SPRUCE POWER HOLDING CORP 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides information which our Management believes is relevant to an assessment and understanding of our financial condition and results of operations. This discussion and analysis should be read together with our results of operations and financial condition and the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions. Refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or elsewhere in this Annual Report on Form 10-K. Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding. Company Overview We are a leading owner and operator of distributed solar energy assets across the U.S., offering subscription-based services to approximately 84,000 home solar assets and customer contracts, making renewable energy more accessible to everyone. We offer asset management and operating and maintenance services, and are contracted to service approximately 60,000 systems owned by third parties, as well as to our Portfolio, through our Spruce Pro servicing platform. Refer to Item 1, “Business” within this Annual Report for additional information on our corporate history and background. Operating Highlights For the years ended December 31, 2025 and 2024, our revenues totaled $111.8 million and $82.1 million, respectively, while our net loss attributable to stockholders was $26.0 million and $70.5 million, respectively. Our 2025 financial performance reflects the full impact of the NJR Acquisition in November 2024, resulting in increased revenues from energy generation and SRECs. 2025 results were also impacted by fluctuations of our interest rate swaps and variations in our operations and maintenance costs. Our 2024 financial performance was impacted by impairment of our goodwill and legal settlements during fiscal year 2024. See the section titled “Results of Operations” in this Annual Report on Form 10-K for more information on our operating results for the years ended December 31, 2025 and 2024. We focus on several core pillars in our operations and we strive to deliver operational excellence to our clean energy customers and the communities we serve. For the year ended December 31, 2025, our portfolio generated approximately 709 thousand MWh of power, compared to 515 thousand MWh for the year ended December 31, 2024. We prioritize a high level of customer satisfaction through our in-house call centers and customer service support teams. For the year ended December 31, 2025, our customer satisfaction score was 81%. We also execute a growth strategy focused on accretive acquisitions and a capital-light approach, while expanding our existing service offerings through Spruce Pro services. As a result of this strategy, revenues increased 39% for the year ended December 31, 2025 from the year ended December 31, 2024. Certain information above constitutes key operating metrics that we use to evaluate our operations, measure our performance and identify trends in our business. Some of our key operating metrics are estimates that are based on our management’s beliefs and assumptions and on information currently available to management. Although we believe we have a reasonable basis for each of these estimates, we caution that these estimates are based on a combination of assumptions that may prove to be inaccurate over time, and any inaccuracies could be material to our actual results when compared to our calculations. See the section titled “Risk Factors” in this Annual Report on Form 10-K for more information. Furthermore, other companies may calculate these operating metrics differently than we do now or in the future, which would reduce their usefulness as a comparative measure. 36 Table of Contents Recent Developments SET Facility and SP4 Facility In June 2024, we entered into a non-recourse credit agreement with Barings GPSF LLC (the “SET Facility”), which provided a fixed interest term loan of $130.0 million. We used the proceeds from the SET Facility to fully repay the outstanding balance on the SP4 Facility of $125.0 million. In connection with the repayment of the SP4 Facility, we settled the related interest rate swap contracts. Capital Investments, Acquisitions and Divestitures In November 2024, we completed the NJR Acquisition acquiring approximately 9,800 solar energy systems for approximately $132.5 million, pursuant to an asset purchase agreement (the “APA”). The NJR Acquisition was funded by proceeds from the concurrent issuance of the SP5 Facility (defined below) and $22.7 million of our cash. During the year ended December 31, 2025, the Company acquired 200 additional systems for approximately $5.3 million in cash, inclusive of transaction costs of approximately $0.1 million. SP5 Facility In November 2024, we entered into a non-recourse credit agreement with Banco Santander, S.A., New York (the “SP5 Facility”), which provided a term loan of approximately $109.8 million, of which proceeds were used to partially fund the NJR Acquisition described above. In addition, we entered into an interest rate swap agreement to hedge the floating rate of the SP5 Facility, which included a notional amount of $87.9 