Annual Report
2024
Forward Looking Statements
This communication contains forward-looking statements related to Sunrun (the “Company”) within the meaning
of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995 regarding the results, performance or achievements of Sunrun. Such
statements involve risks, uncertainties and other factors that may cause the actual results, performance or
achievements of Sunrun to differ materially from those expressed in such forward-looking statements. These risks
and uncertainties include, but are not limited to, those factors listed in the “Risk Factors” sections of our Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q (available through the Investor Relations section of our
website at Sunrun.com). All forward-looking statements used herein are based on information available to us as of
the date hereof, and we assume no obligation to update publicly these forward-looking statements for any reason,
except as required by law.
April 29, 2025
Dear Stockholder,
2024 was a defining year for Sunrun, as we became the first
storage-plus-solar company to surpass one million
customers. We achieved this milestone while also generating
meaningful financial results, with record unit margins and
shifting to becoming structurally cash flow positive. We
accelerated our transformation into a multi-product clean
energy business, demonstrating agility and innovation amid
evolving macroeconomic conditions, including rising interest
rates and an evolving policy landscape. Our focus remains
clear: executing a disciplined, margin-focused strategy to
drive meaningful Cash Generation and long-term value for
our stockholders in the face of an increasingly complex
industry landscape.
AT THE FOREFRONT OF A
CUSTOMER-LED REVOLUTION IN ENERGY
Sunrun is at the forefront of the customer-led revolution in
energy. Americans want greater energy independence and
control of their lives and their pocketbooks, and we’re
meeting that need by making affordable and reliable energy
accessible to families across America with the most pro-
consumer offerings and delivering the best customer
experience and service in the industry. Being the chosen,
trusted provider to deliver this clean energy future is critical.
We have firmly established our position as the largest
developer of residential clean energy systems, providing
benefit to over one million families. In 2024, we added nearly
116,000 Customers, with 94% selecting our subscription
offering. Our subscription service provides solar energy to
our customers under long-term agreements, typically
without any upfront costs and with immediate savings
compared to the cost of energy from traditional providers.
We continued to grow our customer base, exiting 2024 with
over 1,048,000 Customers, representing 7.5 gigawatts of
Networked Solar Energy Capacity.
Our growth opportunity is tremendous, as only about 5% of
households across America have made the transition to
clean, affordable, locally-produced energy. The fundamental
demand drivers of our business are incredibly strong and
independent of political affiliation. Utility rates are rising due
to climate-related grid stress and large utility investments,
while solar and storage equipment costs have declined
significantly over the last few years. We have also continued
to reduce costs through improved productivity and
efficiency gains, while maintaining high quality and safety
standards. Most importantly, customers remain eager to take
control of their energy needs with affordable and resilient
solutions to power their lives.
WE ARE EXECUTING ON OUR TRANSITION TO A
STORAGE-FIRST COMPANY
Sunrun introduced battery storage to its offering in 2016, laying
the foundation for a major strategic shift. By 2023, we had fully
embraced a storage-first strategy, and in 2024, we accelerated
adoption further, setting records for storage attach rates. Our
differentiated approach delivers a compelling customer value
proposition and unlocks multiple value streams for stockholders.
This transition demands an extraordinary national change effort,
one that few have pursued, and we are uniquely equipped to lead.
We ended 2023 by installing storage systems at approximately
45% of new customers’ homes, and by the end of 2024, we
increased our storage attachment rate to 62% of new customers.
This transition has enabled us to adapt swiftly to evolving
regulatory frameworks across our markets and provide customers
with resilient, reliable home power in the face of an increasingly
unstable grid. By the end of 2024, Sunrun installed more than
156,000 solar and storage systems, representing over 2.5 gigawatt
hours of Networked Storage Capacity.
This growing fleet of solar and storage systems can be used to
provide valuable energy resources to utilities and grid operators to
reduce the strain on the energy system during times of peak
demand, when energy supply is tightest. During 2024, more than
20,000 Sunrun customers participated in 16 virtual power plant
programs across nine states and territories. These virtual power
plants successfully supported power grids with a combined
instantaneous peak of nearly 80 megawatts, a capacity greater
than many traditional fossil-fuel power plants. Through these
virtual power plants,Sunrun earned incremental revenue streams
while customers also received a financial incentive for their
participation. As our base of valuable energy resources increases,
we expect more utilities, their regulators, and grid operators to
look to our networked fleet of solar and storage systems as a
valuable resource to meet the growing demands of the grid.
PRIORITIZING MARGIN-FOCUSED GROWTH,
DELIVERY OF MEANINGFUL CASH GENERATION AND
PRUDENT BALANCE SHEET MANAGEMENT
In 2024, we remained focused on executing our margin-focused
growth strategy, optimizing product mix and routes to market with
an intense focus on costs. At the same time, we adapted to the
higher interest rate environment, innovated through changes in
state regulations, built a strong, domestic-focused supply chain,
and remained disciplined in how we approached our market
presence.
These actions are fundamentally geared towards remaining the
disciplined margin-focused industry leader, positioning us for
meaningful Cash Generation. A strong focus on Cash Generation
provides us the financial flexibility for continued prudent
management of our balance sheet through debt reduction and
other measures that will maximize long-term value creation for our
stockholders.
2024 Annual Letter
To Stockholders
NAVIGATING A DYNAMIC ENVIRONMENT
Our industry is undergoing a period of transformation, with many
peers facing operational and financial challenges. The industry as
a whole is navigating a dynamic operating environment marked by
rapid changes in capital costs and ongoing state and federal
policy uncertainty.
Amid this complex backdrop, we are focused on managing the
factors within our control. We believe that our storage-first,
margin-focused strategy positions us to operate effectively and
deliver value creation for our shareholders, allowing us to best
navigate fluctuating macroeconomic conditions.
OUR TEAM: THE DRIVERS OF OUR SUCCESS
The achievements of the past year are a testament to the talent,
dedication, and hard work of the Sunrun team. I want to celebrate
our teams across the country, in the field and our offices, who are
helping accelerate this customer-led revolution in energy and
practicing our strong culture of doing it safely and efficiently. I am
so thankful for the contributions from each and every Sunrunner
who is helping drive this transformation.
2024 Annual Letter
To Stockholders
CONCLUDING COMMENTS
We are at the forefront of a customer-led revolution to make
clean, affordable, and reliable energy accessible to more families
across America. We are at the beginning of a massive transition
towards electrification, driving more electricity use at the home,
and can offer an affordable, reliable source of clean energy for
millions of households.
I am confident we will continue to capitalize on market shifts and
strengthen our position by remaining customer-focused and
long-term-oriented. By prioritizing a margin-focused strategy,
Cash Generation, and prudent balance sheet management, we
are well-positioned to maximize the value we deliver to
stockholders and enhance the positive impact we make in our
communities and for our customers.
Your continued support and investment in Sunrun fuel our journey
towards a brighter, cleaner future.
Thank you for your continued investment in Sunrun.
Mary Powell
CEO
Annual Report
2024
Over
Networked Storage Capacity,
providing at-scale distributed power
plant capabilities
Cumulative amount of Networked
Solar Energy Capacity deployed since
2007, making Sunrun one of the
largest solar companies in the world
in Annual Recurring Revenue with
Average Contract Life Remaining of
17.6 years
in Net Earning Assets
1,048,800
Customers
Sunrun’s
Impact
2024
2.5
gigawatt hours
7.5 gigawatts
$1.64 billion
$6.8 billion
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-37511
Sunrun Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
26-2841711
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
600 California Street, Suite 1800
San Francisco, California 94108
(Address of principal executive offices and Zip Code)
(415) 580-6900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
RUN
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐ (Do not check if a smaller reporting company)
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common
stock on The Nasdaq Stock Market on June 30, 2024 was approximately $2.6 billion.
As of February 21, 2025, the number of shares of the registrant’s common stock outstanding was 226,209,702.
Portions of the information called for by Part III of this Form 10-K are hereby incorporated by reference from the definitive Proxy Statements for our annual meeting of
stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2024.
Table of Contents
Page
PART I
Item 1.
Business
5
Item 1A.
Risk Factors
13
Item 1B.
Unresolved Staff Comments
51
Item 1C.
Cybersecurity
51
Item 2.
Properties
54
Item 3.
Legal Proceedings
54
Item 4.
Mine Safety Disclosures
54
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
55
Item 6.
[Reserved]
56
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
57
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
75
Item 8.
Financial Statements and Supplementary Data
76
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
122
Item 9A.
Controls and Procedures
122
Item 9B.
Other Information
123
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
123
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
124
Item 11.
Executive Compensation
124
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
124
Item 13.
Certain Relationships and Related Transactions, and Director Independence
124
Item 14.
Principal Accounting Fees and Services
124
PART IV
Item 15.
Exhibits, Financial Statement Schedules
125
Item 16.
Form 10-K Summary
130
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this Annual Report on Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995,
which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future
events or our future financial or operating performance. In some cases, you can identify forward-looking statements
because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “goals,” “anticipates,” “could,”
“intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “likely,” or the
negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or
intentions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to,
statements about:
•
the potential impact of regulatory and policy development and changes;
•
the availability of rebates, tax credits and other financial incentives, and decreases to federal solar tax credits;
•
the potential impact of volatile or rising interest rates on our interest expense;
•
our industry’s, and specifically our, continued ability to manage costs (including, but not limited to, equipment
costs) associated with solar service offerings;
•
potential changes in the retail price of utility-generated electricity or electricity from other energy sources;
•
the sufficiency of our cash, investment fund commitments and available borrowings to meet our anticipated
cash needs;
•
our need and ability to raise capital, refinance existing debt, and finance our operations and solar energy
systems from new and existing investors;
•
our investment in research and development and new product offerings;
•
determinations by the Internal Revenue Service (“IRS”) of the creditable basis of our solar energy systems;
•
our ability to manage our supply chains and distribution channels and the impact of natural disasters, supply
chain disruptions, inflation, tariffs and trade barriers, export regulations, bank failures, geopolitical conflicts,
macroeconomic conditions, and other events beyond our control on our business and operations, results of
operations, and financial position;
•
our business plan and our ability to effectively manage our growth, including our rate of revenue growth;
•
our ability to further penetrate existing markets, expand into new markets and our expectations regarding
market growth (including, but not limited to, expected cancellation rates);
•
our expectations concerning relationships with third parties, including the attraction, retention and continued
existence of qualified solar partners;
•
the impact of seasonality on our business;
•
our strategic partnerships and investments and the expected benefits of such partnerships and investments;
1
•
our ability to realize the anticipated benefits of past or future investments, strategic transactions, or
acquisitions, and risk that the integration of these acquisitions may disrupt our business and management;
•
our ability to protect our intellectual property and customer data, as well as to maintain our brand;
•
the willingness of and ability of our solar partners to fulfill their respective warranty and other contractual
obligations;
•
our ability to renew or replace expiring, canceled or terminated Customer Agreements at favorable rates or on
a long-term basis;
•
the ability of our solar energy systems to operate or deliver energy for any reason, including if interconnection
or transmission facilities on which we rely become unavailable;
•
our expectations regarding certain performance objectives and the renewal rates and purchase value of our
solar energy systems after expiration of our Customer Agreements;
•
the calculation of certain of our key financial and operating metrics and accounting policies; and
•
our ability to capitalize on the market opportunities created by the electrification of the U.S. economy with
renewable energy.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including
those described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover,
we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is
not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or
the extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements we may make. These risks and uncertainties may be amplified by
evolving economic and regulatory conditions, including increasing or volatile interest rates. The extent to which
these risks and uncertainties impact our business, operations, and financial results, including the duration and
magnitude of such effects, will depend on numerous factors, including, but not limited to, the duration, rapidity, and
intensity of these conditions, how widespread their impact is and will continue to be on our industry, and how quickly
and to what extent more predictable and stable economic conditions resume. In light of these risks, uncertainties
and assumptions, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may
not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-
looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future
results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will
be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and
completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking
statements for any reason after the date of this Annual Report on Form 10-K to conform these statements to actual
results or to changes in our expectations, except as required by law.
You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report
on Form 10-K and have filed with the Securities and Exchange Commission (the “SEC”) as exhibits to this Annual
Report on Form 10-K with the understanding that our actual future results, levels of activity, performance, and
events and circumstances may be materially different from what we expect.
2
SELECTED RISKS AFFECTING OUR BUSINESS
Investing in our common stock involves numerous risks, including the risks described in “Part I, Item 1A. Risk
Factors”, of this Annual Report on Form 10-K. Below are some of these risks, any one of which could materially
adversely affect our business, financial condition, results of operations and prospects.
Selected Risks Related to the Solar Industry
•
The solar energy industry is an emerging market which is constantly evolving and may not develop to the
size or at the rate we expect.
•
We have historically benefited from declining costs in our industry, and our business and financial results
may be harmed as a result of recent and any continued increases in costs associated with our solar service
offerings and any failure of these costs to continue declining as we currently expect. If we do not reduce our
cost structure in the future, our ability to continue to be profitable may be impaired.
•
We face competition from traditional energy companies as well as solar and other renewable energy
companies.
Selected Risks Related to Our Operating Structure and Financing Activities
•
We need to raise capital to finance the continued growth of our operations and solar service business. If
capital is not available to us on acceptable terms, as and when needed, our business and prospects would
be materially and adversely impacted. In addition, our business is affected by general economic conditions
and related uncertainties affecting markets in which we operate. Volatility in current economic conditions
could adversely impact our business, including our ability to raise financing.
•
Volatility and increases in interest rates raise our cost of capital and may adversely impact our business.
•
We expect to incur substantially more debt in the future, which could intensify the risks to our business.
Selected Risks Related to Regulation and Policy
•
The customer value proposition for distributed solar, storage, and home electrification products is influenced
by a number of factors, including, but not limited to, the retail price of electricity, the valuation of electricity
not consumed on site and exported to the grid, the rate design mechanisms of customers’ utility bills,
various policies related to the permitting and interconnection costs of our products to homes and the grid,
the availability of incentives for solar, batteries, and other electrification products, and other policies which
allow aggregations of our systems to provide the grid value. Significant changes to any of these factors may
impact the competitiveness of our service offerings to customers.
•
Electric utility statutes and regulations and changes to such statutes or regulations may present technical,
regulatory and economic barriers to the purchase and use of our solar service offerings that may
significantly reduce demand for such offerings.
•
Regulations and policies related to rate design could deter potential customers from purchasing our solar
service offerings, reduce the value of the electricity our systems produce, and reduce any savings that our
customers could realize from our solar service offerings.
•
Trade policies and international relations between the U.S. and key solar manufacturing countries continue
to evolve. The imposition of new duties, tariffs, or other trade barriers—whether by the U.S. government or
in retaliation by other nations—may disrupt supply chains, increase costs, and create uncertainty in our
business operations.
Selected Risks Related to Our Business Operations
•
Our growth depends in part on the success of our relationships with third parties, including our solar
partners.
•
We and our solar partners depend on a limited number of suppliers of solar panels, batteries, and other
system components to adequately meet anticipated demand for our solar and storage service offerings. Any
3
shortage, bottlenecks, delay, detentions, or component price change from these suppliers, or the acquisition
of any of these suppliers by a competitor, could result in sales and installation delays, cancellations and loss
of market share.
•
If we fail to manage our recent and future growth effectively, we may be unable to execute our business
plan, maintain high levels of customer service, or adequately address competitive challenges.
•
We may not realize the anticipated benefits of past or future investments, strategic transactions, or
acquisitions, and integration of these acquisitions may disrupt our business and our management team.
•
The failure to hire and retain a sufficient number of employees and service providers in key functions would
constrain our growth and our ability to timely complete customers' Projects and successfully manage
customer accounts.
•
Regulators may impose rules on the type of electricians qualified to install and service our solar and battery
systems in California, which may result in workforce shortages, operational delays, and increased costs.
•
Our results of operations may fluctuate from quarter to quarter, which could make our future performance
difficult to predict and could cause our results of operations for a particular period to fall below expectations,
resulting in a decline in the price of our common stock.
•
Our actual financial results may differ materially from any guidance we may publish from time to time.
•
Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory
schemes, standards, and other obligations related to data privacy and security (including security incidents)
could harm our business. Compliance or the actual or perceived failure to comply with such obligations
could increase the costs of our products/services, limit their use or adoption, and otherwise negatively affect
our operating results and business.
Selected Risks Related to Taxes and Accounting
•
Our ability to provide our solar and storage service offerings to customers on an economically viable basis
depends in part on our ability to finance these systems with fund investors who seek particular tax and other
benefits.
•
If the IRS makes determinations that the creditable basis of our solar energy systems is materially lower
than what we have claimed, we may have to pay significant amounts to our fund investors, and our
business, financial condition, and prospects may be materially and adversely affected.
•
Our business currently depends on the availability of utility rebates, tax credits and other benefits, tax
exemptions and exclusions, and other financial incentives, on the federal, state, and/or local levels. We may
be adversely affected by changes in, and application of, these laws or other incentives to us, and the
expiration, elimination or reduction of these benefits could adversely impact our business.
If we are unable to adequately address these and other risks we face, our business may be harmed.
4
PART I
Item 1. Business.
Overview
Sunrun's (the “Company,” “our,” “we”) mission is to connect people to the cleanest energy on earth. Sunrun
transformed the solar industry in 2007 by removing financial barriers and democratizing access to locally-generated,
renewable energy. Today, Sunrun is the nation’s leading provider of clean energy as a subscription service, offering
residential solar and storage with no upfront costs. Sunrun’s innovative products and solutions can connect homes
to the cleanest energy on earth, providing them with energy security, predictability, and peace of mind. Sunrun also
manages energy services that benefit communities, utilities, and the electric grid while enhancing customer value.
We are engaged in the design, development, installation, sale, ownership and maintenance of residential
solar energy systems (“Projects”) in the United States. We provide clean, solar energy typically at savings
compared to traditional utility energy. Our primary customers are residential homeowners. We also offer battery
storage along with solar energy systems to our customers in select markets and sell our services to certain
commercial developers through our multi-family and new homes offerings. After inventing the residential solar
service model and recognizing its enormous market potential, we have built the infrastructure and capabilities
necessary to rapidly acquire and serve customers in a low-cost and scalable manner. Today, our scalable operating
platform provides us with a number of unique advantages. First, we are able to drive distribution by marketing our
solar service offerings through multiple channels, including our diverse partner network and direct-to-consumer
operations. This multi-channel model supports broad sales and installation capabilities, which together allow us to
achieve capital-efficient growth. Second, we are able to provide differentiated solutions to our customers that,
combined with a great customer experience, we believe will drive meaningful margin advantages for us over the
long term as we strive to create the industry’s most valuable and satisfied customer base.
Our core solar service offerings are provided through our lease and power purchase agreements, which we
refer to as our “Customer Agreements,” and which provide customers with simple, predictable pricing for solar
energy that is insulated from rising retail electricity prices. They also provide customers who opt for storage offerings
the benefit of increased resiliency from backup energy and enhanced energy management capabilities. While
customers have the option to purchase a solar energy system outright from us, most of our customers choose to
buy solar as a service from us through our Customer Agreements without the significant upfront investment of
purchasing a solar energy system. With our solar service offerings, we install solar energy systems on our
customers’ homes and provide them with the solar power produced by those systems for typically a 20- or 25-year
initial term. In addition, we monitor, maintain and insure the system during the term of the contract. In exchange, we
receive predictable cash flows from high credit quality customers and qualify for tax and other benefits. We finance
portions of these tax benefits and cash flows through tax equity, non-recourse debt and project equity structures in
order to fund our upfront costs, overhead and growth investments. We develop valuable customer relationships that
can extend beyond this initial contract term and provide us an opportunity over time to integrate additional solar,
battery storage, electrification and distributed power plant offerings into a smart solution for each home and
community. Since our founding, we have continued to invest in a platform of services and tools to enable large scale
operations for us and our partner network, and these partners include solar integrators, sales partners, installation
partners and other strategic partners. The platform includes processes and software, as well as fulfillment and
acquisition of marketing leads. We believe our platform empowers new market entrants and smaller industry
participants to profitably serve our large and underpenetrated market without making the significant investments in
technology and infrastructure required to compete effectively against established industry players. Our platform
provides the support for our multi-channel model, which drives broad customer reach and capital-efficient growth.
Delivering a differentiated customer experience is core to our strategy. We emphasize a customized solution,
including a design specific to each customer’s home and pricing configurations that typically drive both customer
savings and value to us. We believe that our passion for engaging our customers, developing a trusted brand, and
providing a customized solar service offering resonates with our customers who are accustomed to a traditional
residential power market that is often overpriced and lacking in customer choice.
5
We have experienced substantial growth in our business and operations since our inception in 2007, as well
as through our acquisition of Vivint Solar on October 8, 2020. As of December 31, 2024, we operated the largest
fleet of residential solar energy systems in the United States. We have a Networked Solar Energy Capacity of 7,531
megawatts as of December 31, 2024, which represents the aggregate megawatt production capacity of our solar
energy systems that have been recognized as deployments, from our inception through the measurement date.
Gross Earning Assets as of December 31, 2024 were approximately $17.8 billion. Please see the section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Operating
Metrics” for more details on how we calculate Networked Solar Energy Capacity and Gross Earning Assets.
We also have a long track record of attracting low-cost capital from diverse sources, including tax equity and
debt investors. Since inception we have raised tax equity investment funds to finance the installation of solar energy
systems.
Our Multi-Channel Capabilities
Our unique, multi-channel capabilities offer consumers a compelling solar service through scalable, cost-
effective and consumer-friendly channels. Customers can access our products through three channels: direct-to-
consumer, solar partnerships and strategic partnerships.
Direct-to-Consumer
We sell solar service offerings and install solar energy systems for customers through our direct-to-consumer
channel. These solar energy systems are offered to customers either under a Customer Agreement or for purchase.
This channel consists of an online lead generation function, a telesales and field sales team, a direct-to-home sales
force, a retail sales team and an industry-leading installation organization.
Solar Partnerships
We contract with diverse solar organizations that act as either exclusive or non-exclusive (depending on the
terms of their contract with us) distributors of our solar service offerings and subcontractors for the installation of the
related solar energy systems. Because of our commitment to these solar organizations and our vested interest in
their success, we refer to them as our “solar partners,” although the actual legal relationship is that of an
independent contractor. Our solar partners include:
•
Solar integrators: trained and trusted partners who originate customers for our solar service offerings
and procure and install the solar energy systems on our customers’ homes on our behalf as our
subcontractors. Partnerships with solar integrators allow us to expand our brand, quickly enter new
markets and drive capital-efficient growth. We compensate our solar integrators on a per solar energy
system basis for generating Customer Agreements and the installation work they perform for us.
•
Sales partners: sales and lead generation partners who provide us with high-quality leads and
customers at competitive prices. We typically compensate our sales partners on a per customer basis
for the sales and lead generation services they perform for us. All contracts are between the customer
and us, based on a price set by us.
•
Installation partners: trusted installation partners who procure and install a subset of our solar energy
systems as our subcontractors and allow us to deploy a mix of in-house and outsourced installation
capabilities more efficiently. We compensate our installation partners on a per solar energy system
basis for the procurement of materials and installation work they perform for us. Installation partners are
solely our subcontractors and do not enter into any agreements with our customers.
Our ability to connect specialized sales and installation firms on a single platform, which we license to our
solar partners at no cost, allows us to enjoy the benefits of vertical integration without the additional fixed cost
structure. This creates margin opportunities, system efficiencies and benefits from network effects in matching these
ecosystem participants.
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Strategic Partnerships
Our strategic partnerships encompass relationships with new market entrants not previously engaged in solar,
including consumer marketing, retail and specialized energy retail companies. Our strategic partners find the
residential solar market attractive, but recognize that significant barriers to entry make partnerships the preferred
method to reach solar customers. Through these strategic arrangements, we typically market our solar service
offerings to the strategic partner’s customer base and install the solar energy systems directly or through one of our
solar partners. We manage the customer experience and retain the value of the economic relationship through the
term of the customer’s contract and potential renewal period. We have executed strategic partnerships in
competitive processes that give us access to millions of potential customers. As our industry grows, we believe that
our unique platform and deep partnership experience position us to be the partner of choice for new market
entrants. We believe that these broad strategic relationships will help us drive down our customer acquisition costs
and make solar accessible to even more customers.
The combination of direct-to-consumer, solar partnerships and strategic partnerships offers distinct
advantages. The direct-to-consumer channel allows us to scale rapidly, drive incremental unit costs down over the
long term, and refine operational processes to share with our partners. Our solar partnerships and strategic
partnerships enable nimble market entry and exit, while allowing for capital efficient growth. Together, this multi-
channel strategy supported by our open platform allows us to reach more customers with our leading solar service
offerings without compromising our ability to provide exceptional customer service.
Customer Agreements
Since we were founded in 2007, we have been providing solar energy to residential customers at prices
typically below utility rates through a variety of offerings, most commonly through our leases and power purchase
agreements which we refer to as our Customer Agreements. Under our Customer Agreements, customers have the
right to use and consume all electricity produced by the solar energy system on a continuous basis or, for customers
who also opted for our battery storage offerings, stored in batteries which can be discharged as needed. Most
Customer Agreements, other than those billed based on generation, entitle the customer to a refund for
underproduction below a guaranteed amount, which we refer to as our "performance guarantee." Either directly or
through a solar partner, we construct a solar energy system on a customer’s home which generates electricity at set
prices through Customer Agreements which typically have an initial term of 20 or 25 years. Rates for both forms of
our Customer Agreements can be fixed for the duration of the contract or escalated at a pre-determined percentage
annually. Upon installation, a system is interconnected to the local utility grid. The home’s energy usage is provided
by the solar energy system with any additional energy needs provided by the local utility. Any excess solar energy
that is not immediately used by our customers or stored in batteries is exported to the utility grid using a bi-
directional utility net meter, and in states with net metering, customers generally receive a credit for this excess
power from their utility to offset future usage of utility-generated energy.
Although many of our customers choose to pay little-to-nothing upfront and instead receive a monthly bill,
some customers choose to prepay an amount upfront, thereby reducing their monthly bill. The amount of an upfront
payment is customized for each customer. Customers may also choose to fully prepay their 20- or 25-year
contracts. The prepayment amount is based on the estimated amount of the solar energy system’s output over the
typically 20- or 25-year term of the Customer Agreement. If the estimated production of the solar energy system is
less than the actual production for a given year after the first full one to two years of the agreement, prepaid
customers are refunded the difference at the end of each such year. If the solar energy system’s energy production
is in excess of the estimate, we allow customers to keep the excess energy at no charge. After the initial term of the
Customer Agreement, customers have the option to renew their contracts for the remaining life of the solar energy
system, typically at a 10% discount to then-prevailing power prices, to purchase the system from us at its fair market
value, or have us remove the system.
Regardless of the type of Customer Agreement our customers choose, we operate the system and agree to
monitor it at no cost to the customer. System maintenance is included in our power purchase agreement (“PPA”) or
lease. We offer an industry-leading performance guarantee to ensure that our customers are receiving the energy
they expect at the price they expect. Our customers also receive up to a ten-year warranty for roof penetrations.
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If a customer sells his or her home, the customer has the right to purchase the system or assign the
Customer Agreement to the new homeowner, provided the new homeowner meets our credit requirements and
agrees to be bound by the terms and conditions of the Customer Agreement. In connection with this service
transfer, the customer may prepay all or a portion of the remaining payments due under the Customer Agreement to
lower or eliminate the monthly rate to be paid by the new homeowner. If the customer fails to purchase the system
or assign the Customer Agreement to a new homeowner, we may negotiate directly with the new homeowner to
transfer the Customer Agreement (at times on modified terms) and/or look to the original customer to pay all
remaining payments due. We have completed thousands of service transfers and, from inception through
December 31, 2024, the aggregate expected net present value of the Customer Agreements once assigned
represented approximately 100% of what it was prior to assignment.
Sales and Marketing
We sell our solar energy offerings through a scalable sales organization using both a direct-to-consumer
approach across online, retail, mass media, digital media, canvassing, field marketing and referral channels as well
as our diverse partner network. We sell to customers over the phone, online, in the field through canvassing and in-
home sales and through our strategic retail sales partnerships. We also partner with sales-only organizations that
focus on direct-to-consumer marketing and sales on our behalf, typically with a Sunrun-branded offering at point of
sale, which further increases our brand and reach. We also generate sales volume through customer referrals.
Customer referrals increase in relation to our penetration in a market and shortly after market entry become an
increasingly effective way to market our solar energy systems. We believe that a customized, customer-focused
selling process is important before, during and after the sale of our solar services to maximize our sales success
and customer experience.
We train our sales team to customize their consultative presentation to the individual customer based on
guidelines and principles outlined in our training materials. We are able to provide our sales team with real-time data
and pricing tools through our proprietary technology which is designed to generate a tailored product offering with
optimized pricing based on the actual characteristics of a customer's home, including roof characteristics and
shading, as well as actual energy usage. This allows our sales team to differentially price homes in the same
geographic region quickly and effectively.
Supply Chain
We purchase equipment, including solar panels, inverters and batteries from a limited number of
manufacturers and suppliers. If we fail to maintain or expand our relationships with these suppliers and
manufacturers, or if one or more that we rely upon to meet anticipated demand reduces or ceases production, it
may be difficult to quickly identify and qualify alternatives on acceptable terms. In addition, equipment prices may
increase in the coming years, or not decrease at the rates we historically have experienced, due to tariffs or other
factors. As discussed in Item 1A. Risk Factors “We have historically benefited from declining costs in our industry,
and our business and financial results may be harmed as a result of recent and any continued increases in costs
associated with our solar service offerings and any failure of these costs to continue declining as we currently
expect. If we do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired.”
Section 201 tariffs on solar modules were imposed beginning in 2018 and were extended through 2026.
In addition, federal agencies and Congress are increasing enforcement against the importation of products
suspected of being manufactured with forced labor. U.S. customs enforcement and the implementation of a new
federal law could negatively impact our supply chain and the availability of products that we use to conduct our
business. See “Risks Related to the Solar Industry” below for more information.
Competition
We believe that our primary competitors are the traditional utilities that supply electricity to our potential
customers. We compete with these traditional utilities primarily based on price (cents per kilowatt hour),
predictability of future prices (by providing pre-determined annual price escalations), the backup power capabilities
of our battery storage solution, and the ease by which customers can switch to electricity generated by our solar
energy systems.
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We also compete with companies that are not regulated like traditional utilities but that have access to the
traditional utility electricity transmission and distribution infrastructure pursuant to state and local pro-competitive
and consumer choice policies, solar companies with business models that are similar to ours, and other renewable
energy companies. Some customers might choose to subscribe to a community solar project or renewable
subscriber program with these companies or their utilities, instead of installing a solar energy system on their home,
which could affect our sales. Additionally, some utilities offer generation portfolios that are increasingly renewable in
nature. We believe that we compete favorably with these companies based on our unique multi-channel approach
and differentiated customer experience.
We also face competition from purely finance-driven organizations that acquire customers and then
subcontract out the installation of solar energy systems, from installation businesses that seek financing from
external parties, to large construction companies and utilities and sophisticated electrical and roofing companies.
Intellectual Property
As of December 31, 2024, we had 61 issued patents and 11 filed patent applications in the United States
relating to a variety of aspects of our solar solutions. Our issued U.S. patents will expire 20 years from their
respective filing dates, with the earliest expiring in 2029. We intend to file additional patent applications as we
continue to innovate through our research and development efforts.
Government Regulation
Although we are not regulated as a public utility in the United States under applicable national, state or other
local regulatory regimes where we conduct business, we compete primarily with regulated utilities. As a result, we
have developed and are committed to maintaining a policy team to focus on the key regulatory and legislative
issues impacting the entire industry. We believe these efforts help us better navigate local markets through
relationships with key stakeholders and facilitate a deep understanding of the national and regional policy
environment.
To operate our systems, we obtain interconnection permission from the applicable local primary electric utility.
Depending on the size of the solar energy system and local law requirements, interconnection permission is
provided by the local utility directly to us and/or our customers. In almost all cases, interconnection permissions are
issued on the basis of a standard process that has been pre-approved by the local public utility commission or other
regulatory body with jurisdiction over net metering policies. As such, no additional regulatory approvals are required
once interconnection permission is given.
Our operations are subject to stringent and complex federal, state and local laws, including regulations
governing the occupational health and safety of our employees and wage regulations. For example, we are subject
to the requirements of the federal Occupational Safety and Health Act, as amended (“OSHA”), the U.S. Department
of Transportation (“DOT”), and comparable state laws that protect and regulate employee health and safety. We
endeavor to maintain compliance with applicable DOT, OSHA and other comparable government regulations.
However, we have in the past experienced workplace accidents and received citations from regulators resulting in
fines, as discussed in Item 1A. Risk Factors “Compliance with occupational safety and health requirements and best
practices can be costly, and noncompliance with such requirements may result in potentially significant penalties,
operational delays and adverse publicity.” These incidents have not had a material impact on our business or our
relations with our employees.
In Puerto Rico, we are subject to regulation as an electric power company by the Puerto Rico Energy Bureau
and are required to comply with certain filing, certification, reporting and annual fee requirements. Regulation by the
Puerto Rico Energy Bureau as an electric power company does not currently subject us to centralized utility-like
regulation and currently we do not need the Puerto Rico Energy Bureau's approval of charges to customers.
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Government Incentives
Federal, state and local government bodies provide incentives to owners, distributors, system integrators and
manufacturers of solar energy systems to promote solar energy in the form of rebates, tax credits, payments for
renewable energy credits associated with renewable energy generation and exclusion of solar energy systems from
property tax assessments. These incentives enable us to lower the price we charge customers for energy from, and
to lease, our solar energy systems, helping to catalyze customer adoption of solar energy as an alternative to utility-
provided power. In addition, for some investors, the acceleration of depreciation creates a valuable tax benefit that
reduces the overall cost of the solar energy system and increases the return on investment. The federal government
also currently offers an investment tax credit (“Commercial ITC”) under Section 48(a) of the Internal Revenue Code
of 1986, as amended (the “Code”) as well as a technology-neutral investment tax credit under Section 48(E) of the
Code (the “48E Credit” and collectively with the Commercial ITC, the “ITCs”), for the installation of certain energy
properties, including solar power facilities and energy storage owned for business purposes.
The Inflation Reduction Act of 2022 (the “IRA”) was signed into law by President Biden on August 16, 2022,
and some of its notable provisions include:
•
the eligibility of solar facilities placed in service in 2022 (regardless of when construction began) and
prior to January 1, 2025, or, at the election of the taxpayer, solar facilities that began construction prior to
January 1, 2025 and are placed in service on or after January 1, 2025, for a 30% Commercial ITC under
Section 48(a) of the Code (assuming apprenticeship and prevailing wage requirements are met; these
requirements are deemed met for projects less than 1 MW), with standalone storage beginning in 2023;
•
in the absence of meeting apprenticeship and prevailing wage requirements, the “base” amount of the
Commercial ITC is 6% for facilities beginning construction prior to January 1, 2025 and 2% thereafter
(however, as indicated above, the majority of our business qualifies for 30% credits upon which “bonus
credits” could increase the total credit amount up to 70% in certain circumstances);
•
the eligibility of solar and storage facilities that begin construction after December 31, 2024 (or began
construction prior to January 1, 2025 but do not elect application of the Commercial ITC) and are placed
in service after 2024 and through at least 2033 (with phase down for projects that begin construction
after (i) 2033 or (ii) if later, the first year after the year in which the U.S. Department of Treasury
determines greenhouse gas emissions from the production of electricity in the United States are no more
than 25% of 2022 levels), for a 30% 48E Credit (assuming application of same apprenticeship and
prevailing wage requirements outlined above); and
•
several new ITC bonus credits under both the Commercial ITC and the 48E Credit, which apply to
certain facilities placed in service beginning in 2023, including those meeting certain domestic content
requirements, those located in “Energy Communities,” and those located in or that benefit low-income
communities and tribal communities.
The federal government also offers a personal income tax credit under Section 25D of the Code (“Residential
Clean Energy Credit”), for the installation of certain solar power facilities owned by residential taxpayers, which is
applicable to customers who purchase a solar energy system outright as opposed to entering into a Customer
Agreement. The Residential Clean Energy Credit was 26% if the facility was placed in service during 2020 or 2021;
30% for facilities placed in service from January 1, 2022 through December 31, 2032; 26% for facilities placed in
service during 2033; and 22% for facilities placed in service during 2034. The Residential Clean Energy Credit is not
available for property placed in service after December 31, 2034.
We and our tax equity partners have claimed and expect to continue to claim ITCs with respect to qualifying
solar energy projects. In structuring tax equity partnerships and determining ITC eligibility, we have relied upon
applicable tax law and published IRS guidance. The U.S. Treasury issued final regulations on the Commercial ITCs
in December 2024 and on the 48E Credits and the ITC bonus credit for low-income communities in 2023 and is
expected to issue final rules on the other ITC bonus credits in 2025. Some of these final rules may be subject to
Congressional Review Act (“CRA”) challenges in 2025, based on legal outcomes determining whether certain final
rules are subject to the CRA. Notably, the U.S. Treasury has not issued proposed or final rules on the Energy
Communities Bonus Credit or the Domestic Content Bonus Credit, so we continue to rely on other published IRS
guidance in this regard.
More than half of the states in the U.S., and many local jurisdictions, have established property tax incentives
for renewable energy systems that include exemptions, exclusions, abatements and credits. Many states also have
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adopted procurement requirements for renewable energy. Approximately thirty states and the District of Columbia
have adopted a renewable portfolio standard (and approximately eight other states have some voluntary goal) that
requires regulated utilities to procure a specified percentage of total electricity delivered in the state from eligible
renewable energy sources, such as solar energy systems, by a specified date. To prove compliance with such
mandates, utilities must surrender solar renewable energy credits (“SRECs”) to the applicable authority. Solar
energy system owners such as our investment funds often are able to sell SRECs to utilities directly or in SREC
markets.
While there are numerous federal, state and local government incentives that benefit our business, some
adverse actions, interpretations or determinations of new or existing laws or regulations could have a negative
impact on our business. For example, in the future, Congress could revise or eliminate certain provisions in the IRA
that could negatively impact our business, such as reducing the percentage or duration of the ITCs. Federal
agencies may also issue tax guidance or regulations that could negatively impact our business, by, for example,
narrowing the applicability of ITC bonus credits or preventing certain businesses from participating.
Human Capital Management
At Sunrun, our human capital strategy is to attract, retain and develop the highest quality workforce. We do
this by providing a differentiated company culture and employee experience, including through our compensation
and benefits programming; and through the support of our employees’ career mobility, leadership development,
continuous education and upskilling. In 2024, we invested and deployed a career mobility platform and this is our
fourth year offering an education benefit. Through our education benefit, we develop future leaders with curated
programs aligned to Sunrun’s priorities, enhancing business skills and job performance. Our career development
programming is particularly focused on growing and developing our frontline sales and installation employees, who
make up 81% of our workforce. In 2024 we also launched our wellbeing strategy to enhance and support our
employees’ mental, physical, social, financial, and career wellbeing.
Inclusion and Diversity. We believe that a culture of belonging creates an engaged and motivated workforce
focused on our customers and delivering value for our shareholders. We are focused on ensuring all of our
employees are informed and regularly connected to values and performance based leadership through our internal
communication platform. To ensure we have a large pool of applicants from a variety of backgrounds, and therefore
that we identify the best qualified talent, we develop a diverse slate of qualified candidates to be presented to hiring
managers for all new management-level roles and above. Additionally, we require that our interview panels of all
new management-level roles and above include a diverse panel of interviewers. We also have minimum
requirements for the length in time that many roles are posted to promote in consideration of internal candidates
and a broader range of external candidates. In 2024, we fostered deeper talent attraction partnerships with local
organizations such as Illinois Solar For All (ILSFA) and military partnerships focused on hiring retiring military
service members. We have grown our nine Sunrun Communities (“Employee Resource Groups”) to promote
connection, collaboration and communication among our employees, foster inclusivity, and assist in the
development and facilitation of programming to support personal and professional development. Annually, as part of
our impact report on environment, sustainability and governance, we share details on our strategies, focus areas,
outcomes achieved and workforce demographics.
Human Capital. As of December 31, 2024, we had approximately 11,058 full-time employees, inclusive of
our active direct-to-home salesforce. We also engage independent contractors and consultants. None of our
employees are covered by collective bargaining agreements. We have not experienced any work stoppages.
