VIVINT SOLAR, INC., 10-Q filed on 11/6/2019
Quarterly Report
v3.19.3
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2019
Nov. 01, 2019
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Trading Symbol VSLR  
Entity Registrant Name Vivint Solar, Inc.  
Entity Central Index Key 0001607716  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity Emerging Growth Company true  
Entity Ex Transition Period true  
Entity File Number 001-36642  
Entity Tax Identification Number 45-5605880  
Entity Address, Address Line One 1800 West Ashton Blvd.  
Entity Address, City or Town Lehi  
Entity Address, State or Province UT  
Entity Address, Postal Zip Code 84043  
City Area Code 877  
Local Phone Number 404-4129  
Entity Common Stock, Shares Outstanding   122,087,876
Entity Incorporation, State or Country Code DE  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Security Exchange Name NYSE  
Entity Interactive Data Current Yes  
Document Quarterly Report true  
Document Transition Report false  
v3.19.3
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 260,753 $ 219,591
Accounts receivable, net 27,203 14,207
Inventories 13,727 13,257
Prepaid expenses and other current assets 31,895 31,201
Total current assets 333,578 278,256
Restricted cash and cash equivalents 83,743 71,305
Solar energy systems, net 1,696,129 1,938,874
Property and equipment, net 14,332 10,730
Other non-current assets, net 567,872 28,090
TOTAL ASSETS [1] 2,695,654 2,327,255
Current liabilities:    
Accounts payable 48,118 45,929
Distributions payable to non-controlling interests and redeemable non-controlling interests 17,328 7,846
Accrued compensation 40,647 25,520
Current portion of long-term debt 144,532 12,155
Current portion of deferred revenue 28,684 30,199
Current portion of finance lease obligation 1,529 1,921
Accrued and other current liabilities 70,238 42,860
Total current liabilities 351,076 166,430
Long-term debt, net of current portion 1,282,868 1,203,282
Deferred revenue, net of current portion 16,450 13,524
Finance lease obligation, net of current portion 4,308 505
Deferred tax liability, net 539,190 437,120
Other non-current liabilities 81,740 24,610
Total liabilities [1] 2,275,632 1,845,471
Commitments and contingencies (Note 19)
Redeemable non-controlling interests 118,251 119,572
Stockholders’ equity:    
Common stock, $0.01 par value—1,000,000 shares authorized, 122,088 shares issued and outstanding as of September 30, 2019; 1,000,000 shares authorized, 120,114 shares issued and outstanding as of December 31, 2018 1,221 1,201
Additional paid-in capital 586,517 574,248
Accumulated other comprehensive loss (24,388) (7,223)
Accumulated deficit (348,430) (279,631)
Total stockholders’ equity 214,920 288,595
Non-controlling interests 86,851 73,617
Total equity 301,771 362,212
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY $ 2,695,654 $ 2,327,255
[1] The assets of Vivint Solar, Inc. (the “Company”) as of September 30, 2019 and December 31, 2018 include $2,133.2 million and $1,835.8 million consisting of assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, of $1,541.3 million and $1,752.3 million as of September 30, 2019 and December 31, 2018; other non-current assets, net of $459.8 million and $10.9 million as of September 30, 2019 and December 31, 2018; cash and cash equivalents of $103.9 million and $62.4 million as of September 30, 2019 and December 31, 2018; accounts receivable, net, of $17.4 million and $6.6 million as of September 30, 2019 and December 31, 2018; restricted cash and cash equivalents of $8.4 million and $2.4 million as of September 30, 2019 and December 31, 2018; and prepaid expenses and other current assets of $2.4 million and $1.3 million as of September 30, 2019 and December 31, 2018. The Company’s liabilities as of September 30, 2019 and December 31, 2018 included $206.7 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include long-term debt of $169.3 million and $55.0 million as of September 30, 2019 and December 31, 2018; distributions payable to non-controlling interests and redeemable non-controlling interests of $17.3 million and $7.8 million as of September 30, 2019 and December 31, 2018; deferred revenue of $13.8 million and $12.0 million as of September 30, 2019 and December 31, 2018; accrued and other current liabilities of $6.0 million and $4.9 million as of September 30, 2019 and December 31, 2018; and other non-current liabilities of $0.4 million and $1.0 million as of September 30, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.