million, a fixed rate of 3.98%, and a maturity date of May 17, 2033. SP1 Facility Amendment On March 27, 2026, the Company entered into an amendment (the “SP1 Facility Amendment”) to the SP1 Facility with Silicon Valley Bank (the “SP1 Facility”) which extends the maturity date to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the Amended SP1 Maturity Date will be January 30, 2027 . Under the terms of the SP1 Facility Amendment, the applicable margin is 2.75% per annum from the effective date of the extension to October 30, 2026 , and 3.25% per annum until maturity. The SP1 Facility Amendment includes a cross-default provision with the Second Key Bank Credit Agreement. Reportable Segments Segment reporting is based on the management approach, following the method Management organizes our reportable segments for which separate financial information is made available to and evaluated regularly by our chief operating decision maker (“CODM”) in allocating resources and in assessing performance. Our CODM is our Chief Executive Officer. Our CODM does not evaluate operating segments using segment asset information. As of December 31, 2025, we have one reportable segment, which constitutes selling electricity to homeowners and providing related services to the homeowners, as well as to third-party owners. Key Factors Affecting Operating Results We are a leading owner and operator of distributed solar energy assets across the U.S., offering subscription-based services to owners of home solar assets and customer contracts. Additionally, we provide servicing functions for our assets and customers, as well as for other institutional owners of home solar energy systems. Our operating results and ability to grow our business over time could be impacted by certain factors and trends that affect our industry, as well as elements of our strategy, including the following factors, as well as the risk factors and other factors set forth under “Risk Factors” or elsewhere in this Annual Report on Form 10-K. 37 Table of Contents Development of Distributed Energy Assets Our future growth depends significantly on our ability to acquire operating home solar energy systems “in-bulk” from other companies. Industry data suggests there is a substantial existing base of operating home solar energy systems, providing us the opportunity to pursue acquisitions. Over the long-term, our continued ability to pursue acquisitions will be dependent on development of distributed energy assets, namely home solar energy systems, by third parties. This development may be impacted by numerous factors that influence homeowner demand for home solar energy systems including but not limited to macroeconomic dynamics, utility rates, climate change impacts and government policy and incentives. Availability of Financing Our ability to raise capital from third parties at reasonable terms is a critical element in supporting ownership of our existing home solar energy assets as well as enabling our future growth. We have historically utilized non-recourse, project-level debt as a primary source of capital for acquisitions. Our ability to raise debt either as means to refinance existing indebtedness or for future acquisitions may be impacted by general macroeconomic conditions, the health of debt capital markets, the interest rate environment and general concerns over its industry or specific concerns over our business. Results of Operations Comparison of the Years Ended December 31, 2025 and 2024 The results of operations related to our Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net loss from discontinued operations in our consolidated statements of operations. Information with respect to the consolidated statements of operations for the years ended December 31, 2025 and 2024 are presented below: Years Ended December 31, 2025 2024 $ Change % Change (in thousands) Revenues $ 111,812 $ 82,107 $ 29,705 36 % Operating expenses: Cost of revenues - solar energy systems depreciation 29,139 23,377 5,762 25 % Cost of revenues - operations and maintenance 9,764 16,597 (6,833) (41) % Selling, general and administrative expenses 55,113 58,889 (3,776) (6) % Litigation settlements 1,711 7,384 (5,673) (77) % Gain on asset disposal (1,855) (2,504) 649 (26) % Impairment of goodwill — 28,757 (28,757) (100) % Total operating expenses 93,872 132,500 (38,628) (29) % Income (Loss) from operations 17,940 (50,393) 68,333 (136) % Other (income) expense: Interest income (20,718) (22,758) 2,040 (9) % Interest expense, net 50,918 40,232 10,686 27 % Other expense, net 13,383 2,211 11,172 505 % Net loss from continuing operations (25,643) (70,078) 44,435 (63) % Net (loss) income from discontinued operations (64) 25 (89) (356) % Net loss (25,707) (70,053) 44,346 (63) % Less: Net income attributable to noncontrolling interests 320 436 (116) (27) % Net loss attributable to stockholders $ (26,027) $ (70,489) $ 44,462 (63) % 38 Table of Contents Revenues Revenues increased by $29.7 million, or 36%, to $111.8 million in 2025 as compared to 2024. The increase was primarily due to i) an increase in SREC revenue of $17.0 million related to the NJR