Health and Safety. At Sunrun, we start with safety. We prioritize the safety, health, and welfare of our team
members as part of our people-centric culture. Our safety strategy consists of four pillars: visible leadership,
technical qualification and knowledge, operational discipline, and formal safety communications. To reinforce our
safety culture of excellence, we have implemented many initiatives, including an expanded fall protection policy; the
implementation of a zero-tolerance policy for any life threatening safety violations; a required recurring competent
persons and human factors training; regular onsite safety visits from our front-line managers and the executive
leadership team; the adoption of a formal rewards and recognition program; and the incorporation of proactive
safety targets within bonus structures.
Available Information
Our principal executive offices are located at 600 California Street, Suite 1800, San Francisco, California
94108, and our telephone number is (415) 580-6900. Our website address is www.sunrun.com. Information
contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form
10-K and inclusions of our website address in this Annual Report on Form 10-K are inactive textual references only.
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We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act. The SEC
maintains a website at www.sec.gov that contains reports, proxy and information statements and other information
that we file with the SEC electronically. Copies of our reports on Form 10-K, Forms 10-Q, Forms 8-K, and
amendments to those reports may also be obtained, free of charge, electronically on the investor relations page on
our website located at investors.sunrun.com as soon as reasonably practical after we file such material with, or
furnish it to, the SEC.
We also use the investor relations page on our website as a channel of distribution for important company
information. Important information, including press releases, analyst presentations and financial information
regarding us, as well as corporate governance information, is routinely posted and accessible on the investor
relations page on our website. We encourage investors, the media and others interested in Sunrun to review the
information we make public in these locations, as such information could be deemed to be material information,
including any information posted to our investor relations page on our website, which has been designated a
Regulation FD compliant method of disclosure. Information on or that can be accessed through our website is not
part of this Annual Report on Form 10-K, any other report or document we file with the SEC, and the inclusion of our
website address is an inactive textual reference only.
The Sunrun design logo, “Sunrun” and our other registered or common law trademarks, service marks or
trade names appearing in this Annual Report on Form 10-K are the property of Sunrun Inc. Other trademarks and
trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.
Data Privacy and Security
In the ordinary course of our business, we may process personal or sensitive data. Accordingly, we are, or
may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign
laws, regulations, guidance, and industry standards related to data privacy, security, and protection. Such
obligations may include, without limitation, the European Union’s General Data Protection Regulation 2016/679
(“EU GDPR”), the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European
Union (Withdrawal) Act 2018 (“UK GDPR”), the ePrivacy Directive, and the Payment Card Industry Data Security
Standard (“PCI DSS”). Several states within the United States have enacted or proposed data privacy laws. For
example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act.
Additionally, we are, or may become, subject to various U.S. federal and state consumer protection laws which
require us to publish statements that accurately and fairly describe how we handle personal data and choices
individuals may have about the way we handle their personal data.
The California Consumer Privacy Act (“CCPA”) is an example of the increasingly stringent and evolving
regulatory frameworks related to personal data processing that may increase our compliance obligations and
exposure for any noncompliance. For example, the CCPA imposes obligations on covered businesses to provide
specific disclosures related to a business’s collecting, using, and disclosing personal data and to respond to certain
requests from California residents related to their personal data (for example, requests to know of the business’s
personal data processing activities, to delete the individual’s personal data, and to opt out of certain personal data
disclosures). Also, the CCPA provides for civil penalties and a private right of action for data breaches which may
include an award of statutory damages. In addition, the California Privacy Rights Act of 2020 (“CPRA”) expanded
the CCPA by giving California residents the ability to limit use of certain sensitive personal data, establishing
restrictions on personal data retention, expanding the types of data breaches that are subject to the CCPA’s private
right of action, and establishing a new California Privacy Protection Agency to implement and enforce the new law.
See the section titled “Risks Related to Our Business Operations” for additional information about the laws
and regulations to which we may become subject and about the risks to our business associated with such laws and
regulations.
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Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and
uncertainties described below, together with all of the other information in this Annual Report on Form 10-K,
including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our consolidated financial statements and related notes, before making a decision to invest in
our common stock. The risks and uncertainties described below may not be the only ones we face. If any of the
risks actually occur, our business, financial condition, results of operations, cash flows and prospects could be
materially and adversely affected. In that event, the market price of our common stock could decline, and you
could lose part or all of your investment.
Risks Related to the Solar Industry
The solar energy industry is an emerging market which is constantly evolving and may not develop to the
size or at the rate we expect.
The solar energy industry is an emerging and constantly evolving market opportunity. We believe the solar
energy industry is still developing and maturing, and we cannot be certain that the market will grow to the size or at
the rate we expect. For example, we have experienced increases in cancellations of our Customer Agreements in
certain geographic markets during various periods in our operating history. Any future growth of the solar energy
market and the success of our solar service offerings depend on many factors beyond our control, including
recognition and acceptance of the solar service market by consumers, the pricing of alternative sources of energy, a
favorable regulatory environment, the continuation of expected tax benefits and other incentives, and our ability to
provide our solar service offerings cost effectively. If the markets for solar energy do not develop to the size or at the
rate we expect, our business may be adversely affected.
Solar energy has yet to achieve broad market acceptance and depends in part on continued support in the
form of rebates, tax credits, and other incentives from federal, state and local governments. Additionally, there have
been significant changes in the residential solar policy and pricing framework in California, which is one of our key
markets and represents over 45% of our customer base. Changes to California’s net metering policy adopted in
December 2022, with the new billing regime implemented in April 2023, present a significant change to the financial
benefits California customers receive from our solar systems and may limit the financial attractiveness of our
offerings in this market, particularly for solar-only systems. Originations in California are below levels prior to the Net
Billing Tariff (“NBT”) transition, and 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. Further, if support diminishes materially for solar policy related to rebates, tax
credits, bill crediting, or other incentives, our ability to obtain external financing on acceptable terms, or at all, could
be materially adversely affected. These types of funding limitations could lead to inadequate financing support for
the anticipated growth in our business. Furthermore, growth in residential solar energy depends in part on
macroeconomic conditions, retail prices of electricity and customer preferences, each of which can change quickly.
Declining macroeconomic conditions, including in job markets and residential real estate markets, could contribute
to instability and uncertainty among customers and impact their financial wherewithal, credit scores or interest in
entering into long-term contracts, even if such contracts would generate immediate and long-term savings.
Furthermore, market prices of retail electricity generated by utilities or other energy sources could decline for
a variety of reasons, as discussed further below. Any declines in macroeconomic conditions, changes in retail prices
of electricity or changes in customer preferences would adversely impact our business.
Achieving net zero emissions by 2050 will require an unprecedented transformation of American energy
systems and the adoption of a wide variety of clean energy, storage, and home electrification solutions. Our
successful deployment of such products will depend on several factors outside our control, including shifting market
conditions and policy frameworks. Our failure to adapt to changing market conditions, to compete successfully with
existing or new competitors, and to adopt new or enhanced offerings could limit our growth and have a material
adverse effect on our business and prospects.
We have historically benefited from declining costs in our industry, and our business and financial results
may be harmed as a result of recent and any continued increases in costs associated with our solar service
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offerings and any failure of these costs to continue declining as we currently expect. If we do not reduce
our cost structure in the future, our ability to continue to be profitable may be impaired.
Declining costs related to raw materials, manufacturing and the sale and installation of our solar service
offerings have been a key driver in the pricing of our solar service offerings and, more broadly, customer adoption of
solar energy. While historically the prices of solar panels and raw materials have declined, the cost of solar panels
and raw materials have at times increased and may increase in the future, and such products’ availability could
decrease, due to a variety of factors, including supply chain disruptions, inflation, tariffs and trade barriers, export
regulations, geopolitical conflicts, regulatory or contractual limitations, industry market requirements, and changes in
technology and industry standards.
In addition, on April 24, 2024, antidumping (“AD”) and countervailing duty (“CVD”) petitions were filed against
Cambodia, Malaysia, Thailand, and Vietnam. AD and CVD measures (typically, in the form of tariffs) are used to
remedy the economic advantage created by unfair foreign pricing and government subsidies. The U.S. Department
of Commerce (“Commerce”) is responsible for investigating dumping and subsidization. Preliminary determinations
in the AD investigations were issued on December 2, 2024 and ranged from 0% - 271%. Importers are now required
to pay cash deposits (estimated duties) on all entries of cells and modules from the subject countries. Preliminary
determinations in CVD investigations were issued on October 1, 2024 with Commerce finding injury and imposing
CVD levels that averaged from 8-10% (with specific rates varying depending on the country and the company
investigated). Further, Commerce determined that “critical circumstances” existed for some importers. As a result,
those importers now face retroactive collection of duty deposits for entries made during the 90-day period before the
publication date of the preliminary determination.
Similarly, on February 4, 2022, the Biden Administration announced a four-year extension of the 2018 tariffs
imposed in response to a petition filed under Section 201 of the Trade Act of 1974 (the “Section 201 Tariffs”). The
Biden Administration set the Section 201 Tariffs at 14.75%, with a modest rate reduction each year. The decision
exempted bifacial modules from the tariffs as well as 5 GW of imported solar cells each year. On May 16, 2024, the
Biden Administration announced the removal of the exemption for bifacial modules and those products are now
subject to the Section 201 Tariffs.
In August 2021, an anonymous group of U.S. solar manufacturers filed petitions with Commerce alleging that
Chinese companies were evading antidumping and countervailing duty orders on crystalline silicon photovoltaic
cells and modules, which are used in the production of solar panels. Ultimately, Commerce objected to the
anonymous nature of the petition, and it expired. Subsequently, on February 8, 2022, Auxin Solar, a U.S.-based
solar panel manufacturer, submitted a petition to Commerce to request country-wide circumvention inquiries
pursuant to Section 781(b) of the Tariff Act of 1930 concerning crystalline silicon photovoltaic cells and modules
assembled in Malaysia, Thailand, Vietnam and Cambodia using Chinese inputs. On April 1, 2022, Commerce
initiated the inquiries, and, after conducting an investigation, issued a preliminary decision on December 2, 2022,
recommending that the Biden Administration impose tariffs on certain solar panel imports from the Southeast Asian
countries. However, prior to Commerce issuing its preliminary decision, the Biden Administration in June 2022
issued Presidential Proclamation 10414, which paused the collection of any new anti-dumping or countervailing duty
of certain solar cells and modules imported from Cambodia, Malaysia, Thailand, and Vietnam for two years, until
June 2024. Since June 2024, new imports have been subject to these circumvention penalties unless suppliers can
show they use sufficient non-Chinese materials in their production, including solar wafers and cells from outside
China. In December 2023, Auxin Solar, a U.S.-based solar panel manufacturer filed a lawsuit seeking to overturn
the regulations implementing Presidential Proclamation 10414 and overturn the Biden Administration’s moratorium
on additional duties and tariffs on certain solar cells and modules imported from Cambodia, Malaysia, Thailand, or
Vietnam.
In addition, U.S. laws and regulations intended to prevent the importation of goods manufactured with forced
labor has and could continue to affect our business operation and supply chain, including the Uyghur Forced Labor
Prevention Act and the withhold release order (“WRO”) that U.S. Customs and Border Protection (“CBP”) issued on
June 24, 2021 applicable to certain silica-based products manufactured in the Xinjiang Uyghur Autonomous Region
of China. Intensive examinations, withhold release orders, and related governmental procedures have resulted in
supply chain and operational delays throughout the industry, and we have implemented policies and procedures to
maintain compliance and minimize delays. These and similar trade restrictions that may be imposed in the future
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could cause delivery and installation delays, and restrict the global supply of polysilicon and solar products. This
could result in near-term demand for available solar energy systems despite higher costs, increased costs of
polysilicon and the overall cost of solar energy systems, and equipment shortages, potentially reducing overall
demand for and limiting the supply of our products and services.
We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the
United States and other countries, which products may be subject to such actions, or what actions may be taken by
other countries in retaliation. The tariffs described above, the adoption and expansion of trade restrictions, the
occurrence of a trade war, or other governmental action related to tariffs, trade agreements or related policies have
the potential to adversely impact our supply chain and access to equipment, and our costs and ability to
economically serve certain markets. Any such cost increases or decreases in availability could slow our growth and
cause our financial results and operational metrics to suffer. We cannot predict whether, and to what extent, U.S.
trade policies will change in the future and cannot ensure that additional tariffs or other restrictive measures will not
continue or increase.
We face competition from traditional energy companies as well as solar and other renewable energy
companies.
The solar energy industry is highly competitive and continually evolving as participants strive to distinguish
themselves within their markets and compete with large utilities. We believe that our primary competitors are the
established utilities that supply energy to homeowners by traditional means. We compete with these utilities
primarily based on price, predictability of price, and the ease by which homeowners can switch to electricity
generated by our solar service offerings. If we cannot offer compelling value to customers based on these factors,
then our business and revenue will not grow. Utilities generally have substantially greater financial, technical,
operational and other resources than we do. As a result of their greater size, utilities may be able to devote more
resources to the research, development, promotion and sale of their products or respond more quickly to evolving
industry standards and changes in market conditions than we can. Furthermore, these competitors are able to
devote substantially more resources and funding to regulatory and lobbying efforts.
Utilities could also offer other value-added products or services that could help them compete with us even if
the cost of electricity they offer is higher than ours. In addition, a majority of utilities’ sources of electricity are non-
solar, which may allow utilities to sell electricity more cheaply than we can. Moreover, regulated utilities are
increasingly seeking approval to “rate-base” their own residential solar and battery businesses. Rate-basing means
that utilities would receive guaranteed rates of return for their solar and battery businesses. This is already
commonplace for utility-scale solar projects and commercial solar projects. While few utilities to date have received
regulatory permission to rate-base residential solar or storage, our competitiveness would be significantly harmed
should more utilities receive such permission because we do not receive guaranteed profits for our solar service
offerings.
We face competition from other residential solar service providers, and we also may face competition from
new entrants into the market as a result of the passage of the IRA and its impacts and benefits to the solar industry.
Some of these competitors may have a higher degree of brand name recognition, differing business and pricing
strategies, lower barriers to entry into the solar market, and greater capital resources than we have, as well as
extensive knowledge of our target markets. For example, more recently, we have seen some of these competitors
offer significantly higher turnkey prices and sales commissions than prevailing industry norms. If we are unable to
establish or maintain a consumer brand that resonates with customers, maintain high customer satisfaction, or
compete with the pricing offered by our competitors, our sales and market share position may be adversely affected,
as our growth is primarily dependent on originating new customers. We also face competitive pressure from
companies that may offer lower-priced consumer offerings than we do.
In addition, we compete with companies that are not regulated like traditional utilities but that have access to
the traditional utility electricity transmission and distribution infrastructure. These energy service companies are able
to offer customers electricity supply-only solutions that are competitive with our solar service offerings on both price
and usage of solar energy technology while avoiding the long-term agreements and physical installations that our
current fund-financed business model requires. This may limit our ability to attract customers, particularly those who
wish to avoid long-term contracts or have an aesthetic or other objection to putting solar panels on their roofs.
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Furthermore, we face competition from purely finance-driven nonintegrated competitors that subcontract out
the installation of solar energy systems, from installation businesses (including solar partners) that seek financing
from external parties, from large construction companies and from electrical and roofing companies. In addition,
local installers that might otherwise be viewed as potential solar partners may gain market share by being able to be
the first providers in new local markets. Some of these competitors may provide energy at lower costs than we do.
Finally, as declining prices for solar panels and related equipment has resulted in an increase in consumers
purchasing instead of leasing solar energy systems, we face competition from companies that offer consumer loans
for these solar panel purchases.
As the solar industry grows and evolves, we will continue to face existing competitors as well as new
competitors who are not currently in the market (including those resulting from the consolidation of existing
competitors) that achieve significant developments in alternative technologies or new products such as storage
solutions, EV chargers, loan products, or other programs related to third-party ownership. Our failure to adapt to
changing market conditions, to compete successfully with existing or new competitors and to adopt new or
enhanced technologies could limit our growth and have a material adverse effect on our business and prospects.
A material drop in the retail price of utility-generated electricity or electricity from other sources would harm
our business, financial condition, and results of operations.
A customer’s decision to buy solar energy from us often stems from a desire to lower electricity costs.
Decreases in the retail prices of electricity from utilities or other energy sources would harm our ability to offer
competitive pricing and could harm our business. The price of electricity from utilities could decrease as a result of:
•
the construction of a significant number of new power generation plants, including nuclear, coal, natural gas
or renewable energy technologies;
•
the construction of additional electric transmission and distribution lines;
•
a reduction in the price of natural gas or other natural resources;
•
energy conservation technologies and public initiatives to reduce electricity consumption;
•
development of new energy technologies that provide less expensive energy, including storage; and
•
utility rate adjustments and customer class cost reallocation.
A reduction in utility electricity prices would make the purchase of our solar service offerings less attractive. If
the retail price of energy available from utilities were to decrease due to any of these or other reasons, we would be
at a competitive disadvantage. As a result, we may be unable to attract new customers and our growth would be
limited.
The production and installation of solar energy systems depends heavily on suitable meteorological and
environmental conditions. If meteorological or environmental conditions are unexpectedly unfavorable, the
electricity production from our solar service offerings may be below our expectations, and our ability to
timely deploy new systems may be adversely impacted.
The energy produced and revenue and cash flows generated by a solar energy system depend on suitable
solar and weather conditions, both of which are beyond our control. Furthermore, components of our systems, such
as panels and inverters, could be damaged by severe weather or natural catastrophes, such as hailstorms,
tornadoes, fires, hurricanes, atmospheric rivers, or earthquakes. In these circumstances, we generally would be
obligated to bear the expense of repairing the damaged solar energy systems that we own. Sustained unfavorable
weather or environmental conditions also could unexpectedly delay the installation of our solar energy systems,
leading to increased expenses and decreased revenue and cash flows in the relevant periods. Extreme weather
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conditions, as well as the natural catastrophes that could result from such conditions, can severely impact our
operations by delaying the installation of our systems, lowering sales, and causing a decrease in the output from our
systems due to smoke or haze. Weather patterns could change, making it harder to predict the average annual
amount of sunlight striking each location where our solar energy systems are installed. This could make our solar
service offerings less economical overall or make individual systems less economical. Any of these events or
conditions could harm our business, financial condition, and results of operations.
Climate change may have long-term impacts on our business, our industry, and the global economy.
Climate change poses a systemic threat to the global economy and will continue to do so until our society
transitions to renewable energy and decarbonizes. While our core business model seeks to accelerate this
transition to renewable energy, there are inherent climate-related risks to our business operations. Warming
temperatures throughout the United States, and in California, our biggest market, in particular, have contributed to
extreme weather, intense drought, and increased wildfire risks. These extreme weather events have the potential to
disrupt our business, our third-party suppliers, and our customers, and may cause us to incur additional operational
costs. They can also cause a decrease in the output from our systems due to smoke or haze. Additionally, if weather
patterns significantly shift due to climate change, it may be harder to predict the average annual amount of sunlight
striking each location where our solar energy systems are installed. This could make our solar service offerings less
economical overall or make individual systems less economical.
Natural disasters and extreme weather events associated with climate change have impacted our operations
by delaying the installation of our systems, leading to increased expenses and decreased revenue and cash flows.
Continued increases in similar types of extreme weather events may harm our business, financial condition, and
results of operations.
Our corporate mission is to connect people to the cleanest energy on earth, and we seek to mitigate these
climate-related risks not only through our core business model and sustainability initiatives, but also by working with
organizations who are also focused on mitigating their own climate-related risks.
Risks Related to Our Operating Structure and Financing Activities
We need to raise capital to finance the continued growth of our operations and solar service business. If
capital is not available to us on acceptable terms, as and when needed, our business and prospects would
be materially and adversely impacted. In addition, our business is affected by general economic conditions
and related uncertainties affecting markets in which we operate. Volatility in current economic conditions
could adversely impact our business, including our ability to raise financing.
Our future success depends on our ability to raise capital at acceptable terms from third parties to grow our
business. To date, we have funded our business principally through low-cost tax equity investment funds. If we are
unable to establish new investment funds when needed, or upon desirable terms, the growth of our solar service
business would be impaired. Changes in tax law or changes in the interpretation of existing tax law could also affect
our ability to establish such tax equity investment funds, impact the terms of existing or future funds, or reduce the
pool of capital available for us to grow our business.
The passage of the IRA, which extended subsidies for various renewable energy technologies, is expected
to lead to additional demands for tax equity. As a result, availability of tax equity may present constraints to our
growth and harm our financial performance. In addition, terms for tax equity funds, including the realization of tax
credit value through potential structures that utilize transferability of the ITC, may not be at terms we view as
favorable.
During the first quarter of 2024, we transitioned a large portion of our funding from a traditional tax equity
framework (where tax equity funding is typically provided at or before installation) to a tax credit transfer framework
under the IRA’s transferability provisions (where the timing of tax equity or cash equity funding can be dependent on
the timing of the transfer of the tax credits, which occurs in arrears following the date the associated solar system is
placed in service). Under this new transferability framework, any transfers of tax credits that occur in arrears can
occur in a range from monthly up to a year or more following the date the associated solar system is placed in
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service. As a result, the timing of tax equity and/or cash equity funding can be delayed, which may adversely impact
our business and operations and may cause volatility to our cash flows as we have an increased mix of
transferability funds.
The contract terms in certain of our existing investment fund documents contain various conditions with
respect to our ability to draw on financing commitments from the fund investors, including conditions that restrict our
ability to draw on such commitments if an event occurs that could reasonably be expected to have a material
adverse effect on the fund or, in some instances, us. If we are not able to satisfy such conditions due to events
related to our business, a specific investment fund, developments in our industry, including tax or regulatory
changes, or otherwise, and as a result, we are unable to draw on existing funding commitments, we could
experience a material adverse effect on our business, liquidity, financial condition, results of operations and
prospects. If any of the investors that currently invest in our investment funds decide not to invest in future
investment funds to finance our solar service offerings due to general market conditions, concerns about our
business or prospects, decreased appetite for tax benefits or any other reason, or materially change the terms
under which they are willing to provide future financing, we would need to identify new investors to invest in our
investment funds and our cost of capital may increase.
In addition, our business and results of operations are materially affected by conditions in the global capital
markets and the economy. A general slowdown or volatility in current economic conditions, the level of U.S. national
debt, currency fluctuations, unemployment rates, the availability and cost of credit, the U.S. housing market, tariffs,
trade wars, inflation levels, interest rates, energy costs, and concerns over a slowing economy or other factors,
could adversely affect our business, including our ability to raise financing.
There can be no assurance that we will be able to continue to successfully access capital in a manner that
supports the growth of our business. Certain sources of capital may not be available in the future, and competition
for any available funding may increase. We cannot be sure that we will be able to maintain necessary levels of
funding without incurring high funding costs, unfavorable changes in the terms of funding instruments or the
liquidation of certain assets. If we are unable to continue to offer a competitive investment profile, we may lose
access to these funds or they may only be available on less favorable terms than those provided to our competitors
or currently provided to us. If we are unable to arrange new or alternative methods of financing on favorable terms,
our business, liquidity, financial condition, results of operations, and prospects could be materially and adversely
affected.
Volatility and increases in interest rates raise our cost of capital and may adversely impact our business.
While interest rates had been at long-term historic lows during large parts of our operating history, they
increased in recent years, and may continue to increase in the future. Rising interest rates, including the 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 decrease the amount of capital available to us to finance
the deployment of new solar energy systems. Additionally, we have selectively increased pricing in many markets in
prior years in response to higher interest rates, and may do so in the future, which may impact the overall
attractiveness of our offerings to potential new customers. Our future success depends on our ability to raise capital
from fund investors and obtain secured lending to help finance the deployment of our solar service offerings. Part of
our business strategy is to seek to reduce our cost of capital through such financing arrangements to improve our
margins, offset reductions in government incentives and maintain the price competitiveness of our solar service
offerings. Rising base interest rates or credit spreads, which have been, and may continue to be, worsened by
inflation, an economic recession, or other variables, may have an adverse impact on our ability to offer attractive
pricing on our solar service offerings to customers, which could negatively impact sales of our solar energy offerings
and our cash flows. Because we typically enter into interest rate swaps shortly after the installation of a system, we
are subject to higher interest rate risk between customer pricing through system installation, which may cause
volatility to our cash flows.
The majority of our cash flows to date have been from solar service offerings under Customer Agreements
that have been monetized under various investment fund structures. One of the components of this monetization is
the present value of the payment streams from customers who enter into these Customer Agreements. If the rate of
return required by capital providers, including debt providers, rises as a result of a rise in interest rates, it will reduce
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the present value of the customer payment stream and consequently reduce the total value derived from this
monetization. Any measures that we could take to mitigate the impact of rising interest rates could ultimately have
an adverse impact on the value proposition that we offer customers.
We expect to incur substantially more debt in the future, which could intensify the risks to our business.
We and our subsidiaries expect to incur additional debt in the future, subject to the restrictions contained in
our debt instruments. Some of our existing debt arrangements restrict our ability to incur additional indebtedness,
including secured indebtedness, and we may be subject to similar restrictions under the terms of future debt
arrangements. These restrictions could inhibit our ability to pursue our business strategies. Increases in our existing
debt obligations would further heighten the debt related risk discussed above.
Furthermore, there is no assurance that we will be able to enter into new debt instruments on acceptable
terms or at all. If we were unable to satisfy financial covenants and other terms under existing or new instruments,
or obtain waivers or forbearance from our lenders, or if we were unable to obtain refinancing or new financings for
our working capital, equipment, and other needs on acceptable terms if and when needed, our business would be
adversely affected.
We may be required to make payments or contribute assets to our investors upon the occurrence of certain
events, including one-time reset or true-up payments or upon the exercise of a redemption option by one of
our tax equity investors.
Our investors in our tax equity investment funds typically advance capital to us based on, among other
things, production capacity estimates. The models we use to calculate prepayments in connection with certain of
our tax equity investment funds are updated at a fixed date occurring after placement in service of all applicable
solar energy systems or an agreed upon date (typically within the first year of the applicable term) to reflect certain
specified conditions, as they exist at such date including the ultimate system size of the equipment that was sold or
leased to the tax equity investment fund, the cost thereof, and the date the equipment went into service. In some
cases, these true-up models also incorporate any changes in law, which would include any reduction in rates (and
thus any reduction in the benefits of depreciation). As a result of this true-up, applicable payments are resized, and
we may be obligated to refund a portion of the tax equity investor’s prepayments or to contribute additional assets to
the tax equity investment fund. In addition, certain of our tax equity fund investors have the right to require us to
purchase their interests in the tax equity investment funds after a set period of time, generally at a price equal to the
greater of a set purchase price or fair market value of the interests at the time of the repurchase. Any significant
refunds, capital contributions, or purchases that we may be required to make could adversely affect our liquidity or
financial condition.
Loan financing developments could adversely impact our business.
The third-party ownership structure, which we bring to market through our solar service offerings, continues
to be the predominant form of system ownership in the residential solar market in many states. However, with the
development of new loan financing products, we have seen a modest shift from leasing and power purchase
arrangements to outright purchases of the solar energy system by the customer (i.e., a customer purchases the
solar energy system outright instead of leasing the system or buying power from us). Continued increases in third-
party loan financing products and outright purchases could result in the demand for long-term Customer
Agreements to decline, which would require us to shift our product focus to respond to the market trend and could
have an adverse effect on our business. The majority of our customers have historically chosen our solar service
offerings as opposed to buying a solar energy system outright. Our financial model is impacted by the volume of
customers who choose our solar service offerings, and an increase in the number of customers who choose to
purchase solar energy systems (whether for cash or through third-party financing) may harm our business and
financial results.
Servicing our debt requires a significant amount of cash to comply with certain covenants and satisfy
payment obligations, and we may not have sufficient cash flow from our business to pay our substantial
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debt and may be forced to take other actions to satisfy our obligations under our indebtedness, which may
not be successful.
We have substantial amounts of debt, including our convertible senior notes (“Notes”), our credit facility and
the non-recourse debt facilities entered into by our subsidiaries, as discussed in more detail in the section titled
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements, in each case, included in this periodic report. Our ability to make scheduled payments of the
principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject
to economic, financial, competitive, and other factors beyond our control. Our business may not continue to
generate cash flow from operations in the future sufficient to service our debt and make necessary capital
expenditures to operate our business. If we are unable to generate such cash flow, we may be required to adopt
one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms
that may be onerous or highly dilutive. Our ability to timely repay or otherwise refinance our indebtedness will
depend on the capital markets and our financial condition at such time. We may not be able to engage in any of
these activities or engage in these activities on desirable terms, which could result in a default on our debt
obligations and negatively impact our financial condition and prospects.
Indebtedness under certain of our Senior and Subordinated Debt Facilities and our other credit facilities
accrue interest at variable interest rates based on the Secured Overnight Financing Rate (or other
benchmark rates based thereof, collectively, “SOFR”).
In certain of our debt facilities accruing interest based on SOFR, daily changes in the rate have, on
occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time
may bear little or no relation to the historical actual or historical indicative data. Additionally, some of our credit
facilities based on SOFR include a credit spread adjustment on SOFR. In addition, ARRC has imposed certain
curbs on interdealer trading in SOFR derivatives, which reduce market liquidity and may raise hedging costs for us
as end-users. The possible volatility of SOFR, the addition of credit spread adjustment in certain of our facilities, and
potential illiquidity in SOFR derivative markets could result in higher borrowing costs for us, which would adversely
affect our financial condition, and results of operations.
We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to
repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our
ability to pay cash upon conversion or repurchase of the Notes.
The Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence
of a fundamental change under the indenture, which includes certain events such as a change of control, before the
maturity date at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be
repurchased, plus accrued and unpaid special interest, if any. In addition, upon conversion of the Notes, unless we
elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of
delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted.
However, we may not have enough available cash or be able to obtain financing at the time we are required to
make repurchases of Notes surrendered therefor or pay cash for Notes being converted. In addition, our ability to
repurchase the Notes or to pay cash upon conversions of the Notes may be limited by law, by regulatory authority or
by agreements governing our indebtedness at the time.
Our failure to repurchase Notes at a time when the repurchase is required by the indenture governing such
Notes or to pay any cash payable on future conversions of the Notes as required by the indenture would constitute
a default. A default under the indenture or the fundamental change itself could also lead to a default under
agreements governing our existing or future indebtedness. If the repayment of the related indebtedness were to be
accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the
indebtedness and repurchase the Notes or make cash payments upon conversions thereof.
We are subject to counterparty risk with respect to the capped call transactions.
In connection with our issuance of the convertible senior notes due 2026 in January 2021 and the
convertible senior notes due 2030 in February 2024, we entered into privately negotiated capped call transactions
(the “Capped Call transactions”) with certain financial institutions (the “option counterparties”). The option
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counterparties are financial institutions or affiliates of financial institutions, and we will be subject to the risk that one
or more of such option counterparties may default under the Capped Call transactions. Our exposure to the credit
risk of the option counterparties will not be secured by any collateral. If any option counterparty becomes subject to
bankruptcy or other insolvency proceedings, with respect to such option counterparty’s obligations under the
relevant Capped Call transaction, we will become an unsecured creditor in those proceedings with a claim equal to
our exposure at that time under such transaction. Our exposure will depend on many factors but, generally, an
increase in our exposure will be positively correlated to an increase in our common stock market price and in the
volatility of the market price of our common stock. In addition, upon a default by any of the option counterparties, we
may suffer adverse tax consequences and dilution with respect to our common stock. We can provide no assurance
as to the financial stability or viability of any of the option counterparties.
Risks Related to Regulation and Policy
The customer value proposition for distributed solar, storage, and home electrification products is
influenced by a number of factors, including, but not limited to, the retail price of electricity, the valuation of
electricity not consumed on site and exported to the grid, the rate design mechanisms of customers’ utility
bills, various policies related to the permitting and interconnection costs of our products to homes and the
grid, the availability of incentives for solar, batteries, and other electrification products, and other policies
which allow aggregations of our systems to provide the grid value. Significant changes to any of these
factors may impact the competitiveness of our service offerings to customers.
The value proposition of our solar and storage offering, as well as our other related home electrification
offerings, such as the electric vehicle charging station, is impacted by several factors outside of our control
including, but are not limited to, the retail price of electricity, the valuation of electricity not consumed on site but
exported to the grid, the rate design mechanisms of customers’ utility bills, various policies related to the permitting
and interconnection costs of our products to homes and the grid, the availability of incentives for solar, batteries,
and other electrification products, and other policies which allow aggregations of our systems to provide the grid
value. For over two decades across the United States, utilities, their trade associations, fossil fuel interests, and
some other stakeholders not aligned with a decentralized grid have been challenging many legislative and
regulatory policies that enhance the customer value proposition of residential solar and storage.
In connection with the value attributed to exported electricity, net metering (“NEM”) has traditionally been
the main policy mechanism to measure and value exported electricity sent back to the grid in the markets within
which we do business. That value has always varied depending on the retail price of power in a certain market,
substantial differences in rate design per market, and NEM market specific differences, including detail around how
to carry over NEM credits, whether or not to cap the amount of net metered solar in a specific market, or how a
specific market values the exported electricity. A substantial majority of the markets in which we operate have
implemented NEM policies, allowing end customers to receive credits for the electricity not consumed on site and
exported to the grid.
Some states, including our largest market of California, have moved away from the traditional retail NEM
credit structure of paying the full retail rate for exported electricity, and instead, such states have chosen to value
excess generation by customers’ solar systems in different ways. In 2016, the Arizona Corporation Commission
(“ACC”) replaced retail NEM with a declining fixed export rate. In 2017, Nevada implemented a reduced credit step
down to NEM credits over time. Hawaii ended retail NEM in 2016 and has since developed programs that utilize
values from rooftop solar paired with batteries to support grid needs. At the end of 2024, Illinois transitioned from
traditional retail NEM to a Smart Solar Billing tariff, which includes an upfront distribution system payment paired
with a time-varying export rate that can be responded to by utilizing solar paired with batteries. Many states across
the United States have traditionally set limits on the amount of rooftop solar that can be exported for retail credit and
there is a long legislative and regulatory history of those limitations being extended in various states, including
California, New Jersey, Illinois, North Carolina, and South Carolina.
Our ability to sell our solar service offerings may be adversely impacted by the failure to extend existing limits
or “caps” to retail NEM or the elimination of other existing policies that value exported electricity to the grid. In 2022,
Florida Governor DeSantis vetoed legislation that would have established a threshold date and percentage trigger
when retail NEM could have faced declines in the immediate export rate in Florida. New Jersey currently has no
NEM cap but reached a threshold that triggers regulatory review of its NEM policy, which will proceed over the next
two years. Recently, the Fiscal Oversight and Management Board of Puerto Rico filed a lawsuit that would require
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the Puerto Rico Energy Board in 2025 to review and determine the future of NEM, which could revise or reverse
Puerto Rico’s Act 10, which had unanimously extended NEM through 2031.
Most notably, as a result of the finalization of the NEM proceeding on December 15, 2022 by the California
Public Utilities Commission (“CPUC”), California moved to a NBT structure in which exported electricity is no longer
valued at the retail rate and is instead valued by the state’s “avoided cost” annual calculations, which substantially
decreases the credit allocated to an exported electron during the day. The final California NEM decision rejected a
very controversial solar-specific fixed charge and rejected the creation of new non-bypassable charges, minimum
bills, and grid participation charges for solar and solar plus storage customers. Additionally, the final California NEM
decision made no retroactive changes to legacy NEM 1.0 or 2.0 California customers. In April 2023, new California
solar customers located in areas serviced by investor-owned utilities (“IOU”) began applying for service under the
new NBT. Also, in April 2023, the California IOUs and other parties filed initial proposals that would represent the
highest fixed charges in the United States. In a June 2023 ruling, the CPUC indicated that it will approve by July
2024 guidelines for future development and implementation of income-graduated fixed charges, but the
implementation of the first iteration of these charges is not expected to occur until late 2025 or early 2026. In May
2024, the CPUC approved a final decision instituting a fixed charge of $24.15/month for most customers of the three
major investor-owned utility territories, with no change in existing income-tiers. The decision added a smaller fixed
monthly charge of $6/month and $12/month, respectively, for the two-tiers of existing low-income customers.
The final California NEM decision presents a significant change to the residential solar market in California.
Under this new framework, storage paired with solar has a heightened value proposition to customers, and we have
seen an increased demand for our solar plus storage offerings, thereby increasing the importance of procuring a
variety of battery storage products and potentially accentuating supply chain risks related to battery storage
systems. The new NBT pricing framework may also result in the introduction of new product offerings and pricing
structures by our competitors throughout the solar and utilities industries, and led to our introduction of Sunrun
Shift™, our home solar subscription offering that maximizes the value of solar energy under California’s NBT by
increasing self-consumption during peak hours when rates are highest and reducing low-value exports back to the
grid through the use of a new storage configuration. This may also result in increased competition and uncertainty
regarding the demand for such new products and offerings, which may adversely impact our business and results of
operations. Recently, California Governor Newsom issued an executive order directing the CPUC and other state
agencies to evaluate and report on efforts to address rising electricity costs, and the potential impact of this
executive order is still unclear.
Electric utility statutes and regulations and changes to such statutes or regulations may present technical,
regulatory and economic barriers to the purchase and use of our solar service offerings that may
significantly reduce demand for such offerings.
Federal, state, and local government statutes and regulations concerning electricity heavily influence the
market for our solar service offerings and are constantly evolving. These statutes, regulations, and administrative
rulings relate to electricity pricing, net metering, consumer protection, incentives, taxation, competition with utilities
and the interconnection of homeowner-owned and third party-owned solar energy systems to the electrical grid.
These statutes and regulations are constantly evolving. Governments, often acting through state utility or public
service commissions, change and adopt different rates for residential customers on a regular basis and these
changes can have a negative impact on our ability to deliver savings, or energy bill management, to customers.
In addition, many utilities, their trade associations, and fossil fuel interests in the country, which have
significantly greater economic, technical, operational, and political resources than the residential solar industry, are
currently challenging solar-related policies, which may have the effect of reducing the competitiveness of residential
solar energy. Any adverse changes in solar-related policies could have a negative impact on our business and
prospects.
Regulations and policies related to rate design could deter potential customers from purchasing our solar
service offerings, reduce the value of the electricity our systems produce, and reduce any savings that our
customers could realize from our solar service offerings.
All states regulate investor-owned utility retail electricity pricing. In addition, there are numerous publicly
owned utilities and electric cooperatives that establish their own retail electricity pricing through some form of
regulation or internal process. These regulations and policies could deter potential customers from purchasing our
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solar service offerings. For example, some utilities in states such as Arizona and Utah have sought and secured
rate design changes that reduce the credit for residential solar exports to below the retail rate and impose new
charges for rooftop solar customers. Utilities in additional states may follow suit. Such rate changes can include
changing rates to charge lower volume-based rates—the rates charged for kilowatt hours of electricity purchased by
a residential customer—while raising unavoidable fixed charges that an end customer is subject to when they
purchase solar energy from third parties, and levying charges on homeowners based on their point of maximum
demand during a month (referred to as “demand charge”). For example, the Arizona Public Service Company offers
residential demand charge rate plans and if our solar customers have subscribed to those plans, they may not
realize typical savings from our offerings. These forms of rate design could adversely impact our business by
reducing the value of the electricity our solar energy systems produce compared to retail net metering, and reducing
any savings customers realize by purchasing our solar service offerings. These proposals could continue or be
replicated in other states. In addition to changes in general rates charged to all residential customers, utilities
sometimes have proposed solar-specific charges (which may be fixed charges, capacity-based charges, or other
rate charges). Any of these changes could materially reduce the demand for our offerings and could limit the
number of markets in which our offerings are competitive with electricity provided by the utilities.
We are not currently regulated as a utility under applicable laws, but we may be subject to regulation as a
utility in the future or become subject to new federal and state regulations for any additional solar service
offerings we may introduce in the future.