v3.19.3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 1,000,000,000 1,000,000,000
Common stock, shares issued 122,088,000 120,114,000
Common stock, shares outstanding 122,088,000 120,114,000
Total assets [1] $ 2,695,654 $ 2,327,255
Solar energy systems, net 1,696,129 1,938,874
Cash and cash equivalents 260,753 219,591
Accounts receivable, net 27,203 14,207
Other non-current assets, net 567,872 28,090
Restricted cash and cash equivalents 83,743 71,305
Prepaid expenses and other current assets 31,895 31,201
Total liabilities [1] 2,275,632 1,845,471
Distributions payable to non-controlling interests and redeemable non-controlling interests 17,328 7,846
Accrued and other current liabilities 70,238 42,860
Other non-current liabilities 81,740 24,610
Variable Interest Entities    
Total assets 2,133,166 1,835,834
Solar energy systems, net 1,541,344 1,752,271
Cash and cash equivalents 103,921 62,350
Accounts receivable, net 17,385 6,593
Other non-current assets, net 459,771 10,888
Restricted cash and cash equivalents 8,361 2,443
Prepaid expenses and other current assets 2,384 1,289
Total liabilities 206,746 80,760
Long-term debt 169,300 55,000
Distributions payable to non-controlling interests and redeemable non-controlling interests 17,328 7,846
Deferred revenue 13,800 12,000
Accrued and other current liabilities 6,027 4,860
Other non-current liabilities $ 375 $ 1,023
[1] The assets of Vivint Solar, Inc. (the “Company”) as of September 30, 2019 and December 31, 2018 include $2,133.2 million and $1,835.8 million consisting of assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, of $1,541.3 million and $1,752.3 million as of September 30, 2019 and December 31, 2018; other non-current assets, net of $459.8 million and $10.9 million as of September 30, 2019 and December 31, 2018; cash and cash equivalents of $103.9 million and $62.4 million as of September 30, 2019 and December 31, 2018; accounts receivable, net, of $17.4 million and $6.6 million as of September 30, 2019 and December 31, 2018; restricted cash and cash equivalents of $8.4 million and $2.4 million as of September 30, 2019 and December 31, 2018; and prepaid expenses and other current assets of $2.4 million and $1.3 million as of September 30, 2019 and December 31, 2018. The Company’s liabilities as of September 30, 2019 and December 31, 2018 included $206.7 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include long-term debt of $169.3 million and $55.0 million as of September 30, 2019 and December 31, 2018; distributions payable to non-controlling interests and redeemable non-controlling interests of $17.3 million and $7.8 million as of September 30, 2019 and December 31, 2018; deferred revenue of $13.8 million and $12.0 million as of September 30, 2019 and December 31, 2018; accrued and other current liabilities of $6.0 million and $4.9 million as of September 30, 2019 and December 31, 2018; and other non-current liabilities of $0.4 million and $1.0 million as of September 30, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.
v3.19.3
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Revenue:        
Total revenue $ 103,849 $ 77,816 $ 263,977 $ 226,864
Cost of revenue:        
Total cost of revenue 68,437 59,835 184,756 184,923
Gross profit 35,412 17,981 79,221 41,941
Operating expenses:        
Sales and marketing 46,121 15,841 112,792 40,999
Research and development 510 475 1,503 1,472
General and administrative 32,760 29,945 87,014 71,941
Total operating expenses 79,391 46,261 201,309 114,412
Loss from operations (43,979) (28,280) (122,088) (72,471)
Interest expense, net 22,804 18,715 61,403 46,973
Other expense (income), net 3,907 (1) 6,657 (6,371)
Loss before income taxes (70,690) (46,994) (190,148) (113,073)
Income tax expense 50,410 25,698 107,847 79,693
Net loss (121,100) (72,692) (297,995) (192,766)