Acquisition, ii) $10.4 million of incremental SLA revenue related to the NJR Acquisition, and (iii) $3.1 million increase due to incremental servicing revenues related to contracted services on third-party owned solar energy systems in 2025. Cost of Revenues — Solar Energy Systems Depreciation Cost of revenues - solar energy systems depreciation increased by $5.8 million, or 25%, to $29.1 million in 2025 as compared to 2024. The increase in cost of revenue - solar energy systems depreciation was primarily due to incremental depreciation related to the NJR Acquisition in November 2024. Cost of Revenues — Operations and Maintenance Cost of revenues - operations and maintenance decreased by $6.8 million, or 41%, to $9.8 million in 2025 as compared to 2024. The decrease in cost of revenue - operations and maintenance was primarily due to cost reductions resulting from certain O&M efficiencies implemented in the second half of 2025, including greater leverage of our asset management platform to streamline third-party vendor management and return material authorization (RMA) processing . In addition, we implemented processes to efficiently manage instances where we needed to initiate a truck roll to maintain or repair systems and managed customer contracts in a more cost-effective manner, both resulting in lower third-party contractor spend. Furthermore, our in-house servicing team is fully operational in New Jersey, where we have a heavy concentration of solar assets. This team is able to handle a majority of service calls in house, further driving down third-party contractor spend. Selling, General and Administrative Selling, general and administrative expenses decreased by $3.8 million, or 6%, to $55.1 million in 2025. The decrease was primarily due to $3.1 million decrease in professional service costs due to fewer outstanding legal cases, better utilization of in-house resources, and a decrease in payments to third party consultants. Higher labor costs in the first half of the year were offset in the second half of the year through a reduction in labor force resulting in a net decrease in labor costs for the year. Litigation Settlements, Net Litigation settlements, net decreased by $5.7 million, or 77%, to $1.7 million in 2025. The decrease related to 2024 costs associated with settlements of various Legacy XL legal matters. See Note 14. Commitments and Contingencies in Part II, Item 8. Financial Statements and Supplementary Data for a description of our material pending legal proceedings. Impairment of Goodwill During the third quarter of 2024, we recorded a full impairment of goodwill totaling $28.8 million resulting from a continuous decline in our stock price and market capitalization. Interest Income Interest income of $20.7 million in 2025 relates to $18.1 million of interest income from the SEMTH Master Lease and $2.6 million of interest earned on investments in U.S. Treasury securities. In comparison, interest income of $22.8 million for 2024 relates to $16.8 million of interest income from the SEMTH Master Lease and $6.0 million of interest earned on investments in U.S. Treasury securities. Interest Expense, Net Interest expense, net of $50.9 million for 2025 primarily relates to (i) $44.4 million of interest expense, related to the principal amounts of our outstanding non-recourse debt, net of swaps and (ii) $6.5 million related to the amortization of debt discount and deferred financing costs. In comparison, interest expense, net of $40.2 million for 2024 primarily related to (i)$34.2 million of interest expense related to the principal amounts of our outstanding non-recourse debt, net of swaps and (ii) $6.0 million related to the amortization of debt discount and deferred financing costs. 39 Table of Contents Interest expense, net was negatively impacted by the fluctuations in the settlements of our interest rate swaps, which we use to convert variable rates on our non-recourse debt into fixed recourse obligations and are subject to interest-rate risk. See Note 8. Interest Rate Swaps in Part II, Item 8. Financial Statements and Supplementary Data for further information on our interest rate swaps. Other Expense, Net Other expense, net of $13.4 million for 2025 consists of $12.6 million of unrealized losses from the change in fair value of interest rate swaps, in addition to $0.7 million of other expense, net, while other expense, net of $2.2 million for 2024 primarily consisted of $2.7 million of unrealized losses from the change in fair value of interest rate swaps, partially offset by $0.5 million of other income, net. Liquidity and Capital Resources As of December 31, 2025, we had negative working capital of $122.9 million. Our working capital included cash and cash equivalents and restricted cash of $93.1 million. We had net losses attributable to stockholders of $26.0 million and $70.5 million for the years ended December 31, 2025 and 2024, respectively. Our principal sources of liquidity include cash and cash equivalents and cash flows from operations as well as cash received from investment related to SEMTH Master Lease. We receive cash from certain of our