Most federal, state, and municipal laws do not currently regulate us as a utility. As a result, we are not subject
to the various regulatory requirements applicable to U.S. utilities. However, federal, state, local or other applicable
regulations could place significant restrictions on our ability to operate our business and execute our business plan
by prohibiting or otherwise restricting our sale of electricity. These regulatory requirements could include restricting
our sale of electricity, as well as regulating the price of our solar service offerings. For example, the New York Public
Service Commission and the Illinois Power Agency have issued orders requiring registration of distributed energy
providers in certain ways similar to energy service companies, which increases the regulatory compliance burden
for us in such states. If we become subject to the same regulatory authorities as utilities in other states or if new
regulatory bodies are established to oversee our business, our operating costs could materially increase and we
may not be able to execute on our business plans.
Our business depends in part on the regulatory treatment of third-party-owned solar energy systems.
Our Customer Agreements are third-party ownership arrangements. Sales of electricity by third parties face
regulatory challenges in some states and jurisdictions. These challenges pertain to issues such as whether third-
party-owned systems qualify for the same rebates, tax exemptions or other non-tax incentives available for
homeowner-owned solar energy systems, whether third-party-owned systems are eligible at all for these incentives,
whether our Customer Agreements are properly characterized as leases or PPAs, and whether third-party-owned
systems are eligible for net metering and the associated significant cost savings. Texas and Connecticut clarified
through legislation that third-party-owned residential solar systems would be treated the same as customer-owned
systems, and would qualify for the existing residential solar property tax exemption. Additionally, Virginia passed
legislation in 2024 that clarified leased systems are allowed. Adverse regulatory treatment of third-party ownership
arrangements could reduce demand for our solar service offerings, adversely impact our access to capital and
cause us to increase the price we charge customers for energy.
Interconnection limits or circuit-level caps imposed by regulators may significantly reduce our ability to sell
electricity from our solar service offerings in certain markets or slow interconnections, harming our growth
rate and customer satisfaction scores.
Interconnection rules establish the circumstances in which rooftop solar will be connected to the electricity
grid. Interconnection limits or circuit-level caps imposed by regulators may curb our growth in key markets. Utilities
throughout the country have different rules and regulations regarding interconnection and some utilities cap or limit
the amount of solar energy that can be interconnected to the grid. Our systems do not provide power to customers
until they are interconnected to the grid, and some relevant laws and regulations in certain markets may
considerably slow the timing of interconnection, which may in turn impact the system production and our business
and sales results.
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Interconnection regulations are based on claims from utilities regarding the amount of solar energy that can
be connected to the grid without causing grid reliability issues or requiring significant grid upgrades. Although recent
rulings from the Hawaii Utilities Commission have helped resolve some problems, historically, interconnection limits
or circuit-level caps have slowed the pace of our installations in Hawaii. Similar interconnection limits could slow our
future installations in Hawaii, Puerto Rico, Colorado, New Jersey, or other markets, harming our growth rate and
customer satisfaction scores. Similarly, the California, Illinois, and Hawaii Public Utilities Commissions require the
activation of some advanced inverter functionality to head off presumed grid reliability issues, which may require
more oversight of the operation of the solar energy systems over time, but may also help ensure circuits remain
open or interconnection costs remain low. Interconnection constraints and limits may hamper our ability to sell our
offerings in certain markets and increase our costs, adversely affecting our business, operating results, financial
condition, and prospects. We expect utility requirements to incorporate these advanced functions provided by the
IEEE 1547-2018/UL-1741 SB inverters and that they will become more commonplace. Additional states are
expected to adopt the usage of advanced inverters to align with California’s anticipated requirement that all new
systems use inverters certified to the new UL 1741 SB standard. This requirement became effective in March 2023.
All of our vendors are certified to this standard.
Risks Related to Our Business Operations
Our growth depends in part on the success of our relationships with third parties, including our solar
partners.
A key component of our growth strategy is to develop or expand our relationships with third parties. For
example, we are investing resources in establishing strategic relationships with market players across a variety of
industries, including large retailers, to generate new customers. These programs may not roll out as quickly as
planned or produce the results we anticipated. A significant portion of our business depends on attracting and
retaining new and existing solar partners. Negotiating relationships with our solar partners, investing in due
diligence efforts with potential solar partners, training such third parties and contractors, and monitoring them for
compliance with our standards require significant time and resources and may present greater risks and challenges
than expanding a direct sales or installation team. If we are unsuccessful in establishing or maintaining our
relationships with these third parties, our ability to grow our business and address our market opportunity could be
impaired. Even if we are able to establish and maintain these relationships, we may not be able to execute on our
goal of leveraging these relationships to meaningfully expand our business, brand recognition and customer base.
This would limit our growth potential and our opportunities to generate significant additional revenue or cash flows.
We and our solar partners depend on a limited number of suppliers of solar panels, batteries, and other
system components to adequately meet anticipated demand for our solar service offerings. Any shortage,
bottlenecks, delay, detentions, or component price change from these suppliers, or the acquisition of any
of these suppliers by a competitor, could result in sales and installation delays, cancellations, and loss of
market share.
We and our solar partners purchase solar panels, inverters, batteries, and other system components from a
limited number of suppliers, making us susceptible to quality issues, shortages, bottlenecks, and price changes. If
we or our solar partners fail to develop, maintain and expand our relationships with these or other suppliers, we may
be unable to adequately meet anticipated demand for our solar service offerings, or we may only be able to offer our
systems at higher costs or after delays. If one or more of the suppliers that we or our solar partners rely upon to
meet anticipated demand ceases or reduces production, we may be unable to quickly identify alternate suppliers or
to qualify alternative products on commercially reasonable terms, and we may be unable to satisfy this demand.
The acquisition of a supplier by one of our competitors could also limit our access to such components and
require significant redesigns of our solar energy systems or installation procedures and have a material adverse
effect on our business.
In particular, there is a limited number of suppliers of inverters, which are components that convert electricity
generated by solar panels into electricity that can be used to power the home. For example, once we design a
system for use with a particular inverter, if that type of inverter is not readily available at an anticipated price, we
may incur delays and additional expenses to redesign the system. Further, the inverters on our solar energy
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systems generally carry only ten year warranties. If there is an inverter equipment shortage in a year when a
substantial number of inverters on our systems need to be replaced, we may not be able to replace the inverters to
maintain proper system functioning or may be forced to do so at higher than anticipated prices, either of which
would adversely impact our business.
Similarly, there is a limited number of suppliers of batteries. Once we design a system for use with a
particular battery, if that type of battery is not readily available from our supplier, we may incur delays and additional
expenses to install the system or be forced to redesign the system. Cost and mass production of battery cells
depends in part upon the prices and availability of raw materials such as lithium, nickel, cobalt and/or other metals.
The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions
and global demand for these materials. For example, as a result of increased global production of electric vehicles
and energy storage products, global demand has increased for lithium-ion battery cells, which may cause
challenges for our battery suppliers, including delays or price volatility. Any such delays or reduced availability of
battery cells (or other component materials) may impact our sales and operating results. Further, these risks may
increase as market demand for our solar and battery offering grows. Any reduced availability of these batteries may
impact our growth, and any increases in their prices may reduce our profitability if we cannot recoup such costs
through increased prices. Our inability to meet demand and any product price increases may harm our brand,
growth, prospects and operating results.
There have also been periods of industry-wide shortage of key components, including solar panels, batteries
and inverters, in times of rapid industry growth or regulatory change. Further, new or unexpected changes in rooftop
fire codes or building codes may require new or different system components to satisfy compliance with such newly
effective codes or regulations, which may not be readily available for distribution to us or our suppliers. The
manufacturing infrastructure for some of these components has a long lead time, requires significant capital
investment and relies on the continued availability of key commodity materials, potentially resulting in an inability to
meet demand for these components and, as a result, could negatively impact our ability to install systems in a timely
manner. Additionally, any decline in the exchange rate of the U.S. dollar compared to the functional currency of our
component suppliers could increase our component prices. Any of these shortages, delays or price changes could
limit our growth, cause cancellations or adversely affect our operating margins, and result in loss of market share
and damage to our brand.
Human rights issues in foreign countries and the U.S. government response to them could also disrupt our
supply chain and operations. In particular, the WRO issued by the CBP on June 24, 2021 applicable to certain
silica-based products manufactured in the Xinjiang Uyghur Autonomous Region of China, and any other allegations
regarding forced labor in China and U.S. trade regulations to prohibit the importation of any goods derived from
forced labor, could affect our operations. Further, the Uyghur Forced Labor Prevention Act that President Biden
signed into law on December 23, 2021, which took effect on June 21, 2022, has affected, and may continue to
affect, our supply chain and operations. Intensive examinations, withhold release orders, and related governmental
procedures have resulted in supply chain and operational delays throughout the industry, and we have implemented
policies and procedures to maintain compliance and minimize delays. These and other similar trade restrictions that
may be imposed in the future could cause delivery and installation delays, and restrict the global supply of
polysilicon and solar products. This, coupled with the passage of the IRA, could result in near-term demand for
available solar energy systems despite higher costs, as well as increased costs of polysilicon and the overall cost of
solar energy systems, potentially reducing overall demand for our products and services.
In addition, our supply chain and operations (or those of our partners) could be subject to events beyond our
control, such as earthquakes, wildfires, flooding, hurricanes, tsunamis, typhoons, volcanic eruptions, droughts,
tornadoes, the effects of climate change and related extreme weather, public health issues and pandemics, war,
terrorism, government restrictions or limitations on trade, and geo-political unrest and uncertainties, such as
Russia’s invasion of Ukraine and the current armed conflict in Israel and the Gaza Strip. We currently do not, and do
not plan to in the future, source any products, materials, components, parts, or services directly from providers in
these regions. As a result, we do not anticipate any material impacts to our supply chain directly arising from these
conflicts at this time.
As the primary entity that contracts with customers, we are subject to risks associated with construction,
cost overruns, delays, customer cancellations, regulatory compliance, and other contingencies, any of
which could have a material adverse effect on our business and results of operations.
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We are a licensed contractor in certain communities that we service, and we are ultimately responsible as the
contracting party for every solar energy system installation. We may be liable, either directly or through our solar
partners, to customers for any damage we cause to them, their home, belongings, or property during the installation
of our systems. For example, we, either directly or through our solar partners, frequently penetrate customers’ roofs
during the installation process and may incur liability for the failure to adequately weatherproof such penetrations
following the completion of construction. In addition, because the solar energy systems we or our solar partners
deploy are high voltage energy systems, we may incur liability for any failure to comply with electrical standards and
manufacturer recommendations.
For example, on December 2, 2020, the California Contractors State License Board (the “CSLB”) filed an
administrative proceeding against us and certain of our officers related to an accident that occurred during an
installation by one of our affiliate channel partners, Horizon Solar Power, which held 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. We consistently denied wrongdoing concerning the allegations
in the administrative proceeding and made no admissions of wrongdoing incident to the settlement. We could face
other similar claims or proceedings in the future, which, if not resolved favorably, could potentially result in fines,
public reprimand, probation, or the suspension or revocation of certain of our licenses.
Completing the sale and installation of a solar energy system requires many different steps including a site
audit, completion of designs, permitting, installation, electrical sign-off and interconnection. Customers may cancel
their Customer Agreement, subject to certain conditions, during this process until commencement of installation,
and we have experienced increased customer cancellations in certain geographic markets during certain periods in
our operating history. We or our solar partners may face customer cancellations, delays or cost overruns which may
adversely affect our or our solar partners’ ability to ramp up the volume of sales or installations in accordance with
our plans. These cancellations, delays or overruns may be the result of a variety of factors, such as labor shortages
or other labor issues, defects in materials and workmanship, adverse weather conditions, transportation constraints,
construction change orders, site changes or roof conditions, geographic factors, extended permitting and inspection
times and other unforeseen difficulties or any other factors that may extend the timing to install, any of which could
lead to increased cancellation rates, reputational harm and other adverse effects. For example, some customer
orders are canceled after a site visit if we determine that a customer needs to make repairs to or install a new roof,
or that there is excessive shading on their property. Additionally, as the demand for solar plus storage offerings
grows, we anticipate facing additional operational challenges associated with the complexity of deploying storage
solutions that 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 or increased project complexity may result in increased operational challenges and correspondingly
lower realization rates. If we continue to experience increased customer cancellations, our financial results may be
materially and adversely affected. In addition, the current macroeconomic environment, including rising interest
rates, instability in financial markets and bank failures, may impact our ability to engage with new customers and
expand our relationships with existing customers. If our customers are materially negatively impacted by these
factors, our business could be negatively impacted.
Policy can impact solar installation completion timelines. For example, in fall 2022, California passed SB 379,
which imposes a required timeline for cities and counties to implement an online, automated solar permitting
platform like SolarAPP+. Cities with populations over 50,000 and counties with populations over 150,000 were
required to have instant, online, automated residential solar and storage permitting as of September 30, 2023,
which may increase the speed at which we install solar systems. The remaining, smaller jurisdictions were required
to implement instant, online residential solar and storage permitting by September 30, 2024.
In addition, the installation of solar energy systems and other energy-related products requiring building
modifications are subject to oversight and regulation in accordance with national, state and local laws and
ordinances relating to building, fire and electrical codes, safety, environmental protection, utility interconnection and
metering, and related matters. We also rely on certain of our and our partners’ employees to maintain professional
licenses in many of the jurisdictions in which we operate, and our failure to employ properly licensed personnel
could adversely affect our licensing status in those jurisdictions. It is difficult and costly to track the requirements of
every individual authority having jurisdiction over our installations and to design solar energy systems to comply with
these varying standards. Any new government regulations or utility policies pertaining to our systems may result in
significant additional expenses to us and our customers and, as a result, could cause a significant reduction in
demand for our solar service offerings.
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We have a variety of stringent quality standards that we apply in the selection, supervision, and oversight of
our third-party suppliers and solar partners. We exercise oversight over our partners through written agreements
requiring compliance with the laws and requirements of all jurisdictions, including regarding safety and consumer
protections, by oversight of compliance with these agreements, and enforced by termination of a partner
relationship for failure to meet those obligations. However, because our suppliers and partners are third parties,
ultimately, we cannot guarantee that they will follow our standards or ethical business practices, such as fair wage
practices and compliance with environmental, safety and other local laws, despite our efforts to hold them
accountable to our standards. A lack of demonstrated compliance could lead us to seek alternative suppliers or
contractors, which could increase our costs and result in delayed delivery or installation of our products, product
shortages or other disruptions of our operations. Violation of labor or other laws by our suppliers and solar partners
or the divergence of a supplier’s or solar partner’s labor or other practices from those generally accepted as ethical
in the United States or other markets in which we do business could also attract negative publicity for us and harm
our business, brand and reputation in the market.
If we fail to manage our recent and future growth effectively, we may be unable to execute our business
plan, maintain high levels of customer service, or adequately address competitive challenges.
We have experienced significant growth in recent periods and we intend to continue to expand our business
within existing markets, such as Puerto Rico, and in a number of new locations in the future, and with our product
offerings, such as EV chargers. This growth has placed, and any future growth may continue to place, a significant
strain on our management, operational and financial infrastructure. In particular, we have been in the past, and may
in the future, be required to expand, train and manage our growing employee base and solar partners. Our
management will also be required to maintain and expand our relationships with customers, suppliers, and other
third parties and attract new customers and suppliers, as well as to manage multiple geographic locations.
In addition, our current and planned operations, personnel, systems and procedures might be inadequate to
support our future growth and may require us to make additional unanticipated investment in our infrastructure,
including additional costs for the expansion of our employee base and our solar partners as well as marketing and
branding costs. Our success and ability to further scale our business will depend, in part, on our ability to manage
these changes in a cost-effective and efficient manner. If we cannot manage our growth, we may be unable to take
advantage of market opportunities, execute our business strategies or respond to competitive pressures. This could
also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new solar service
offerings or other operational difficulties. Any failure to effectively manage growth could adversely impact our
business, operating results, financial condition, and reputation.
We typically bear the risk of loss and the cost of maintenance, repair and removal on solar energy systems
that are owned or leased by our investment funds.
We typically bear the risk of loss and are generally obligated to cover the cost of maintenance, repair and
removal for any solar energy system that we sell or lease to our investment funds. At the time we sell or lease a
solar energy system to an investment fund, we enter into a maintenance services agreement where we agree to
operate and maintain the system for a fixed fee that is calculated to cover our future expected maintenance costs. If
our solar energy systems require an above-average amount of repairs or if the cost of repairing systems were
higher than our estimate, we would need to perform such repairs without additional compensation. If our solar
energy systems, more than 45% of which were located in California as of December 31, 2024, are damaged as the
result of a natural disaster beyond our control, losses could exceed or be excluded from, our insurance policy limits,
and we could incur unforeseen costs that could harm our business and financial condition. We may also incur
significant costs for taking other actions in preparation for, or in reaction to, such events. We purchase property
insurance with industry standard coverage and limits approved by an investor’s third-party insurance advisors to
hedge against such risk, but such coverage may not cover our losses.
Product liability claims against us could result in adverse publicity and potentially significant monetary
damages.
If our solar service offerings, including our racking systems, photovoltaic modules, batteries, inverters, or
other products, injured someone, we would be exposed to product liability claims. Because solar energy systems
and many of our other current and anticipated products are electricity-producing devices, it is possible that
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customers or their property could be injured or damaged by our products, whether by product malfunctions, defects,
improper installation or other causes. We rely on third-party manufacturing warranties, warranties provided by our
solar partners and our general liability insurance to cover product liability claims and have not obtained separate
product liability insurance. Our solar energy systems, including our photovoltaic modules, batteries, inverters, and
other products, may also be subject to recalls due to product malfunctions or defects. Any product liability claim we
face could be expensive to defend and divert management’s attention. The successful assertion of product liability
claims against us could result in potentially significant monetary damages that could require us to make significant
payments, as well as subject us to adverse publicity, damage our reputation and competitive position and adversely
affect sales of our systems and other products. In addition, product liability claims, injuries, defects or other
problems experienced by other companies in the residential solar industry could lead to unfavorable market
conditions to the industry as a whole, and may have an adverse effect on our ability to attract customers, thus
affecting our growth and financial performance.
Our business is concentrated in certain markets, putting us at risk of region-specific disruptions.
As of December 31, 2024, California represented over 45% of our customer base. This concentration of our
customer base and operational infrastructure could lead to our business and results of operations being particularly
susceptible to adverse economic, regulatory, political, weather and other conditions in this market and in other
markets that may become similarly concentrated, in particular the east coast, where we have seen significant
growth recently. Recent changes to net metering policy and the tariff structure in California in December 2022 have
created additional uncertainty and challenges, given the size of our customer base in California. Originations in
California continue to be below levels prior to the NBT transition, and 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.
Our corporate and sales headquarters are located in San Francisco, California, an area that has a
heightened risk of earthquakes and nearby wildfires. We may not have adequate insurance, including business
interruption insurance, to compensate us for losses that may occur from any such significant events. A significant
natural disaster, such as an earthquake or wildfire, or a public health crisis, such as a pandemic, or civil unrest could
have a material adverse impact on our business, results of operations and financial condition. In addition, acts of
terrorism or malicious computer viruses could cause disruptions in our or our solar partners’ businesses or the
economy as a whole. To the extent that these disruptions result in delays or cancellations of installations or the
deployment of our solar service offerings, our business, results of operations and financial condition would be
adversely affected.
Changes to the applicable laws and regulations governing direct-to-home sales and marketing may limit or
restrict our ability to effectively compete.
We utilize a direct-to-home sales model as a primary sales channel and are vulnerable to changes in laws
and regulations related to direct sales and marketing that could impose additional limitations on unsolicited
residential sales calls and may impose additional restrictions such as adjustments to our marketing materials and
direct-selling processes, and new training for personnel. If additional laws and regulations affecting direct sales and
marketing are passed in the markets in which we operate, it would take time to train our sales professionals to
comply with such laws, and we may be exposed to fines or other penalties for violations of such laws. If we fail to
compete effectively through our direct-selling efforts, our financial condition, results of operations and growth
prospects could be adversely affected.
Expanding and maintaining new sales channels and affiliate channel partner networks could be costly and
time-consuming. As we enter new channels and establish new partnerships, we could be at a disadvantage
relative to other companies who have more history in these spaces.
As we continue to grow and expand our sales channels and affiliate channel partner networks, we may
encounter challenges and additional costs.
With respect to developing our sales channels, such as direct-to-home, homebuilder, retail, and e-commerce
channels and adapting to a remote selling model, we have incurred and may continue to incur significant costs. In
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addition, we may not initially or ever be successful in utilizing these new channels. Furthermore, we may not be able
to compete successfully with companies with a historical presence in such channels, and we may not realize the
anticipated benefits of entering such channels, including efficiently increasing our customer base and ultimately
reducing costs. Entering new channels also poses the risk of conflicts between sales channels. If we are unable to
successfully compete in new channels, our operating results and growth prospects could be adversely affected.
If we fail to maintain or expand our affiliate channel partner relationships, we may be unable to adequately
meet anticipated demand for our solar service offerings, or we may only be able to offer our systems at higher costs
or after delays. Further, if the terms, including geographic scope, exclusivity, pricing, duration, or other key terms of
our agreements with our solar partners are substantially altered, it may impact our operational results and financial
performance.
Obtaining a sales contract with a potential customer does not guarantee that the potential customer will not
decide to cancel or that we will not need to cancel due to a failed inspection, which could cause us to
generate no revenue despite incurring costs and adversely affect our results of operations.
Even after we secure a sales contract with a potential customer, we (either directly or through our solar
partners) must perform an inspection to ensure the home, including the rooftop, meets our standards and
specifications. If the inspection finds repairs to the rooftop are required in order to satisfy our standards and
specifications to install the solar energy system, and a potential customer does not want to make such required
repairs, we would lose that anticipated sale. In addition, per the terms of our Customer Agreements, a customer
maintains the ability to cancel before commencement of installation, subject to certain conditions. Any delay or
cancellation of an anticipated sale could materially and adversely affect our financial results, as we may have
incurred sales-related, design-related, and other expenses and generated no revenue.
The value of our solar energy systems at the end of the associated term of the lease or PPA may be lower
than projected, which may adversely affect our financial performance and valuation.
We depreciate the costs of our solar energy systems over their estimated useful life of 35 years. At the end of
the initial typically 20- or 25-year term of the Customer Agreement, customers may choose to purchase their solar
energy systems, ask to remove the system at our cost or renew their Customer Agreements. Customers may
choose to not renew or purchase for any reason, including pricing, decreased energy consumption, relocation of
residence, or switching to a competitor product.
Furthermore, it is difficult to predict how future environmental regulations may affect the costs associated with
the removal, disposal or recycling of our solar energy systems. If the value in trade or renewal revenue is less than
we expect, we may be required to recognize all or some of the remaining unamortized costs. This could materially
impair our future results of operations.
We are exposed to the credit risk of customers and payment delinquencies on our accounts receivables.
Our Customer Agreements are typically for 20 or 25 years and require the customer to make monthly
payments to us. Accordingly, we are subject to the credit risk of customers. As of December 31, 2024, the average
FICO score of our customers under a Customer Agreement with a monthly payment schedule remained at or above
740, which is generally categorized as a “Very Good” credit profile by the Fair Isaac Corporation. However, this may
decline to the extent FICO score requirements under future investment funds are relaxed. While customer defaults
have been immaterial to date, we expect that the risk of customer defaults may increase as we grow our business.
Due to the immaterial amount of customer defaults to date, our reserve for this exposure is minimal, and our future
exposure may exceed the amount of such reserves. If we experience increased customer credit defaults, our
revenue and our ability to raise new investment funds could be adversely affected. If economic conditions worsen,
certain of our customers may face liquidity concerns and may be unable to satisfy their payment obligations to us on
a timely basis or at all, which could have a material adverse effect on our financial condition and results of
operations.
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We may not realize the anticipated benefits of past or future investments, strategic transactions, or
acquisitions, and integration of these acquisitions may disrupt our business and management.
We have in the past and may in the future, acquire companies, Project pipelines, Projects, SRECs, products,
or technologies or enter into joint ventures or other strategic transactions. For example, we completed the
acquisition of Vivint Solar on October 8, 2020. Also, in July 2020, we announced a venture with SK E&S Co., Ltd.
and other affiliated companies focused on home electrification. We may not realize the anticipated benefits of past
or future investments, strategic transactions, or acquisitions, and these transactions involve numerous risks that are
not within our control. These risks include the following, among others:
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failure to satisfy the required conditions and otherwise complete a planned acquisition, joint venture or other
strategic transaction on a timely basis or at all;
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legal or regulatory proceedings, if any, relating to a planned acquisition, joint venture or other strategic
transaction and the outcome of such legal proceedings;
•
difficulty in assimilating the operations, systems, and personnel of the acquired company, especially given
our unique culture;
•
difficulty in effectively integrating the acquired technologies or products with our current products and
technologies;
•
difficulty in maintaining controls, procedures and policies during the transition and integration;
•
disruption of our ongoing business and distraction of our management and employees from other
opportunities and challenges due to integration issues;
•
difficulty integrating the acquired company’s accounting, management information and other administrative
systems;
•
inability to retain key technical and managerial personnel of the acquired business;
•
inability to retain key customers, vendors and other business partners of the acquired business;
•
inability to achieve the financial and strategic goals for the acquired and combined businesses;
•
incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our
results of operations;
•
significant post-acquisition investments which may lower the actual benefits realized through the
acquisition;
•
potential failure of the due diligence processes to identify significant issues with product quality, legal, and
financial liabilities, among other things;
•
moderating and anticipating the impacts of inherent or emerging seasonality in acquired customer
agreements;
•
potential inability to assert that internal controls over financial reporting are effective; and
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•
potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which
could delay or prevent such acquisitions.
Our failure to address these risks, or other problems encountered in connection with our past or future
investments, strategic transactions, or acquisitions, could cause us to fail to realize the anticipated benefits of these
acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally. Future
acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent
liabilities, amortization expenses, or incremental expenses, any of which could harm our financial condition or
results of operations, and the trading price of our common stock could decline.
From time to time, we may pursue acquisitions of previously installed solar systems to further expand future
solar and storage upsell and retrofit opportunities. 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. We may not realize
the anticipated benefits of such transactions, and these transactions involve numerous risks that are not within our
control.
Mergers and acquisitions are inherently risky, may not produce the anticipated benefits and could adversely
affect our business, financial condition or results of operations.
If we are unsuccessful in developing and maintaining our proprietary technology, including our BrightPath
software, our ability to attract and retain solar partners could be impaired, our competitive position could
be harmed and our revenue could be reduced.
Our future growth depends on our ability to continue to develop and maintain our proprietary technology that
supports our solar service offerings, including our design and proposal software, BrightPath. In addition, we rely,
and expect to continue to rely, on licensing agreements with certain third parties for aerial images that allow us to
efficiently and effectively analyze a customer’s rooftop for solar energy system specifications. In the event that our
current or future products require features that we have not developed or licensed, or we lose the benefit of an
existing license, we will be required to develop or obtain such technology through purchase, license or other
arrangements. If the required technology is not available on commercially reasonable terms, or at all, we may incur
additional expenses in an effort to internally develop the required technology. In addition, our BrightPath software
was developed, in part, with U.S. federal government funding. When new technologies are developed with U.S.
government funding, the government obtains certain rights in any resulting patents, including a nonexclusive license
authorizing the government to use the invention for non-commercial purposes. These rights may permit the
government to disclose certain confidential information related to BrightPath to third parties and to exercise “march-
in” rights to use or allow third parties to use our patented technology. We are also subject to certain reporting and
other obligations to the U.S. government in connection with funding for BrightPath. If we are unable to maintain our
existing proprietary technology, our ability to attract and retain solar partners could be impaired, our competitive
position could be harmed and our revenue could be reduced.
Disruptions to our solar production metering solution could negatively impact our revenue and increase
our expenses.
Our ability to monitor solar energy production for various purposes depends on the operation of our metering
solution. We could incur significant expense and disruption to our operations in connection with failures of our
metering solution, including meter hardware failures and failure or obsolescence of the cellular technology that we
use to communicate with those meters. For example, many of our meters operate on either the 3G or 4G cellular
data networks, which are expected to sunset before the term of our Customer Agreements, and newer technologies
we use today may become obsolete before the end of the term of Customer Agreements entered into now.
Upgrading our metering solution may cause us to incur significant expense. Additionally, our meters communicate
data through proprietary software, which we license from our metering partners. Should we be unable to continue to
license, on agreeable terms, the software necessary to communicate with our meters, it could cause a significant
disruption in our business and operations.
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Problems with product quality or performance may cause us to incur warranty expenses and performance
guarantee expenses, may lower the residual value of our solar energy systems and may damage our market
reputation and cause our financial results to decline.
Customers who enter into Customer Agreements with us are covered by production guarantees and roof
penetration warranties. As the owners of the solar energy systems, we or our investment funds receive a warranty
from the inverter and solar panel manufacturers, and, for those solar energy systems that we do not install directly,
we receive workmanship and material warranties as well as roof penetration warranties from our solar partners.
Furthermore, one or more of our third-party manufacturers or solar partners could cease operations and no longer
honor these warranties, leaving us to fulfill these potential obligations to customers, or such warranties may be
limited in scope and amount, and may be inadequate to protect us. We also provide a performance guarantee with
certain solar service offerings pursuant to which we compensate customers on an annual basis if their system does
not meet the electricity production guarantees set forth in their agreement with us. Customers who enter into
Customer Agreements with us are covered by production guarantees equal to the length of the term of these
agreements, typically 20 or 25 years. We may suffer financial losses associated if significant performance guarantee
payments are triggered.
Because of our limited operating history and the length of the term of our Customer Agreements, we have
been required to make assumptions and apply judgments regarding a number of factors, including our anticipated
rate of warranty claims and the durability, performance and reliability of our solar energy systems. Our assumptions
could prove to be materially different from the actual performance of our systems, causing us to incur substantial
expense to repair or replace defective solar energy systems in the future or to compensate customers for systems
that do not meet their production guarantees. Product failures or operational deficiencies also would reduce our
revenue from power purchase or lease agreements because they are dependent on system production. Any
widespread product failures or operating deficiencies may damage our market reputation and adversely impact our
financial results.
Our business may be harmed if we fail to properly protect our intellectual property, and we may also be
required to defend against claims or indemnify others against claims that our intellectual property infringes
on the intellectual property rights of third parties.
We believe that the success of our business depends in part on our proprietary technology, including our
software, information, processes and know-how. We rely on copyright, trade secret and patent protections to secure
our intellectual property rights. Although we may incur substantial costs in protecting our technology, we cannot be
certain that we have adequately protected or will be able to adequately protect it, that our competitors will not be
able to utilize our existing technology or develop similar technology independently, that the claims allowed with
respect to any patents held by us will be broad enough to protect our technology or that foreign intellectual property
laws will adequately protect our intellectual property rights. Moreover, we cannot be certain that our patents provide
us with a competitive advantage. Despite our precautions, it may be possible for third parties to obtain and use our
intellectual property without our consent. Unauthorized use of our intellectual property by third parties, and the
expenses incurred in protecting our intellectual property rights, may adversely affect our business. In the future,
some of our products could be alleged to infringe existing patents or other intellectual property of third parties, and
we cannot be certain that we will prevail in any intellectual property dispute. In addition, any future litigation required
to enforce our patents, to protect our trade secrets or know-how or to defend us or indemnify others against claimed
infringement of the rights of third parties could harm our business, financial condition, and results of operations.
We use “open source” software in our solutions, which may require that we release the source code of
certain software subject to open source licenses or introduce vulnerabilities into our software that could
become exploitable and expose sensitive data, either of which could subject us to possible litigation or
other actions that could adversely affect our business.
We utilize software that is licensed under so-called “open source,” “free” or other similar licenses. Open
source software is made available to the general public on an “as-is” basis under the terms of a non-negotiable
license. We currently combine our proprietary software with open source software but not in a manner that we
believe requires the release of the source code of our proprietary software to the public. However, our use of open
source software may entail greater risks than use of third-party commercial software. Open source licensors
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generally do not provide warranties or other contractual protections regarding infringement claims or the quality of
the code, which could introduce vulnerabilities that could be exploited and lead to the loss of sensitive or protected
data. In addition, if we combine our proprietary software with open source software in a certain manner, we could,
under certain open source licenses, be required to release the source code of our proprietary software to the public.
This would allow our competitors to create similar offerings with lower development effort and time.
We may also face claims alleging noncompliance with open source license terms or infringement or
misappropriation of proprietary software. These claims could result in litigation, require us to purchase a costly
license or require us to devote additional research and development resources to change our software, any of which
would have a negative effect on our business and results of operations. In addition, if the license terms for open
source software that we use change, we may be forced to re-engineer our solutions, incur additional costs or
discontinue the use of these solutions if re-engineering cannot be accomplished on a timely basis. Few courts have
interpreted open source licenses, and there is a risk that these licenses could be construed in a way that could
impose unanticipated conditions or restrictions on our ability to use our proprietary software. We cannot guarantee
that we have incorporated or will incorporate open source software in our software in a manner that will not subject
us to liability or in a manner that is consistent with our current policies and procedures.
Any security breach, unauthorized access or disclosure, or theft of data, including personal information,
we, our third-party service providers, and suppliers gather, store, transmit, and use, or other hacking,
cyber-attack, phishing attack, and unauthorized intrusions into or through our systems or those of our third
party service providers, could harm our reputation, subject us to claims, litigation, financial harm, and have
an adverse impact on our business.
In the ordinary course of business, we, our third-party providers upon which we rely, and our suppliers collect,
receive, store, transmit, process, and use proprietary, confidential, and sensitive data, including the personal
information of customers, such as names, addresses, email addresses, credit information and other housing and
energy use information, as well as the personal information of our employees.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten
the confidentiality, integrity, and availability of our sensitive information and information technology systems, and
those of the third parties with whom we work. Such threats are prevalent and continue to rise, are increasingly
difficult to detect, and come from a variety of sources, including “hackers,” threat actors, “hacktivists,” organized
criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-
supported actors.
Some actors now engage and are expected to continue to engage in cyber-attacks, including without
limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
During times of war and other major conflicts, we, the third parties with whom we work, and our customers may be
vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our
systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
In addition, we, our third-party service providers with whom we work are subject to a variety of evolving
threats, such as computer malware (including as a result of advanced persistent threat intrusions), ransomware,
malicious code (such as viruses or worms), social engineering (including through deep fakes, which may be
increasingly more difficult to identify as fake, and phishing attacks), telecommunications failures, denial-of-service
attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, supply-chain attacks,
software bugs, server malfunctions, software or hardware failures, loss of data or other information technology
assets, adware, natural disasters and extreme weather events, general hacking, telecommunications failures,
attacks enhanced or infiltrated by AI, and other similar threats. Cybersecurity threats have become more prevalent,
and could impact our systems and those of our third parties in the future. Our team members who work remotely
pose increased risks to our information technology systems and data, because many of them utilize network
connections outside our premises that are less secure.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant
interruptions in our operations, ability to provide our products or services, loss of sensitive data and income,
reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware
attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or
regulations prohibiting such payments.
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Applicable data privacy and security obligations may require us to notify relevant stakeholders, including
affected individuals, customers, regulators, and investors, of security incidents. Such disclosures are costly, and the
disclosure or the failure to comply with such requirements could lead to adverse consequences. Inadvertent
disclosure of confidential data, such as personal information, or if a third party were to gain unauthorized access to
this type of data in our possession, has resulted in, and could result in future claims or litigation arising from
damages suffered by those affected, government enforcement actions (for example, investigations, fines, penalties,
audits, and inspections), additional reporting requirements and/or oversight, indemnification obligations, reputational
harm, interruptions in our operations, financial loss, and other similar harms. In addition, we could incur significant
costs in complying with the multitude of federal, state and local laws, and applicable independent security control
frameworks, regarding the unauthorized disclosure of personal information.
While we have implemented security measures designed to protect against security incidents, there can be
no assurance that these measures will be effective. Finally, any perceived or actual unauthorized disclosure of such
information, unauthorized intrusion, or other cyberthreat could harm our reputation, substantially impair our ability to
attract and retain customers, interrupt our operations, and have an adverse impact on our business.
We rely on third parties and technologies to operate critical business systems to process sensitive
information in a variety of contexts, including, without limitation, cloud-based infrastructure, encryption and
authentication technology, employee email, and other functions. Our ability to monitor these third parties’ information
security practices is limited, and these third parties may not have adequate information security measures in place.
If the third parties with whom we work experience a security incident or other interruption, we could experience
adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their
privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be
unable to recover such award.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as
our hardware and/or software, including that of third parties with whom we work). We may not, however, detect and
remediate all such vulnerabilities on a timely basis. Further, we may experience delays in developing and deploying
remedial measures and patches designed to address identified vulnerabilities.
Any of the previously identified or similar threats could cause a security incident or other interruption that
could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration,
encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of
the third parties with whom we work. A security incident or other interruption could disrupt our ability (and that of
third parties with whom we work) to provide our services.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that
limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our
data privacy and security obligations. While we currently maintain cybersecurity insurance, such insurance may not
be sufficient to cover us against claims, and we cannot be certain that cyber insurance will continue to be available
to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information
about us from public sources, data brokers, or other means that reveals competitively sensitive details about our
organization and could be used to undermine our competitive advantage or market position. Additionally, sensitive
information of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection
with our employees’, personnel’s, or vendors’ use of generative AI technologies.
We, and the third parties with whom we work, are, and may become, subject to stringent and evolving U.S.
and foreign laws, regulations, and rules, contractual obligations, industry standards, policies and other
obligations related to data privacy and security. Many of these laws and regulations are subject to change
and uncertain interpretation, and could result in claims, increased cost of operations, or otherwise harm
our business.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make
accessible, protect, secure, dispose of, transmit, and share (collectively, “process”) personal data and other
sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, and
sensitive third-party data. Our data processing activities subject us to numerous data privacy and security
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obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and
security policies, contractual requirements, and other obligations relating to data privacy and security. Obligations
related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming
increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing
applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and
complying with these obligations requires us to devote significant resources, which may necessitate changes to our
services, information technologies, systems, and practices, and to those of any third parties that process personal
data on our behalf.
In the United States, federal, state, and local governments have enacted numerous data privacy and security
laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5
of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). For example, the Telephone
Consumer Protection Act of 1991 (“TCPA”) imposes various consumer consent requirements and other restrictions
on certain telemarketing activity and other communications with consumers by phone, fax, or text message, and
violations of the TCPA violations can result in significant financial penalties, including penalties or criminal fines
imposed by the Federal Communications Commission or fines of up to $1,500 per violation imposed through private
litigation or by state authorities.
Numerous U.S. states—including California, Colorado, Utah, Virginia, and Connecticut —have enacted
comprehensive data privacy and security laws that impose certain obligations on covered businesses, including
providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal
data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-
out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.
The exercise of these rights may impact our business and ability to provide our products and services. Certain
states also impose stricter requirements for processing certain personal data, including sensitive information. These
state laws allow for statutory fines for noncompliance. For example, the CCPA applies to personal data of
consumers, business representatives, and employees who are California residents, and requires businesses to
provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy
rights. The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by
certain data breaches to recover significant statutory damages. These developments further complicate compliance
efforts, and increase legal risk and compliance costs for us, the third parties with whom we work, and our
customers. Similar laws are being considered in several other states, as well as at the federal and local levels, and
we expect more states to pass similar laws in the future.
Our employees and personnel use generative artificial intelligence (“AI”) technologies, and the disclosure and
use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations.
Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this
technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are
unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
In addition to data privacy and security laws, we are or may become contractually subject to industry
standards adopted by industry groups, such as the Payment Card Industry Data Security Standard (“PCI DSS”).
Noncompliance with PCI-DSS by us or the third parties with whom we work can result in penalties from credit card
companies ranging from $5,000 to $100,000 per month, as well as litigation, reputational damage, and revenue
losses.
We publish privacy policies, marketing materials, whitepapers, and other statements, regarding data privacy
and security. Regulators in the United States are increasingly scrutinizing these statements, and if these policies,
materials, or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of
our practices, we may be subject to investigation, enforcement actions by regulators or other adverse
consequences. We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy
and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may fail to
comply with such obligations, which could negatively impact our business operations. If we or the third parties on
which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security
obligations, we could face significant consequences, including but not limited to: government enforcement actions
(e.g., investigations, fines, penalties, audits, inspections), litigation (including class-action claims), mass arbitration
claims, additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy
or not use personal data.
In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against
companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of
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statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages,
depending on the volume of data and the number of violations.