Net loss attributable to non-controlling interests and redeemable non-controlling interests (107,265) (64,824) (229,351) (190,038)
Net loss attributable to common stockholders $ (13,835) $ (7,868) $ (68,644) $ (2,728)
Net loss attributable per share to common stockholders:        
Basic and diluted $ (0.11) $ (0.07) $ (0.57) $ (0.02)
Weighted-average shares used in computing net loss attributable per share to common stockholders:        
Basic and diluted 121,730 118,767 120,974 116,871
Customer Agreements and Incentives        
Revenue:        
Total revenue $ 70,819 $ 53,470 $ 173,777 $ 139,349
Cost of revenue:        
Total cost of revenue 48,993 42,135 132,258 122,188
Solar Energy System and Product Sales        
Revenue:        
Total revenue 33,030 24,346 90,200 87,515
Cost of revenue:        
Total cost of revenue $ 19,444 $ 17,700 $ 52,498 $ 62,735
v3.19.3
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]        
Net loss attributable to common stockholders $ (13,835) $ (7,868) $ (68,644) $ (2,728)
Other comprehensive (loss) income:        
Unrealized (losses) gains on cash flow hedging instruments (net of tax effect of $(2,110), $1,076, $(6,562) and $2,247) (5,779) 2,890 (17,954) 6,037
Less: Interest (expense) income on derivatives recognized into earnings (net of tax effect of $(138), $(145), $(288) and $6,016) (379) (390) (789) 16,165
Total other comprehensive (loss) income (5,400) 3,280 (17,165) (10,128)
Comprehensive loss $ (19,235) $ (4,588) $ (85,809) $ (12,856)
v3.19.3
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]        
Unrealized losses on cash flow hedging instruments, tax $ (2,110) $ 1,076 $ (6,562) $ 2,247
Interest expense on derivatives recognized into earnings, tax $ (138) $ (145) $ (288) $ 6,016
v3.19.3
Condensed Consolidated Statements of Redeemable Non-Controlling Interests and Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Redeemable Non-Controlling Interests
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive (Loss) Income
Retained Earnings (Accumulated Deficit)
Total Stockholders Equity
Non-Controlling Interests
Balance at Dec. 31, 2017 $ 861,066 $ 122,444 $ 1,151 $ 559,788 $ 6,905 $ 213,107 $ 780,951 $ 80,115
Balance (in Shares) at Dec. 31, 2017     115,099          
Cumulative-effect adjustment from adoption of new ASUs (473,828)       3,318 (477,146) (473,828)  
Stock-based compensation expense 9,884     9,884     9,884  
Issuance of common stock, net 876   $ 42 834     876  
Issuance of common stock, net (in shares)     4,217          
Contributions from non-controlling interests and redeemable non-controlling interests 122,843 72,078           122,843
Distributions to non-controlling interests and redeemable non-controlling interests (28,865) (7,663)           (28,865)
Total other comprehensive income (loss) (10,128)       (10,128)   (10,128)  
Net loss (127,727) (65,039)       (2,728) (2,728) (124,999)
Balance at Sep. 30, 2018 354,121 121,820 $ 1,193 570,506 95 (266,767) 305,027 49,094
Balance (in Shares) at Sep. 30, 2018     119,316          
Balance at Jun. 30, 2018 347,223 122,647 $ 1,185 567,372 (3,185) (258,899) 306,473 40,750
Balance (in Shares) at Jun. 30, 2018     118,477          
Stock-based compensation expense 3,103     3,103     3,103  
Issuance of common stock, net 39   $ 8 31     39  
Issuance of common stock, net (in shares)     839          
Contributions from non-controlling interests and redeemable non-controlling interests 79,555 7,079           79,555
Distributions to non-controlling interests and redeemable non-controlling interests (11,742) (2,551)           (11,742)
Total other comprehensive income (loss) 3,280       3,280   3,280  
Net loss (67,337) (5,355)       (7,868) (7,868) (59,469)
Balance at Sep. 30, 2018 354,121 121,820 $ 1,193 570,506 95 (266,767) 305,027 49,094
Balance (in Shares) at Sep. 30, 2018     119,316          
Balance at Dec. 31, 2018 $ 362,212 119,572 $ 1,201 574,248 (7,223) (279,631) 288,595 73,617
Balance (in Shares) at Dec. 31, 2018 120,114   120,114          
Cumulative-effect adjustment from adoption of new ASUs $ (155)         (155) (155)  
Stock-based compensation expense 11,985     11,985     11,985  
Issuance of common stock, net 304   $ 20 284     304  