wholly-owned subsidiaries specifically related to the portfolio servicing fees provided for under the relevant servicing agreements between us and the subsidiaries, as well as reimbursement for any expenses we pay on behalf of those subsidiaries, which are allowed under certain agreements related to those subsidiaries. Our cash requirements depend on many factors, including the execution of our business strategy. We may be required to utilize our cash to support certain current and future operations of our wholly owned subsidiaries. We remain focused on carefully managing costs, including capital expenditures, maintaining a strong balance sheet, and ensuring adequate liquidity. Our primary cash needs are debt servicing, acquisition of solar energy portfolios, operating expenses, and working capital to support the growth in our business. Working capital is impacted by the timing and extent of our business needs. See below discussions under “ Cash Flows Summary” for the impact of our operations and M&A transactions on our cash balances during the years ended December 31, 2025 and 2024. As of December 31, 2025, our debt balance was $676.8 million, net of $16.5 million of unamortized fair value adjustment and $2.3 million of unamortized deferred financing costs, all of which is non-recourse project-level debt. See Note 7. Non-Recourse Debt. Our debt consists of four senior debt facilities and two subordinate facilities, of which the earliest maturity date is October 30, 2026. For additional information on our debt, refer to Note 7. Non-Recourse Debt included within the accompanying audited consolidated financial statements. The accompanying audited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern. The Company’s debt obligations under the SP1 Facility are non-recourse to the Company (see Note 7. Non-Recourse Debt included within the accompanying audited consolidated financial statements). On March 27, 2026 , the Company entered into the SP1 Facility Amendment to extend the maturity of this facility to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the extended maturity date will be January 30, 2027. Because (i) the Amended SP1 Maturity Date is within twelve months from the date the accompanying audited consolidated financial statements are issued, (ii) the Company has not yet entered into a commitment to refinance the SP1 Facility, (iii) the Company has determined that it is unlikely to have sufficient cash on hand or proceeds from currently available liquidity sources to satisfy the SP1 Facility at the Amended SP1 Maturity Date (iv) the Company had negative working capital of $122.9 million as of December 31, 2025 solely due to the current maturity of the SP1 Facility at that date, and (v) the Company has experienced recurring net losses and negative cash flows from operations for the year ended December 31, 2025, these conditions raise substantial doubt about the Company’s ability to continue as a going concern . Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. 40 Table of Contents The Company plans to refinance the SP1 Facility prior to the Amended SP1 Maturity Date consistent with the Company’s historical financing strategy for investing in solar assets on a leveraged basis. The Company has commenced preliminary discussions with potential lenders, which are currently being reviewed by management. The Company’s management believes that such refinancing will be completed prior to the Amended SP1 Maturity Date. However, the Company can offer no assurances it will be able to obtain financing at acceptable terms or at all. Therefore, the Company has concluded that there is substantial doubt about its ability to continue as a going concern. Should the Company be unsuccessful in refinancing the SP1 Facility, this could result in a foreclosure of collateral and negatively impact operations. Further, an event of default on the SP1 Facility, if not cured in the permittable time allowed under the agreement, would result in a cross default on the Second Key Bank Credit Agreement, which is also non-recourse. Cash Flows Summary Presented below is a summary of our operating, investing and financing cash flows: Years Ended December 31, (Amounts in thousands) 2025 2024 Net cash provided by (used in) Continuing operating activities $ (3,405) $ (41,686) Discontinued operating activities (125) (125) Continuing investing activities 24,780 (101,412) Continuing financing activities (37,253) 79,349 Discontinued financing activities — 81 Net change in cash and cash equivalents and restricted cash $ (16,003) $ (63,793) Cash Flows Used in Operating Activities Operating cash inflows include cash from the sale of solar energy power generated by our home solar energy systems and the servicing of long-term agreements for other institutional owners of home solar energy systems. These operating cash inflows are primarily offset by operating expenses and interest payments on our outstanding debt. The related cash flows for Drivetrain and XL Grid businesses are reflected as discontinued operating activities for the years presented. The net cash used in continuing operating activities improved by $38.3 million in 2025 compared to 2024 primarily due to increased revenue and decreased operating expenses as a result of O&M efficiencies in 2025. Cash Flows Provided by (Used in) Investing Activities The net cash provided by continuing investing activities in 2025 was $24.8 million, which primarily relates to $24.7 million of proceeds from our investments under the SEMTH Master Lease and $5.6 million of proceeds from the sale of certain solar energy systems, partially offset by $5.3 million of net cash paid for incremental tranches purchased in 2025 related to the NJR Acquisition. The net cash used in continuing investing activities in 2024 was $101.4 million, which primarily relates to $132.8 million of net cash paid for the NJR Acquisition in 2024, partially offset by $25.6 million of proceeds from our investments under the SEMTH Master Lease, and $6.1 million of proceeds from the sale of certain solar energy systems. Cash Flows Provided by (Used in) Financing Activities The net cash used in continuing financing activities in 2025 was $37.3 million, which primarily relates to $35.1 million for the repayment of non-recourse long-term debt, and $1.8 million related to shares repurchased under our Repurchase Program. The net cash provided by continuing financing activities in 2024 was $79.3 million, which primarily relates to $239.8 million of proceeds from the issuance of non-recourse long-term debt under the SET and SP5 Facilities in 2024, partially offset by $155.9 million for the repayment of non-recourse long-term debt, including the full repayment of $125.0 million for the SP4 Facility, and $3.4 million of payments for related deferred financing costs. 41 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations and which require us to make our most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Although Management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions. We have identified the following as the most critical accounting policies and judgments. Our significant accounting policies are discussed in Note 2. Summary of Significant Accounting Policies, included in accompanying audited consolidated financial statements, and should be reviewed in connection with the following discussion of accounting policies that require difficult, subjective and complex judgments. Acquisitions All acquisitions, regardless of whether a business combination or asset acquisition, are evaluated to determine whether the acquired entity is a variable interest entity (“VIE”), including an evaluation of whether there is sufficient equity at risk. Business combinations are accounted for using the acquisition method of accounting. The purchase price of a business combination is measured at the estimated fair value of the assets acquired, equity instruments issued and liabilities assumed at the acquisition date. Any noncontrolling interests acquired are also initially measured at fair value. Costs that are directly attributable to the acquisition are expensed as incurred to selling, general and administrative expense. Goodwill is recognized if the aggregate fair value of the total purchase consideration and the noncontrolling interests is in excess of the aggregate fair value of the assets acquired and liabilities assumed. Asset acquisitions are measured based on the cost to us, including transaction costs. Asset acquisition costs, or the consideration transferred, are assumed to be equal to the fair value of the net assets acquired. If the consideration transferred is cash, measurement is based on the amount of cash paid to the seller, as well as transaction costs incurred. Consideration given in the form of non-monetary assets, liabilities incurred or equity instruments issued is measured based on either the cost to us or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated fair values. Goodwill is not recognized in an asset acquisition. We concluded that the SEMTH, Tredegar and NJR Acquisitions do not individually meet the definition of a business or variable interest entity. The fair values of the assets acquired and liabilities assumed are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Significant estimates include, but are not limited to, discount rates and forecasted cash flows. These estimates are inherently uncertain and unpredictable. Revenue Recognition Our revenue is derived from our home solar energy Portfolio and servicing platform, which primarily generates revenue through the sale to homeowners of power generated by the home solar energy systems pursuant to long-term agreements. Pursuant to Accounting Standards Codification (“ASC”) 606 defined below, we have elected the “right to invoice” practical expedient, and revenues for the performance obligations related to energy generation and servicing revenue are recognized as services are rendered based upon the underlying contractual arrangements. Previously, we also derived revenue from the Drivetrain operations which generated revenue from the sales of hybrid electric powertrain systems, and the XL Grid operations which generated revenues through turnkey energy efficiency, renewable technology and other