Information technology systems are a critical component of our long-term competitive strategy. Failure to
implement, adopt, and innovate responsibly and in a timely manner in response to rapidly evolving
technological developments, including the use of artificial intelligence, could adversely impact our ability to
compete, as well as our financial condition and operating results.
Our ability to compete effectively requires our continued investment in technology to ensure we provide
ongoing value to our current and potential customers and operate efficiently. The adoption and integration of newly
emerging technologies involve significant uncertainties. If we are unable to effectively develop, integrate, or
introduce new technologies, products, and services, our competitive position could be negatively impacted, and our
business may suffer material adverse effects.
Whether we compete effectively may also be impacted by our ability to accurately anticipate and effectively
respond to the risks and opportunities presented by the disruptions and developments of emerging and newly
available technologies, including artificial intelligence (“AI”). We may not be successful in anticipating or responding
to these developments on a timely and cost-effective basis, and if the rate at which we adopt and the ways in which
we apply new technologies lags or differs negatively in meaningful ways from our competitors, our business could
be adversely affected.
In particular, generative AI and other new and emerging technologies present a number of inherent risks and
incorporating them into our information technology infrastructure, products, and services responsibly is crucial to
maintaining and strengthening our competitive position in the market. For example, the use of generative AI
technologies may result in unintended biases, accuracy issues, or discriminatory outcomes, potentially leading to
errors in decision-making, product development, or other business activities. Such outcomes could negatively affect
our business operations, financial performance, and overall financial condition. Further, the unauthorized use of
generative AI technologies by our employees, third-party providers, or our suppliers pose additional risks relating to
data privacy and security, including the potential exposure of our confidential information to unauthorized recipients.
Use of generative AI tools could result in future claims or litigation related to unauthorized access to or use of
confidential information and failure to comply with open source software requirements.
Damage to our brand and reputation or failure to expand our brand would harm our business and results of
operations.
We depend significantly on our brand and reputation for high-quality solar service offerings, engineering and
customer service to attract customers and grow our business. If we fail to continue to deliver our solar service
offerings within the planned timelines, if our solar service offerings do not perform as anticipated or if we damage
any customers’ properties or cancel Projects, our brand and reputation could be significantly impaired. We also
depend greatly on referrals from customers for our growth. Therefore, our inability to meet or exceed customers’
expectations would harm our reputation and growth through referrals. We have at times focused particular attention
on expeditiously growing our direct sales force and our solar partners, leading us in some instances to hire
personnel or partner with third parties who we may later determine do not fit our company culture and standards.
Given the sheer volume of interactions our direct sales force and our solar partners have with customers and
potential customers, it is also unavoidable that some interactions will be perceived by customers and potential
customers as less than satisfactory and result in complaints. If we cannot manage our hiring and training processes
to limit potential issues and maintain appropriate customer service levels, our brand and reputation may be harmed
and our ability to grow our business would suffer. In addition, if we were unable to achieve a similar level of brand
recognition as our competitors, some of which may have a broader brand footprint, more resources and longer
operational history, we could lose recognition in the marketplace among prospective customers, suppliers and
partners, which could affect our growth and financial performance. Our growth strategy involves marketing and
branding initiatives that will involve incurring significant expenses in advance of corresponding revenue. We cannot
assure you that such marketing and branding expenses will result in the successful expansion of our brand
recognition or increase our revenue. We are also subject to marketing and advertising regulations in various
jurisdictions, and overly restrictive conditions on our marketing and advertising activities may inhibit the sales of the
affected products.
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A failure to hire and retain a sufficient number of employees and service providers in key functions would
constrain our growth and our ability to timely complete customers’ projects and successfully manage
customer accounts.
To support our growth, we need to hire, train, deploy, manage and retain a substantial number of skilled
employees, engineers, installers, electricians, sales and project finance specialists. Competition for qualified
personnel in our industry is increasing, particularly for skilled personnel involved in the installation of solar energy
systems. We have in the past been, and may in the future be, unable to attract or retain qualified and skilled
installation personnel or installation companies to be our solar partners, which would have an adverse effect on our
business. We and our solar partners also compete with the homebuilding and construction industries for skilled
labor. As these industries grow and seek to hire additional workers, our cost of labor may increase. The unionization
of the industry’s labor force could also increase our labor costs. Shortages of skilled labor could significantly delay a
project or otherwise increase our costs. Because our profit on a particular installation is based in part on
assumptions as to the cost of such a project, cost overruns, delays or other execution issues may cause us to not
achieve our expected margins or cover our costs for that project. In addition, because we are headquartered in the
San Francisco Bay Area, we compete for a limited pool of technical and engineering resources that requires us to
pay wages that are competitive with relatively high regional standards for employees in these fields. Further, we
need to continue to expand upon the training of our customer service team to provide high-end account
management and service to customers before, during and following the point of installation of our solar energy
systems. Identifying, and recruiting qualified personnel and training them requires significant time, expense and
attention. It can take several months before a new customer service team member is fully trained and productive at
the standards that we have established. If we are unable to hire, develop and retain talented technical and customer
service personnel, we may not be able to realize the expected benefits of this investment or grow our business.
In addition, to support the growth and success of our direct-to-consumer channel, we need to recruit, retain
and motivate a large number of sales personnel on a continuing basis. We compete with many other companies for
qualified sales personnel, and it could take many months before a new salesperson is fully trained on our solar
service offerings. If we are unable to hire, develop and retain qualified sales personnel or if they are unable to
achieve desired productivity levels, we may not be able to compete effectively.
If we or our solar partners cannot meet our hiring, retention and efficiency goals, we may be unable to
complete customers’ Projects on time or manage customer accounts in an acceptable manner or at all. Any
significant failures in this regard would materially impair our growth, reputation, business and financial results. If we
are required to pay higher compensation than we anticipate, these greater expenses may also adversely impact our
financial results and the growth of our business.
Regulators may limit the type of electricians qualified to install and service our solar and battery systems in
California, which may result in workforce shortages, operational delays, and increased costs.
In June 2023, the CSLB initiated a formal rule proposal to allow solar installers (C-46 license holders) to
continue to install energy storage systems less than 80 kWh when “incidental and supplemental” to the installation
of a PV system, but would require the use of a C-10 license holder for repair and retrofit work. The proposed rule
was adopted by the CSLB on April 18, 2024. The Office of Administrative Law approved the proposed rule on June
5, 2024, and the rule was set to be effective as of October 1, 2024. However, there is currently a preliminary
injunction in the case and the CSLB is enjoined from taking any action to enforce or implement the regulation
pending resolution of the case. The energy storage systems that we install in the residential market typically do not
exceed 80 kWh.
While our workforce includes workers operating under both C-10 and C-46 licenses in California, there are
a limited number of C-10 certified electricians in the state and we are required to have each jobsite staffed with a
Commercial Journeyperson or Residential Wireman (if it is a residential job) if any electrical work is being performed
under a C-10, which may result in workforce shortages, operational delays, and increased costs. Obtaining a C-10
license can be an extended process, and the timing and cost of having a large number of our C-46 licensed Solar
Contractors seek such additional qualification is unclear. A significant portion of our customer base is in California,
and as the state deals with growing wildfire risk and grid instability, an increasing number of our customers are
choosing our solar and battery offerings. If we are unable to hire, develop and retain sufficient certified electricians,
our growth of solar and battery customers in California may be significantly constrained, which would negatively
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impact our operating results. We have actively managed our workforce in anticipation of these changing contractor
regulations by signing up Electrical Trainees in all of our California branches and through on the job training plus
enrollment in schooling we have had many of our trainees become Journeypersons as well.
Our workforce has led the industry in safely installing solar and battery systems for tens of thousands of
customers across the country, and we intend to work with regulators, industry partners, and stakeholders to grow
the solar and battery market throughout California.
The loss of one or more members of our senior management or key employees may adversely affect our
ability to implement our strategy.
We depend on our experienced management team, and the loss of one or more key executives could have
a negative impact on our business. With any change in leadership, there is a risk to organizational effectiveness and
employee retention as well as the potential for disruption to our business. None of our key executives or our key
employees are bound by employment agreements for any specific term, and we may be unable to replace key
members of our management team and key employees in the event we lose their services. Integrating new
employees into our management team could prove disruptive to our operations, require substantial resources and
management attention and ultimately prove unsuccessful. An inability to attract and retain sufficient managerial
personnel who have critical industry experience and relationships could limit or delay our strategic efforts, which
could have a material adverse effect on our business, financial condition, and results of operations.
We are subject to legal proceedings, regulatory inquiries and litigation, and we have previously been, and
may in the future be, named in additional legal proceedings, become involved in regulatory inquiries or be
subject to litigation in the future, all of which are costly, distracting to our core business and could result in
an unfavorable outcome, or a material adverse effect on our business, financial condition, results of
operations, or the trading price for our securities.
We are involved in legal proceedings and receive inquiries from government and regulatory agencies from
time to time. In the event that we are involved in significant disputes or are the subject of a formal action by a
regulatory agency, we could be exposed to costly and time-consuming legal proceedings that could result in any
number of outcomes. Although outcomes of such actions vary, any current or future claims or regulatory actions
initiated by or against us, whether successful or not, could result in significant costs, costly damage awards or
settlement amounts, injunctive relief, increased costs of business, fines or orders to change certain business
practices, significant dedication of management time, diversion of significant operational resources, or otherwise
harm our business.
If we are not successful in our legal proceedings and litigation, we may be required to pay significant
monetary damages, which could hurt our results of operations. Lawsuits are time-consuming and expensive to
resolve and divert management’s time and attention. Although we carry general liability insurance, our insurance
may not cover potential claims or may not be adequate to indemnify us for all liability that may be imposed. We
cannot predict how the courts will rule in any potential lawsuit against us. Decisions in favor of parties that bring
lawsuits against us could subject us to significant liability for damages, adversely affect our results of operations and
harm our reputation.
A failure to comply with laws and regulations relating to our interactions with current or prospective
residential customers could result in negative publicity, claims, investigations, and litigation, and adversely
affect our financial performance.
Our business involves transactions with customers. We and our solar partners must comply with numerous
federal, state and local laws and regulations that govern matters relating to our interactions with customers,
including those pertaining to data privacy and security, consumer financial and credit transactions, home
improvement contracts, warranties and direct-to-home solicitation, along with certain rules and regulations specific
to the marketing and sale of residential solar products and services. These laws and regulations are dynamic and
subject to potentially differing interpretations, and various federal, state and local legislative and regulatory bodies
may expand current laws or regulations, or enact new laws and regulations, regarding these matters. Changes in
these laws or regulations or their interpretation could dramatically affect how we do business, acquire customers,
38
and manage and use information we collect from and about current and prospective customers and the costs
associated therewith. We strive to comply with all applicable laws and regulations relating to our interactions with
residential customers. It is possible, however, that these requirements may be interpreted and applied in a manner
that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices.
Noncompliance with any such laws or regulations, or the perception that we or our solar partners have violated such
laws or regulations or engaged in deceptive practices that could result in a violation, could also expose us to claims,
proceedings, litigation and investigations by private parties and regulatory authorities, as well as substantial fines
and negative publicity, each of which may materially and adversely affect our business. We have incurred, and will
continue to incur, significant expenses to comply with such laws and regulations, and increased regulation of
matters relating to our interactions with residential customers could require us to modify our operations and incur
significant additional expenses, which could have an adverse effect on our business, financial condition, and results
of operations.
Any investigations, actions, adoption or amendment of regulations relating to the marketing of our products to
residential consumers could divert management’s attention from our business, require us to modify our operations
and incur significant additional expenses, which could have an adverse effect on our business, financial condition,
and results of operations or could reduce the number of our potential customers.
We cannot ensure that our sales professionals and other personnel will always comply with our standard
practices and policies, as well as applicable laws and regulations. In any of the numerous interactions between our
sales professionals or other personnel and our customers or potential customers, our sales professionals or other
personnel may, without our knowledge and despite our efforts to effectively train them and enforce compliance,
engage in conduct that is or may be prohibited under our standard practices and policies and applicable laws and
regulations. Any such non-compliance, or the perception of non-compliance, has exposed us to claims and could
expose us to additional claims, proceedings, litigation, investigations, or enforcement actions by private parties or
regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and
adversely affect our business and reputation. We have incurred, and will continue to incur, significant expenses to
comply with the laws, regulations and industry standards that apply to us.
Compliance with occupational safety and health requirements and best practices can be costly, and
noncompliance with such requirements may result in potentially significant penalties, operational delays
and adverse publicity.
The installation of solar energy systems requires our employees and employees of our solar partners to work
with complicated and potentially dangerous electrical and utility systems. The evaluation and installation of our
energy-related products also require these employees to work in locations that may contain potentially dangerous
levels of asbestos, lead or mold or other substances. We also maintain large fleets of vehicles that these employees
use in the course of their work. There is substantial risk of serious illness, injury, or death if proper safety procedures
are not followed. Our operations are subject to regulation under OSHA and equivalent state laws. Changes to OSHA
requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs.
If we fail to comply with applicable OSHA regulations, even if no work-related serious illness, injury, or death occurs,
we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant
capital expenditures, or suspend or limit operations. Any accidents, citations, violations, illnesses, injuries or failure
to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive
position and adversely affect our business.
If our products do not work as well as planned or if we are unsuccessful in developing and selling new
products or in penetrating new markets, our business, financial condition, and results of operations could
be adversely affected.
Our success and ability to compete are dependent on the products that we have developed or may develop
in the future. There is a risk that the products that we have developed or may develop may not work as intended, or
that the marketing of the products may not be as successful as anticipated. The development of new products
generally requires substantial investment and can require long development and testing periods before they are
commercially viable. We intend to continue to make substantial investments in developing new products and it is
possible that we may not develop or acquire new products or product enhancements that compete effectively within
39
our target markets or differentiate our products based on functionality, performance or cost and thus our new
technologies and products may not result in meaningful revenue. In addition, any delays in developing and releasing
new or enhanced products could cause us to lose revenue opportunities and potential customers. Any technical
flaws in product releases could diminish the innovative impact of our products and have a negative effect on
customer adoption and our reputation. If we fail to introduce new products that meet the demands of our customers
or target markets or do not achieve market acceptance, or if we fail to penetrate new markets, our business,
financial conditions and results of operations could be adversely affected.
We have incurred losses and may be unable to sustain profitability in the future.
We have incurred net losses in the past and may continue to incur net losses as we increase our spending to
finance the expansion of our operations, expand our installation, engineering, administrative, sales and marketing
staffs, increase spending on our brand awareness and other sales and marketing initiatives, make significant
investments to drive future growth in our business and implement internal systems and infrastructure to support our
growth. We do not know whether our revenue will grow rapidly enough to absorb these costs and our limited
operating history makes it difficult to assess the extent of these expenses or their impact on our results of
operations. Our ability to sustain profitability depends on a number of factors, including but not limited to:
•
growing our customer base;
•
reducing our operating costs by lowering our customer acquisition costs and optimizing our design and
installation processes and supply chain logistics;
•
finding investors willing to invest in our investment funds on favorable terms;
•
maintaining or further lowering our cost of capital;
•
reducing the cost of components for our solar service offerings;
•
growing and maintaining our affiliate channel partner network;
•
maintaining high levels of product quality, performance, and customer satisfaction; and
•
growing our direct-to-consumer business to scale.
Even if we do sustain profitability, we may be unable to achieve positive cash flows from operations in the
future.
Our results of operations may fluctuate from quarter to quarter, which could make our future performance
difficult to predict and could cause our results of operations for a particular period to fall below
expectations, resulting in a decline in the price of our common stock.
Our quarterly results of operations are difficult to predict and may fluctuate significantly in the future. We have
experienced seasonal and quarterly fluctuations in the past and expect these fluctuations to continue. However,
given that we are operating in a rapidly changing industry, those fluctuations may be masked by our recent growth
rates and thus may not be readily apparent from our historical results of operations. As such, our past quarterly
results of operations may not be good indicators of future performance.
In addition to the other risks described in this “Risk Factors” section, as well as the factors discussed in the
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, the following
factors, among others, could cause our results of operations and key performance indicators to fluctuate:
40
•
the expiration, reduction or initiation of any governmental tax rebates, tax exemptions, or incentives;
•
significant fluctuations in customer demand for our solar service offerings or fluctuations in the geographic
concentration of installations of solar energy systems;
•
changes in financial markets, which could restrict our ability to access available and cost-effective financing
sources;
•
seasonal, environmental or weather conditions that impact sales, energy production, and system
installations;
•
the amount and timing of operating expenses related to the maintenance and expansion of our business,
operations and infrastructure;
•
announcements by us or our competitors of new products or services, significant acquisitions, strategic
partnerships, joint ventures, or capital-raising activities or commitments;
•
changes in our pricing policies or terms or those of our competitors, including utilities;
•
changes in regulatory policy related to solar energy generation;
•
the loss of one or more key partners or the failure of key partners to perform as anticipated;
•
actual or anticipated developments in our competitors’ businesses or the competitive landscape;
•
actual or anticipated changes in our growth rate;
•
general economic, industry and market conditions beyond our control, such as bank failures, the COVID-19
pandemic, inflationary pressures, other macroeconomic factors, and associated economic downturn; and
•
changes to our cancellation rate.
In the past, we have experienced seasonal fluctuations in sales and installations, particularly in the fourth
quarter. This has been the result of decreased sales through the holiday season and weather-related installation
delays. Our incentives revenue is also highly variable due to associated revenue recognition rules, as discussed in
greater detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Seasonal
and other factors may also contribute to variability in our sales of solar energy systems and product sales. For these
or other reasons, the results of any prior quarterly or annual periods should not be relied upon as indications of our
future performance. In addition, our actual revenue or key operating metrics in one or more future quarters may fall
short of the expectations of investors and financial analysts. If that occurs, the trading price of our common stock
could decline and you could lose part or all of your investment.
Our actual financial results may differ materially from any guidance we may publish from time to time.
We have in the past provided, and may from time to time provide, guidance regarding our future performance
that represents our management’s estimates as of the date such guidance is provided. Any such guidance is based
upon a number of assumptions with respect to future business decisions (some of which may change) and
estimates that, while presented with numerical specificity, are inherently subject to significant business, economic,
and competitive uncertainties and contingencies (many of which are beyond our control, including those related to
the COVID-19 pandemic, inflationary pressures, geopolitical conflict, bank failures, other macroeconomic factors,
and associated economic downturn). Guidance is necessarily speculative in nature, and it can be expected that
some or all of the assumptions that inform such guidance will not materialize or will vary significantly from actual
results. Our ability to meet deployment volume, cost, net present value or any other forward-looking guidance is
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impacted by a number of factors including, but not limited to, the number of our solar energy systems purchased
outright versus the number of our solar energy systems that are subject to long-term Customer Agreements,
changes in installation costs, the availability of additional financing on acceptable terms, changes in the retail prices
of traditional utility generated electricity, the availability of rebates, tax credits and other incentives, changes in
policies and regulations including net metering and interconnection limits or caps, the availability of solar panels and
other raw materials, as well as the other risks to our business that are described in this section. Accordingly, our
guidance is only an estimate of what management believes is realizable as of the date such guidance is provided.
Actual results may vary from such guidance and the variations may be material. Investors should also recognize
that the reliability of any forecasted financial data diminishes the farther in the future that the data is forecast. In light
of the foregoing, investors should not place undue reliance on our financial guidance, and should carefully consider
any guidance we may publish in context.
The requirements of being a public company may strain our resources, divert management’s attention and
affect our ability to attract and retain qualified board members and officers.
We are subject to the reporting requirements of the Exchange Act, the listing requirements of the Nasdaq
Stock Market and other applicable rules and regulations, including, among other requirements, U.S. laws regarding
requirements to disclose efforts to identify the origin and existence of certain “conflict minerals.” Compliance with
these rules and regulations has increased our legal and financial compliance costs, made some activities more
difficult, time-consuming or costly and increased demand on our systems and resources. The Exchange Act
requires, among other things, that we file annual, quarterly and current reports with respect to our business and
results of operations and maintain effective disclosure controls and procedures and internal controls over financial
reporting. Maintaining our disclosure controls and procedures and internal controls over financial reporting in
accordance with this standard requires significant resources and management oversight. As a result, management’s
attention may be diverted from other business concerns, which could harm our business and results of operations.
Although we have already hired additional employees to comply with these requirements, we may need to hire more
employees in the future, which will increase our costs and expenses.
Risks Related to Taxes and Accounting
Our ability to provide our solar service offerings to customers on an economically viable basis depends in
part on our ability to finance these systems with fund investors who seek particular tax and other benefits.
Our solar service offerings have been eligible for federal investment tax credits, U.S. Treasury grants, and
other tax benefits. We have relied on, and will continue to rely on, tax equity investment funds, which are financing
structures that monetize a substantial portion of those benefits, in order to finance our solar service offerings. If, for
any reason, we are unable to continue to monetize those benefits through these arrangements, we may be unable
to provide and maintain our solar service offerings for customers on an economically viable basis.
The availability of this tax-advantaged financing depends upon many factors, including:
•
our ability to compete with other solar energy companies for the limited number of potential fund investors,
each of which has limited funds and limited appetite for the tax benefits associated with these financings;
•
the state of financial and credit markets;
•
changes in the legal or tax risks associated with these financings; and
•
legislative or regulatory changes or decreases to these incentives.
The federal government currently offers ITCs under Section 48(a) and 48E of the Code, for the installation
of certain energy properties, including solar power and storage facilities owned for business purposes. The
Commercial ITC was extended and expanded upon and the 48E Credit was created by the IRA, which was signed
into law by President Biden on August 16, 2022. The IRA also created several ITC “bonus credits” to further
incentivize various types of solar and storage facilities.
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Our inability to operationalize these tax credits, avail ourselves of IRA benefits in a timely fashion, or ensure
the facilities we intend to qualify under the ITC bonus credits satisfy the applicable requirements could impact our
ability to compete, and compromise or eliminate opportunities to financially benefit from these tax credits, which
would adversely impact our business. The U.S. Department of the Treasury has issued various stages of issuing
guidance on the ITC bonus credits.
The U.S. Department of Treasury recently issued final regulations and further guidance on the Commercial
ITC, 48E Credits and ITC bonus credits. We are continuing to review and analyze such final regulations and
guidance and whether, to what extent, and when we may benefit from the ITCs and bonus credits.
The federal government also currently offers a Residential Clean Energy Credit, for the installation of
certain solar power facilities owned by residential taxpayers, which is applicable to customers who purchase a solar
energy system outright as opposed to entering into a Customer Agreement.
We and our tax equity partners have claimed and expect to continue to claim ITCs with respect to
qualifying solar energy projects. However, the application of law and guidance regarding ITC eligibility to the facts of
particular solar energy projects is subject to a number of uncertainties. In particular with respect to the new IRA
provisions for which U.S. Treasury regulations (“Treasury Regulations”) had been proposed and were only recently
finalized, there can be no assurance that the IRS will agree with our approach in the event of an audit. While the
U.S. Department of the Treasury addressed and clarified certain outstanding issues from the proposed Treasury
Regulations regarding energy property and aggregation, the final rules may be subject to further interpretation and
guidance. The U.S. Congress and Executive branches may enact legislation or issue executive orders that impact
the newly enacted IRA provisions, and the IRS and U.S. Treasury may modify existing guidance, possibly with
retroactive effect. For example, on January 20, 2025, the current U.S. administration issued an executive order for
all federal agencies to immediately review all agency actions that potentially burden development of domestic
energy resources, including any clean energy-related federal disbursements, followed by additional guidance and
judicial action that generally make the fate of clean energy tax credits unclear. Additionally, on January 1, 2025, the
ITC framework of Section 48 that the solar industry has historically relied upon shifted to the “tech-neutral” 48E
Credit applied separately to a qualified facility and energy storage technology. This transition may create uncertainty
regarding the implementation of Section 48E of the Code under this new framework, which may cause delays or
potentially adverse impacts on our business. Any of the foregoing items could reduce the amount of ITCs available
to us and our tax equity partners. In this event, we could be required to indemnify tax equity partners for disallowed
ITCs, adjust the terms of future tax equity partnerships, or seek alternative sources of funding for solar energy
projects, each of which could have a material adverse effect on our business, financial condition, results of
operations and prospects.
Future reductions in the ITCs or any further legislative reductions or changes to the ITC may impact the
attractiveness of solar energy to certain tax equity investors and could potentially harm our business. Obtaining tax
equity funding (and tax equity funding on advantageous terms) also may become more challenging. Additionally, the
benefits of the Commercial ITC have historically enhanced our ability to provide competitive pricing for customers.
Reductions in, eliminations of or expirations of governmental incentives such as the Residential Clean Energy
Credit could reduce the number of customers who choose to purchase our solar energy systems.
Additionally, potential investors must remain satisfied that the structures that we offer make the tax benefits
associated with solar energy systems available to these investors, which depends on the investors’ assessment of
the tax law, the absence of any unfavorable interpretations of that law and the continued application of existing tax
law and interpretations to our funding structures. Changes in existing law or interpretations of existing law by the
IRS and/or the courts could reduce the willingness of investors to invest in funds associated with these solar energy
systems. Moreover, reductions to the corporate tax rate may reduce the appetite for tax benefits overall, which could
reduce the pool of available funds. Accordingly, we cannot provide assurances that this type of financing will
continue to be available to us. New investment fund structures or other financing mechanisms may become
available, but if we are unable to take advantage of these fund structures and financing mechanisms, we may be at
a competitive disadvantage. If, for any reason, we are unable to finance our solar service offerings through tax-
advantaged structures or if we are unable to realize or monetize ITCs or other tax benefits, we may no longer be
able to provide our solar service offerings to new customers on an economically viable basis, which would have a
material adverse effect on our business, financial condition, and operations.
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If the IRS makes determinations that the creditable basis of our solar energy systems is materially lower
than what we have claimed, we may have to pay significant amounts to our fund investors, and our
business, financial condition, and prospects may be materially and adversely affected.
We and our fund investors claim the ITCs in amounts based on the purchase price paid by our funds for
our solar energy systems (i.e., the funds’ basis in the solar energy systems, or creditable basis). Such purchase
prices are based on the fair market value of our systems as determined pursuant to independent appraisals
obtained by us. With respect to ITCs, the IRS may on audit determine that the creditable basis for our solar energy
systems is lower than the amount determined by the appraisal and accordingly argue that the tax credits previously
claimed must be reduced. If the creditable basis is determined in these circumstances to be less than what we or
our tax equity investment funds reported, we may owe our fund investors an amount equal to the amount by which
the ITCs are reduced (including any interest and penalties), plus any costs and expenses associated with a
challenge to that valuation. We could also be subject to tax liabilities, including interest and penalties. If the IRS
further disagrees now or in the future with the amounts we or our tax equity investment funds reported regarding the
creditable or depreciable basis of our solar energy systems, it could have a material adverse effect on our business,
financial condition, and prospects.
We have purchased insurance policies insuring us and related parties for additional taxes owed in respect of
lost Commercial ITCs, depreciation, gross-up costs and expenses incurred in defending the types of claims
described above. However, these policies only cover certain investment funds and have negotiated exclusions from,
and limitations to, coverage and therefore may not cover us for all such lost Commercial ITCs, taxes, costs and
expenses.
In 2018, the IRS opened an audit of our investors and reviewed the tax basis of our solar energy systems in
the investment fund, which is covered by our 2018 insurance policy. In December 2024, this IRS audit resolved with
no adverse findings involving the fair market value of the price paid by the investment fund for our solar energy
systems. We incurred no out-of-pocket costs except the time, procedural, and administrative expenses associated
with such a multi-year process. We do not expect increases in insurance premiums as a result of this audit. Now or
in the future, routine IRS audits may subject us to indemnity obligations to investors, and may result in certain
limited out-of-pocket costs and potential increased insurance premiums in the future.
Our business currently depends on the availability of utility rebates, tax credits and other benefits, tax
exemptions and exclusions, and other financial incentives on the federal, state, and/or local levels. We may
be adversely affected by changes in, and application of, these laws or other incentives to us, and the
expiration, elimination or reduction of these benefits could adversely impact our business.
Our business depends on government policies that promote and support solar energy and enhance the
economic viability of owning solar energy systems. U.S. federal, state and local governmental bodies provide
incentives to owners, distributors, installers and manufacturers of solar energy systems to promote solar energy.
These incentives include ITCs and Residential Energy Efficient Property Credit, as discussed above, as well as
other tax credits, rebates and SRECs associated with solar energy generation. Some markets, such as New Jersey
and Maryland, currently utilize SRECs. SRECs can be volatile and their value could decrease over time as the
supply of SREC-producing solar energy systems installed in a particular market increases. We rely on these
incentives to lower our cost of capital and to attract investors, all of which enable us to lower the price we charge
customers for our solar service offerings. These incentives have had a significant impact on the development of
solar energy but they could change at any time, especially after changes in the Administration or Congress. These
incentives may also expire on a particular date, when the allocated funding is exhausted, or be reduced, terminated
or repealed without notice. The financial value of certain incentives may also decrease over time.
In December 2017, significant federal tax legislation was enacted, including a change to the corporate tax
rate (the “Tax Act”). As part of the Tax Act, the current corporate income tax rate was reduced, and there were other
changes including limiting or eliminating various other deductions, credits and tax preferences. This reduction in the
corporate income tax rate may have reduced appetite for the ITC and depreciation benefits available with respect to
solar facilities. The IRA implemented a corporate alternative minimum tax of 15% of financial statement income
(subject to certain adjustments) for companies that report over $1 billion in profits to shareholders; similar to existing
law, business credits (including Commercial ITCs) are limited to 75% of income in excess of $25,000 (with no limit
44
against the first $25,000). We cannot predict whether and to what extent the U.S. corporate income tax rate will
change as a result of the new White House administration and changes in Congress. Congress has been
consistently considering changes to the tax code. For example, Congress and the current administration are
discussing several approaches to adjust the 48E Credit and other tax credits. Further limitations on, or elimination
of, the tax benefits that support the financing of solar energy under current U.S. law could significantly impact our
ability to raise tax equity investment funds or impact the terms thereof, including the amount of cash distributable to
our investors. Similarly, any unfavorable interpretations of tax law by the IRS and/or the courts with respect to our
financing structures could reduce the willingness of investors to invest in our funds associated with any such
structure.
Any effort to overturn federal and state laws, regulations or policies that are supportive of solar energy
generation or that remove costs or other limitations on other types of energy generation that compete with solar
energy projects could materially and adversely affect our business.
Our business model also relies on multiple tax exemptions offered at the state and local levels. For example,
some states have property tax exemptions that exempt the value of solar energy systems in determining values for
calculation of local and state real and personal property taxes. State and local tax exemptions can have sunset
dates, triggers for loss of the exemption, and can be changed by state legislatures and other regulators, and if solar
energy systems were not exempt from such taxes, the property taxes payable by customers would be higher, which
could offset any potential savings our solar service offerings could offer. Similarly, if state or local legislatures or tax
administrators impose property taxes on third-party owners of solar energy systems, solar companies like us would
be subject to higher costs.
In general, we rely on certain state and local tax exemptions that apply to the sale of equipment, sale of
power, or both. These state and local tax exemptions can expire, can be changed by state legislatures, or their
application to us can be challenged by regulators, tax administrators, or court rulings, and such changes could
adversely impact our business and the profitability of our offerings in certain markets.
We may be subject to adverse California property tax consequences.
The State of California provides an exclusion (the “Solar Exclusion”) from the assessment of California
property taxes for qualifying “active solar energy systems” installed as fixtures before January 1, 2027, provided
such systems are locally rather than centrally assessed (“Eligible Property”). However, the Solar Exclusion is not a
permanent exclusion from the assessment of property tax. Once a change in ownership of the Eligible Property
occurs, the Eligible Property may be subject to reassessment and California property taxes may become due.
Vivint Solar, through certain of its subsidiaries, owns solar energy systems that constitute Eligible Property
(the “California PV Systems”). To the extent Vivint Solar or its subsidiaries are considered the tax owners of the
California PV Systems for purposes of the California Revenue and Tax Code, our acquisition of Vivint Solar may
constitute a change of control of the California PV Systems, triggering the loss of the Solar Exclusion and the
imposition of California property taxes, which could adversely affect our business.
If we are unable to maintain effective disclosure controls and internal controls over financial reporting,
investors may lose confidence in the accuracy and completeness of our financial reports and, as a result,
the value of our common stock may be materially and adversely affected.
We are required, pursuant to the Exchange Act, to furnish a report by management on, among other things,
the effectiveness of our internal controls over financial reporting. This assessment includes disclosure of any
material weaknesses, if any, identified by our management in our internal controls over financial reporting. We are
continuing to develop and refine our disclosure controls and improve our internal controls over financial reporting.
We have expended, and anticipate that we will continue to expend, significant resources in order to maintain and
continuously look for ways to enhance existing effective disclosure controls and procedures and internal controls
over financial reporting. Our current controls and any new controls that we develop may become inadequate
because of changes in conditions in our business, which presents additional complexities relating to the design and
implementation of our disclosure controls and internal control over financial reporting. In addition, we or our
independent accounting firm may identify weaknesses and deficiencies that we may not otherwise identify in a
45
timely manner in the future. If we are not able to complete the work required under Section 404 of the Sarbanes-
Oxley Act on a timely basis for future fiscal years, our annual report on Form 10-K may be delayed or deficient.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be
detected.
We cannot guarantee that our internal controls over financial reporting will prevent or detect all errors and
fraud. The risk of errors is increased in light of the complexity of our business and investment funds. For example,
we must deal with significant complexity in accounting for our fund structures and the resulting allocation of net
(loss) income between our stockholders and noncontrolling interests under the HLBV method as well as the income
tax consequences of these fund structures. As we enter into additional investment funds, which may have
contractual provisions different from those of our existing funds, the analysis as to whether we consolidate these
funds, the calculation under the HLBV method, and the analysis of the tax impact could become increasingly
complicated. This additional complexity could require us to hire additional resources and increase the chance that
we experience errors in the future.
If we are unable to assert that our internal controls over financial reporting is effective, we could lose
investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our
common stock to decline. In addition, we could become subject to investigations by Nasdaq, the SEC or other
regulatory authorities, which could require additional management attention and which could adversely affect our
business.
Our reported financial results may be affected, and comparability of our financial results with other
companies in our industry may be impacted, by changes in the accounting principles generally accepted in
the United States.
Generally accepted accounting principles in the United States are subject to change and interpretation by
the Financial Accounting Standards Board (“FASB”), the SEC, and various bodies formed to promulgate and
interpret appropriate accounting principles. A change in these principles or interpretations could have a significant
effect on our reported financial results and on the financial results of other companies in our industry, and may even
affect the reporting of transactions completed before the announcement or effectiveness of a change. Other
companies in our industry may be affected differently by the adoption of new accounting standards, including timing
of the adoption of new accounting standards, adversely affecting the comparability of financial statements.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2024, we had U.S. federal, state and foreign net operating loss carryforwards (“NOLs”)
of approximately $720.7 million, $3.3 billion, and $459.9 million respectively, which begin expiring in varying
amounts in 2028, 2025, and 2031 respectively, if unused. Our U.S. federal and certain state NOLs generated in tax
years beginning after December 31, 2017 total approximately $2.0 billion and $334.4 million, respectively, have
indefinite carryover periods, and do not expire. Under Sections 382 and 383 of the Code, if a corporation undergoes
an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax assets, such
as tax credits, to offset its post change income and taxes may be limited. In general, an “ownership change” occurs
if there is a cumulative change in our ownership by “5% stockholders” that exceeds 50 percentage points over a
rolling three-year period. Similar rules may apply under state tax laws. Additionally, states may impose other
limitations on the use of NOLs and tax credit carryforwards. Any such limitations on our ability to use our NOLs and
other tax assets could adversely impact our business, financial condition, and results of operations. We have
performed an analysis to determine whether an ownership change under Section 382 of the Code had occurred and
determined no ownership changes were identified as of December 31, 2024.
We may be required to record an impairment expense on our goodwill in the future.
We are required under generally accepted accounting principles to test goodwill for impairment at least
annually or when events or changes in circumstances indicate that the carrying value may be impaired. Factors that
can lead to impairment of goodwill include significant adverse changes in the business climate and actual or
projected operating results, declines in the financial condition of our business and sustained decrease in our stock
46
price. As of October 1, 2024, we conducted our annual goodwill impairment test and concluded that the fair value of
our one reporting unit exceeded its carrying value. However, during the fourth quarter of fiscal 2024, we performed
an interim quantitative assessment as of December 31, 2024 related to the recoverability of our goodwill for our one
reporting unit as a result of a material sustained decline in the Company’s market capitalization. We concluded that
the fair value of our one reporting unit did not exceed its carrying value as of December 31, 2024 and recorded an
impairment of $3.1 billion in our consolidated statements of operations equal to the full value of the previously
recorded goodwill. We may be required to record an impairment expense on any goodwill to arise from a future
acquisition.
For further information regarding the assessment please see Note 2, Summary of Significant Accounting
Policies, in this Annual Report on Form 10-K.
Risks Related to Ownership of Our Common Stock
Our executive officers, directors and principal stockholders continue to have substantial control over us,
which will limit your ability to influence the outcome of important matters, including a change in control.
Our executive officers, directors and each of our stockholders who beneficially own 5% or more of our
outstanding common stock and their affiliates, in the aggregate, beneficially own approximately 27.8% of the
outstanding shares of our common stock, based on the number of shares outstanding as of December 31, 2024. As
a result, these stockholders, if acting together, will be able to influence or control matters requiring approval by our
stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary
transactions. They may also have interests that differ from yours and may vote in a way with which you disagree
and which may be adverse to your interests. This concentrated control may have the effect of delaying or preventing
a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their
capital stock and might ultimately affect the market price of our common stock.
The market price of our common stock has been and may continue to be volatile, and you could lose all or
part of your investment in our common stock.
The trading price of our common stock has been volatile since our initial public offering, and is likely to
continue to be volatile. Factors that could cause fluctuations in the market price of our common stock include the
following:
•
price and volume fluctuations in the overall stock market from time to time;
•
volatility in the market prices and trading volumes of companies in our industry or companies that investors
consider comparable;
•
changes in operating performance and stock market valuations of other companies generally, or those in
our industry in particular;
•
sales of shares of our common stock by us or our stockholders;
•
failure of securities analysts to maintain coverage of us, changes in financial estimates by securities
analysts who follow us, or our failure to meet these estimates or the expectations of investors;
•
the financial projections we may provide to the public, any changes in those projections or our failure to
meet those projections;
•
announcements by us or our competitors of new products or services;
•
the public’s reaction to our press releases, other public announcements and filings with the SEC;
47
•
rumors and market speculation involving us or other companies in our industry;
•
actual or anticipated changes in our results of operations;
•
changes in tax and other incentives that we rely upon in order to raise tax equity investment funds;
•
actual or perceived data privacy or security incidents;
•
our ability to protect our intellectual property and other proprietary rights;
•
changes in the regulatory environment and utility policies and pricing, including those that could reduce any
savings we are able to offer to customers;
•
actual or anticipated developments in our business, our competitors’ businesses or the competitive
landscape generally;
•
litigation involving us, our industry or both, or investigations by regulators into our operations or those of our
competitors;
•
announced or completed acquisitions of businesses or technologies by us or our competitors;
•
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
•
changes in accounting standards, policies, guidelines, interpretations or principles;
•
major catastrophic events, global armed conflicts or civil unrest;
•
negative publicity, including accurate or inaccurate commentary or reports regarding us, our products, our
sales professionals or other personnel, or other third parties affiliated with us, on social media platforms,
blogs, and other websites;
•
any significant change in our management; and
•
general economic conditions including instability in financial markets and bank failures, and slow or
negative growth of our markets.
Further, the stock markets have experienced price and volume fluctuations that have affected and continue
to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or
disproportionate to the operating performance of those companies. In addition, the stock prices of many renewable
energy companies have experienced fluctuations that have often been unrelated to the operating performance of
those companies. These broad market and industry fluctuations, as well as general economic, political and market
conditions such as recessions, government shutdowns, interest rate changes, or international currency fluctuations,
has, and may continue to, cause the trading price of the Notes and our common stock to decline. In the past,
following periods of volatility in the overall market and the market price of a particular company’s securities,
securities class action litigation has often been instituted against these companies. We are party to litigation that
could result in substantial costs and a diversion of our management’s attention and resources.