Issuance of common stock, net (in shares)     1,974          
Contributions from non-controlling interests and redeemable non-controlling interests 263,081 20,974           263,081
Distributions to non-controlling interests and redeemable non-controlling interests (35,167) (7,624)           (35,167)
Total other comprehensive income (loss) (17,165)       (17,165)   (17,165)  
Net loss (283,324) (14,671)       (68,644) (68,644) (214,680)
Balance at Sep. 30, 2019 $ 301,771 118,251 $ 1,221 586,517 (24,388) (348,430) 214,920 86,851
Balance (in Shares) at Sep. 30, 2019 122,088   122,088          
Balance at Jun. 30, 2019 $ 320,386 118,900 $ 1,216 582,338 (18,988) (334,595) 229,971 90,415
Balance (in Shares) at Jun. 30, 2019     121,606          
Stock-based compensation expense 4,150     4,150     4,150  
Issuance of common stock, net 34   $ 5 29     34  
Issuance of common stock, net (in shares)     482          
Contributions from non-controlling interests and redeemable non-controlling interests 121,449 2,968           121,449
Distributions to non-controlling interests and redeemable non-controlling interests (18,608) (2,757)           (18,608)
Total other comprehensive income (loss) (5,400)       (5,400)   (5,400)  
Net loss (120,240) (860)       (13,835) (13,835) (106,405)
Balance at Sep. 30, 2019 $ 301,771 $ 118,251 $ 1,221 $ 586,517 $ (24,388) $ (348,430) $ 214,920 $ 86,851
Balance (in Shares) at Sep. 30, 2019 122,088   122,088          
v3.19.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (297,995) $ (192,766)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 61,243 51,247
Deferred income taxes 108,344 80,121
Stock-based compensation 11,985 9,884
Loss on solar energy systems and property and equipment 9,254 4,439
Noncash interest and other expense 7,288 15,317
Reduction in lease pass-through financing obligation (3,662) (3,549)
Losses (gains) on interest rate swaps 846 (1,279)
Changes in operating assets and liabilities:    
Accounts receivable, net (12,996) (245)
Inventories (470) 6,817
Prepaid expenses and other current assets 741 8,931
Other non-current assets, net (126,402) (8,042)
Accounts payable 2,032 941
Accrued compensation 14,409 4,390
Deferred revenue 1,411 (6,441)
Accrued and other liabilities 9,050 7,177
Net cash used in operating activities (214,922) (23,058)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Payments for the cost of solar energy systems (187,328) (233,548)
Payments for property and equipment (1,219) (129)
Proceeds from disposals of solar energy systems and property and equipment 2,025 2,335
Purchase of intangible assets (1,089) (223)
Net cash used in investing activities (187,611) (231,565)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from investment by non-controlling interests and redeemable non-controlling interests 284,055 194,921
Distributions paid to non-controlling interests and redeemable non-controlling interests (33,309) (41,729)
Proceeds from long-term debt 351,972 917,748
Payments on long-term debt (139,080) (693,782)
Payments for debt issuance and deferred offering costs (9,382) (21,209)
Proceeds from lease pass-through financing obligation 2,527 2,491
Principal payments on finance lease obligations (954) (2,663)
Proceeds from issuance of common stock 304 876
Net cash provided by financing activities 456,133 356,653
NET INCREASE IN CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS 53,600 102,030
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—Beginning of period 290,896 154,938
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—End of period 344,496 256,968
NONCASH INVESTING AND FINANCING ACTIVITIES:    
Costs of solar energy systems included in changes in accounts payable, accrued compensation and accrued and other liabilities 55,183 4,682
Right-of-use assets obtained in exchange for new operating lease liabilities 9,210  
Right-of-use assets obtained in exchange for new finance lease liabilities $ 6,077 1,079
Solar energy system sales    
NONCASH INVESTING AND FINANCING ACTIVITIES:    
Receivable for state tax credits recorded as a reduction to solar energy system costs   $ 7
v3.19.3
Organization
9 Months Ended
Sep. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Organization