energy solutions. Energy generation Customers purchase solar energy from us under PPAs or SLAs, both defined above. Revenue is recognized from contracts with customers as performance obligations are satisfied at a transaction price reflecting an amount of consideration based upon an estimated rate of return which is expressed as the solar rate per kilowatt hour or a flat rate per month as defined in the customer contracts. • PPA revenues - Under ASC 606, Revenue from Contracts with Customers (“ASC 606”) issued by the Financial Accounting Standards Board , PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs. 42 Table of Contents • SLA revenues - We have SLAs, which do not meet the definition of a lease under ASC 842, Leases , and are accounted for as contracts with customers under ASC 606. Revenue is recognized on a straight-line basis over the contract term as the obligation to provide continuous access to the solar energy system is satisfied. The amount of revenue recognized may not equal customer cash payments due to the performance obligation being satisfied ahead of cash receipt or evenly as continuous access to the solar energy system has been provided. The differences between revenue recognition and cash payments received are reflected in deferred rent assets on the consolidated balance sheets. Certain SLAs contain provisions to provide customers a performance guarantee that each solar energy system will achieve certain specified minimum solar energy production output. If the solar energy system does not produce the guaranteed production amount, we are obligated to pay a performance guarantee calculated as the product of (a) the shortfall production amount and (b) guaranteed rate per kWh as defined in the SLA. Solar renewable energy credit revenues We enter into contracts with third parties to sell SRECs generated by the solar energy systems for fixed prices. Certain contracts that meet the definition of a derivative may be exempted as normal purchase or normal sales transactions (“NPNS”). NPNS are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Certain SREC contracts meet these requirements and are designated as NPNS contracts. Such SRECs are exempted from the derivative accounting and reporting requirements, and we recognize revenues in accordance with ASC 606. We recognize revenue for SRECs based on pricing predetermined within the respective contracts at a point in time when the SRECs are transferred. As SRECs can be sold separate from the actual electricity generated by the renewable-based generation source, we account for the SRECs it generates from its solar energy systems as governmental incentives and do not consider those SRECs output of the underlying solar energy systems. We classify these SRECs as inventory held until sold and delivered to third parties. As we did not incur costs to obtain these governmental incentives, the inventory carrying value for the SRECs was $0 as of December 31, 2025 and December 31, 2024. Investment related to SEMTH master lease agreement and interest income We account for our investment related to the SEMTH master lease agreement in accordance with ASC 325-40, Investments—Other—Beneficial Interests in Securitized Financial Assets . We recognize accretable yield as interest income over the life of the related beneficial interest using the effective yield method, which is reflected within interest income in our consolidated statements of operations. On a recurring basis, we evaluate changes in the cash flows expected to be collected from the cash flows previously projected, and when favorable or adverse changes are deemed other than temporary, we prospectively update our expected cash flows accordingly. Assumptions used in the development of the expected cash flows include expected cash inflows related to the market utility rates in the states where these solar assets are located, estimated production, and expected cash outflows associated with operating and maintenance of these solar assets. Impairment of long-lived assets We review long-lived assets, such as property and equipment, and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable. We group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value. There were no long-lived asset impairment charges during the years ended December 31, 2025 and 2024. 43 Table of Contents Valuation of deferred tax assets We account for income taxes using the asset and liability method under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Deferred income taxes are provided for the temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and net operating loss carry-forwards and credits. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which the differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period in which the enactment rate changes. The ultimate recovery of deferred tax assets is dependent upon the amount and timing of future taxable income and other factors such as the taxing jurisdiction in which the asset is to be recovered. Deferred tax assets are reduced through the establishment of a valuation allowance if, based on available evidence, it is more likely than not that the deferred tax assets will not be realized. A high degree of judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets. We have provided valuation allowances as of December 31, 2025 and 2024 aggregating $96.7 million and $100.0 million, respectively, against such assets based on our assessment of past operating results, estimates of future taxable income and the feasibility of tax planning strategies. Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in income taxes that could be material. Noncontrolling interests Noncontrolling interests represent third-party interests in the net assets of certain consolidated subsidiaries. We consolidate any VIE of which we are the primary beneficiary. We formed or acquired VIEs which are partially funded by tax equity investors in order to facilitate the funding and monetization of certain attributes associated with solar energy systems. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. A variable interest holder is required to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. We evaluate our relationships with the VIEs on an ongoing basis to determine if we are the primary beneficiary. As of December 31, 2025 and 2024, o ur investments in Volta Solar Owner II, LLC and ORE F4 HoldCo, LLC (collectively, the “Funds”) were each determined to be a VIE upon investment. We considered the provisions within the contractual arrangements that grant us power to manage and make decisions that affect the operation of the VIEs, including determining the solar energy systems contributed to the VIEs, and the operation and maintenance of the solar energy systems. We consider the rights granted to the other investors under the contractual arrangements to be more protective in nature rather than substantive participating rights. As such, we were determined to be the primary beneficiary, and the assets, liabilities and activities of the Funds (before any ceased being a VIE) were consolidated by us. The distribution rights and priorities for the Funds (before any ceased being a VIE) as set forth in their respective operating agreements differ from the underlying percentage ownership interests of the members. As a result, we allocate income or loss to the noncontrolling interest holders of the Funds (before any ceased being a VIE) utilizing the hypothetical liquidation of book value (“HLBV”) method, in which income or loss is allocated based on the change in each member's claim on the net assets at the end of each reporting period, adjusted for any distributions or contributions made during such periods. The HLBV method is commonly applied to investments where cash distribution percentages vary at different points in time and are not directly linked to an equity member's ownership percentage. 44 Table of Contents The HLBV method is a balance sheet-focused approach. Under this method, a calculation is prepared at each reporting date to determine the amount that each member would receive if the entity were to liquidate all of its assets and distribute the resulting proceeds to its creditors and members based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each member's share of the income or loss for the period. Factors used in the HLBV calculation include U.S. GAAP income (loss), taxable income (loss), capital contributions, ITCs, distributions and the stipulated targeted investor return specified in the subsidiaries' operating agreements. Changes in these factors could have a significant impact on the amounts that investors would receive upon a hypothetical liquidation. The use of the HLBV method to allocate income (loss) to the noncontrolling interest holders may create volatility in the consolidated statements of operations as the application of HLBV can drive changes in net income or loss attributable to noncontrolling interests from period to period. Interest Rate Swaps We utilize interest rate swaps to manage interest rate risk on existing and planned future debt issuance s. These swaps are not designated as cash flow hedges or fair value hedges. The fair value of the interest rate swaps are calculated by discounting the future net cash flows to the present value based on the terms and conditions of the agreements and the forward interest rate curves. As these inputs are based on observable data and valuations of similar instruments, the interest rate derivatives are primarily categorized as Level 2 in the fair value hierarchy. The fair value of interest rate swaps are recorded on the consolidated balance sheets. Realized gains and losses on interest rate swaps are recognized in interest expense, net on the consolidated statements of operations. Unrealized gains and losses on interest rate swaps are reflected in the consolidated statements of operations and as a non-cash reconciling item in operating activities on the consolidated statements of cash flows. New and Recently Adopted Accounting Pronouncements Refer to Note 2. Summary of Significant Accounting Policies to the consolidated financial statements, included below in Item 8. Financial Statements and Supplementary Data. Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.