Sales of a substantial number of shares of our common stock in the public market, including by our
existing stockholders, could cause our stock price to fall.
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Sales of a substantial number of shares of our common stock in the public market, or the perception that
these sales might occur, could depress the market price of our common stock and could impair our ability to raise
capital through the sale of additional equity securities. We are unable to predict the effect that these sales and
others may have on the prevailing market price of our common stock.
In addition, certain of our stockholders, including SK E&S Co., Ltd. and other affiliated companies as well as
certain stockholders who received shares as a result of our acquisition of Vivint Solar, have registration rights that
would require us to register shares of our capital stock owned by them for public sale in the United States. We have
also filed a registration statement to register shares of our common stock reserved for future issuance under our
equity compensation plans, including shares underlying equity awards assumed in connection with our acquisition
of Vivint Solar. Subject to the satisfaction of applicable exercise periods and applicable volume and restrictions that
apply to affiliates, the shares of our common stock issued upon exercise of outstanding options will become
available for immediate resale in the public market upon issuance.
Future sales of our common stock may make it more difficult for us to sell equity securities in the future at a
time and at a price that we deem appropriate. These sales also could cause the market price of our common stock
to decline and make it more difficult for you to sell shares of our common stock.
Anti-takeover provisions contained in our restated certificate of incorporation and amended and restated
bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions
that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by
our board of directors and therefore depress the trading price of our common stock. Among other things, our
restated certificate of incorporation and amended and restated bylaws include provisions:
•
authorizing “blank check” preferred stock, which could be issued by our board of directors without
stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common
stock;
•
limiting the liability of, and providing indemnification to, our directors and officers;
•
limiting the ability of our stockholders to call and bring business before special meetings;
•
requiring advance notice of stockholder proposals for business to be conducted at meetings of our
stockholders and for nominations of candidates for election to our board of directors; and
•
controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or
changes in our management.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the
Delaware General Corporation law, which prevents certain stockholders holding more than 15% of our outstanding
capital stock from engaging in certain business combinations without approval of the holders of at least two-thirds of
our outstanding capital stock not held by such stockholder. Any provision of our restated certificate of incorporation,
amended and restated bylaws or Delaware law that has the effect of delaying or preventing a change in control
could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could
also affect the price that some investors are willing to pay for our common stock.
Provisions contained in our restated certificate of incorporation and amended and restated bylaws limit the
ability of our stockholders to call special meetings and prohibit stockholder action by written consent.
49
Our restated certificate of incorporation provides that our stockholders may not take action by written
consent. Instead, any such actions must be taken at an annual or special meeting of our stockholders. As a result,
our stockholders are not able to take any action without first holding a meeting of our stockholders called in
accordance with the provisions of our amended and restated bylaws, including advance notice procedures set forth
in our amended and restated bylaws. Our amended and restated bylaws further provide that special meetings of our
stockholders may be called only by a majority of our board of directors, the chairman of our board of directors, our
Chief Executive Officer or our President. As a result, our stockholders are not allowed to call a special meeting.
These provisions may delay the ability of our stockholders to force consideration of a stockholder proposal,
including a proposal to remove directors.
Provisions contained in our restated certificate of incorporation and amended and restated bylaws could
preclude our stockholders from bringing matters before meetings of stockholders and delay changes in our
board of directors.
Our amended and restated bylaws provide advance notice procedures for stockholders seeking to bring
business before, or nominate candidates for election as directors at, our annual or special meetings of stockholders.
In addition, our restated certificate of incorporation provides that stockholders may remove directors only for cause.
Any amendment of these provisions in our amended and restated bylaws or restated certificate of incorporation
would require approval by holders of a majority of our then outstanding capital stock. These provisions could
preclude our stockholders from bringing matters before annual or special meetings of stockholders and delay
changes in our board of directors.
Our amended and restated bylaws provide that a state or federal court located within the State of Delaware
will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which
could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our
directors, officers or employees.
Our amended and restated bylaws provide that, unless we consent to the selection of an alternative forum,
the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action
asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or to our
stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General
Corporation Law or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or
federal court located within the state of Delaware, in all cases subject to the court’s having personal jurisdiction over
the indispensable parties names as defendants. The choice of forum provision may limit a stockholder’s ability to
bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other
employees, which may discourage such lawsuits against us and our directors, officers and other employees. In
addition, our amended and restated bylaws also provide that, unless we consent to the selection of an alternative
forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the
sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities
Act. If a court were to find the choice of forum provisions contained in our amended and restated bylaws to be
inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in
other jurisdictions, which could harm our business, results of operations and financial condition.
If securities or industry analysts cease publishing research or reports about us, our business, our market
or our competitors, or if they adversely change their recommendations regarding our common stock, the
market price of our common stock and trading volume could decline.
The market for our common stock is influenced by the research and reports that securities or industry
analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us
adversely change their recommendations regarding our common stock, or provide more favorable
recommendations about our competitors, the market price of our common stock would likely decline. If any of the
analysts who cover us cease coverage of our company or fail to regularly publish reports on us, we could lose
visibility in the financial markets, which in turn could cause the market price of our common stock and trading
volume to decline.
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We do not expect to declare any dividends in the foreseeable future, so investors may need to rely on sales
of our common stock after price appreciation, which may never occur or only occur at certain times, as the
only way to realize any future gains on their investment.
We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future.
In addition, our credit agreements contain restrictions on payments of cash dividends. Consequently, investors may
need to rely on sales of our common stock after price appreciation, which may never occur or only occur at certain
times, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not
purchase shares of our common stock.
Additional issuances of our capital stock or equity-linked securities could result in dilution to our
stockholders.
We may issue additional equity securities to raise capital, make acquisitions or for a variety of other
purposes. For example, in connection with the acquisition of Vivint Solar, we issued 0.55 shares of our common
stock for each share of Vivint Solar’s common stock owned prior to the acquisition, which resulted in dilution to our
stockholders. Additional issuances of our capital stock may be made pursuant to the exercise or conversion of new
or existing convertible debt securities (including the Notes), warrants, stock options or other equity incentive awards
to new and existing service providers. Any such issuances will result in dilution to existing holders of our stock. We
also rely on equity-based compensation as an important tool in recruiting and retaining employees. The amount of
dilution due to equity-based compensation of our employees and other additional issuances of our common stock or
securities convertible into or exchangeable or exercisable for our common stock could be substantial, and the
market price of our common stock could decline.
The Capped Call transactions may negatively affect the value of our common stock.
In connection with the issuance of the Notes, we entered into the Capped Call transactions with the option
counterparties. The Capped Call transactions are expected generally to reduce the potential dilution to our common
stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the
principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
The option counterparties or their respective affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or
other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so
during the observation period for conversions of Notes following November 1, 2025 for the 2026 Notes or December
1, 2029 for the 2030 Notes or following any repurchase of Notes by us). This activity could also cause or avoid an
increase or a decrease in the market price of our common stock.
The potential effect, if any, of these transactions and activities on the market price of our common stock will
depend in part on market conditions and cannot be ascertained at this time.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
Cybersecurity Risk Management and Strategy
We recognize the importance of assessing, identifying, and managing material risks associated with
cybersecurity threats. We have implemented cybersecurity processes, technologies, and controls to aid in our
efforts to assess, identify, and manage such material risks.
To identify and assess material risks from cybersecurity threats, our enterprise risk management program
considers cybersecurity risks alongside other company risks as part of our overall risk assessment process. Our
51
enterprise risk professionals collaborate with subject matter specialists, as necessary, to gather insights for
identifying and assessing material cybersecurity risks, their severity, and potential mitigation strategies. We employ
various tools and services for such purposes, including network, cloud and endpoint monitoring, vulnerability
assessments, penetration testing, and tabletop exercises. We also have a cybersecurity risk assessment process,
which surfaces cybersecurity risks by measuring our posture against industry standards and engaging third parties
to assess our information security program.
To manage our material risks from cybersecurity threats, we take certain measures, including the below listed
activities, depending on the nature of the relevant systems, data, and environment:
•
undertaking period reviews of our consumer-facing policies and statements;
•
conduct phishing security training for employees and contractors with access to corporate email systems;
•
require employees, and data service providers with whom we share customer, employee or partner data, to
treat customer information with care;
•
running tabletop exercises to simulate a response to a cybersecurity incident;
•
carrying cybersecurity insurance that provides protection against the potential losses arising from a
cybersecurity incident;
•
conducting annual cybersecurity awareness training for employees; and
•
maintaining an incident response plan to prepare for, detect, respond to, and recover from, cybersecurity
incidents.
As part of our efforts to identify, assess, and manage material risks from cybersecurity threats, we engage third-
party cybersecurity consultants and use them to, among other things, conduct a review of our cybersecurity
program or conduct a tabletop exercise to help identify areas for continued focus, improvement and/or compliance.
In addition to maintaining a robust incident response plan, we regularly test our response capabilities through real-
world simulations, post-incident reviews, and lessons-learned exercises to ensure continuous improvement in our
ability to respond effectively to cybersecurity incidents.
Our processes also address cybersecurity risks associated with our use of third-party service providers,
including those in our supply chain, which also include, but are not limited to, open-source software in our
application development processes, or those who have access to our customer and employee data or our systems.
Our cybersecurity program is closely aligned with our commitment to data privacy. We adhere to applicable data
protection laws and regulations, integrate privacy-by-design principles into our processes, and routinely assess our
practices to ensure that we protect customer, employee, and partner information. Addressing these risks is part of
our enterprise risk management program. Cybersecurity risks affect the selection and oversight of our third-party
service providers. We perform diligence on third-parties that have access to our critical systems, data or facilities
that house such systems or data, and monitor cybersecurity threat risks identified through such diligence.
Additionally, we may impose contractual requirements related to cybersecurity on certain third parties that could
pose significant cybersecurity risk to us and require them to agree to audits as appropriate.
Cybersecurity Incidents
During the last fiscal year, we did not identify any risks from cybersecurity threats, including as a result of any
previous cybersecurity incidents, that materially affected or are reasonably likely to materially affect the Company,
including its business strategy, results of operations, or financial condition. While we have encountered routine
cybersecurity threats and attempted attacks, such as phishing emails and malware attempts, our security measures
have effectively mitigated these risks without causing material disruption.
Despite our efforts, the risk of cybersecurity incidents remains, and we continue to monitor, adapt and enhance
our security posture to address evolving threats. Any future cybersecurity breaches or system vulnerabilities could
impact our business operations, reputation and regulatory compliance obligations. We remain committed to
maintaining a robust cybersecurity program to mitigate these risks.
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We provide disclosures on the potential material impacts of cybersecurity threats on our business operations,
which are detailed under the heading 'Risks Related to Our Business Operations' in Item 1A of this Annual Report
on Form 10-K, and those disclosures are incorporated by reference herein.
Cybersecurity Governance
Cybersecurity is a critical component of our enterprise risk management framework and a key area of focus
for both our Board and management. Our approach is to treat cybersecurity not just as a technology issue, but to
recognize that it can have wide-ranging impacts on the business, operations, and financials of our company.
Our Audit Committee is responsible for the oversight of risks from cybersecurity threats and receives
updates from management quarterly. At least annually, the entire Board receives an overview from management of
our cybersecurity threat risk management and strategy processes covering topics such as data security posture,
results from third-party assessments, progress towards pre-determined risk-mitigation-related goals, our incident
response plan, and material cybersecurity threat risks or incidents and developments, as well as the steps
management has taken to respond to such risks. In such sessions, the Audit Committee and Board generally
receive materials including a cybersecurity scorecard and other materials indicating current and emerging material
cybersecurity threat risks, and describing the company’s ability to mitigate those risks, and discuss such matters
with our Chief Information Security Officer. Members of the Board are also encouraged to regularly engage in ad
hoc conversations with management on cybersecurity-related news events and discuss any updates to our
cybersecurity risk management and strategy programs. Material cybersecurity threat risks are also integrated into
Board meeting discussions of important matters like enterprise risk management, operational budgeting, business
continuity planning, mergers and acquisitions, brand management, and other relevant matters.
Our cybersecurity risk management and strategy processes, which are discussed in greater detail above,
are led by our VP Information Security in connection with our Chief Technology Officer, Chief Legal and People
Officer, our Senior Vice President of Legal and Vice President, Internal Audit. Such individuals have extensive prior
work experience and expertise spanning over three decades in various roles involving managing information
security, developing cybersecurity strategy, implementing effective information and cybersecurity programs,
managing cybersecurity operations and incident response, and incorporating security and privacy by design into
software development programs.
These members of management are informed about and monitor the prevention, mitigation, detection, and
remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk
management and strategy processes described above, including the operation of our incident response plan.
As discussed above, these members of management report to the entire Board about cybersecurity threat
risks, among other cybersecurity related matters at least annually, with updates to the Audit Committee on a
quarterly basis.
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Item 2. Properties.
Our corporate headquarters and executive offices are located in San Francisco, California, where we lease
approximately 14,800 square feet of office space. We also maintain 91 other locations, consisting primarily of
branch offices, warehouses and sales offices in 19 states.
We lease all of our facilities and we do not own any real property. We believe that our current facilities are
adequate to meet our ongoing needs. If we require additional space, we believe that we will be able to obtain
additional facilities on commercially reasonable terms.
Item 3. Legal Proceedings.
See Note 18, Commitments and Contingencies, to our consolidated financial statements included elsewhere
in this Annual Report on Form 10-K.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Market Information
Our common stock began trading on the Nasdaq Global Select Market under the symbol “RUN” on August 5,
2015.
Holders of Record
As of February 21, 2025, there were approximately 429 holders of record of common stock. Certain shares
are held in “street” name and, accordingly, the number of beneficial owners of such shares is not known or included
in the foregoing number.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all
available funds and any future earnings for use in the operation of our business and do not expect to pay any
dividends on our capital stock in the foreseeable future. Any future determination to declare dividends will be made
at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors,
including our financial condition, results of operations, capital requirements, contractual restrictions, general
business conditions and other factors that our board of directors may deem relevant. In addition, our credit
agreements contain restrictions on payments of cash dividends.
Unregistered Sales of Equity Securities
During the year ended December 31, 2021, we issued warrants exercisable for up to 846,943 shares of our
common stock to certain strategic partners, calculated using the closing stock price for the respective stock grant’s
quarter of issuance. The shares underlying the warrants will vest upon certain time- and performance-based criteria
as set forth in the warrants. The exercise price of the warrants is $0.01 per share, and 13,939, 63,742 and 346,269
warrants were exercised during the years ended December 31, 2024, 2023 and 2022, respectively.
The warrants were issued and sold pursuant to an exemption from the registration requirements of Section
5 of the Securities Act, as they did not involve a public offering under Section 4(a)(2) and were issued as restricted
securities pursuant to Rule 144 of the Securities Act.
Stock Price Performance Graph
The following stock performance graph compares our total stock return with the total return for (i) the Nasdaq
Composite Index and the (ii) the Invesco Solar ETF, which represents a peer group of solar companies, for the
period from December 31, 2019 through December 31, 2024. The figures represented below assume an investment
of $100 in our common stock at the closing price of $13.81 on December 31, 2019 and in the Nasdaq Composite
Index and the Invesco Solar ETF on December 31, 2019 including the reinvestment of dividends into shares of
common stock. The comparisons in the table are required by the SEC, and are not intended to forecast or be
indicative of possible future performance of our common stock. This graph shall not be deemed “soliciting material”
or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that
section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act,
whether made before or after the date hereof and irrespective of any general incorporation language in any such
filing.
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Item 6. [Reserved].
Not applicable.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual
Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those discussed below. 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 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. We, either directly or through one of our solar partners, install a solar energy
system on a customer’s home and either sell the system to the customer or, as is more often the case, sell the
energy generated by the system to the customer pursuant to a lease or PPA with no or low upfront costs. We refer
to these leases and PPAs as “Customer Agreements.” Following installation, a system is interconnected to the local
utility grid. The home’s energy usage is provided by the solar energy system, with any additional energy needs
provided by the local utility. Any excess solar energy, including amounts in excess of battery storage, that is not
immediately used by the customers is exported to the utility grid using a bi-directional utility net meter, and the
customer generally receives a credit for the excess energy from their utility to offset future usage of utility-generated
energy.
We offer our solar service offerings both directly to the customer and through our solar partners, which
include sales and installation partners, and strategic partners, which include retail partners. In addition, we sell solar
energy systems directly to customers for cash. We also sell solar energy panels and other products (such as
racking) to resellers. As of December 31, 2024, we provided our solar services to customers and sold solar energy
panels and other products to resellers throughout the United States. More than 45% of our cumulative systems
deployed are in California.
We compete mainly with traditional utilities. In the markets we serve, our strategy is to price the energy we
sell below prevailing local retail electricity rates. As a result, the price our customers pay under our solar service
offerings varies depending on the state where the customer lives, the local traditional utility that otherwise provides
electricity to the customer, as well as the prices other solar energy companies charge in that region. Even within the
same neighborhood, site-specific characteristics drive meaningful variability in the revenue and cost profiles of each
home. Using our proprietary technology, we target homes with advantageous revenue and cost characteristics,
which means we are often able to offer pricing that allows customers to save more on their energy bill while
maintaining our ability to meet our targeted returns. 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
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.
Since inception we have raised numerous tax equity investment funds to finance the installation of solar energy
systems. From time to time, we may repurchase investors' interests in our tax equity investment funds after the
recapture period of the relevant tax incentives. We intend to establish additional investment funds and may also use
debt, equity and other financing strategies to fund our growth.
In addition, completing the sale and installation of a solar energy system requires many different steps
including a site audit, completion of designs, permitting, installation, electrical sign-off and interconnection.
Customers may cancel their Customer Agreements with us, subject to certain conditions, during this process until
commencement of installation. Customer cancellation rates can change over time and vary between markets.
Market & Macroeconomic Environment
57
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, 2024, 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
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. We are actively delivering demand response and capacity services to meet operational needs in multiple
geographies, and partnering with grid managers to build a more resilient electricity system that integrates the new
energy technologies customers want.
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We believe the electrification of U.S. households with renewable energy, and the accompanying
development of an inter-connected, smart grid will provide a number of market opportunities beyond our traditional
solar and battery storage offerings, including EV chargers, battery retrofits, re-powered or expanding systems,
home energy management services, and other home electrification products. 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.
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 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.
2024 Election
As a result of the recent transition in both the White House and Congress, we may face changes or delays
in policies that affect our business, including those related to federal tax credits, tariffs, and other regulatory
measures. Any delay, reduction, or elimination in the implementation of policies that support the residential solar
industry, such as the ITCs and adders under the IRA, or Executive Orders issued by the President of the United
States, could have an adverse effect on our business. Additionally, these changes in the United States’ government
could contribute to a higher interest rate environment, which may further negatively impact our operations and
financing costs. While it is difficult to predict specific outcomes at this time, we expect a period of regulatory and
policy uncertainty in the near term. However, we believe our diversified business model and flexible operational
framework position us to adapt to potential changes in the regulatory landscape and will continue to build on the
robust bi-partisan support for residential solar policy.
Investment Funds
Our Customer Agreements provide for recurring customer payments, typically over 20 or 25 years, and the
related solar energy systems are generally eligible for Commercial ITCs, accelerated tax depreciation and other
government or utility incentives. Our financing strategy is to monetize these benefits at a low weighted average cost
of capital. This low cost of capital enables us to offer attractive pricing to our customers for the energy generated by
the solar energy system on their homes. Historically, we have monetized a portion of the value created by our
Customer Agreements and the related solar energy systems through investment funds. 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.
As of December 31, 2024, we had 62 active investment funds, which are described below. We have
established different types of investment funds to implement our asset monetization strategy. Depending on the
nature of the investment fund, cash may be contributed to the investment fund by the investor upfront or in stages
based on milestones associated with the design, construction or interconnection status of the solar energy systems.
The cash contributed by the fund investor is used by the investment fund to purchase solar energy systems. The
investment funds either own or enter into a master lease with a Sunrun subsidiary for the solar energy systems,
Customer Agreements and associated incentives. We receive on-going cash distributions from the investment funds
representing a portion of the monthly customer payments received. We use the upfront cash, as well as on-going
distributions to cover our costs associated with designing, purchasing and installing the solar energy systems. In
addition, we also use debt, equity and other financing strategies to fund our operations. The allocation of the
economic benefits between us and the fund investor and the corresponding accounting treatment varies depending
on the structure of the investment fund.
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We currently utilize the legal structure for our investment funds which we refer to as partnership flips.
Historically, we also utilized pass-through financing obligations as a legal structure for our investment funds. In Q4
2024, we retired our last pass-through financing obligation fund. We record the investor’s interest in partnership flips
as noncontrolling interests or redeemable noncontrolling interests. These partnership flips are usually redeemable
at our option and, in certain cases, at the investor’s option. If redemption is at our option, 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.
The table below provides an overview of our current investment funds (dollars in millions):
Pass-Through
Financing Obligations
Partnership Flip
Consolidation
Owner entity
consolidated, tenant
entity not consolidated
Single entity,
consolidated
Balance sheet classification
Pass-through financing
obligation
Redeemable
noncontrolling interests
and noncontrolling
interests
Revenue from Commercial ITCs
Recognized on the
permission to operate
("PTO") date
None
Method of calculating investor interest
Effective interest rate
method
Greater of HLBV or
redemption value
Liability balance as of December 31, 2024
$
—
N/A
Noncontrolling interest balance (redeemable or otherwise)
as of December 31, 2024
N/A
$
1,610.0
For further information regarding our investment funds, including the associated risks, see Item 1A. Risk
Factors—"Our ability to provide our solar service offerings to customers on an economically viable basis depends in
part on our ability to finance these systems with fund investors who seek particular tax and other benefits.", Note 12,
Pass-Through Financing Obligation, Note 13, VIE Arrangements and Note 14, Redeemable Noncontrolling Interests
to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Pass-through Financing Obligations
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 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 (“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.
In this investment fund structure, the investors make a series of large up-front payments as well as, in some
instances, subsequent smaller quarterly lease payments through their respective tenant entity to the corresponding
owner entity in exchange for the assignment of cash flows from Customer Agreements and certain other benefits
associated with the Customer Agreements and related solar energy systems. We account for the payments from
investors as borrowings by recording the proceeds received as financing obligations. The financing obligation is
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 system reaches permission to operate ("PTO").
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We account for these investment funds in our consolidated financial statements as if we have not assigned
the Customer Agreement to the investor, and we record on our consolidated financial statements activities arising
from the Customer Agreements and any related Commercial ITCs monetized as part of the upfront payments
received from the investor and SREC sales. The interest charge on our pass-through financing obligations is
imputed at the inception of the fund based on the effective interest rate in the arrangement giving rise to the
obligation and is updated prospectively as appropriate.
In certain arrangements, we agree to defer a portion of the up-front payments by arranging a loan between
one of our indirectly wholly owned subsidiaries to a subsidiary of the investor’s tenant entity.
Partnership Flips
Under partnership flip structures, we and our fund investors contribute cash into a partnership entity. The
partnership uses the cash to acquire solar energy systems developed by us with signed Customer Agreements.
Each fund investor receives a rate of return, typically on an after-tax basis, which varies by investment fund. Prior to
the fund investor receiving its contractual rate of return or for a time period specified in the contractual
arrangements, the fund investor receives a significant portion of the value attributable to customer payments, a
majority of the accelerated tax depreciation and substantially all of the Commercial ITCs. 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.
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.
For all of our partnership flips, 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. The HLBV method estimates the
amount that, if the fund’s assets were hypothetically sold at their book value, the investor would be entitled to
receive according to the liquidation waterfall in the partnership agreement.
Key Operating Metrics
The following operating metrics are used by management to evaluate the performance of the business.
Management believes these metrics provide investors with helpful information to determine the economic
performance of the business activities in a period that would otherwise not be observable from historic GAAP
measures. We regularly review a number of metrics, including the following key operating metrics, to evaluate our
business, measure our performance, identify trends affecting our business, formulate financial projections and make
strategic decisions. 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 that we have a
reasonable basis for each of these estimates, we caution you that these estimates are based on a combination of
assumptions that may prove to be inaccurate over time. Any inaccuracies could be material to our actual results
when compared to our calculations. Please see the section titled “Risk Factors” in this Annual Report on Form 10-K
for more information. Furthermore, other companies may calculate these metrics differently than we do now or in
the future, which would reduce their usefulness as a comparative measure.
•
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, subject to final inspection; or (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). Systems that have met these criteria are considered to
be deployed. We believe it is helpful to investors to evaluate networked solar energy capacity added during
the period in order to measure the growth of our business as a whole, whether sold directly to customers or
subject to executed Customer Agreements.
•
Gross Earning Assets is calculated as Gross Earning Assets Contracted Period plus Gross Earning Assets
Renewal Period.
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◦
Gross Earning Assets Contracted Period represents the present value of the remaining net
cash flows (discounted at 6%) during the initial term of our Customer Agreements as of the
measurement date. It is calculated as the present value of cash flows (discounted at 6%) we
expect to receive from Subscribers in future periods as set forth in Customer Agreements,
after deducting expected operating and maintenance costs, equipment replacements costs,
distributions to tax equity partners in partnership flip structures, and distributions to project
equity investors. We include cash flows we expect to receive in future periods from tax equity
partners, government incentive and rebate programs, contracted sales of solar renewable
energy credits, and awarded net cash flows from grid service programs with utility or grid
operators.
◦
Gross Earning Assets Renewal Period is the forecasted net present value we would receive
upon or following the expiration of the initial Customer Agreement term but before the 30th
anniversary of the system’s activation (either in the form of cash payments during any
applicable renewal period or a system purchase at the end of the initial term), for Subscribers
as of the measurement date. We calculate the Gross Earning Assets Renewal Period amount
at the expiration of the initial contract term assuming either a system purchase or a renewal,
forecasting only a 30-year customer relationship (although the customer may renew for
additional years, or purchase the system), at a contract rate equal to 90% of the customer’s
contractual rate in effect at the end of the initial contract term. After the initial contract term,
our Customer Agreements typically automatically renew annually or for a five year term and
the rate is initially set at up to a 10% discount to then-prevailing utility power prices.
◦
Subscribers represent the cumulative number of Customer Agreements for systems that have
been recognized as deployments through the measurement date.
•
Customers represent the cumulative number of deployments, from our inception through the measurement
date. We believe that it is helpful to investors to evaluate customers added during the period in order to
measure the growth of our business as a whole.
Gross Earning Assets is forecasted as of a specific date. It is forward-looking, and we use judgment in
developing the assumptions used to calculate it. 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 partnership flip structures, and distributions to project equity investors. Various assumptions are
made when calculating these metrics. Gross Earning Assets utilize a 6% unlevered discount rate (weighted
average cost of capital or “WACC”) to discount future cash flows to the present period. Furthermore, this
metric assumes that customers renew after the initial contract period at a rate equal to 90% of the rate in
effect at the end of the initial contract term. For Customer Agreements with 25-year initial contract terms, a
5-year renewal period is assumed. For a 20-year initial contract term, a 10-year renewal period is assumed.
In all instances, we assume a 30-year customer relationship, although the customer may renew for
additional years, or purchase the system. Estimated cost of servicing assets has been deducted and is
estimated based on the service agreements underlying each fund.
As of December 31,
2024
2023
Networked Solar Energy Capacity (megawatts)
7,531
6,689
Customers
1,048,842
933,275
62
As of December 31,
2024
2023
(in thousands)
Gross Earning Assets Contracted Period
$
13,790,540 $
10,802,494
Gross Earning Assets Renewal Period
4,043,288
3,364,026
Gross Earning Assets
$
17,833,828 $
14,166,520
The tables below provide a range of Gross Earning Asset amounts if different default, discount and
purchase and renewal assumptions were used.
Gross Earning Assets Contracted Period:
As of December 31, 2024
Discount rate
Default rate
4%
5%
6%
7%
8%
(in thousands)
5%
$ 16,022,644 $ 14,619,534 $ 13,402,304 $ 12,341,650 $ 11,413,421
0%
$ 16,514,342 $ 15,055,431 $ 13,790,540 $ 12,689,006 $ 11,725,573
Gross Earning Assets Renewal Period:
As of December 31, 2024
Discount rate
Purchase or Renewal rate
4%
5%
6%
7%
8%
(in thousands)
80%
$ 5,152,733 $ 4,241,752 $ 3,507,314 $ 2,912,667 $ 2,429,164
90%
$ 5,938,980 $ 4,889,436 $ 4,043,288 $ 3,358,184 $ 2,801,115
100%
$ 6,725,224 $ 5,537,118 $ 4,579,261 $ 3,803,700 $ 3,173,064
Total Gross Earning Assets:
As of December 31, 2024
Discount rate
Purchase or Renewal rate
4%
5%
6%
7%
8%
(in thousands)
80%
$ 21,667,075 $ 19,297,183 $ 17,297,854 $ 15,601,673 $ 14,154,737
90%
$ 22,453,322 $ 19,944,867 $ 17,833,828 $ 16,047,190 $ 14,526,688
100%
$ 23,239,566 $ 20,592,549 $ 18,369,801 $ 16,492,706 $ 14,898,637
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial
statements, which have been prepared in accordance with generally accepted accounting principles in the United
States ("GAAP"). GAAP requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could
have reasonably used different accounting estimates, and in other instances, changes in the accounting estimates
are reasonably likely to occur from period-to-period. Actual results could differ significantly from our estimates. Our
future financial statements will be affected to the extent that our actual results materially differ from these estimates.
For further information on all of our significant accounting policies, see Note 2, Summary of Significant Accounting
Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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We believe that policies associated with our principles of consolidation, revenue recognition, impairment of
long-lived assets, provision for income taxes, business combinations and calculation of noncontrolling interests and
redeemable noncontrolling interests have the greatest impact on our consolidated financial statements. Therefore,
we consider these to be our critical accounting policies and estimates.
Principles of Consolidation
Our consolidated financial statements include our accounts and those of our subsidiaries in which we have a
controlling financial interest. The typical condition for a controlling financial interest 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 financial interests. We consolidate any VIE of which we are the primary
beneficiary, which is defined as the party that has (1) the power to direct the activities of a VIE that most significantly
impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits of the VIE that
could potentially be significant to the VIE. We evaluate our relationships with our VIEs on an ongoing basis to
determine whether we continue to be the primary beneficiary. Our financial statements reflect the assets and
liabilities of VIEs that we consolidate. All intercompany transactions and balances have been eliminated in
consolidation. For further information regarding consolidation of our investment funds, see “—Investment Funds”
above.
Revenue Recognition
We recognize revenue when control of goods or services is transferred to customers, in an amount that
reflects the consideration we expect to be entitled to in exchange for those goods or services.
Customer Agreements and Incentives Revenue. Customer agreements and incentives revenue is primarily
comprised of revenue from our Customer Agreements and sales of Commercial ITCs and SRECs to third parties.
We begin to recognize revenue from a Customer Agreement when PTO for the applicable solar energy
system is given by the local utility company or on the date daily operation commences if utility approval is not
required. For Customer Agreements that include a fixed fee per month which entitles the customer to any and all
electricity generated by the system, we recognize revenue evenly over the time that we satisfy our performance
obligations over the initial term of Customer Agreements. For Customer Agreements that charge a fixed price per
kilowatt hour, revenue is recognized based on the actual amount of power generated at rates specified under the
contracts. Customer Agreements typically have an initial term of 20 or 25 years. After the initial contract term, our
Customer Agreements typically automatically renew annually or for a five year term.
We also apply for and receive SRECs associated with the energy generated by our solar energy systems and
sell them to third parties in certain jurisdictions. SREC revenue is estimated net of any variable consideration related
to possible liquidated damages if we were to deliver fewer SRECs than contractually committed, and is generally
recognized upon delivery of the SRECs to the counterparty.
Certain upfront payments related to Customer Agreements and SRECs are deemed to have a financing
component, and therefore increase both revenue and interest expense by the same amount over the term of the
related agreement. The additional revenue is included in the total transaction price to be recorded over the term of
the agreement and is recognized based on the timing of the delivery. The interest expense is recognized based
upon an amortization schedule which typically decreases throughout the term of the related agreement.
For pass-through financing obligation funds, the value attributable to the Commercial ITCs is recognized in
the period a solar system is granted PTO, at which point we have met our obligation to the investor. The
Commercial ITCs are subject to recapture under the Internal Revenue Code (“Code”) if the underlying solar energy
system either ceases to be a qualifying property or undergoes a change in ownership within five years of its placed-
in-service date. The recapture amount decreases on the anniversary of the PTO date. We have not historically
incurred a material recapture of Commercial ITCs, and do not expect to experience a material recapture of
Commercial ITCs in the future.
Consideration from customers is considered variable due to the performance guarantee under Customer
Agreements and liquidated damage provisions under SREC contracts in the event minimum deliveries are not
achieved. Customer Agreements with a performance guarantee provide a credit to the customer if the system's
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cumulative production, as measured on various PTO anniversary dates, is below our guarantee of a specified
minimum. Revenue is recognized to the extent it is probable that a significant reversal of such revenue will not
occur. If our estimate of the future production shortfall amount for Customer Agreements with a performance
guarantee was 10% higher, the additional reduction to revenue in the twelve months ended December 31, 2024
would have been less than $4.0 million. Our estimated production shortfall reduced revenue during the twelve
months ended December 31, 2024 by less than $7.6 million more than the prior year's period. We have historically
estimated an immaterial amount of liquidated damages pursuant to SREC contracts, and actual damages have not
been materially different from estimates, nor material in amount during the years ended December 31, 2024, 2023
and 2022.
Solar Energy Systems and Product Sales. 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. For solar energy system sales that include delivery obligations up until interconnection to the local power
grid with permission to operate, we recognize revenue at PTO. Certain solar energy systems sold to customers
include fees for extended warranty and maintenance services. These fees are recognized over the life of the service
agreement.
Product sales revenue consists of revenue from the sale of solar panels, inverters, racking systems, roof
repair, and other solar energy products sold to resellers, as well as the sale of customer leads to third parties,
including our partners and other solar providers. Product sales revenue is recognized when control is transferred,
generally upon shipment, or as services are delivered. Customer lead revenue is recognized at the time the lead is
delivered.
Goodwill
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 as of October 1st 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. When assessing goodwill for
impairment, we use qualitative and if necessary, quantitative methods in accordance with FASB ASC Topic 350,
Goodwill.
Circumstances or events that could indicate impairment and require us to perform a quantitative impairment
test include a significant decline in our financial results, a significant decline in our enterprise value relative to our
net book value, a sustained decline in our stock price, or an unanticipated change in competition affecting our
market share and a significant change in our strategic plans or regulatory environment. 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, 2024, we performed a qualitative assessment to evaluate any circumstances and events
impacting our one reporting unit to determine the likelihood of goodwill impairment. We concluded it was more likely
than not that the fair value of our one reporting unit exceeded its carrying value. 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.
However, in November 2024, consistent with industry peers, our stock price declined resulting in a significant
decline in our market capitalization below the book value of equity. This indicator triggered an interim quantitative
assessment as of December 31, 2024. Per ASC 350-20-35-22 “quoted market prices in active markets are the best
evidence of fair value and shall be used as the basis for the measurement, if available.” We estimated the fair value
of our reporting unit primarily based on consideration of an income approach and market capitalization. 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. 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. We also compared the total invested capital (including market
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capitalization) to the fair value of our reporting unit to assess the reasonableness of fair value. As of December 31,
2024, we concluded that the fair value of our one reporting unit did not exceed its carrying value primarily driven by
our market capitalization and recorded an impairment charge of $3.1 billion in our consolidated statements of
operations equal to the full value of the previously recorded goodwill.
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 decrease in the discount rate assumptions or a
10% increase in our market capitalization as of December 31, 2024 would not change the goodwill impairment
charge.
Impairment of Long-Lived Assets
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 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. If the useful life is shorter than
originally estimated, we amortize the remaining carrying value over the new shorter useful life. During the years
ended December 31, 2024, 2023 and 2022, there were no indicators of impairment and therefore no cash flow
analysis was performed.
Provision for Income Taxes
We account for income taxes under an asset and liability approach. Deferred income taxes reflect the impact
of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts
recognized for income tax reporting purposes, net operating loss carryforwards and other tax credits measured by
applying currently enacted tax laws. A valuation allowance is provided when necessary to reduce deferred tax
assets to an amount that is more likely than not to be realized. We consider all available evidence, both positive and
negative, including historical levels of income, estimates of future taxable income, reversing taxable temporary
differences, and ongoing tax planning strategies in assessing the need for a valuation allowance. 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 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. However, this
gain is recognized for tax reporting purposes. 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
are recognized (i.e. the flow-through method). The Company enters into ITC transfer agreements with third-party
transferees to transfer to such third-parties, for cash, the ITCs generated by certain solar energy systems that have
been or will be placed in service. The Company accounts for its share of ITC transfer proceeds under ASC 740,
Income Taxes, as a reduction of income tax expense in the consolidated statement of operations during the year in
which the credits are recognized (i.e., the flow-through method) and the tax equity investor’s share is distributed
upon receipt.
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. We use a
two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that
the position will be sustained upon tax authority examination, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon ultimate settlement.
Our policy is to include interest and penalties related to unrecognized tax benefits, if any, within the provision
for taxes in the consolidated statements of operations.
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Business Combinations
We allocate the fair value of purchase price to the tangible assets acquired, liabilities assumed and intangible
assets acquired based on their estimated fair values. 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 in 2020.
Significant estimates in valuing certain tangible assets include but are not limited to discount rates. These
estimates are inherently uncertain and unpredictable.
Noncontrolling Interests and Redeemable Noncontrolling Interests
Our noncontrolling interests and redeemable noncontrolling interests represent fund investors’ interests in the
net assets of certain investment funds, which we consolidate, that we have entered into in order to finance the costs
of solar energy facilities under Customer Agreements. We have determined that the provisions in the contractual
arrangements of the investment funds represent substantive profit-sharing arrangements, which gives rise to the
noncontrolling interests and redeemable noncontrolling interests. We have further determined that for all but two of
these arrangements, the appropriate methodology for attributing income and loss to the noncontrolling interests and
redeemable noncontrolling interests each period is a balance sheet approach using the HLBV method.
Attributing income and loss to the noncontrolling interests and redeemable noncontrolling interests under the
HLBV method requires the use of various inputs to calculate the amounts that fund investors would receive upon a
hypothetical liquidation. Changes in these inputs, including change in tax rates, can have a significant impact on the
amount that fund investors would receive upon a hypothetical liquidation.
We classify certain noncontrolling interests with redemption features that are not solely within our control
outside of permanent equity on our consolidated balance sheets. Redeemable noncontrolling interests are reported
using the greater of their carrying value at each reporting date as determined by the HLBV method or their
estimated redemption value in each reporting period. Estimating the redemption value of the redeemable
noncontrolling interests requires the use of significant assumptions and estimates such as projected future cash
flows at the time the redemption feature can be exercised.
We determine the net income (loss) attributable to common stockholders by deducting from net loss, the net
loss attributable to noncontrolling interests and redeemable noncontrolling interests in these funds. The net loss
attributable to noncontrolling interests and redeemable noncontrolling interests represents the fund investors’
allocable share in the results of operations of these investment funds. For these funds, we have determined that the
provisions in the contractual arrangements represent substantive profit-sharing arrangements, where the allocations
to the partners sometimes differ from the stated ownership percentages. We have further determined that, for these
arrangements, the appropriate methodology for attributing income and loss to the noncontrolling interests and
redeemable noncontrolling interests each period is a balance sheet approach using the HLBV method. Under the
HLBV method, the amounts of income and loss attributed to the noncontrolling interests and redeemable
noncontrolling interests in the consolidated statements of operations reflect changes in the amounts the fund
investors would hypothetically receive at each balance sheet date under the liquidation provisions of the contractual
provisions of these funds, assuming the net assets of the respective investment funds were liquidated at the
carrying value determined in accordance with GAAP. The fund investors’ interest in the results of operations of
these investment funds is initially determined by calculating the difference in the noncontrolling interests and
redeemable noncontrolling interests’ claim under the HLBV method at the start and end of each reporting period,
after taking into account any contributions and distributions between the fund and the fund investors and subject to
the redemption provisions in certain funds.