1.

Organization

Vivint Solar, Inc. and its subsidiaries are collectively referred to as the “Company.” The Company most commonly offers solar energy to residential customers through long-term customer contracts, such as power purchase agreements (“PPAs”) and legal-form leases (“Solar Leases”). The Company also offers its customers the option to purchase solar energy systems (“System Sales”) through third-party loan offerings or a cash purchase. The Company enters into customer contracts through a sales organization that primarily uses a direct-to-home sales model. The long-term customer contracts under PPAs and Solar Leases are typically for 20 years and require the customer to make monthly payments to the Company.

The Company has formed various investment funds and entered into long-term debt facilities to monetize the recurring customer payments under its long-term customer contracts and investment tax credits (“ITCs”), accelerated tax depreciation and other incentives associated with residential solar energy systems. The Company uses the cash received from the investment funds, long-term debt facilities and cash generated from operations, including System Sales, to finance a portion of the Company’s variable and fixed costs associated with installing solar energy systems.

v3.19.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of normal recurring nature) considered necessary to present fairly the Company’s financial results. The results of the nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2019 or for any other interim period or other future year.

The unaudited condensed consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company uses a qualitative approach in assessing the consolidation requirement for VIEs. This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. All of these determinations involve significant management judgments and estimates. The Company has determined that it is the primary beneficiary in the operational VIEs in which it has an equity interest. The Company evaluates its relationships with the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. For additional information, see Note 14—Investment Funds.

Beginning with the first quarter of 2019, the condensed consolidated statements of operations items formerly captioned “Operating leases and incentives” and “Cost of revenue—operating leases and incentives” are now captioned “Customer agreements and incentives” and “Cost of revenue—customer agreements and incentives.” Also beginning with the first quarter of 2019, the condensed consolidated balance sheet items formerly captioned “Current portion of capital lease obligation” and “Capital lease obligation, net of current portion” are now captioned “Current portion of finance lease obligation” and “Finance lease obligation, net of current portion.” Amounts in these balance sheet items were capital leases under Accounting Standards Codification 840: Leases (“Topic 840”) in periods ending prior to January 1, 2019, while amounts in these balance sheet items are finance leases under Accounting Standards Codification 842: Leases (“Topic 842”) in periods ending subsequent to January 1, 2019. See “—Leases” below for further explanation of these changes.

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, ITCs; revenue recognition; solar energy systems, net; the impairment analysis of long-lived assets; stock-based compensation; the provision for income taxes; the valuation of derivative financial instruments; the recognition and measurement of loss contingencies; and non-controlling interests and redeemable non-controlling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.

Liquidity

In order to grow, the Company requires cash to finance the deployment of solar energy systems. As of the date of this filing, the Company will require additional sources of cash beyond current cash balances and currently available financing facilities to fund long-term planned growth. If the Company is unable to secure additional financing when needed, or upon desirable terms, the Company may be unable to finance installation of customers’ systems in a manner consistent with past performance, cost of capital could increase, or the Company may be required to significantly reduce the scope of operations, any of which would have a material adverse effect on its business, financial condition, results of operations and prospects. While the Company believes additional financing is available and will continue to be available to support current levels of operations, the Company believes it has the ability and intent to reduce operations to the level of available financial resources for at least the next 12 months from the date of this report, if necessary.

Performance Obligation—Solar Energy system and Product Sales

For certain System Sales, the Company provides limited post-sale services to monitor the productivity of the solar energy system for 20 years after it has been placed into service. The Company allocates a portion of the transaction price to the monitoring services by estimating the standalone selling price that the Company would charge for these services if offered separately from the sale of the solar energy system. As of September 30, 2019 and December 31, 2018, the Company had allocated deferred revenue of $4.4 million and $3.3 million to monitoring services that will be recognized over the term of the monitoring services.

Leases

The Company adopted Topic 842 and its subsequent updates effective January 1, 2019. These updates are intended to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the condensed consolidated balance sheets and disclosing key information about leasing arrangements. The Company utilized the additional transition method permitted by Accounting Standards Update (“ASU”) 2018-11 and adopted Topic 842 using a modified retrospective method with a cumulative-effect adjustment to its accumulated deficit as of January 1, 2019. As such, comparative periods ending prior to January 1, 2019 are presented in accordance with Topic 840 and periods ending after January 1, 2019 are presented in accordance with Topic 842. The impact to the accumulated deficit as a result of adopting ASU 2016-02 was a net reduction of approximately $0.2 million. The Company did not use the transitionary practical expedients allowed under Topic 842, and as such, the Company reassessed all contracts existing at the adoption date of January 1, 2019. The Company elected to treat leases with lease terms of 12 months or less as short-term leases. No right-of-use assets or lease liabilities are recognized for short-term leases. The Company has also elected not to separate lease components from non-lease components for all classes of leased assets except for building leases.

The adoption of this ASU resulted in right-of-use assets of $34.6 million related to operating leases being recognized in other non-current assets, net on the condensed consolidated balance sheets as of January 1, 2019. Corresponding lease liabilities of $43.8 million related to operating leases were recognized on the condensed consolidated balance sheets as of January 1, 2019, with the current portion recognized in accrued and other current liabilities and the long-term portion recognized in other non-current liabilities. In addition, at January 1, 2019, approximately $1.0 million of lease-related liabilities were removed from accrued and other current liabilities and approximately $8.2 million of lease-related liabilities were removed from other non-current liabilities and included as reductions to the initial operating lease right-of-use assets. As of January 1, 2019, finance lease right-of-use assets of $0.9 million continued to be recorded in property and equipment, net. Any changes in lease terms or estimates subsequent to adoption of the ASU 2016-02 are reflected in the right-of-use assets and lease liabilities.

