee compensation and costs to acquire customers through our sales lead generating partners.

Included in sales and marketing expense were $56.3 million and $38.7 million of amortization of costs to obtain Customer Agreements for 2023 and 2022, respectively.

Research and Development Expense .

The $2.3 million decrease in Research and development expense was primarily attributable to a decrease in headcount driving lower employee compensation costs.

The $0.9 million increase in Research and development expense was primarily attributable to an increase in support related consulting costs.

General and Administrative Expense .

The $69.9 million decrease in General and administrative expenses was primarily attributable to a decrease in stock-based compensation expense.

This decrease in stock-based compensation was primarily attributable to $36.4 million of expense related to Vivint Solar recognized during 2021,

which was based on the fair value at the time of the acquisition and the underlying awards have since fully vested.

Additionally, there were decreases related to consulting costs of $3.1 million and $18.0 million in severance-related integration costs, when compared to 2021.

The $26.5 million increase in General and administrative expenses was primarily attributable to an increase in headcount driving higher employee compensation costs.

Additionally, there

were increases related to information technology related consulting costs, when compared to the prior year period.

Included in general and administrative expense were $7.458 million and $5.364 million of amortization of intangibles for 2023 and 2022, respectively.

Goodwill impairment .

The $1.2 billion increase in Goodwill impairment expense related to an impairment charge of $1.2 billion that was a result of an interim impairment test performed during the third quarter of 2023.

For further detail, see Note 2, Summary of Significant Accounting Policies to our consolidated financial statement included elsewhere in this Annual Report on Form 10-K.

Non-Operating Expenses

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Interest expense, net $ (652,989) $ (445,819) $ (207,170) 46 %

Other income, net 260,657 22,628 238,029 1,052 %

Total interest and other income, net $ (185,162) $ (305,072) $ 119,910 (39) %

Other (expense) income, net

(63,900) 260,657 (324,557) (125) %

Total interest and other expense, net

$ (716,889) $ (185,162) $ (531,727) 287 %

Interest expense, net.

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Included in net interest expense is $31.2 million and $28.3 million of non-cash interest recognized under Customer Agreements that have a significant financing component for 2023 and 2022, respectively.

Other income, net.

The increase in other income, net of $238.0 million relates primarily to an increase of $168.3 million in gains on derivatives recognized in 2022, as well as a $47.3 million gain on an equity investment, with no such comparable activity in 2021.

Income Tax Expense

Other (expense) income, net.

The increase in other expense of $324.6 million relates primarily to a $58.7 million loss on an equity investment in Lunar Energy Inc.

(“Lunar Energy”) during 2023, compared with a $47.3 million gain on this same equity investment in Lunar Energy during 2022, as well as to gains on derivatives during 2022, with no such comparable activity in 2023.

Income Tax (Benefit) Expense

December 31, Change

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(in thousands)

Income tax expense $ 2,291 $ 9,271 $ (6,980) (75) %

The decrease in Income tax expense of $7.0 million primarily relates to a decrease in valuation allowance on certain federal and state tax credits and net operating losses, which was offset by a decrease in tax benefit related to a higher pre-tax loss and an increase in noncontrolling interest and redeemable noncontrolling interests.

Income tax (benefit) expense

$ (12,691) $ 2,291 $ (14,982) (654) %

The decrease in Income tax (benefit) expense of $15.0 million primarily relates to an increase in tax benefit related to a higher pre-tax loss, which was offset by goodwill impairment, an increase in valuation allowance on certain federal and state tax credits and net operating losses, and an increase in noncontrolling interest and redeemable noncontrolling interests.

Given our net operating loss carryforwards as of December 31, 2023, we do not expect to pay income tax, including in connection with our 2023 income tax provision, until our net operating losses are fully utilized.

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Net loss attributable to noncontrolling interests and redeemable noncontrolling interests $ (1,078,344) $ (1,023,022) $ (55,322) 5 %

Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was primarily the result of an addition of six new investment funds since December 31, 2021, for which the HLBV method was used in

determining the amount of net loss attributable to noncontrolling interests.

Investment funds generally allocate more loss to the noncontrolling interest in the first several years after fund formation.

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As of December 31, 2023, we had outstanding borrowings of $539.5 million on our $600.0 million credit facility maturing in January 2025.

Additionally, we have 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 2022.

In February 2024, we amended one of our subsidiary’s senior secured credit facility to, among other things, increase the total commitments from $1.8 billion to $2.35 billion and extend the maturity date from April 2025 to April 2028.

In February 2024, we amended our bank line of credit to, among other things, reduce the total commitments from $600.0 million to $447.5 million, and to extend the maturity date from January 2025 to November 2025.

This maturity date can be further extended to March 2027, if we meet certain liquidity tests as of September 30, 2024.

For additional details, see the description of "Senior Secured Credit Facility" and "Line of Credit" in Item 9B.Other Information.

Additionally, we have purchase commitments, which have the ability to be canceled without significant penalties, with multiple suppliers to purchase $366.4 million of photovoltaic modules, inverters and batteries by the end of the first quarter of 2025.

In January 2021, we issued $400.0 million of convertible senior notes with a maturity date of February 1, 2026, for net proceeds of approximately $389.0 million.

11 unchanged sentences

Net cash used in operating activities $ (820,740) $ (848,793)

$ (848,793) $ (817,186)

Net cash used in investing activities

1 unchanged sentence

Net cash provided by financing activities 3,468,698 3,037,451

3,037,451 2,645,594

Net increase in cash

2 unchanged sentences

During 2023, we used $820.7 million in net cash from operating activities.

The driver of our operating cash outflow consists of the costs of our revenue, as well as sales, marketing and general and administrative costs.

The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs.

During 2023, our operating cash outflows were $625.5 million from our net loss excluding non-cash and non-operating items.

1 unchanged sentence

During 2022, we used $848.8 million in net cash from operating activities.

The driver of our operating cash outflow consists of the costs of our revenue, as well as sales, marketing and general and administrative costs.

The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs.

During 2022, our operating cash outflows were $438.1 million from our net loss excluding non-cash and non-operating items.

3 unchanged sentences

The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.

Included within cash used

in investing activities during 2022, was a $75.0 million contribution we made as an additional investment in our home electrification venture with SK E&S Co., Ltd.

Included within cash used in investing activities during 2023, was a $5.0 million contribution we made as an additional investment in Lunar Energy.

During 2022, we used $2.1 billion in cash in investing activities.

The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.

Included within cash used in investing activities during 2022, was a $75.0 million contribution we made as an additional investment in Lunar Energy.

Financing Activities

During 2023, we generated $3.5 billion from financing activities.

This was primarily driven by $1.2 billion in net proceeds from fund investors, $1.9 billion in net proceeds from debt, $32.9 million in net proceeds from stock-based awards activity, offset by $42.6 million in acquisition of noncontrolling interests and $14.1 million in repayments under finance lease obligations.

This was primarily driven by $1.4 billion in net proceeds from fund investors, $2.2 billion in net proceeds from debt, $22.6 million in net proceeds from stock-based awards activity, offset by $1.5 million in repurchase of convertible senior notes, $46.3 million in acquisition of noncontrolling interests and $23.3 million in repayments under finance lease obligations.

During 2022, we generated $3.0 billion from financing activities.

7 unchanged sentences

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statement included elsewhere in this Annual Report on Form 10-K.

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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 7. Management’s Discussion and Analysis