The calculation of HLBV does not require estimates since each HLBV calculation is based upon the
liquidation provisions of each fund’s contractual agreement. The calculation of the redeemable noncontrolling
interest balance involves estimates such as a discount rate used in net present value calculations, and customer
default rates. If the assumptions used for each of these were 10% higher, the impact to the aggregate redeemable
noncontrolling interest balance as of December 31, 2024 would be a reduction of $21.8 million.
67
Results of Operations
The results of operations presented below should be reviewed in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this Annual Report on Form 10-K. Our Annual Report on Form
10-K for the year ended December 31, 2023 includes a discussion and analysis of our financial condition and
results of operations for the year ended December 31, 2022 in Item 7 of Part II, “Management's Discussion and
Analysis of Financial Condition and Results of Operations.”
Year Ended December 31,
2024
2023
(in thousands, except per share amounts)
Revenue:
Customer agreements and incentives
$
1,505,227 $
1,186,706
Solar energy systems and product sales
532,492
1,073,107
Total revenue
2,037,719
2,259,813
Operating expenses:
Cost of customer agreements and incentives
1,169,213
1,077,114
Cost of solar energy systems and product sales
539,952
1,019,638
Sales and marketing
617,162
740,821
Research and development
39,304
21,816
General and administrative
245,127
221,067
Goodwill impairment
3,122,168
1,158,000
Total operating expenses
5,732,926
4,238,456
Loss from operations
(3,695,207)
(1,978,643)
Interest expense, net
(848,366)
(652,989)
Other income (expense), net
161,539
(63,900)
Loss before income taxes
(4,382,034)
(2,695,532)
Income tax benefit
(26,817)
(12,691)
Net loss
(4,355,217)
(2,682,841)
Net loss attributable to noncontrolling interests and redeemable
noncontrolling interests
(1,509,050)
(1,078,344)
Net loss attributable to common stockholders
$
(2,846,167) $
(1,604,497)
Net loss per share attributable to common stockholders
Basic
$
(12.81) $
(7.41)
Diluted
$
(12.81) $
(7.41)
Weighted average shares used to compute net loss per share
attributable to common stockholders
Basic
222,215
216,642
Diluted
222,215
216,642
68
Comparison of the Years Ended December 31, 2024 and 2023
Revenue
Year Ended
December 31,
Change
2024
2023
$
%
(in thousands)
Customer agreements
$ 1,388,412 $ 1,077,099 $ 311,313
29 %
Incentives
116,815
109,607
7,208
7 %
Customer agreements and incentives
1,505,227 1,186,706
318,521
27 %
Solar energy systems
204,776
656,408 (451,632)
(69) %
Products
327,716
416,699
(88,983)
(21) %
Solar energy systems and product sales
532,492 1,073,107 (540,615)
(50) %
Total revenue
$ 2,037,719 $ 2,259,813 $ (222,094)
(10) %
Customer Agreements and Incentives. The $311.3 million increase in Revenue from Customer Agreements
was primarily due to new systems placed in service in 2024 and a full year of revenue recognized in 2024 for
systems placed in service in 2023 versus only a partial amount of such revenue related to the period in which the
assets were in service in 2023. Revenue from incentives consisted primarily of sales of SRECs. The $7.2 million
increase 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 decreased by $451.6
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 $89.0 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 and the wind-down of the AEE Solar
operations in 2024.
Operating Expenses
Year Ended
December 31,
Change
2024
2023
$
%
(in thousands)
Cost of customer agreements and incentives
$ 1,169,213 $ 1,077,114 $
92,099
9 %
Cost of solar energy systems and product sales
539,952 1,019,638 (479,686)
(47) %
Sales and marketing
617,162
740,821 (123,659)
(17) %
Research and development
39,304
21,816
17,488
80 %
General and administrative expense
245,127
221,067
24,060
11 %
Goodwill impairment
3,122,168 1,158,000 1,964,168
100 %
Total operating expenses
$ 5,732,926 $ 4,238,456 $ 1,494,470
35 %
Cost of Customer Agreements and Incentives. The $92.1 million increase in Cost of customer agreements
and incentives was primarily due to the new systems placed in service in 2024, plus a full year of costs recognized
in 2024 for systems placed in service in 2023 versus only a partial amount of such expenses related to the period in
which the assets were in service in 2023.
The Cost of customer agreements and incentives decreased to 78% of customer agreements and incentives
revenue during 2024, from 91% in the prior year. This decrease is primarily due to customer pricing increases
catching up to costs.
69
Cost of Solar Energy Systems and Product Sales. There was a $479.7 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 101% of solar energy systems and product
sales revenue during 2024, when compared with 95% in the prior year, primarily as the result of a $22.1 million
increase in inventory reserves recorded in the first quarter of fiscal 2024 related to the wind-down of the AEE Solar
operations.
Sales and Marketing Expense. The $123.7 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 $76.2 million and $56.3
million of amortization of costs to obtain Customer Agreements for 2024 and 2023, respectively.
Research and Development Expense. The $17.5 million increase in Research and development expense
was primarily attributable to an increase in headcount driving higher employee compensation costs, as well as an
increase in support related consulting costs.
General and Administrative Expense. The $24.1 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.
Goodwill impairment. The $2.0 billion increase in Goodwill impairment expense related to an impairment
charge of $3.1 billion that was a result of an interim impairment test performed during the fourth quarter of 2024 and
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
Year Ended
December 31,
Change
2024
2023
$
%
(in thousands)
Interest expense, net
$ (848,366) $ (652,989) $ (195,377)
30 %
Other income (expense), net
161,539
(63,900)
225,439
(353) %
Total interest and other expense, net
$ (686,827) $ (716,889) $
30,062
(4) %
Interest expense, net. The increase in Interest expense, net of $195.4 million is primarily related to additional
non-recourse debt entered into in 2024. Included in net interest expense is $34.8 million and $31.2 million of non-
cash interest recognized under Customer Agreements that have a significant financing component for 2024 and
2023, respectively.
Other income (expense), net. The increase in other income of $225.4 million relates primarily to an increase
in gains on derivatives during 2024, as well as a $7.4 million decrease in loss on an equity investment, as we
recorded a $51.3 million loss on an equity investment in 2024, compared with a $58.7 million loss on an equity
investment during 2023.
Income Tax Benefit
Year Ended
December 31,
Change
2024
2023
$
%
(in thousands)
Income tax benefit
$
26,817 $
12,691 $
14,126
111 %
The increase in Income tax benefit of $14.1 million primarily relates to an increase in pre-tax loss, increased
proceeds from investment tax credit transfers, and a decrease in valuation allowance on certain federal and state
70
tax credits and net operating losses, which was offset by goodwill impairment and an increase in noncontrolling
interest and redeemable noncontrolling interests.
Given our net operating loss carryforwards as of December 31, 2024, we do not expect to pay income tax,
including in connection with our 2024 income tax provision, until our net operating losses are fully utilized. As of
December 31, 2024, we had net operating loss carryforwards for federal, state, and foreign income tax purposes of
approximately $720.7 million, $3.3 billion, and $459.9 million, respectively, which will begin to expire in 2028 for
federal purposes, in 2025 for state purposes, and in 2031 for foreign purposes. In addition, federal and certain state
net operating loss carryforwards generated in tax years beginning after December 31, 2017 total $2.0 billion and
$334.4 million, respectively, and have indefinite carryover periods and do not expire.
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests
Year Ended
December 31,
Change
2024
2023
$
%
(in thousands)
Net loss attributable to noncontrolling interests and
redeemable noncontrolling interests
$ (1,509,050) $ (1,078,344) $ (430,706)
40 %
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was primarily the
result of an addition of seven new investment funds since December 31, 2023, 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.
Liquidity and Capital Resources
As of December 31, 2024, we had cash of $575.0 million, which consisted of cash held in checking and
savings accounts with financial institutions. We finance our operations mainly through a variety of financing fund
arrangements that we have formed with fund investors, cash generated from our sources of revenue and
borrowings from secured credit facilities arrangements with syndicates of banks and from secured, long-term non-
recourse loan arrangements. In 2024, we received $3.4 billion of new commitments on secured credit facilities
arrangements and $1.5 billion of commitments from secured, long-term non-recourse loan arrangements. Our
principal uses of cash are funding our business, including the costs of acquisition and installation of solar energy
systems, satisfaction of our obligations under our debt instruments and other working capital requirements. As of
December 31, 2024, we had outstanding borrowings of $384.2 million on our $447.5 million credit facility maturing in
March 2027. 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 $2.4 billion and extend the maturity date from April 2025
to April 2028. In July 2024, we amended the same senior secured credit facility to increase total commitments from
$2.4 billion to $2.6 billion. 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. As of September 30, 2024, this maturity date was automatically extended to March 1, 2027, due to
us maintaining funds on deposit in a collateral account equal to an amount sufficient to repay at the scheduled
maturity all of our 0% Senior Convertible Notes due 2026 that are outstanding as of September 30, 2024 and being
otherwise in compliance with our quarter-end liquidity covenant.
71
Additionally, we have purchase commitments, which have the ability to be canceled without significant
penalties, with multiple suppliers to purchase $574.0 million of photovoltaic modules, inverters and batteries by the
end of the fourth quarter of 2025. In February 2024, we issued $475.0 million of convertible senior notes with a
maturity date of March 1, 2030, for net proceeds of approximately $470.1 million. Our business model requires
substantial outside financing arrangements to grow the business and facilitate the deployment of additional solar
energy systems. The solar energy systems that are operational are expected to generate a positive return rate over
the term of the Customer Agreement, typically 20 or 25 years. However, in order to grow, we will continue to be
dependent on financing from outside parties. If financing is not available to us on acceptable terms if and when
needed, we may be required to reduce planned spending, which could have a material adverse effect on our
operations. While there can be no assurances, we anticipate raising additional required capital from new and
existing investors. We believe our cash, investment fund commitments and available borrowings as further
described below will be sufficient to meet our anticipated cash needs for at least the next 12 months. We believe we
will meet longer-term expected future cash requirements and obligations through a combination of cash flows from
operating activities, available cash balances, and available credit via our credit facilities. The following table
summarizes our cash flows for the periods indicated:
Year Ended December 31,
2024
2023
(in thousands)
Consolidated cash flow data:
Net cash used in operating activities
$
(766,153) $
(820,740)
Net cash used in investing activities
(2,701,024)
(2,613,143)
Net cash provided by financing activities
3,426,755
3,468,698
Net (decrease) increase in cash
$
(40,422) $
34,815
Operating Activities
During 2024, we used $766.2 million in net cash from operating activities. 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 2024, our operating cash outflows were $447.6 million from our net loss excluding non-cash and non-
operating items. Changes in working capital resulted in a net cash outflow of $318.5 million.
During 2023, we used $820.7 million in net cash from operating activities. 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 $625.6 million from our net loss excluding non-cash and non-
operating items. Changes in working capital resulted in a net cash outflow of $195.3 million.
Investing Activities
During 2024, we used $2.7 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.
During 2023, we used $2.6 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 2023, was a $5.0 million contribution we made as an additional investment in Lunar
Energy.
Financing Activities
During 2024, we generated $3.4 billion from financing activities. This was primarily driven by $1.3 billion in
net proceeds from fund investors, $2.1 billion in net proceeds from debt, $124.3 million in net proceeds from trade
receivable financing, $98.2 million in net proceeds from convertible senior notes and $18.9 million in net proceeds
from stock-based awards activity, offset by $26.2 million in acquisition of noncontrolling interests and $27.2 million in
repayments under finance lease obligations.
72
During 2023, we generated $3.5 billion from financing activities. 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.
Debt, Equity, and Financing Fund Commitments
Debt Instruments
For a discussion of the terms and conditions of debt instruments and changes thereof in the period, refer to
Note 10, Indebtedness, to our consolidated financial statements included elsewhere in this Annual Report on Form
10-K.
Investment Fund Commitments
As of December 31, 2024, we had committed and available capital of approximately $260.2 million that may
only be used to purchase and install solar energy systems. We intend to establish new investment funds in the
future, and we may also use debt, equity or other financing strategies to finance our business.
73
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K.
74
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to certain market risks in the ordinary course of our business. Our primary exposure
includes changes in interest rates because certain borrowings bear interest at floating rates based on SOFR, as
applicable, plus a specified margin. We sometimes manage our interest rate exposure on floating-rate debt by
entering into derivative instruments to hedge all or a portion of our interest rate exposure in certain debt facilities.
We do not enter into any derivative instruments for trading or speculative purposes. Changes in economic
conditions could result in higher interest rates, thereby increasing our interest expense and operating expenses and
reducing funds available for capital investments, operations and other purposes. A hypothetical 10% increase in our
interest rates on our variable rate debt facilities would have increased our interest expense by $14.8 million and
$11.7 million for the year ended December 31, 2024 and 2023, respectively.
75
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 0042)
77
Consolidated Balance Sheets
80
Consolidated Statements of Operations
82
Consolidated Statements of Comprehensive (Loss) Income
83
Consolidated Statements of Redeemable Noncontrolling Interests and Stockholders'
Equity
84
Consolidated Statements of Cash Flows
85
Notes to Consolidated Financial Statements
87
76
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Sunrun Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sunrun Inc. (the Company) as of December 31,
2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework), and our report dated February 27, 2025 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
77
Noncontrolling Interests and Redeemable Noncontrolling Interests
Description of matter
At December 31, 2024, noncontrolling interests were $1 billion and
redeemable noncontrolling interests were $0.6 billion. As explained in Note 2
to the consolidated financial statements, noncontrolling interests and redeemable
noncontrolling interests represent investors’ interests in the net assets of the tax
equity funds that the Company has created to finance the cost of its solar energy
systems subject to the Company’s Customer Agreements. The Company has
determined that the contractual provisions in the funding arrangements represent
substantive profit sharing arrangements. The Company has further determined
that the appropriate methodology for attributing income and loss to the
noncontrolling interests and redeemable noncontrolling interests each period is a
balance sheet approach referred to as the hypothetical liquidation at book value
(“HLBV”) method.
Auditing the noncontrolling interests and redeemable noncontrolling interests is
complex due to the volume of tax equity funds and the allocation of the net
income or loss to the equity holders. Each HLBV calculation is based upon the
liquidation provisions of each fund’s contractual agreement used to calculate the
amount of income or loss to be attributed to the noncontrolling member.
How We Addressed the Matter in
Our Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of internal controls that address the risks of material misstatement
relating to the noncontrolling interests and redeemable noncontrolling interests.
This included evaluating controls over establishing each HLBV model and
management’s review of each significant input into the HLBV models for
compliance with the contractual provisions of such funding arrangements, the
completeness and accuracy of underlying data, the calculation of tax capital
accounts, and the mathematical accuracy of the HLBV models.
To test the noncontrolling interests and redeemable noncontrolling interests, our
audit procedures included, among others, examining the HLBV models for
compliance with contractual provisions in the funding arrangements. We tested
the completeness and accuracy of the underlying data used in the HLBV models.
We involved tax professionals to assist in evaluating the calculation of the tax
capital accounts in accordance with the tax code, as well as compliance with
contractual provisions in the funding arrangements. We also tested the
mathematical accuracy of management’s HLBV models.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
San Francisco, California
February 27, 2025
78
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Sunrun Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Sunrun Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Sunrun Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the 2024 consolidated financial statements of the Company and our report dated February 27,
2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Ernst & Young LLP
San Francisco, California
February 27, 2025
79
Sunrun Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Par Values)
As of December 31,
2024
2023
Assets
Current assets:
Cash
$
574,956
$
678,821
Restricted cash
372,312
308,869
Accounts receivable (net of allowances for credit losses of $15,420 and $19,042
as of December 31, 2024 and 2023, respectively)
170,706
172,001
Inventories
402,083
459,746
Prepaid expenses and other current assets
202,579
262,822
Total current assets
1,722,636
1,882,259
Restricted cash
148
148
Solar energy systems, net
15,032,115
13,028,871
Property and equipment, net
121,239
149,139
Goodwill
—
3,122,168
Other assets
3,021,746
2,267,652
Total assets (1)
$
19,897,884
$
20,450,237
Liabilities and total equity
Current liabilities:
Accounts payable
$
354,214
$
230,723
Distributions payable to noncontrolling interests and redeemable noncontrolling interests
41,464
35,180
Accrued expenses and other liabilities
543,752
499,225
Deferred revenue, current portion
129,442
128,600
Deferred grants, current portion
7,900
8,199
Finance lease obligations, current portion
26,045
22,053
Non-recourse debt, current portion
231,665
547,870
Pass-through financing obligation, current portion
—
16,309
Total current liabilities
1,334,482
1,488,159
Deferred revenue, net of current portion
1,208,905
1,067,461
Deferred grants, net of current portion
196,535
195,724
Finance lease obligations, net of current portion
66,139
68,753
Line of credit
384,226
539,502
Non-recourse debt, net of current portion
11,806,181
9,191,689
Convertible senior notes
479,420
392,867
Pass-through financing obligation, net of current portion
—
278,333
Other liabilities
119,846
190,866
Deferred tax liabilities
137,940
122,870
Total liabilities (1)
15,733,674
13,536,224
Commitments and contingencies (Note 18)
Redeemable noncontrolling interests
624,159
676,177
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 200,000 shares as of
December 31, 2024 and 2023; no shares issued and outstanding
as of December 31, 2024 and 2023
—
—
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of
December 31, 2024 and 2023; issued and outstanding, 225,662 and
219,392 shares as of December 31, 2024 and 2023, respectively
23
22
Additional paid-in capital
6,747,236
6,609,229
Accumulated other comprehensive loss
86,814
54,676
Retained earnings
(4,279,866)
(1,433,699)
Total stockholders’ equity
2,554,207
5,230,228
Noncontrolling interests
985,844
1,007,608
Total equity
3,540,051
6,237,836
Total liabilities, redeemable noncontrolling interests and total equity
$
19,897,884
$
20,450,237
80
(1)
The Company’s consolidated assets as of December 31, 2024 and 2023 include $13,290,216 and $11,538,540, respectively, in assets
of variable interest entities, or “VIEs”, that can only be used to settle obligations of the VIEs. Solar energy systems, net, as of
December 31, 2024 and 2023 were $12,062,819 and $10,469,093, respectively; cash as of December 31, 2024 and 2023 were
$420,756 and $254,522, respectively; restricted cash as of December 31, 2024 and 2023 were $57,892 and $48,169, respectively;
accounts receivable, net as of December 31, 2024 and 2023 were $92,259 and $76,249, respectively; inventories as of December 31,
2024 and 2023 of $62,581 and $150,065, respectively; prepaid expenses and other current assets as of December 31, 2024 and 2023
were $7,616 and $161,414, respectively and other assets as of December 31, 2024 and 2023 were $586,293 and $379,028,
respectively. The Company’s consolidated liabilities as of December 31, 2024 and 2023 include $2,343,040 and $2,417,984,
respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of
December 31, 2024 and 2023 of $5,400 and $12,187, respectively; distributions payable to noncontrolling interests and redeemable
noncontrolling interests as of December 31, 2024 and 2023 of $41,465 and $35,181, respectively; accrued expenses and other liabilities
as of December 31, 2024 and 2023 of $42,997 and $185,766, respectively; deferred revenue as of December 31, 2024 and 2023 of
$826,854 and $708,413, respectively; deferred grants as of December 31, 2024 and 2023 of $0 and $0, respectively; non-recourse debt
as of December 31, 2024 and 2023 of $1,407,784 and $1,459,621, respectively; and other liabilities as of December 31, 2024 and
2023 of $18,540 and $16,816, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
81
Sunrun Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
Year Ended December 31,
2024
2023
2022
Revenue:
Customer agreements and incentives
$ 1,505,227 $ 1,186,706 $
983,047
Solar energy systems and product sales
532,492
1,073,107
1,338,375
Total revenue
2,037,719
2,259,813
2,321,422
Operating expenses:
Cost of customer agreements and incentives
1,169,213
1,077,114
844,162
Cost of solar energy systems and product sales
539,952
1,019,638
1,178,548
Sales and marketing
617,162
740,821
745,386
Research and development
39,304
21,816
20,907
General and administrative
245,127
221,067
194,611
Goodwill impairment
3,122,168
1,158,000
—
Total operating expenses
5,732,926
4,238,456
2,983,614
Loss from operations
(3,695,207) (1,978,643)
(662,192)
Interest expense, net
(848,366)
(652,989)
(445,819)
Other income (expense), net
161,539
(63,900)
260,657
Loss before income taxes
(4,382,034) (2,695,532)
(847,354)
Income tax (benefit) expense
(26,817)
(12,691)
2,291
Net loss
(4,355,217) (2,682,841)
(849,645)
Net loss attributable to noncontrolling interests and
redeemable noncontrolling interests
(1,509,050) (1,078,344) (1,023,022)
Net (loss) income attributable to common stockholders
$ (2,846,167) $ (1,604,497) $
173,377
Net (loss) income per share attributable to common stockholders
Basic
$
(12.81) $
(7.41) $
0.82
Diluted
$
(12.81) $
(7.41) $
0.80
Weighted average shares used to compute net (loss) income
per share attributable to common stockholders
Basic
222,215
216,642
211,347
Diluted
222,215
216,642
219,157
The accompanying notes are an integral part of these consolidated financial statements.
82
Sunrun Inc.
Consolidated Statements of Comprehensive (Loss) Income
(In Thousands)
Year Ended December 31,
2024
2023
2022
Net (loss) income attributable to common stockholders
$ (2,846,167) $ (1,604,497) $
173,377
Unrealized gain on derivatives, net of income taxes
58,056
14,482
140,805
Adjustment for net gain on derivatives recognized into
earnings, net of income taxes
(25,918)
(26,915)
(646)
Other comprehensive income (loss)
32,138
(12,433)
140,159
Comprehensive (loss) income
$ (2,814,029) $ (1,616,930) $
313,536
The accompanying notes are an integral part of these consolidated financial statements.
83
Sunrun Inc.
Consolidated Statements of Redeemable Noncontrolling Interests and Stockholders' Equity
(In Thousands)
Redeemable
Noncontrolling
Interests
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Retained
Earnings
(Accumulated
Deficit)
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
Shares
Amount
Balance - December 31, 2021
$
594,973
208,176
$
21
$
6,330,344
$
(73,050)
$
(2,579)
$
6,254,736
$
722,878
$
6,977,614
Exercise of stock options
—
1,842
—
13,772
—
—
13,772
$
—
13,772
Issuance of restricted stock units, net of
tax withholdings
—
2,968
—
—
—
—
—
—
—
Shares issued in connection with the
Employee Stock Purchase Plan
—
1,198
—
19,091
—
—
19,091
—
19,091
Stock-based compensation
—
—
—
123,050
—
—
123,050
—
123,050
Contributions from redeemable
noncontrolling interests and
noncontrolling interests
89,088
—
—
—
—
—
—
1,325,705
1,325,705
Distributions to redeemable
noncontrolling interests and
noncontrolling interests
(67,732)
—
—
—
—
—
—
(150,369)
(150,369)
Net (loss) income
(5,558)
—
—
—
—
173,377
173,377
(1,017,464)
(844,087)
Acquisition of noncontrolling interest
(1,069)
—
—
(16,063)
—
—
(16,063)
(19,557)
(35,620)
Other comprehensive income, net of
taxes
—
—
—
—
140,159
—
140,159
—
140,159
Balance - December 31, 2022
609,702
214,184
21
6,470,194
67,109
170,798
6,708,122
861,193
7,569,315
Exercise of stock options
—
838
—
4,304
—
—
4,304
—
4,304
Issuance of restricted stock units, net of
tax withholdings
—
2,836
1
—
—
—
1
—
1
Shares issued in connection with the
Employee Stock Purchase Plan
—
1,534
—
18,305
—
—
18,305
—
18,305
Stock-based compensation
—
—
—
111,280
—
—
111,280
—
111,280
Contributions from redeemable
noncontrolling interests and
noncontrolling interests
185,397
—
—
—
—
—
—
1,387,002
1,387,002
Distributions to redeemable
noncontrolling interests and
noncontrolling interests
(68,310)
—
—
—
—
—
—
(159,876)
(159,876)
Net (loss) income
(30,601)
—
—
—
—
(1,604,497)
(1,604,497)
(1,047,743)
(2,652,240)
Acquisition of noncontrolling interests
(20,011)
—
—
5,146
—
—
5,146
(32,968)
(27,822)
Other comprehensive income, net of
taxes
—
—
—
—
(12,433)
—
(12,433)
—
(12,433)
Balance - December 31, 2023
676,177
219,392
22
6,609,229
54,676
(1,433,699)
5,230,228
1,007,608
6,237,836
Exercise of stock options
—
524
—
3,607
—
—
3,607
—
3,607
Issuance of restricted stock units, net of
tax withholdings
—
4,076
1
—
—
—
1
—
1
Shares issued in connection with the
Employee Stock Purchase Plan
—
1,670
—
15,267
—
—
15,267
—
15,267
Stock-based compensation
—
—
—
124,267
—
—
124,267
—
124,267
Contributions from redeemable
noncontrolling interests and
noncontrolling interests
24,602
—
—
—
—
—
—
1,787,364
1,787,364
Distributions to redeemable
noncontrolling interests and
noncontrolling interests
(68,543)
—
—
—
—
—
—
(246,400)
(246,400)
Net income (loss)
14,820
—
—
—
—
(2,846,167)
(2,846,167)
(1,523,870)
(4,370,037)
Capped call transaction
—
—
—
(38,365)
—
—
(38,365)
—
(38,365)
Acquisition of noncontrolling interests
(22,897)
—
—
33,231
—
—
33,231
(38,858)
(5,627)
Other comprehensive loss, net of taxes
—
—
—
—
32,138
—
32,138
—
32,138
Balance - December 31, 2024
$
624,159
225,662
$
23
$
6,747,236
$
86,814
$
(4,279,866)
$
2,554,207
$
985,844
$
3,540,051
The accompanying notes are an integral part of these consolidated financial statements
84
Sunrun Inc.
Consolidated Statements of Cash Flows
(In Thousands)
Year Ended December 31,
2024
2023
2022
Operating activities:
Net loss
$
(4,355,217) $
(2,682,841) $
(849,645)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, net of amortization of deferred grants
620,876
531,669
451,046
Goodwill impairment
3,122,168
1,158,000
—
Deferred income taxes
(26,817)
(12,716)
2,291
Stock-based compensation expense
112,825
111,781
110,633
Interest on pass-through financing obligations
8,837
19,504
20,076
Reduction in pass-through financing obligations
(20,787)
(40,352)
(41,164)
Unrealized (gain) loss on derivatives
(120,008)
28,105
(184,904)
Other noncash items
210,479
261,390
53,651
Changes in operating assets and liabilities:
Accounts receivable
(14,974)
15,748
(86,762)
Inventories
57,663
324,158
(277,085)
Prepaid expenses and other current assets
(771,997)
(476,628)
(378,807)
Accounts payable
177,449
(108,785)
40,458
Accrued expenses and other liabilities
80,588
(56,473)
64,122
Deferred revenue
152,762
106,700
227,297
Net cash used in operating activities
(766,153)
(820,740)
(848,793)
Investing activities:
Payments for the costs of solar energy systems
(2,699,452)
(2,587,183)
(1,992,863)
Purchase of equity investment
—
(5,000)
(75,000)
Purchases of property and equipment, net
(1,572)
(20,960)
(18,203)
Net cash used in investing activities
(2,701,024)
(2,613,143)
(2,086,066)
Financing activities:
Proceeds from state tax credits, net of recapture
5,203
4,033
—
Proceeds from trade receivable financing
124,261
41,225
—
Repayment of trade receivable financing
—
(41,225)
—
Proceeds from line of credit
354,256
1,124,675
1,165,267
Repayment of line of credit
(509,532)
(1,090,331)
(871,175)
Proceeds from issuance of convertible senior notes, net of capped call transaction
444,822
—
—
Repurchase of convertible senior notes
(346,581)
(1,545)
—
Proceeds from issuance of non-recourse debt
4,009,906
3,745,580
3,428,830
Repayment of non-recourse debt
(1,794,962)
(1,575,527)
(1,799,428)
Payment of debt fees
(93,875)
(47,342)
(62,994)
Proceeds from pass-through financing and other obligations, net
4,795
8,812
3,645
Repayment of pass-through financing obligation
(240,288)
—
—
Payment of finance lease obligations
(27,240)
(23,279)
(14,146)
Contributions received from noncontrolling interests and redeemable noncontrolling interests
1,811,966
1,572,399
1,414,793
Distributions paid to noncontrolling interests and redeemable noncontrolling interests
(308,657)
(225,114)
(217,633)
Acquisition of noncontrolling interest
(26,195)
(46,274)
(42,571)
Net proceeds related to stock-based award activities
18,876
22,611
32,863
Proceeds from transfer of investment tax credits
705,697
6,980
—
Payments to redeemable noncontrolling interests and noncontrolling interests of investment tax
credits
(705,697)
(6,980)
—
Net cash provided by financing activities
3,426,755
3,468,698
3,037,451
Net change in cash and restricted cash
(40,422)
34,815
102,592
Cash and restricted cash, beginning of period
987,838
953,023
850,431
Cash and restricted cash, end of period
$
947,416
$
987,838
$
953,023
Supplemental disclosures of cash flow information
Cash paid for interest
$
591,285
$
433,050
$
300,118
Cash paid for income taxes
$
—
$
—
$
—
Supplemental disclosures of noncash investing and financing activities
Purchases of solar energy systems and property and equipment included in accounts payable
and accrued expenses
$
40,814
$
61,740
$
61,327
Right-of-use assets obtained in exchange for new finance lease liabilities
$
36,991
$
87,726
$
21,030
Portion of solar energy systems financed with seller financing, included within non-recourse debt
$
—
$
—
$
—
85
The accompanying notes are an integral part of these consolidated financial statements.
86
Note 1. Organization
Sunrun Inc. (“Sunrun” or the “Company”) was formed in 2007. The Company is engaged in the design,
development, installation, sale, ownership and maintenance of residential solar energy and battery storage systems
(“Projects”) in the United States.
Sunrun acquires customers directly and through relationships with various solar and strategic partners
(“Partners”). The Projects are constructed either by Sunrun or by Sunrun’s Partners and are mostly owned by the
Company. Sunrun’s customers enter into an agreement to utilize the solar energy system (the “Customer
Agreement”) which typically has an initial term of 20 or 25 years. Sunrun monitors, maintains and insures the
Projects during the term of the Customer Agreement. The Company also sells battery storage along with the solar
energy systems and products, such as panels and racking and solar leads generated by customers.
The Company has formed various subsidiaries (“Funds”) to finance the development of Projects. These
Funds, structured as limited liability companies, obtain financing from outside investors and purchase Projects from
Sunrun under master purchase. The Company currently utilizes the legal structure for its investment Funds which
are referred to as partnership-flips.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) and reflect the accounts and operations of the Company and those of its
subsidiaries, including Funds, in which the Company has a controlling financial interest. 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 variable interest entities (“VIEs”), through arrangements that do
not involve controlling voting interests. In accordance with the provisions of Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Company consolidates any VIE
of which it is the primary beneficiary. The primary beneficiary, as defined in FASB ASC Topic 810, Consolidation, is
the party that has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic
performance and (2) the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that
could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing
basis to determine whether it continues to be the primary beneficiary. The consolidated financial statements reflect
the assets and liabilities of VIEs that are consolidated. All intercompany transactions and balances have been
eliminated in consolidation.
Reclassifications
When necessary, reclassifications have been made to the Company’s prior period financial information to
conform with current year presentation and are not material to the Company’s consolidated financial statements.
Use of Estimates
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 fair value estimates used in the goodwill impairment calculation, the discount rate used
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
various other assumptions believed to be reasonable. Actual results may differ from such estimates.
Sunrun Inc.
Notes to Consolidated Financial Statements
87
Segment Information
The Company has one operating segment with one business activity, providing solar energy services and
products to customers. The Company's chief operating decision maker ("CODM") is its Chief Executive Officer, who
reviews financial information presented on a consolidated basis. When evaluating performance and allocating
resources, the CODM uses consolidated income (loss) from operations and net income (loss). These financial
metrics are used by the CODM to make key operating decisions, such as the determination of volume targets and
the allocation of budget between cost of revenues, sales and marketing, research and development, and general
and administrative expenses. The CODM does not use asset or liability information in evaluating the Company’s
operating segment.
Revenue from external customers (including, but not limited to homeowners) for each group of similar
products and services is as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Customer agreements
$ 1,388,412 $ 1,077,099 $
872,298
Incentives
116,815
109,607
110,749
Customer agreements and incentives
1,505,227
1,186,706
983,047
Solar energy systems
204,776
656,408
913,904
Products
327,716
416,699
424,471
Solar energy systems and product sales
532,492
1,073,107
1,338,375
Total revenue
$ 2,037,719 $ 2,259,813 $ 2,321,422
Revenue from Customer Agreements includes payments by customers for the use of the system as well as
utility and other rebates assigned by the customer to the Company in the Customer Agreement. Revenue from
incentives includes revenue from the sale of commercial investment tax credits ("Commercial ITCs") and solar
renewable energy credits (“SRECs”).
Cash and Restricted Cash
Cash consists of bank deposits held in checking and savings accounts. The Company considers all highly
liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company
has exposure to credit risk to the extent cash balances exceed amounts covered by federal deposit insurance. The
Company believes that its credit risk is not significant.
Restricted cash represents amounts related to obligations under certain financing transactions and future
replacement of solar energy system components.
The following table provides a reconciliation of cash and restricted cash reported within the consolidated
balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.
Cash and restricted cash consists of the following (in thousands):
December 31,
2024
2023
2022
Cash
$
574,956 $
678,821 $
740,508
Restricted cash, current and long-term
372,460
309,017
212,515
Total
$
947,416 $
987,838 $
953,023
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
88
Accounts Receivable
Accounts receivable consist of amounts due from customers as well as state and utility rebates due from
government agencies and utility companies. Under Customer Agreements, the customers typically assign incentive
rebates to the Company.
Accounts receivable are recorded at net realizable value. 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. Once a receivable is deemed to be
uncollectible, it is written off. In 2024, 2023 and 2022, the Company recorded provisions for credit losses of $17.0
million, $21.7 million and $17.0 million, respectively, and wrote-off uncollectible receivables of $20.7 million, $15.8
million and $10.3 million, respectively.
Accounts receivable, net consists of the following (in thousands):
December 31,
2024
2023
Customer receivables
$
179,152 $
186,537
Other receivables
6,974
4,506
Allowance for credit losses
(15,420)
(19,042)
Total
$
170,706 $
172,001
Inventories
Inventories are stated at the lower of cost or net realizable value on a first-in, first-out basis. Inventories
consist of raw materials such as photovoltaic panels, inverters and mounting hardware as well as miscellaneous
electrical components that are sold as-is by the distribution operations and used in installations and work-in-
process. Work-in-process primarily relates to solar energy systems that will be sold to customers, which are partially
installed and have yet to meet the criteria for revenue recognition. For solar energy systems where the Company
performs the installation, the Company commences transferring component parts from inventories to construction-
in-progress, a component of solar energy systems, once a lease contract with a lease customer has been executed
and the component parts have been assigned to a specific project. Additional costs incurred including labor and
overhead are recorded within construction in progress.
The Company periodically reviews inventories for unusable and obsolete items based on assumptions about
future demand and market conditions. Based on this evaluation, provisions are made to write inventories down to
their market value.
Solar Energy Systems, net
The Company records solar energy systems subject to signed Customer Agreements and solar energy
systems that are under installation as solar energy systems, net on its consolidated balance sheet. Solar energy
systems, net is comprised of system equipment costs related to solar energy systems, less accumulated
depreciation and amortization. Depreciation on solar energy systems is calculated on a straight-line basis over the
estimated useful lives of the systems of 35 years. The Company periodically reviews its estimated useful life and
recognizes changes in estimates by prospectively adjusting depreciation expense. Inverters and batteries are
depreciated over their estimated useful life of 10 to 15 years.
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.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
89
Property and Equipment, net
Property and equipment, net consists of leasehold improvements, furniture, computer hardware and
software, machinery and equipment and automobiles. All property and equipment are stated at historical cost net of
accumulated depreciation. Repairs and maintenance are expensed as incurred.
Property and equipment is depreciated on a straight-line basis over the following periods:
Leasehold improvements
Lesser of 6 years or lease term
Furniture
5 years
Computer hardware and software
3 years
Machinery and equipment
5 years or lease term
Automobiles
Lease term
Capitalization of Software Costs
For costs incurred in the development of internal use software, the Company capitalizes costs incurred during
the application development stage. Costs related to preliminary project activities and post implementation activities
are expensed as incurred. Internal use software is amortized on a straight-line basis over its estimated useful life of
3 years. Costs of $25.9 million, $21.3 million and $10.0 million were capitalized in 2024, 2023 and 2022,
respectively.
Impairment of Long-Lived Assets
The carrying values of the Company’s 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 are considered
in deciding when to perform an impairment review would include significant negative industry or economic trends
and significant changes or planned changes in the use of the assets. Recoverability of these assets is measured by
comparison of the carrying value of each asset group to the future undiscounted cash flows the asset group is
expected to generate over its remaining life. If the asset group 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 group.
If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the
new shorter useful life. The Company has recognized no material impairments of its long-lived assets in any of the
periods presented.
Goodwill
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 value may be impaired. The Company has determined that it operates as one reporting
unit and the Company’s goodwill is recorded at the enterprise level. 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. 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
estimates, including the Company’s future financial performance, weighted average cost of capital and interpretation
of currently enacted tax laws.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
90
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. The Company tests goodwill for impairment for its one
reporting unit using an estimated fair value approach. The Company’s stock price, consistent with other industry
peers, experienced a significant decline during the fourth quarter of fiscal 2024. 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.
As of October 1st, the Company performed a qualitative assessment and concluded that the fair value of the
Company’s one reporting unit exceeded its carrying value with consideration of a reasonable control premium.
However, during the fourth quarter of fiscal 2024, due to the significant sustained decline in the Company’s market
capitalization below the book value of equity, the Company performed an interim quantitative assessment. The
Company estimated the fair value of its reporting unit primarily based on consideration of an income approach and
market capitalization. Under the income approach, future cash flows of the Company were estimated and present
valued based on a discount rate reflecting a market participant risk-adjusted rate of return.
The assumptions and estimates used in the assessment include, among others, estimated future net annual
contracted cash flows under its existing long term customer agreements, as well as future growth estimates which
rely on management judgement. The Company selected estimates used in the discounted cash flow projections
using historical data as well as current and anticipated market conditions, and estimated growth rates with
consideration of published industry trends. The Company also compared the total invested capital (including market
capitalization) to the fair value of its reporting unit to assess the reasonableness of fair value. The Company
concluded that the fair value of its one reporting unit did not exceed its carrying value as of December 31, 2024 and
recorded a non-cash goodwill impairment charge of $3.1 billion in its consolidated statements of operations primarily
driven by the Company’s market capitalization. This impairment charge did not result in a change to previously
recorded deferred taxes, as goodwill was not deductible for tax purposes, nor did it impact the Company’s liquidity
position, its debt covenants or cash flows.
Supplier Finance Agreements
The Company has entered into supplier finance agreements with certain financial institutions, whereby
these institutions pay amounts related to trade and inventory payables to suppliers on behalf of the Company. The
terms of these agreements allow the Company to extend, at its sole discretion, the original supplier payment terms
up to 90 or 120 days. The Company does not provide any form of guarantee under these financing agreements.
Amounts outstanding under these agreements are reflected in Accrued expenses and other liabilities in the
consolidated balance sheets. The Company records interest for the period the supplier finance obligation is
outstanding and reflects the proceeds and payments related to these transactions as a financing activity within its
consolidated statement of cash flow.
The following is a rollforward of the obligations under these supplier finance agreements (in thousands):
Supplier finance obligations outstanding at December 31, 2022
$
—
Proceeds from trade receivable financing
41,225
Repayment of trade receivable financing
(41,225)
Supplier finance obligations outstanding at December 31, 2023
—
Proceeds from trade receivable financing
124,261
Repayment of trade receivable financing
—
Accrued interest on trade receivable financing
5,977
Supplier finance obligations outstanding at December 31, 2024
$
130,238
Deferred Revenue
When the Company receives consideration, or when such consideration is unconditionally due, from a
customer prior to delivering goods or services to the customer under the terms of a Customer Agreement, the
Company records deferred revenue. Such deferred revenue consists of amounts for which the criteria for revenue
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
91
recognition have not yet been met and includes amounts that are collected or assigned from customers, including
upfront deposits and prepayments, and rebates. Deferred revenue relating to financing components represents the
cumulative excess of interest expense recorded on financing component elements over the related revenue
recognized to date and will eventually net to zero by the end of the initial term. Amounts received related to the
sales of SRECs which have not yet been delivered to the counterparty are recorded as deferred revenue.
The opening balance of deferred revenue was $1,096.0 million as of December 31, 2022. Deferred revenue
consists of the following (in thousands):
December 31,
2024
2023
Under Customer Agreements:
Payments received, net
$
950,225 $
873,137
Financing component balance
79,731
72,289
1,029,956
945,426
Under SREC contracts:
Payments received, net
291,972
237,800
Financing component balance
16,419
12,835
308,391
250,635
Total
$
1,338,347 $
1,196,061
During the years ended December 31, 2024, 2023 and 2022, the Company recognized revenue of $137.7
million, $113.3 million and $99.0 million, respectively, from amounts included in deferred revenue at the beginning of
the respective periods. Revenue allocated to remaining performance obligations represents contracted revenue that
has not yet been recognized and includes deferred revenue as well as amounts that will be invoiced and recognized
as revenue in future periods. Contracted but not yet recognized revenue was approximately $31.3 billion as of
December 31, 2024, of which the Company expects to recognize approximately 5% over the next 12 months. The
annual recognition is not expected to vary significantly over the next 10 years as the vast majority of existing
Customer Agreements have at least 10 years remaining, given that the average age of the Company's fleet of
residential solar energy systems under Customer Agreements is less than 6 years due to the Company being
formed in 2007 and having experienced significant growth in the last few years. 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.
Deferred Grants
Deferred grants consist of U.S. Treasury grants and state tax credits. The Company applied for a renewable
energy technologies income tax credit offered by one of the states in the form of a cash payment and deferred the
tax credit as a grant on the consolidated balance sheets. 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.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
92
Warranty Accrual
The Company accrues warranty costs when revenue is recognized for solar energy systems sales, based on
the estimated future costs of meeting its warranty obligations. Warranty costs primarily consist of replacement costs
for supplies and labor costs for service personnel since warranties for equipment and materials are covered by the
original manufacturer’s warranty (other than a small deductible in certain cases). As such, the warranty reserve is
immaterial in all periods presented. 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. A
warranty is provided for solar systems sold and leased. 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. Instead, any repair costs on those solar energy systems are expensed when they are
incurred as a component of customer agreements and incentives costs of revenue.
Solar Energy Performance Guarantees
The Company guarantees to customers certain specified minimum solar energy production output for solar
facilities over the initial term of the Customer Agreements. The Company monitors the solar energy systems to
determine whether these specified minimum outputs are being achieved. Annually or every two years, depending on
the terms of the Customer Agreement, the Company will refund a portion of electricity payments to a customer if the
solar energy production output was less than the performance guarantee. The Company considers this a variable
component that offsets the transaction price.
Derivative Financial Instruments
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 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 is 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. On
the date that the Company enters into a derivative contract, the Company formally documents all relationships
between the hedging instruments and the hedged items, as well as its risk management objective and strategy for
undertaking each hedge transaction. Derivative instruments designated in a hedge relationship to mitigate exposure
to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow
hedges. Cash flow hedges are accounted for by recording the fair value of the derivative instrument on the balance
sheet as either a freestanding asset or liability. Changes in the fair value of a derivative that is designated and
qualifies as an effective cash flow hedge are recorded in accumulated other comprehensive loss, net of tax, until
earnings are affected by the variability of cash flows of the hedged item. Any derivative gains and losses that are not
effective in hedging the variability of expected cash flows of the hedged item or that do not qualify for hedge
accounting treatment are recognized directly into income. At the hedge’s inception and at least quarterly thereafter,
a formal assessment is performed to determine whether changes in cash flows of the derivative instrument have
been highly effective in offsetting changes in the cash flows of the hedged items and whether they are expected to
be highly effective in the future. The Company discontinues hedge accounting prospectively when (i) it determines
that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item; (ii) the derivative
expires or is sold, terminated, or exercised; or (iii) management determines that designating the derivative as a
hedging instrument is no longer appropriate. 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 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.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
93
Fair Value of Financial Instruments
The Company defines fair value as the exchange price that would be received for an asset or an exit price
that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. The Company uses valuation
approaches to measure fair value that maximize the use of observable inputs and minimize the use of unobservable
inputs. The FASB establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
•
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the
measurement date;
•
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or
liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not
active, or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the related assets or liabilities; and
•
Level 3—Inputs that are unobservable, significant to the measurement of the fair value of the assets or
liabilities and are supported by little or no market data.
The Company’s financial instruments include cash, receivables, accounts payable, accrued expenses,
distributions payable to noncontrolling interests, derivatives, contingent consideration, and recourse and non-
recourse debt.
Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair
value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances. These assets
can include goodwill that is written down to fair value when it is impaired, which uses level 3 inputs. Assets that are
written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment
occurs.
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 expects to be entitled to in exchange for those goods or services.
Customer agreements and incentives
Customer agreements and incentives revenue is primarily comprised of revenue from Customer
Agreements in which the Company provides continuous access to a functioning solar energy system and revenue
from the sales of SRECs generated by the Company’s solar energy systems to third parties.
The Company begins to recognize revenue on Customer Agreements when permission to operate ("PTO")
is given by the local utility company or on the date daily operation commences if utility approval is not required.
Revenue recognition does not necessarily follow the receipt of cash. For Customer Agreements that include a fixed
fee per month which entitles the customer to any and all electricity generated by the system, and for which the
Company’s obligation is to provide continuous access to a functioning solar energy system, the Company
recognizes revenue evenly over the time that it satisfies its performance obligations, which is over the initial term of
the Customer Agreements. For Customer Agreements that charge a fixed price per kilowatt hour, and for which the
Company’s obligation is the provision of electricity from a solar energy system, revenue is recognized based on the
actual amount of power generated at rates specified under the contracts. Customer Agreements typically have an
initial term of 20 or 25 years. After the initial contract term, Customer Agreements typically automatically renew
annually or for a five year term.
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.
In determining the transaction price, the Company adjusts the promised amount of consideration for the
effects of the time value of money when the timing of payments provides it with a significant benefit of financing the
transfer of goods or services to the customer. 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
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
94
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. Performance guarantees provide a credit to the customer if the system's cumulative production, as
measured on various PTO anniversary dates, is below the Company's guarantee of a specified minimum. Revenue
is recognized to the extent it is probable that a significant reversal of such revenue will not occur.
The Company capitalizes incremental costs incurred to obtain a contract in Other Assets in the consolidated
balance sheets. These amounts are amortized on a straight-line basis over the term of the Customer Agreements,
and are included in Sales and marketing in the consolidated statements of operations.
Solar energy systems and product sales
For solar energy systems sold to customers, revenue is recognized 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 the Company has met the performance obligation in the contract. For solar energy system sales that
include delivery obligations up until interconnection to the local power grid with permission to operate, the Company
recognizes revenue at PTO. Certain solar energy systems sold to customers include fees for extended warranty
and maintenance services. These fees are recognized over the life of the service agreement. The Company’s
installation Projects are typically completed in less than twelve months.
Product sales consist of solar panels, racking systems, inverters, other solar energy products sold to
resellers, roofing repair, and customer leads. Product sales revenue is recognized at the time when control is
transferred, upon shipment, or as services are delivered. Customer lead revenue, included in product sales, is
recognized at the time the lead is delivered.
Taxes assessed by government authorities that are directly imposed on revenue producing transactions are
excluded from solar energy systems and product sales.
Cost of Revenue
Customer agreements and incentives
Cost of revenue for customer agreements and incentives is primarily comprised of (1) the depreciation of the
cost of the solar energy systems, as reduced by amortization of deferred grants, (2) solar energy system operations,
monitoring and maintenance costs including associated personnel costs, and (3) allocated corporate overhead
costs.
Solar energy systems and product sales
Cost of revenue for solar energy systems and non-lead generation product sales consist of direct and indirect
material and labor costs for solar energy systems installations and product sales. Also included are engineering and
design costs, estimated warranty costs, freight costs, allocated corporate overhead costs, vehicle depreciation costs
and personnel costs associated with supply chain, logistics, operations management, safety and quality control.
Cost of revenue for lead generations consists of costs related to direct-response advertising activities associated
with generating customer leads.
Research and Development Expense
Research and development expenses include personnel costs, allocated overhead costs, and other costs
related to the development of the Company’s proprietary technology.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
95
Stock-Based Compensation
The Company grants stock options and restricted stock units (“RSUs”) for its equity incentive plan and
employee stock purchase plan. Stock-based compensation to employees is measured based on the grant date fair
value of the awards and recognized over the period during which the employee is required to perform services in
exchange for the award (generally the vesting period of the award). When determining the grant date fair value of
stock-based compensation, the Company utilizes the observable closing share price of its stock on the grant date.
The Company considers whether any adjustments are needed to the share price to reflect fair value, including in
instances where the observable market price does not reflect certain material non-public information known to the
Company, but unavailable to marketplace participants at the time the market price is observed. No such
adjustments were made during the years ended December 31, 2024, 2023, and 2022. The Company estimates the
fair value of stock options and employee stock purchase plans awards granted using the Black-Scholes option-
valuation model. Upon completion of the acquisition of Vivint Solar, all outstanding equity awards under Vivint
Solar's equity incentive plans were automatically converted to Sunrun equity awards with the number of shares
underlying such awards (and, in the case of stock options, the applicable exercise price) adjusted based on the
exchange ratio of 0.55 shares of Sunrun common stock per share of Vivint Solar common stock and the fair value
was also updated in accordance with FASB ASC Topic 718, Stock Compensation. Compensation cost is recognized
over the vesting period of the applicable award using the straight-line method for those options expected to vest.
For performance-based equity compensation awards, the Company generally recognizes compensation expense
for each vesting tranche over the related performance period.
The Company also grants RSUs to non-employees that vest upon the satisfaction of both performance and
service conditions. 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 (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 (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 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
Noncontrolling interests represent investors’ interests in the net assets of the Funds that the Company has
created to finance the cost of its solar energy systems subject to the Company’s Customer Agreements. The
Company has determined that the contractual provisions in the funding arrangements represent substantive profit
sharing arrangements. The Company has further determined that the appropriate methodology for attributing
income and loss to the noncontrolling interests and redeemable noncontrolling interests each period is a balance
sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method.
Under the HLBV method, the amounts of income and loss attributed to the noncontrolling interests and
redeemable noncontrolling interests in the consolidated statements of operations reflect changes in the amounts the
investors would hypothetically receive at each balance sheet date under the liquidation provisions of the contractual
agreements of these arrangements, which are based on the investors' tax capital accounts, assuming the net assets
of these funding structures were liquidated at recorded amounts. The Company’s initial calculation of the investor’s
noncontrolling interest in the results of operations of these funding arrangements is determined as the difference in
the noncontrolling interests’ claim under the HLBV method at the start and end of each reporting period, after taking
into account any capital transactions, such as contributions or distributions, between the Fund and the investors.
The Company classifies certain noncontrolling interests with redemption features that are not solely within the
control of the Company outside of permanent equity on its consolidated balance sheets. 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.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
96
Income Taxes
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. Under this method,
deferred tax assets and liabilities are determined based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
reverse. Valuation allowances are provided against deferred tax assets to the extent that it is more likely than not
that the deferred tax asset will not be realized. The Company is subject to the provisions of FASB ASC Topic 740,
Income Taxes, which establishes consistent thresholds as it relates to accounting for income taxes. 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
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. As the Funds are consolidated by the Company, the
gain on the sale of the solar energy systems is not recognized in the consolidated financial statements. However,
this gain is recognized for tax reporting purposes. The Company accounts 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.
The Company accounts for investment tax credits as a reduction of income tax expense in the year in which
the credits are recognized (i.e. the flow-through method). The Company enters into ITC transfer agreements with
third-party transferees to transfer to such third-parties, for cash, the ITCs generated by certain solar energy systems
that have been or will be placed in service. The Company accounts for its share of ITC transfer proceeds under
ASC 740, Income Taxes, as a reduction of income tax expense in the consolidated statement of operations during
the year in which the credits are recognized (i.e., the flow-through method) and the tax equity investor’s share is
distributed upon receipt.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. 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 jurisdiction.
Concentrations of Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily
of cash and accounts receivable, which includes rebates receivable. The associated risk of concentration for cash is
mitigated by banking with institutions with high credit ratings. At certain times, amounts on deposit exceed Federal
Deposit Insurance Corporation insurance limits. The Company does not require collateral or other security to
support accounts receivable. To reduce credit risk, management performs periodic credit evaluations and ongoing
evaluations of its customers’ financial condition. Rebates receivable are due from various states and local
governments as well as various utility companies. The Company considers the collectability risk of such amounts to
be low. The Company is not dependent on any single customer. The Company’s customers under Customer
Agreements are primarily located in California, Arizona, New Jersey, New York, Maryland, Illinois and
Massachusetts. The loss of a customer would not adversely impact the Company’s operating results or financial
position. The Company depends on a limited number of suppliers of solar panels and other system components.
During the years ended December 31, 2024 and 2023, the solar materials purchases from the top five suppliers
were approximately $854.9 million and $561.6 million, respectively.
Recently Issued and Adopted Accounting Standards
Accounting standards adopted January 1, 2022:
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for
Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract
liabilities acquired in a business combination to be recognized and measured in accordance with FASB ASC Topic
606, Revenue from Contracts with Customers. This ASU is effective for interim and annual periods beginning after
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
97
December 15, 2022 on a prospective basis, with early adoption permitted. Effective January 1, 2022, the Company
early adopted ASU 2021-08 on a prospective basis. There was no impact to its consolidated financial statements.
In May 2021, the FASB issued ASU No. 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. The Company adopted ASU
2021-04 effective January 1, 2022, and there was no impact to its consolidated financial statements.
Accounting standards adopted January 1, 2023:
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 adopted ASU
2022-04 effective January 1, 2023 and there was no impact to its financial statement disclosures.
Accounting standards adopted January 1, 2024:
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and
requires enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a
public entity’s CODM uses reported segment profit or loss information in assessing segment performance and
allocating resources. This ASU became effective for fiscal years beginning after December 15, 2023. The Company
adopted ASU 2023-07 during the year ended December 31, 2024, see Segment Information above in this footnote
for further detail.
Accounting standards to be adopted:
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements — Codification Amendments in
Response to the SEC’s Disclosure Update and Simplification Initiative, to modify the disclosure or presentation
requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC’s
existing disclosures with those entities that were not previously subject to the SEC’s requirements, and to align the
requirements in the FASB accounting standard codification with the SEC’s regulations. The amendments in this
ASU are effective when the related disclosure is effectively removed from Regulations S-X or S-K, with early
adoption prohibited. The Company is currently evaluating the provisions of the amendments and the impact on its
future consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income
Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash
taxes paid both in the U.S. and foreign jurisdictions. This ASU is effective for fiscal years beginning after December
15, 2024, with early adoption permitted. The Company is currently evaluating this guidance and the impact it may
have on its financial statement disclosures.
In March 2024, the SEC issued Final Rule 33-11275 and 34-99678 - The Enhancement and Standardization
of Climate-Related Disclosures for Investors. This rule requires registrants to provide standardized disclosures
related to climate-related risks, governance and risk management strategies, and the financial impact of severe
weather events and Scope 1 and 2 greenhouse gas emissions. The rule requires implementation in phases
between 2025 and 2033. In April 2024, the SEC announced that it would voluntarily stay its final climate disclosure
rules pending judicial review. The Company is currently evaluating the impact of the rule on its future consolidated
financial statements.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
98
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income
—Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses. This guidance requires
disclosures about significant expense categories, including but not limited to, inventory purchases, employee
compensation, depreciation, amortization, and selling expenses. This ASU is effective for fiscal years beginning
after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early
adoption permitted. The Company is currently evaluating this guidance and the impact it may have on its financial
statement disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt — Debt with Conversion and Other Options
(Subtopic 470-20) — Induced Conversions of Convertible Debt Instruments. This guidance clarifies the
requirements for determining whether to account for certain early settlements of convertible debt instruments as
induced conversions or extinguishment. This ASU is effective for fiscal years beginning after December 15, 2025,
with early adoption permitted for entities that have already adopted ASU 2020-06, Debt—Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-
40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The Company is currently
evaluating this guidance and the impact it may have on its future consolidated financial statements.
Note 3. Fair Value Measurement
At December 31, 2024 and 2023, the carrying value of receivables, accounts payable, accrued expenses and
distributions payable to noncontrolling interests approximates fair value due to their short-term nature and falls
under the Level 2 hierarchy. The carrying values and fair values of debt instruments are as follows (in thousands):
December 31, 2024
December 31, 2023
Carrying Value
Fair Value
Carrying Value
Fair Value
Recourse debt
$
863,646 $
807,801 $
932,369 $
844,727
Senior debt
4,738,594
4,681,858
4,114,134
4,082,994
Subordinated debt
2,667,010
2,539,930
2,219,573
2,131,994
Securitization debt
4,632,242
4,363,326
3,405,852
3,191,542
Total
$
12,901,492 $ 12,392,915 $
10,671,928 $ 10,251,257
At December 31, 2024 and 2023, the fair value of certain recourse debt and certain senior, subordinated and
securitization loans approximate their carrying values because their interest rates are variable rates that
approximate rates currently available to the Company. At December 31, 2024 and 2023, the fair value of the
Company’s other debt instruments are based on rates currently offered for debt with similar maturities and terms.
The Company’s fair value of the debt instruments fell under the Level 2 hierarchy. These valuation approaches
involve some level of management estimation and judgment, the degree of which is dependent on the price
transparency for the instruments or market.
At December 31, 2024 and 2023, financial instruments measured at fair value on a recurring basis, based
upon the fair value hierarchy are as follows (in thousands):
December 31, 2024
Level 1
Level 2
Level 3
Total
Derivative assets:
Interest rate swaps
$
— $ 171,758 $
— $ 171,758
Total
$
— $ 171,758 $
— $ 171,758
Derivative liabilities:
Interest rate swaps
$
— $
7,385 $
— $
7,385
Total
$
— $
7,385 $
— $
7,385
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
99
December 31, 2023
Level 1
Level 2
Level 3
Total
Derivative assets:
Interest rate swaps
$
— $ 132,734 $
— $ 132,734
Total
$
— $ 132,734 $
— $ 132,734
Derivative liabilities:
Interest rate swaps
$
— $
60,401 $
— $
60,401
Total
$
— $
60,401 $
— $
60,401
The above balances are recorded in other assets and other liabilities, respectively, in the consolidated
balance sheets, except for $30.6 million and $55.5 million as of December 31, 2024 and 2023, respectively, which is
recorded in prepaid expenses and other current assets.
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.
Note 4. Inventories
Inventories consist of the following (in thousands):
December 31,
2024
2023
Raw materials
$
357,870 $
413,410
Work-in-process
44,213
46,336
Total
$
402,083 $
459,746
The Internal Revenue Service (“IRS”) provided taxpayers a safe harbor opportunity for solar facilities that
began construction prior to January 1, 2025 and are placed in service on or after January 1, 2025 to elect the
application of the Commercial ITC under Section 48(a) of the Code. The Company has sought to avail itself of the
safe harbor in order to retain the ability to elect the application of the Commercial ITC under Section 48(a) of the
Code by incurring certain costs and taking title to equipment in 2024. As of December 31, 2024, there was $349.5
million related to the safe harbor program within raw materials.
Note 5. Solar Energy Systems, net
Solar energy systems, net consists of the following (in thousands):
December 31,
2024
2023
Solar energy system equipment costs
$
14,258,772 $
12,558,996
Inverters and batteries
2,554,739
1,845,580
Total solar energy systems
16,813,511
14,404,576
Less: accumulated depreciation and amortization
(2,732,888)
(2,165,171)
Add: construction-in-progress
951,492
789,466
Total solar energy systems, net
$
15,032,115 $
13,028,871
All solar energy systems, including construction-in-progress, have been leased to or are subject to signed
Customer Agreements with customers. In accordance with its policy, the Company periodically reviews the
estimated useful lives of its fixed assets on an ongoing basis and recognizes any changes in estimated useful lives
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
100
by prospectively adjusting depreciation expense. During the three months ended June 30, 2024, the Company
completed an assessment of its battery equipment, which included review of an independent engineering report,
and determined that the useful life of its batteries was longer than the estimated useful life being used to calculate
depreciation. As a result, effective April 1, 2024, the Company changed its estimated useful life to reflect the
estimated period these assets will remain in service. The estimated useful life of batteries previously was 10 years
and was increased to 15 years. The impact of this change in estimate reduces depreciation expense and was
immaterial for the twelve months ended December 31, 2024. For batteries placed in service as of the effective date
of April 1, 2024, the impact on depreciation for the year ended December 31, 2024 was approximately $14.0 million.
The Company recorded depreciation expense related to solar energy systems of $584.6 million, $500.6 million and
$426.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. The depreciation expense was
reduced by the amortization of deferred grants of $7.8 million, $8.2 million and $8.3 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
Note 6. Property and Equipment, net
Property and equipment, net consists of the following (in thousands):
December 31,
2024
2023
Machinery and equipment
$
17,375 $
17,216
Leasehold improvements, furniture, and computer hardware
43,835
47,810
Vehicles
159,736
157,486
Computer software
56,742
74,636
Total property and equipment
277,688
297,148
Less: Accumulated depreciation and amortization
(156,449)
(148,009)
Total property and equipment, net
$
121,239 $
149,139
Depreciation and amortization expense was $44.1 million, $31.9 million and $27.2 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
Note 7. Goodwill, net
The goodwill was acquired as part of the acquisition of Mainstream Energy Corporation, which included AEE
Solar and its racking business SnapNrack; Clean Energy Experts, LLC; Omni Energy, LLC; and Vivint Solar.
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. During the fourth quarter of 2024, the Company as part of its annual impairment
test performed a qualitative assessment as of October 1, 2024 related to the recoverability of its goodwill for its one
reporting unit. As of October 1, 2024, the Company concluded that the fair value of the Company’s one reporting
unit exceed its carrying value with consideration of a reasonable control premium. However, during the fourth
quarter of fiscal 2024, the Company performed an interim quantitative assessment as of December 31, 2024 related
to the recoverability of its goodwill for its one reporting unit as a result of a material sustained decline in the
Company’s market capitalization below the book value of equity. The Company concluded that the fair value of its
one reporting unit did not exceed its carrying value as of December 31, 2024 and recorded a non-cash goodwill
impairment charge of $3.1 billion in its consolidated statements of operations. As of September 30, 2023, the
Company concluded that the fair value of the Company’s one reporting unit did not exceed its carrying value with
consideration of a control premium and recorded a non-cash goodwill impairment charge of $1.2 billion in its
consolidated statements of operations. There was no such impairment during the year ended December 31, 2022.
The change in the carrying value of goodwill is as follows (in millions):
Balance—January 1, 2023 and 2022
$
4,280
Impairment—September 30, 2023
(1,158)
Balance—December 31, 2023
$
3,122
Impairment—December 31, 2024
$
(3,122)
Balance—December 31, 2024
$
—
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
101
Note 8. Other Assets
Other assets consist of the following (in thousands):
December 31,
2024
2023
Costs to obtain contracts - customer agreements
$
2,084,545 $
1,565,098
Costs to obtain contracts - incentives
2,481
2,481
Accumulated amortization of costs to obtain contracts
(243,989)
(168,564)
Unbilled receivables
681,823
468,379
Allowance for credit loss on unbilled receivables
(6,928)
(4,774)
Operating lease right-of-use assets
76,810
91,635
Equity investment
81,297
132,563
Other assets
345,707
180,834
Total
$
3,021,746 $
2,267,652
The Company recorded amortization of costs to obtain contracts of $76.2 million and $56.3 million for the
years ended December 31, 2024 and 2023, respectively, in sales and marketing expense in the consolidated
statements of operations.
The majority of unbilled receivables arise from fixed price escalators included in the Company's long-term
Customer Agreements. The escalator is included in calculating the total estimated transaction value for an individual
Customer Agreement. The total estimated transaction value is then recognized over the term of the Customer
Agreement. 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. The Company
applies an estimated loss-rate in order to determine the current expected credit loss for unbilled receivables. The
estimated loss-rate is determined by analyzing historical credit losses, residential first and second mortgage
foreclosures and consumers' utility default rates, as well as current economic conditions. The Company reviews
individual customer collection status of electricity billings to determine whether the unbilled receivables for an
individual customer should be written off, including the possibility of a service transfer to a potential new
homeowner.
Note 9. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following (in thousands):
December 31,
2024
2023
Accrued employee compensation
$
104,747 $
93,414
Operating lease obligations
28,784
29,572
Accrued interest
115,112
92,881
Accrued supplier finance obligations
130,238
—
Other accrued expenses
164,871
283,358
Total
$
543,752 $
499,225
102
Note 10. Indebtedness
As of December 31, 2024 and 2023, respectively, debt consisted of the following (in thousands, except
percentages):
December
31, 2024
December
31, 2023
Unused
Borrowing
Capacity (1)
Weighted
Average
Interest Rate
at December
31, 2024 (2)
Weighted
Average
Interest Rate
at December
31, 2023 (2)
Contractual
Interest Rate (3)
Contractual
Maturity Date
Recourse debt
Line of credit (4)
$ 384,226
$ 539,502
$
—
8.45%
8.89%
SOFR +3.25%
March 2027
Convertible Senior Notes
due 2026 (5)
7,687
397,642
—
—%
—%
—%
February 2026
Convertible Senior Notes
due 2030 (6)
483,187
—
—
4.00%
—%
4%
March 2030
Total recourse debt
875,100
937,144
—
Unamortized debt discount
(11,454)
(4,775)
—
Total recourses debt, net
863,646
932,369
—
Non-recourse debt (7)
Senior revolving and delayed
draw loans (8)
2,412,400
1,886,300
61,500
7.24%
7.59%
SOFR +2.35% -
3.10%
March 2027 -
February 2028
Senior non-revolving loans (9)
2,325,558
2,226,343
—
6.66%
7.07%
4.66% - 6.93%;
SOFR +1.85% -
2.25%
September 2026
- January 2054
Subordinated revolving and
delayed draw loans (8)
20,400
146,000
—
13.62%
12.01%
SOFR +9.10%
March 2027
Subordinated loans (10)(11)(12)
2,691,534
2,110,693
—
9.36%
9.18%
7.00% - 10.61%;
SOFR +6.50% -
6.90%
April 2027 -
January 2042
Securitized loans
4,705,549
3,450,794
—
5.08%
4.61%
2.27% - 6.60%
April 2048 -
October 2059
Total non-recourse debt
12,155,441 9,820,130
61,500
Unamortized debt (discount)
premium, net
(117,595)
(80,571)
—
Total non-recourse debt, net
12,037,846 9,739,559
61,500
Total debt, net
$ 12,901,492 $ 10,671,928 $
61,500
(1)
Represents the additional amount the Company could borrow, if any, based on the state of its existing assets
as of December 31, 2024.
(2)
Reflects weighted average contractual, unhedged rates. See Note 11, Derivatives, for hedge rates.
(3)
Ranges shown reflect fixed interest rate and rates using SOFR, as applicable.
(4)
The working capital facility (the “Facility”) was amended in October 2024 and its total commitment of up to
$447.5 million 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% to 2.75% depending on total
outstanding balance as a percentage of total commitment 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% to 3.75% depending
on total outstanding balance as a percentage of total commitment 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
103
pursuant to clause (b), the “Adjusted Term SOFR Rate”). The maturity date of this facility was automatically
extended to March 1, 2027 in September 2024 as the Company had funds on deposit in the Convertible Debt
Reserve Account equal to the amount sufficient to repay at the scheduled maturity all of its 0% Senior
Convertible Notes due 2026 that were outstanding as of September 2024. 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, 2024.
(5)
Convertible senior notes due 2026 (the "2026 Notes") under this category with an outstanding balance of $7.7
million as of December 31, 2024 will not bear regular interest, and the principal amount of the 2026 Notes will
not accrete. The 2026 Notes may bear special interest under specified circumstances relating to the
Company’s failure to comply with its reporting obligations under the Indenture or if the 2026 Notes are not
freely tradeable as required by the indenture. The 2026 Notes will mature on February 1, 2026, unless earlier
repurchased by the Company, redeemed by the Company or converted pursuant to their terms. The initial
conversion rate of the Notes is 8.4807 shares of the Company’s common stock, par value $0.0001 per share,
per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately
$117.91 per share. The conversion rate will be subject to adjustment upon the occurrence of certain specified
events but will not be adjusted for any accrued and unpaid special interest. In addition, upon the occurrence
of a make-whole fundamental change or an issuance of a notice of redemption, the Company will, in certain
circumstances, increase the conversion rate by a number of additional shares for a holder that elects to
convert its 2026 Notes in connection with such make-whole fundamental change or notice of redemption. The
debt discount recorded on the 2026 Notes is being amortized to interest expense at an effective interest rate
of 0.57%. As of December 31, 2024, $7.7 million of the debt discount was amortized to interest expense
inception to date. In connection with the offering of the 2026 Notes, the Company entered into privately
negotiated capped call transactions (the “2026 Capped Calls”) with certain of the initial purchasers and/or
their respective affiliates at a cost of approximately $28.0 million. The 2026 Capped Calls are classified as
equity and were recorded to additional paid-in-capital within stockholders’ equity as of March 31, 2021. The
2026 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 2026 Notes. The 2026 Capped Calls
have initial cap prices of $157.22 per share. The 2026 Capped Calls cover, subject to anti-dilution
adjustments, approximately 3.4 million shares of common stock. The 2026 Capped Calls are expected
generally to reduce the potential dilution to the common stock upon any conversion of 2026 Notes and/or
offset any cash payments the Company is required to make in excess of the principal amount of the 2026
Notes, as the case may be, in the event the market price per share of common stock, as measured under the
2026 Capped Calls, is greater than the strike price of the 2026 Capped Call, with such offset subject to a cap.
If, however, the market price per share of the common stock, as measured under the 2026 Capped Calls,
exceeds the cap price of the 2026 Capped Calls, there would be dilution and/or there would not be an offset
of such potential cash payments, in each case, to the extent that the then-market price per share of the
common stock exceeds the cap price. The final components of the 2026 Capped Calls are scheduled to
expire on January 29, 2026. None of the conversion criteria has been met as of December 31, 2024.
(6)
Convertible senior notes due 2030 (the "2030 Notes" and, together with the 2026 Notes, the "Notes") under
this category with an outstanding balance of $483.2 million as of December 31, 2024 will bear regular interest
at 4.00% per annum, and the principal amount of the 2030 Notes will not accrete. The 2030 Notes may bear
special interest under specified circumstances relating to the Company’s failure to comply with its reporting
obligations under the Indenture or if the 2030 Notes are not freely tradeable as required by the indenture. The
2030 Notes will mature on March 1, 2030, unless repurchased by the Company, redeemed by the Company
or converted pursuant to their terms prior to maturity. The initial conversion rate of the 2030 Notes is 61.3704
shares of the Company’s common stock, par value $0.0001 per share, per $1,000 principal amount of 2030
Notes, which is equivalent to an initial conversion price of approximately $16.29 per share. The conversion
rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for
any accrued and unpaid special interest. In addition, upon the occurrence of a make-whole fundamental
change or an issuance of a notice of redemption, the Company will, in certain circumstances, increase the
conversion rate by a number of additional shares for a holder that elects to convert its 2030 Notes in
connection with such make-whole fundamental change or notice of redemption. The debt discount recorded
on the 2030 Notes is being amortized to interest expense at an effective interest rate of 4.51%. As of
December 31, 2024, $1.6 million of the debt discount was amortized to interest expense inception to date. In
connection with the offering of the 2030 Notes, the Company entered into privately negotiated capped call
104
transactions (the “2030 Capped Calls”) with certain of the initial purchasers and/or their respective affiliates at
a cost of approximately $38.4 million. The 2030 Capped Calls are classified as equity and were recorded to
additional paid-in-capital within stockholders’ equity as of March 31, 2024. The 2030 Capped Calls each have
an initial strike price of approximately $16.29 per share, subject to certain adjustments, which corresponds to
the initial conversion price of the 2030 Notes. The 2030 Capped Calls have initial cap prices of $22.37 per
share. The 2030 Capped Calls cover, subject to anti-dilution adjustments, approximately 29.7 million shares of
common stock. The 2030 Capped Calls are expected generally to reduce the potential dilution to the common
stock upon any conversion of 2030 Notes and/or offset any cash payments the Company is required to make
in excess of the principal amount of the 2030 Notes, as the case may be, in the event the market price per
share of common stock, as measured under the 2030 Capped Calls, is greater than the strike price of the
2030 Capped Call, with such offset subject to a cap. If, however, the market price per share of the common
stock, as measured under the 2030 Capped Calls, exceeds the cap price of the 2030 Capped Calls, there
would be dilution and/or there would not be an offset of such potential cash payments, in each case, to the
extent that the then-market price per share of the common stock exceeds the cap price. The final components
of the 2030 Capped Calls are scheduled to expire on February 27, 2030. None of the conversion criteria has
been met as of December 31, 2024.
(7)
Certain loans under this category are part of project equity transactions.
(8)
Pursuant to the terms of the aggregation facilities within this category the Company may draw up to an
aggregate principal amount of $2.8 billion in revolver borrowings depending on the available borrowing base
at the time.
(9)
Loans under this category with a fixed rate had a total outstanding balance of $888.6 million as of
December 31, 2024.
(10)
A loan under this category with an outstanding balance of $152.5 million as of December 31, 2024 contains a
put option that can be exercised beginning in 2036 that would require the Company to pay off the entire loan
on November 30, 2037.
(11)
Loans under this category with a floating rate had a total outstanding balance of $646.4 million as of
December 31, 2024.
(12)
A loan under this category with an outstanding balance of $217.5 million as of December 31, 2024 and a
maturity date of June 28, 2026 was amended on January 31, 2025 to extend the maturity date to June 28,
2027 and upsize the facility by $35.0 million.
Senior and Subordinated Debt Facilities
Each of the Company's senior and subordinated debt facilities contain customary covenants including the
requirement to maintain certain financial measurements and provide lender reporting. Each of the senior and
subordinated debt facilities also contain certain provisions in the event of default that entitle lenders to take certain
actions including acceleration of amounts due under the facilities and acquisition of membership interests and
assets that are pledged to the lenders under the terms of the senior and subordinated debt facilities. The facilities
are non-recourse to the Company and are secured by net cash flows from Customer Agreements or inventories less
certain operating, maintenance and other expenses that are available to the borrower after distributions to tax equity
investors, where applicable. Under the terms of these facilities, the Company's subsidiaries pay interest and
principal from the net cash flows available to the subsidiaries. The Company was in compliance with all debt
covenants as of December 31, 2024.
Non-Recourse Financings
In connection with each of the Company's non-recourse debt (including securitized loans), assets (consisting
of membership interests in project companies that own photovoltaic systems and related Customer Agreements)
were contributed by the Company to special purpose subsidiaries of the Company (each a “Non-Recourse
Borrower”). Each of such financings contains customary covenants including the requirement to provide reporting to
the indenture trustee or collateral agent and, if applicable, ratings agencies. Each of the financings also contains
certain provisions which entitle the indenture trustee or collateral agent to take certain actions upon the occurrence
of an event of default, including acceleration of amounts due under the facilities and the foreclosure on the assets of
the Non-Recourse Borrower that are pledged to the lenders under the terms thereof. The facilities are non-recourse
to the Company and are secured by first priority security interests by each Non-Recourse Borrower in favor of the
indenture trustee or collateral agent in all of the Non-Recourse Borrower’s assets including the cash flows from
Customer Agreements which are available to each Non-Recourse Borrower after giving effect to certain operating,
105
maintenance and other expenses and, where applicable, distributions to tax equity investors. As a result of such
security interests, the assets of each Non-Recourse Borrower are not available to the creditors of the Company
unless and until distributions from such entities are made to the Company as permitted under the applicable facility
documentation. Under the terms of these financings, each Non-Recourse Borrower pays interest and principal from
such net cash flows. The Company was in compliance with all debt covenants as of December 31, 2024.
Maturities of Indebtedness
The aggregate future principal payments for debt as of December 31, 2024 are as follows (in thousands):
2025
$
245,745
2026
865,755
2027
1,531,774
2028
2,567,435
2029
1,244,672
Thereafter
6,575,160
Subtotal
13,030,541
Debt discount, net
(129,049)
Total
$
12,901,492
Note 11. Derivatives
Interest Rate Swaps
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 SOFR (daily, one month, three
month) on the notional amounts over the life of the swaps. In the second quarter of 2023, the Company entered into
bilateral agreements with its swap counterparties to transition the remaining portion of its swaps to SOFR. The
Company made various elections under FASB ASC Topic 848, Reference Rate Reform, related to changes in
critical terms of the hedging relationships due to reference rate reform to not result in a de-designation of these
hedging relationships. As of September 30, 2023, all of the Company's interest rate swap agreements were indexed
to SOFR. In December 2023, the Company started using interest rate swaptions to protect against adverse
fluctuations in interest rates prior to expected future draws on the Company’s floating-rate facilities, at which point
the Company enters into long-term interest rate hedges.
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 quarter ended
December 31, 2024, 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. Changes in the fair value of these
derivatives are subsequently reclassified into earnings, and are included in interest expense, net in the Company’s
statements of operations, in the period that the hedged forecasted transactions affect earnings. To the extent that
the hedge relationships are not effective, changes in the fair value of these derivatives are recorded in other
expense (income), net in the Company's statements of operations on a prospective basis.
The Company’s master netting and other similar arrangements allow net settlements under certain
conditions. When those conditions are met, the Company presents derivatives at net fair value. As of December 31,
2024, the information related to these offsetting arrangements were as follows (in thousands):
106
Instrument
Description
Gross Amounts of
Recognized
Assets / Liabilities
Gross Amounts Offset
in the Consolidated
Balance Sheet
Net Amounts of Assets /
Liabilities Included in the
Consolidated Balance Sheet
Notional
Amount (1)
(2)
Assets:
Derivatives
designated as
hedging
instruments
$
117,793 $
— $
117,793 $ 1,382,188
Derivatives not
designated as
hedging
instruments
53,965
(7,252)
46,713 2,118,393
Total derivative
assets
171,758
(7,252)
164,506 3,500,581
Liabilities:
Derivatives
designated as
hedging
instruments
—
—
—
—
Derivatives not
designated as
hedging
instruments
(7,385)
7,252
(133)
653,365
Total derivative
liabilities
(7,385)
7,252
(133)
653,365
Total derivative
assets &
liabilities
$
164,373 $
— $
164,373 $ 4,153,946
(1)
Comprised of 66 interest rate swaps which effectively fix the SOFR portion of interest rates on outstanding
balances of certain loans under the senior section of the debt footnote table (see Note 10, Indebtedness) at
0.31% to 4.53% per annum. These swaps mature from August 13, 2027 to January 31, 2043.
(2)
Comprised of 9 interest rate swaptions which effectively fix the SOFR portion of interest rates on future
outstanding balances of certain loans under the senior revolving section of the debt footnote table (see Note
10, Indebtedness) at 3.94% to 4.27% per annum. These swaptions expire from February 5, 2025 to March 5,
2025 with potential underlying swaps maturing on October 31, 2040.
As of December 31, 2023, the information related to these offsetting arrangements were as follows (in
thousands):
107
Instrument
Description
Gross Amounts of
Recognized
Assets / Liabilities
Gross Amounts Offset
in the Consolidated
Balance Sheet
Net Amounts of Assets /
Liabilities Included in the
Consolidated Balance Sheet
Notional
Amount
Assets:
Derivatives
designated as
hedging
instruments
$
97,321 $
(5) $
97,316 $ 1,416,686
Derivatives not
designated as
hedging
instruments
35,413
(5,246)
30,167 1,695,495
Total derivative
assets
132,734
(5,251)
127,483 3,112,181
Liabilities:
Derivatives
designated as
hedging
instruments
(5,963)
5
(5,958)
324,042
Derivatives not
designated as
hedging
instruments
(54,438)
5,246
(49,192)
809,785
Total derivative
liabilities
(60,401)
5,251
(55,150) 1,133,827
Total derivative
assets &
liabilities
$
72,333 $
— $
72,333 $ 4,246,008
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,
2024
2023
2022
Derivatives designated as cash flow hedges:
Interest rate swaps
$
(75,396) $
(23,787) $
(177,451)
108
The losses (gains) on derivatives financial instruments recognized into the consolidated statements of
operations, before tax effect, consisted of the following (in thousands):
Year Ended December 31,
2024
2023
2022
Interest
expense, net
Other
expense, net
Interest
expense, net
Other
income, net
Interest
expense, net
Other
income, net
Derivatives designated as cash flow
hedges:
Interest rate swaps
Gains reclassified from AOCI into
income
$
(35,237) $
—
$
(36,755) $
—
$
(2,407) $
—
Derivatives not designated as cash flow
hedges:
Interest rate swaps
(Gains) losses recognized into income
—
(121,665)
—
661
—
(189,710)
Total (gains) losses
$
(35,237) $
(121,665) $
(36,755) $
661
$
(2,407) $
(189,710)
All amounts in Accumulated other comprehensive (loss) income ("AOCI") in the consolidated statements of
redeemable noncontrolling interests and equity relate to derivatives, refer to the consolidated statements of
comprehensive loss. The net gains (losses) on derivatives includes the tax effect of $8.0 million, $0.5 million and
$34.9 million for the twelve months ended December 31, 2024, 2023 and 2022, respectively.
During the next 12 months, the Company expects to reclassify $16.2 million of net gains on derivative
instruments from accumulated other comprehensive income to earnings. There were forty-four undesignated
derivative instruments recorded by the Company as of December 31, 2024.
Note 12. Pass-Through Financing Obligation
The Company's pass-through financing obligation ("Financing Obligation") arises when the Company leases
solar energy systems to Fund investors who are considered commercial customers under a master lease
agreement, and these investors in turn are assigned the Customer Agreements with customers. The Company
receives all of the value attributable to the accelerated tax depreciation and some or all of the value attributable to
the other incentives. Given the assignment of operating cash flows, this arrangement is accounted for as a
Financing Obligation. The Company also sells the rights and related value attributable to the Commercial ITC to
these investors.
Under the Financing Obligation arrangement, a wholly owned subsidiary of the Company finances the cost of
solar energy systems with investors for an initial term of seven years. The solar energy systems are subject to
Customer Agreements with an initial term of typically 20 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. As of December 31, 2023, the cost of the solar energy systems placed in service under the Financing
Obligation arrangement was $692.3 million. The accumulated depreciation related to these assets as of December
31, 2023 was $191.5 million. During the year ended December 31, 2024, the Company retired all five of its
remaining Financing Obligation arrangements and terminated the associated leases for $240.3 million, which
resulted in a gain on debt extinguishment of $50.6 million.
The investors make a series of large up-front payments and, subsequent smaller quarterly payments (lease
payments) to the subsidiary of the Company. The Company accounts for the payments received from the investors
under the Financing Obligation arrangement as borrowings by recording the proceeds received as a Financing
Obligation on its consolidated balance sheets, and cash provided by financing activities in its consolidated
statements of cash flows. This Financing Obligation is reduced over a period of approximately 7 years by customer
payments under the Customer Agreements. 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, if any, is reflected in cash provided by operations on the consolidated statements of cash
flows. The Company accounts for the Customer Agreements consistent with the Company’s revenue recognition
accounting policies as described in Note 2, Summary of Significant Accounting Policies.
109
Interest is calculated on the financing obligation using the effective interest rate method. The effective interest
rate, which is adjusted on a prospective basis, is the interest rate that equates the present value of the estimated
cash amounts to be received by the investor over the lease term with the present value of the cash amounts paid by
the investor to the Company, adjusted for amounts received by the investor. The Financing Obligation is
nonrecourse once the associated assets have been placed in service and all the contractual arrangements have
been assigned to the investor.
Under the Financing Obligation, the investor has a right to extend its right to receive cash flows from the
customers beyond the initial term in certain circumstances.
Under the Financing Obligation, the Company is responsible for services such as warranty support,
accounting, lease servicing and performance reporting to customers. As part of the warranty and performance
guarantee with the customers in applicable Funds, the Company guarantees certain specified minimum annual
solar energy production output for the solar energy systems leased to the customers, which the Company accounts
for as disclosed in Note 2, Summary of Significant Accounting Policies.
Note 13. VIE Arrangements
The Company consolidated various VIEs at December 31, 2024 and 2023. The carrying amounts and
classification of the VIEs’ assets and liabilities included in the consolidated balance sheets are as follows (in
thousands):
December 31,
2024
2023
Assets
Current assets
Cash
$
420,756 $
254,522
Restricted cash
57,892
48,169
Accounts receivable, net
92,259
76,249
Inventories
62,581
150,065
Prepaid expenses and other current assets
7,616
161,414
Total current assets
641,104
690,419
Solar energy systems, net
12,062,819
10,469,093
Other assets
586,293
379,028
Total assets
$
13,290,216 $
11,538,540
Liabilities
Current liabilities
Accounts payable
$
5,400 $
12,187
Distributions payable to noncontrolling interests
and redeemable noncontrolling interests
41,465
35,181
Accrued expenses and other liabilities
42,997
185,766
Deferred revenue, current portion
62,278
54,103
Non-recourse debt, current portion
60,292
270,460
Total current liabilities
212,432
557,697
Deferred revenue, net of current portion
764,576
654,310
Non-recourse debt, net of current portion
1,347,492
1,189,161
Other liabilities
18,540
16,816
Total liabilities
$
2,343,040 $
2,417,984
110
Note 14. Redeemable Noncontrolling Interests
During certain specified periods of time (the “Early Exit Periods”), noncontrolling interests in certain funding
arrangements have the right to put all of their membership interests to the Company (the “Put Provisions”). 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.
Note 15. Stockholders’ Equity
Convertible Preferred Stock
The Company did not have any convertible preferred stock issued and outstanding as of December 31, 2024
and 2023.
The Company did not declare or pay any dividends in 2024, 2023 or 2022.
Common Stock
The Company has reserved sufficient shares of common stock for issuance upon the exercise of stock
options and the exercise of warrants. Common stockholders are entitled to dividends if and when declared by the
board of directors, subject to the prior rights of the preferred stockholders. As of December 31, 2024, no common
stock dividends had been declared by the board of directors.
The Company has reserved shares of common stock for issuance as follows (in thousands):
December 31,
2024
2023
Stock plans
Shares available for grant
Sunrun-VSI 2014 Equity Incentive Plan
—
5,694
2015 Equity Incentive Plan
15,595
17,830
2015 Employee Stock Purchase Plan
6,868
8,537
Options outstanding
3,507
4,243
Restricted stock units outstanding
12,375
8,449
Total
38,345
44,753
Note 16. Stock-Based Compensation
2013 Equity Incentive Plan
In July 2013, the Board of Directors approved the 2013 Equity Incentive Plan (“2013 Plan”). In March 2015,
the Board of Directors authorized an additional 3,000,000 shares reserved for issuance under the 2013 Plan. An
aggregate of 4,500,000 shares of common stock were reserved for issuance under the 2013 Plan plus (i) any
shares that were reserved but not issued under the plan that was previously in place, and (ii) any shares subject to
stock options or similar awards granted under the plan that was previously in place that expire or otherwise
terminate without having been exercised in full and shares issued that are forfeited to or repurchased by the
Company, with the maximum number of shares to be added to the 2013 Plan pursuant to clauses (i) and (ii) equal to
8,044,829 shares. All the remaining shares that were available for future grants under the 2013 Plan were
transferred to the 2015 Equity Incentive Plan (“2015 Plan”) at the inception of the 2015 Plan.
Sunrun-VSI 2014 Equity Incentive Plan
Upon completion of the Merger, the Company may grant equity awards through the Sunrun-VSI 2014 Equity
Incentive Plan (“Sunrun-VSI 2014 Plan”), which was previously called the Vivint Solar 2014 Equity Incentive Plan.
111
Under the Sunrun-VSI 2014 Plan, the Company could grant stock options, restricted stock, restricted stock units
(“RSUs”), stock appreciation rights, performance stock units, performance shares and performance awards to its
employees, directors and consultants, and its parent and subsidiary corporations’ employees and consultants.
In September 2024, the Sunrun-VSI 2014 Plan expired pursuant to its terms and as of that date no additional
shares were able to be granted pursuant to such plan. All Sunrun-VSI 2014 Plan shares that were reserved but not
granted have expired and are no longer available for grant under the Sunrun-VSI 2014 Plan.
2015 Equity Incentive Plan
In July 2015, the Sunrun Board approved the 2015 Plan. An aggregate of 11,400,000 shares of common
stock are reserved for issuance under the 2015 Plan plus (i) any shares that were reserved but not issued under the
2013 Plan at the inception of the 2015 Plan, and (ii) any shares subject to stock options or similar awards granted
under the 2008 Plan, 2013 Plan and 2014 Plan that expire or otherwise terminate without having been exercised in
full and shares issued that are forfeited to or repurchased by the Company, with the maximum number of shares to
be added to the 2015 Plan pursuant to clauses (i) and (ii) equal to 15,439,334 shares. The 2015 Plan provides for
annual automatic increases on January 1 to the shares reserved for issuance. 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 2023 and 2024, there were no additional shares reserved
for issuance under the 2015 Plan pursuant to the automatic 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; 25% vest at the end of
one year, and 75% vest monthly over the remaining three years. The options may include provisions permitting
exercise of the option prior to full vesting. Any unvested shares shall be subject to repurchase by the Company at
the original exercise price of the option in the event of a termination of an optionee’s employment prior to vesting.
RSUs granted to employees generally vest over a four-year period from the date of grant; 25% vest at the end of
one year, and 75% vest quarterly over the remaining three years.
Stock Options
The following table summarizes the activity for all stock options under all of the Company’s equity incentive
plans for the years ended December 31, 2024 and 2023 (shares and aggregate intrinsic value in thousands):
Number of
Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual Life
Aggregate
Intrinsic
Value
Outstanding at December 31, 2022
5,217 $
16.08
5.68
$
58,784
Granted
—
—
Exercised
(775)
6.58
Canceled
(199)
29.58
Outstanding at December 31, 2023
4,243
17.19
4.85
31,762
Granted
—
—
Exercised
(669)
6.55
Canceled
(67)
25.76
Outstanding at December 31, 2024
3,507 $
19.05
4.54
$
3,882
Options vested and exercisable at
December 31, 2024
3,218 $
17.92
4.30
$
3,882
Options vested and expected to vest
at December 31, 2024
3,507 $
19.05
4.54
$
3,882
The weighted-average grant-date fair value of stock options granted during the year ended December 31,
2024, 2023 and 2022 were $0.00, $0.00 and $17.21 per share, respectively. The total intrinsic value of the options
exercised during the year ended December 31, 2024, 2023 and 2022 was $4.5 million, $10.3 million and $30.8
million, respectively. The aggregate intrinsic value is the difference of the current fair value of the stock and the
exercise price for in-the-money stock options. The total fair value of options vested during the year ended
December 31, 2024, 2023 and 2022 was $6.5 million, $11.8 million and $16.7 million, respectively.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
112
The Company estimates the fair value of stock-based awards on their grant date using the Black-Scholes
option-pricing model. The Company estimates the fair value using a single-option approach and amortizes the fair
value on a straight-line basis for options expected to vest. All options are amortized over the requisite service
periods of the awards, which are generally the vesting periods.
The Company estimated the fair value of stock options with the following assumptions:
Year Ended December 31,
2024
2023
2022
Risk-free interest rate
N/A
N/A
1.60% - 3.80%
Volatility
N/A
N/A
65.60% - 69.40%
Expected term (in years)
N/A
N/A
6.10
Expected dividend yield
N/A
N/A
— %
The expected term assumptions were determined based on the average vesting terms and contractual lives
of the options. The risk-free interest rate is based on the rate for a U.S. Treasury zero-coupon issue with a term that
approximates the expected life of the option grant. No stock options were granted in the years ended December 31,
2024 and 2023. For stock options granted in the year ended December 31, 2022, the expected volatility was
calculated based on the Company’s average historical volatilities. 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
The following table summarizes the activity for all RSUs under all of the Company’s equity incentive plans for
the years ended December 31, 2024 and 2023 (shares in thousands):
Shares
Weighted
Average Grant
Date Fair
Value
Unvested balance at December 31, 2022
4,542 $
31.60
Granted
7,782
19.04
Issued
(2,835)
27.11
Canceled / forfeited
(1,040)
26.59
Unvested balance at December 31, 2023
8,449
22.16
Granted
9,447
13.88
Issued
(4,079)
22.03
Canceled / forfeited
(1,442)
18.29
Unvested balance at December 31, 2024
12,375 $
16.29
Warrants for Strategic Partners
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 13,939, 63,742 and 346,269 warrants were exercised during the years ended December 31, 2024,
2023 and 2022, respectively. During the years ended December 31, 2024, 2023 and 2022, the Company
recognized stock-based compensation expense of nil, $4.3 million and $4.3 million, respectively, under time-based
warrants.
Employee Stock Purchase Plan
Under the Company's 2015 Employee Stock Purchase Plan (“ESPP”) (as amended in May 2017), eligible
employees are offered shares bi-annually through a 24-month offering period which encompasses four six-month
purchase periods. Each purchase period begins on the first trading day on or after May 15 and November 15 of
each year. Employees may purchase a limited number of shares of the Company’s common stock via regular
payroll deductions at a discount of 15% of the lower of the fair market value of the Company’s common stock on the
first trading date of each offering period or on the exercise date. Employees may deduct up to 15% of payroll, with a
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
113
cap of $25,000 of fair market value of shares in any calendar year and 10,000 shares per employee per purchase
period. Under the ESPP, 1,000,000 shares of the Company’s common stock have been reserved for issuance to
eligible employees. 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 2023 and 2024, the Board of
Directors did not authorize any additional shares reserved for issuance under the ESPP.
Stock-Based Compensation Expense
The Company recognized stock-based compensation expense, including ESPP expenses, in the
consolidated statements of operations as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Cost of customer agreements and incentives
$
8,538 $
8,772 $
9,181
Cost of solar energy systems and product sales
1,999
5,267
9,274
Sales and marketing
50,741
59,026
56,857
Research and development
9,961
1,739
2,667
General and administration
41,586
36,977
32,654
Total
$
112,825 $
111,781 $
110,633
During the years ended December 31, 2024 and 2023, stock-based compensation expense capitalized to
the Company’s consolidated balance sheet was $9.9 million and $11.3 million, respectively. As of December 31,
2024 and 2023, total unrecognized compensation cost related to outstanding stock options and RSUs was $150.6
million and $146.5 million, respectively, which are expected to be recognized over a weighted-average period of 2.5
years.
401(k) Plans
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. Under both the Sunrun and Vivint Solar 401(k) Plans, participating U.S.
employees may defer a portion of their pre-tax earnings, up to the IRS annual contribution limit ($23,000 for
calendar year 2024). Under the Sunrun 401(k) Plan, the Company matches 100% of the first 1% and 50% of the
next 5% of each employee's contributions. Under the Vivint Solar 401(k) Plan, the Company matches 33% of each
employee's contributions up to a maximum of 6% of the employee’s eligible earnings. The Company recognized
expense of $21.1 million, $22.7 million and $21.5 million in the years ended December 31, 2024, 2023 and 2022,
respectively.
Note 17. Income Taxes
The following table presents the loss (income) before income taxes for the periods presented (in thousands):
For the Year Ended December 31,
2024
2023
2022
Loss (income) attributable to common stockholders
$ 2,872,984 $ 1,617,188 $ (175,668)
Loss attributable to noncontrolling interest and redeemable
noncontrolling interests
1,509,050 1,078,344 1,023,022
Loss before income taxes
$ 4,382,034 $ 2,695,532 $
847,354
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
114
The income tax (benefit) provision consists of the following (in thousands):
For the Year Ended December 31,
2024
2023
2022
Current
Federal
$
— $
— $
—
State
—
—
—
Foreign
—
—
—
Total current (benefit) expense
—
—
—
Deferred
Federal
(25,833)
(23,583)
1,460
State
(984)
10,892
831
Foreign
—
—
—
Total deferred (benefit) provision
(26,817)
(12,691)
2,291
Total
$
(26,817) $
(12,691) $
2,291
The following table represents a reconciliation of the statutory federal rate and the Company’s effective tax
rate for the periods presented:
For the Year Ended December 31,
2024
2023
2022
Tax provision (benefit) at federal statutory rate
(21.00) %
(21.00) %
(21.00) %
State income taxes, net of federal benefit
0.06
(1.11)
3.42
Foreign provision, net of federal benefit
(0.71)
—
—
Effect of noncontrolling and redeemable noncontrolling interests
7.23
8.40
25.35
Stock-based compensation
0.27
0.46
1.03
Tax credits
(1.78)
(0.63)
(1.42)
Effect of valuation allowance
(0.16)
4.06
(7.47)
Goodwill impairment
14.96
9.02
—
Other
0.52
0.33
0.36
Total
(0.61) %
(0.47) %
0.27 %
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
115
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. The following
table represents the components of the Company’s deferred tax assets and liabilities for the periods presented (in
thousands):
December 31,
2024
2023
Deferred tax assets
Accruals and prepaids
$
48,019 $
47,922
Deferred revenue
149,928
81,692
Net operating loss carryforwards
835,420
788,507
Stock-based compensation
16,962
12,309
Investment tax and other credits
168,623
122,317
Interest expense
188,016
125,332
UNICAP costs
73,180
110,656
Total deferred tax assets
1,480,148
1,288,735
Less: Valuation allowance
(165,000)
(174,328)
Gross deferred tax assets
1,315,148
1,114,407
Deferred tax liabilities
Interest rate derivatives
27,134
16,945
Capitalized costs to obtain a contract
486,978
375,226
Fixed asset depreciation and amortization
696,755
580,569
Deferred tax on investment in partnerships
242,221
264,537
Gross deferred tax liabilities
1,453,088
1,237,277
Net deferred tax liabilities
$
(137,940) $
(122,870)
The Company accounts for investment tax credits as a reduction of income tax expense in the year in which
the credits are recognized (i.e. the flow-through method). As of December 31, 2024, the Company has an
investment tax credit carryforward of approximately $109.3 million which begins to expire in the year 2033, if not
utilized. As of December 31, 2023, the Company has an investment tax credit carryforward of approximately $102.0
million and California enterprise zone credits of approximately $0.8 million.
The Company enters into ITC transfer agreements with third-party transferees to transfer to such third-
parties, for cash, the ITCs generated by certain solar energy systems that have been or will be placed in service.
The Company accounts for its share of ITC transfer proceeds under ASC 740, Income Taxes, as a reduction of
income tax expense in the consolidated statement of operations during the year in which the credits are recognized
(i.e., the flow-through method) and the tax equity investor’s share is distributed upon receipt. During the 12 months
ended December 31, 2024 and December 31, 2023, the Company recognized income tax benefit to the Company
of $70.0 million and $2.0 million, respectively, from such transfers.
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 IRC section 382 had occurred and determined that no ownership changes were identified as of
December 31, 2024.
As of December 31, 2024, the Company had approximately $7.1 million of federal and $7.1 million of state
capital loss carryforwards. The Company believes its capital loss carryforwards are not likely to be realized.
Valuation allowances are provided against deferred tax assets to the extent that it is more likely than not that
the deferred tax asset will not be realized. The Company’s management considers all available positive and
negative evidence including its history of operating income or losses, future reversals of existing taxable temporary
difference, taxable income in carryback years and tax-planning strategies. The Company has concluded that it is
more likely than not that the benefit from certain federal, state, and foreign tax credits and net operating loss
carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance of
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
116
$165.0 million on certain deferred tax assets, including those relating to federal, state, and foreign tax credits and
net operating loss carryforwards, which is a decrease of $9.3 million in 2024.
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.
However, this gain is recognized for tax reporting purposes. The Company accounts 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.
Uncertain Tax Positions
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the
normal course of business, the Company is subject to examination by federal, state and local, and foreign
jurisdictions, where applicable. 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. The
Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate
the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than
not that the position will be sustained upon tax authority examination, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than
50% likely of being realized upon ultimate settlement. The Company has analyzed its inventory of tax positions with
respect to all applicable income tax issues for all open tax years (in each respective jurisdiction).
The Company’s policy is to include interest and penalties related to unrecognized tax benefits, if any, within
the provision for taxes in the consolidated statements of operations.
In 2018, the IRS opened an audit of one of the Company’s investors and reviewed the tax basis of the
Company’s solar energy systems in the investment fund, which is covered by the Company’s 2018 insurance policy.
In December 2024, this IRS audit resolved with no adverse findings involving the fair market value of the price paid
by the investment fund for the Company’s solar energy systems. The Company incurred no out-of-pocket costs
except the time, procedural, and administrative expenses associated with such a multi-year process. The Company
does not expect increases in insurance premiums as a result of this audit.
The Company is subject to taxation and files income tax returns in the U.S., its territories, and various state
and local jurisdictions. Due to the Company’s net losses, substantially all of its federal, state and local, and foreign
income tax returns since inception are still subject to audit.
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:
Tax Years
U.S. Federal
2020-2024
State
2019-2024
Foreign
2019-2024
Net Operating Loss Carryforwards
As a result of the Company’s net operating loss carryforwards as of December 31, 2024, the Company does
not expect to pay income tax, including in connection with its income tax provision for the year ended December 31,
2024. As of December 31, 2024, the Company had net operating loss carryforwards for federal, state, and foreign
income tax purposes of approximately $720.7 million, $3.3 billion, and $459.9 million, respectively, which will begin
to expire in 2028 for federal purposes, in 2025 for state purposes, and in 2031 for foreign purposes. In addition,
federal and certain state net operating loss carryforwards generated in tax years beginning after December 31,
2017 total $2.0 billion and $334.4 million, respectively, and have indefinite carryover periods and do not expire.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
117
Note 18. Commitments and Contingencies
Letters of Credit
As of December 31, 2024 and 2023, the Company had $47.3 million and $37.0 million, respectively, of
unused letters of credit outstanding, which each carry fees of 0.50% - 3.25%, respectively.
Guarantees
Certain tax equity funds and debt facilities require the Company to maintain an aggregate amount of $35.0
million of unencumbered cash and cash equivalents at the end of each month.
Operating and Finance Leases
The Company leases real estate under non-cancellable operating leases and equipment under finance
leases.
The components of lease expense were as follows (in thousands):
For the Year Ended December 31,
2024
2023
2022
Finance lease cost:
Amortization of right-of-use assets
$
29,332 $
18,827 $
15,873
Interest on lease liabilities
5,704
3,291
1,127
Operating lease cost
31,742
34,937
31,966
Short-term lease cost
2,857
2,025
2,602
Variable lease cost
9,828
11,516
9,246
Sublease income
(3,132)
(4,667)
(3,780)
Total lease cost
$
76,331 $
65,929 $
57,034
Other information related to leases was as follows (in thousands):
For the Year Ended December 31,
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
$ 35,473
$ 39,157
$ 34,233
Operating cash flows from finance leases
5,588
2,952
896
Financing cash flows from finance leases
27,240
23,279
14,146
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
14,461
21,417
38,543
Finance leases
36,991
87,726
21,030
Weighted average remaining lease term (years):
Operating leases
4.56
4.92
5.26
Finance leases
3.48
4.07
2.86
Weighted average discount rate:
Operating leases
5.3 %
4.4 %
3.8 %
Finance leases
5.9 %
5.6 %
3.7 %
Future minimum lease commitments under non-cancellable leases as of December 31, 2024 were as
follows (in thousands):
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
118
Operating
Leases
Sublease
Income
Net Operating
Leases
Finance
leases
2025
$
33,334 $
2,700 $
30,634 $
30,556
2026
28,409
2,191
26,218
29,601
2027
18,353
1,366
16,987
25,883
2028
10,626
—
10,626
14,273
2029
9,259
—
9,259
1,348
Thereafter
15,833
—
15,833
—
Total future lease payments
115,814
6,257
109,557
101,661
Less: Amount representing interest
(12,945)
—
(12,945)
(9,477)
Present value of future payments
102,869
6,257
96,612
92,184
Less: Amount for tenant incentives
—
—
—
—
Revised Present value of future payments
102,869
6,257
96,612
92,184
Less: Current portion
(28,784)
(2,700)
(26,084)
(26,045)
Long term portion
$
74,085 $
3,557 $
70,528 $
66,139
Purchase Commitment
The Company entered into a purchase commitment, which has the ability to be canceled without significant
penalties, with a supplier to purchase $574.0 million of batteries by the end of the fourth quarter of 2025.
Warranty Accrual
The Company accrues warranty costs when revenue is recognized for solar energy systems sales, based on
the estimated future costs of meeting its warranty obligations. Warranty costs primarily consist of replacement costs
for supplies and labor costs for service personnel since warranties for equipment and materials are covered by the
original manufacturer’s warranty (other than a small deductible in certain cases). As such, the warranty reserve is
immaterial in all periods presented. 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. 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. Instead, any repair costs on those solar energy systems are expensed when they are
incurred as a component of customer agreements and incentives costs of revenue.
Commercial ITC Indemnification
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 (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, October 2022 and May 2023.
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.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
119
In 2018, the IRS opened an audit of one of the Company’s investors and reviewed the tax basis of the Company’s
solar energy systems in the investment fund, which is covered by the Company’s 2018 insurance policy. In
December 2024, this IRS audit resolved with no adverse findings involving the fair market value of the price paid by
the investment fund for the Company’s solar energy systems. The Company incurred no out-of-pocket costs except
the time, procedural, and administrative expenses associated with such a multi-year process. The Company does
not expect increases in insurance premiums as a result of this audit.
Litigation
The Company is subject to certain legal proceedings, claims, investigations and administrative proceedings in
the ordinary course of its business. The Company records a provision for a liability when it is both probable that the
liability has been incurred and the amount of the liability can be reasonably estimated. The Company evaluates the
adequacy of its legal reserves based on its assessment of many factors, including interpretations of the law and
assumptions that ultimately may or may not be correct about the future outcome of each case based on available
information. These provisions, if any, are reviewed at least quarterly and adjusted to reflect the impacts of
negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular
case. 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 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.
Note 19. 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 (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 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.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
120
The computation of the Company’s basic and diluted net (loss) income per share is as follows (in thousands,
except per share amounts):
Years Ended December 31,
2024
2023
2022
Numerator:
Net (loss) income attributable to common stockholders
$ (2,846,167) $ (1,604,497) $
173,377
Debt discount amortization
—
—
2,258
Net (loss) income available to common stockholders
$ (2,846,167) $ (1,604,497) $
175,635
Denominator:
Weighted average shares used to compute net (loss) income per
share attributable to common stockholders, basic
222,215
216,642
211,347
Weighted average effect of potentially dilutive shares to purchase
common stock
—
—
7,810
Weighted average shares used to compute net (loss) income
per share attributable to common stockholders, diluted
222,215
216,642
219,157
Net (loss) income per share attributable to common stockholders
Basic
$
(12.81) $
(7.41) $
0.82
Diluted
$
(12.81) $
(7.41) $
0.80
The following shares were excluded from the computation of diluted net (loss) income per share as the
impact of including those shares would be anti-dilutive (in thousands):
Year Ended December 31,
2024
2023
2022
Outstanding stock options
1,805
1,674
1,661
Unvested restricted stock units
7,534
7,398
2,863
Convertible Senior Notes (if converted)
11,232
2,544
—
Total
20,571
11,616
4,524
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
121
Note 20. Related Party Transactions
Advances Receivable—Related Party
Net amounts due from direct-sales professionals were $14.3 million and $10.1 million as of December 31,
2024 and 2023, respectively. The Company provided a reserve of $2.8 million and $2.4 million as of December 31,
2024 and 2023, respectively, related to advances to direct-sales professionals who have terminated their
employment agreement with the Company.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including
our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our “disclosure controls and
procedures” as of the end of the period covered by this Annual Report on Form 10-K, pursuant to Rules 13a-15(e)
and 15d-15(e) under the Exchange Act.
In connection with that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that
our disclosure controls and procedures were effective and designed to provide reasonable assurance that the
information required to be disclosed is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms as of December 31, 2024. The term
“disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are
designed to ensure that information required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the company’s management, including its principal
executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the
evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered
by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management used the Committee of
Sponsoring Organizations of the Treadway Commission Internal Control - Integrated Framework (2013), or the
COSO framework, to evaluate the effectiveness of internal control over financial reporting. Management believes
that the COSO framework is a suitable framework for its evaluation of financial reporting because it is free from
bias, permits reasonably consistent qualitative and quantitative measurements of our internal control over financial
reporting, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness
of our internal control over financial reporting are not omitted and is relevant to an evaluation of internal control over
financial reporting.
Management has assessed the effectiveness of our internal control over financial reporting as of
December 31, 2024 and has concluded that such internal control over financial reporting is effective.
Sunrun Inc.
Notes to Consolidated Financial Statements — Continued
122
The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited
by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report which is included in
Item 8 of this Annual Report on Form 10-K.
Item 9B. Other Information.
None.
Rule 10b5-1 Disclosure
During our last fiscal quarter, none of our directors and officers (as defined in Rule 16a-1(f) under the
Exchange Act) adopted or terminated the contracts, instructions or written plans for the purchase or sale of our
securities.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not Applicable.
123
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item 10 of Form 10-K will be set forth in our proxy statement to be filed with
the SEC in connection with the solicitation of proxies for our 2025 Annual Meeting of Stockholders (“Proxy
Statement”) under the section titled “Directors, Executive Officers and Corporate Governance” and is incorporated
herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the year-end of the fiscal
year which this report relates.
Item 11. Executive Compensation.
The information required by this Item 11 will be set forth in the Proxy Statement under the section titled
“Executive Compensation” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The information required by this Item 12 will be set forth in the Proxy Statement under the section titled
“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 will be set forth in the Proxy Statement under the section titled
“Certain Relationships and Related Transactions, and Director Independence” and is incorporated herein by
reference.
Item 14. Principal Accounting Fees and Services.
The information required by this Item 14 will be set forth in the Proxy Statement under the section titled
“Ratification of Appointment of Independent Registered Public Accounting Firm” and is incorporated herein by
reference.
124
PART IV
Item 15. Exhibits and Financial Statement Schedules.
Documents filed as part of this report are as follows:
(1) Consolidated Financial Statements
Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements”
under Item 8 of Part II of this Annual Report on Form 10-K.
(2) Financial Statement Schedules
The required information is included elsewhere in this Annual Report on Form 10-K, not applicable, or
not material.
(3) Exhibits
The exhibits listed in the accompanying “Exhibit Index” are filed or incorporated by reference as part of
this Annual Report on Form 10-K.
125
EXHIBIT INDEX
3.1
Restated Certificate of Incorporation of
Sunrun Inc.
8-K
001-37511
3.3
6/7/2023
3.2
Bylaws of Sunrun Inc., Amended and
Restated as of June 2, 2023
8-K
001-37511
3.4
6/7/2023
4.1
Form of common stock certificate of the
Registrant
S-1
333-205217
4.1
6/25/2015
4.2
Form of Stock Issuance Agreement
S-1/A
333-205217
4.4
7/22/2015
4.3
Indenture, dated January 28, 2021, between
Sunrun Inc. and Wells Fargo Bank, National
Association
8-K
001-37511
4.1
1/28/2021
4.4
Form of 0% Convertible Senior Note due
2026
8-K
001-37511
4.1
1/28/2021
4.5
Form of 4% Convertible Senior Note due
2030
8-K
001-37511
4.1
2/27/2024
4.6
Description of Capital Stock
10-K
001-37511
4.5
2/17/2022
10.1+
Form of Indemnification Agreement between
the Registrant and each of its directors and
executive officers
S-1
333-205217
10.1
6/25/2015
10.2+
Sunrun Inc. 2015 Equity Incentive Plan and
related form agreements
S-1/A
333-205217
10.2
7/22/2015
10.3+
Sunrun Inc. Amended and Restated
Employee Stock Purchase Plan and related
form agreements
10-Q
001-37511
10.1
8/9/2018
10.4+
Sunrun-VSI 2014 Equity Incentive Plan, and
the forms thereunder
10-Q
001-37511
10.1
8/5/2021
10.5+
Sunrun Inc. 2014 Equity Incentive Plan
S-1
333-205217
10.4
6/25/2015
10.6+
Sunrun Inc. 2013 Equity Incentive Plan and
related form agreements
S-1
333-205217
10.5
6/25/2015
10.7+
Sunrun Inc. 2008 Equity Incentive Plan and
related form agreements
S-1
333-205217
10.6
6/25/2015
10.8+
Sunrun Inc. Amended and Restated
Executive Incentive Compensation Plan
8-K
001-37511
10.1
2/4/2020
10.9+
Vivint Solar, Inc. 2014 Equity Incentive Plan
S-1
333-198372
10.3
9/18/2014
10.10+
Form of Notice of Stock Option Grant and
Stock Option Agreement under the Vivint
Solar, Inc. 2014 Equity Incentive Plan
10-Q
001-36642
10.15
11/12/2014
10.11+
Form of Notice of Restricted Stock Unit
Grant and Restricted Stock Unit Agreement
under the Vivint Solar, Inc. 2014 Equity
Incentive Plan
10-Q
001-36642
10.16
11/12/2014
10.12+
V Solar Holdings, Inc. 2013 Omnibus
Incentive Plan
S-1
333-198372
10.2
8/26/2014
10.13+
Form of Stock Option Agreement under the
V Solar Holdings, Inc. 2013 Omnibus
Incentive Plan
10-Q
001-36642
10.17
11/12/2014
10.14+
Key Employee Change in Control and
Severance Plan and Summary Plan
Description
10-Q
001-37511
10.1
11/7/2018
10.15+
Amended and Restated Confirmatory
Employment Letter by and between Edward
Fenster and Sunrun, Inc., dated February
22, 2023
8-K
001-37511
10.1
2/22/2023
Exhibit
Incorporated by Reference
Filed
Herewith
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
126
10.16+
Amended and Restated Confirmatory
Employment Letter by and between Lynn
Jurich and Sunrun, Inc., dated February 22,
2023
8-K
001-37511
10.2
2/22/2023
10.17+
Executive Employment Agreement between
Sunrun Inc. and Jeanna Steele, dated
November 30, 2021
10-K
001-37511
10.20
2/17/2022
10.18+
Employment Agreement between Sunrun
Inc. and Paul Dickson, dated December 3,
2021
10-K
001-37511
10.21
2/17/2022
10.19+
Employment Agreement by and between
Danny Abajian and Sunrun Inc., dated April
28, 2022
8-K
001-37511
10.1
5/4/2022
10.21+
Amended and Restated Non-Employee
Director Pay Policy, Amended July 28, 2023
10-K
001-37511
10.21
2/21/2024
10.22
Subscription Agreement dated July 29, 2020,
between Sunrun Inc. and SK E&S Co., Ltd.
8-K
001-37511
10.1
7/30/2020
10.23
Purchase Agreement, dated January 25,
2021, by and among Sunrun Inc. Credit
Suisse Securities (USA) LLC and Morgan
Stanley & Co. LLC, as representatives of the
several initial purchasers named in Schedule
I thereto
8-K
001-37511
10.1
1/28/2021
10.24
Form of Capped Call Confirmation for 0%
Convertible Senior Note due 2026
8-K
001-37511
10.2
1/28/2021
10.25+
Employment Agreement between Sunrun
Inc. and Mary Powell, dated August 31, 2021
8-K
001-37511
10.2
8/5/2021
10.26¥
Credit Agreement, dated as of April 20, 2021,
by and among Sunrun Luna Portfolio 2021,
LLC, as Borrower, Atlas Securitized Products
Holdings, L.P., as Administrative Agent,
Computershare Trust Company, National
Association, as Collateral Agent and Paying
Agent, and the Lenders and Funding Agents
party thereto from time to time, as amended
by the Amendment to the Credit Agreement,
dated as of May 5, 2021, the Second
Amendment to Credit Agreement, dated as
of October 8, 2021, the Third Amendment to
Credit Agreement, dated as of March 23,
2022, the Fourth Amendment to Credit
Agreement and First Amendment to
Amended and Restated Custodial
Agreement, dated as of May 10, 2023, the
Fifth Amendment to Credit Agreement and
First Amendment to Transaction
Management Agreement, dated as of
December 27, 2023, the Sixth Amendment to
the Credit Agreement, dated as of February
16, 2024, the Seventh Amendment to Credit
Agreement, dated as of July 31, 2024, the
Eighth Amendment to Credit Agreement and
Omnibus Amendment to Transaction
Documents, dated as of October 2, 2024,
and the Ninth Amendment to Credit
Agreement, dated as of January 3, 2025.
X
Exhibit
Incorporated by Reference
Filed
Herewith
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
127
10.30¥
Credit Agreement, dated as of January 24,
2022, by and among the Company, KeyBank
National Association, as administrative
agent, Silicon Valley Bank, a division of First-
Citizens Bank & Trust Company, as collateral
agent, and each of the guarantors, lenders
and arrangers identified on the signature
pages thereto, and as amended by
Amendment No. 1 to the Credit Agreement,
dated as of March 8, 2022, as further
amended by Amendment No. 2 to the Credit
Agreement, dated as of November 2, 2022,
and as further amended by Amendment No.
3 to the Credit Agreement, dated as of
February 20, 2024.
10-K
001-37511
10.30
2/21/2024
10.31
Purchase Agreement, dated February 22,
2024, by and among Sunrun Inc., Goldman
Sachs & Co. LLC and Morgan Stanley & Co.
LLC, as representatives of the several initial
purchasers named in Schedule I thereto.
8-K
001-37511
10.1
2/27/2024
10.32
Form of Capped Call Confirmation.
8-K
001-37511
10.2
2/27/2024
19.1
Amended and Restated Insider Trading
Policy, Amended and Restated as of October
26, 2023.
X
21.1
List of subsidiaries of the Registrant
X
23.1
Consent of Independent Registered Public
Accounting Firm
X
31.1
Certification of Chief Executive Officer
pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002
X
31.2
Certification of Chief Financial Officer
pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002
X
32.1†
Certifications of Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
X
97.1
Sunrun Inc. Policy for Recoupment of
Incentive Compensation, Amended and
Restated as of October 26, 2023
10-Q
001-37511
10.3
5/8/2024
101.INS
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Incorporated by Reference
Filed
Herewith
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
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Filed
Herewith
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
†
The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K, are
deemed furnished and not filed with the Securities and Exchange Commission and are not to be
incorporated by reference into any filing of Sunrun Inc. under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this
Annual Report on Form 10-K, irrespective of any general incorporation language contained in such
filing.
+
Indicates management contract or compensatory plan.
¥
Confidential treatment has been requested as to certain portions of this exhibit, which portions have
been omitted and submitted separately to the Securities and Exchange Commission.
^
Portions of this exhibit have been omitted from the exhibit because they are both not material and
would be competitively harmful if publicly disclosed.
129
Item 16. Form 10-K Summary.
None.
130
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Sunrun Inc.
Date: February 27, 2025
By:
/s/ Mary Powell
Mary Powell
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been
signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
Date
/s/ Mary Powell
Chief Executive Officer and Director (Principal Executive Officer)
February 27,
2025
Mary Powell
/s/ Danny Abajian
Chief Financial Officer (Principal Financial Officer)
February 27,
2025
Danny Abajian
/s/ Maria Barak
Chief Accounting Officer (Principal Accounting Officer)
February 27,
2025
Maria Barak
/s/ Lynn Jurich
Co-Chair and Director
February 27,
2025
Lynn Jurich
/s/ Edward Fenster
Co-Chair and Director
February 27,
2025
Edward Fenster
/s/ Katherine August-deWilde
Director
February 27,
2025
Katherine August-deWilde
/s/ Leslie Dach
Director
February 27,
2025
Leslie Dach
/s/ Alan Ferber
Director
February 27,
2025
Alan Ferber
/s/ Sonita Lontoh
Director
February 27,
2025
Sonita Lontoh
/s/ John Trinta
Director
February 27,
2025
John Trinta
/s/ Manjula Talreja
Director
February 27,
2025
Manjula Talreja
131
Annual Report
2024