The Company’s PPAs, Solar Leases, and associated rebates and incentives no longer meet the definition of a lease under Topic 842. Accordingly, they are accounted for in accordance with Accounting Standards Codification 606: Revenue from Contracts with Customers (“Topic 606”) beginning on January 1, 2019. The Company concluded that there was no change to its revenue recognition practices for its PPA revenue stream under Topic 606. For Solar Leases, the Company concluded that the impact of applying Topic 606 is immaterial. The Company also concluded that there was no material change related to the timing of revenue recognition for rebates and incentives under Topic 606. Upon the adoption of Topic 842, the Company no longer capitalizes initial direct costs and amortizes them to the respective cost of revenue line items. Instead, the Company now capitalizes costs of obtaining a contract which meet the “incremental” criteria defined in Accounting Standards Codification 340 to other non-current assets, net. These costs are now amortized over the period of benefit to sales and marketing expense on the condensed consolidated statements of operations. In accordance with the Company’s Topic 842 transition discussed above, no prior period amounts were changed.

For purposes of comparison, the following tables show how the balances as of December 31, 2018 and for the three and nine months ended September 30, 2018 would have changed if the effects of adopting Topic 842 had been applied to those balances (in thousands):

 

December 31, 2018

 

 

September 30, 2019

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

 

As Reported

 

Solar energy systems, net

$

1,938,874

 

 

$

(388,087

)

 

$

1,550,787

 

 

$

1,696,129

 

Other non-current assets, net

 

28,090

 

 

 

388,087

 

 

 

416,177

 

 

 

567,872

 

 

 

Three Months Ended September 30,

 

 

2018

 

 

2019

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

 

As Reported

 

Cost of revenue—customer agreements and incentives

$

42,135

 

 

$

(4,625

)

 

$

37,510

 

 

$

48,993

 

Cost of revenue—solar energy system and product sales

 

17,700

 

 

 

(3,804

)

 

 

13,896

 

 

 

19,444

 

Total cost of revenue

 

59,835

 

 

 

(8,429

)

 

 

51,406

 

 

 

68,437

 

Gross profit

 

17,981

 

 

 

8,429

 

 

 

26,410

 

 

 

35,412

 

Sales and marketing

 

15,841

 

 

 

8,429

 

 

 

24,270

 

 

 

46,121

 

Total operating expenses

 

46,261

 

 

 

8,429

 

 

 

54,690

 

 

 

79,391

 

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2019

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

 

As Reported

 

Cost of revenue—customer agreements and incentives

$

122,188

 

 

$

(13,215

)

 

$

108,973

 

 

$

132,258

 

Cost of revenue—solar energy system and product sales

 

62,735

 

 

 

(14,058

)

 

 

48,677

 

 

 

52,498

 

Total cost of revenue

 

184,923

 

 

 

(27,273

)

 

 

157,650

 

 

 

184,756

 

Gross profit

 

41,941

 

 

 

27,273

 

 

 

69,214

 

 

 

79,221

 

Sales and marketing

 

40,999

 

 

 

27,273

 

 

 

68,272

 

 

 

112,792

 

Total operating expenses

 

114,412

 

 

 

27,273

 

 

 

141,685

 

 

 

201,309

 

Software Implementation Costs

The Company adopted ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, effective January 1, 2019. This update clarifies that entities should capitalize implementation costs incurred in cloud computing arrangements that are service contracts, which the Company will now record within other non-current assets, net. The Company will expense the capitalized costs over the term of the hosting arrangement. The service element of a hosting arrangement that is a service contract is not affected by this update, meaning service costs will continue to be expensed as incurred. The Company is applying the amendments in this update on a prospective basis beginning January 1, 2019. No prior periods were impacted as a result of adopting this ASU.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of this update is to provide users of financial statements with more useful information by changing the incurred loss methodology for recognizing credit losses to a more forward-looking methodology that reflects expected credit losses. Under this ASU, the Company’s accounts receivable and certain contract assets are considered financial assets measured at an amortized cost basis and will need to be presented at the net amount expected to be collected. This ASU will be effective for the Company beginning on January 1, 2020 and will be applied through a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the first reporting period in which the guidance is effective. The Company is still evaluating the impact of this update on its condensed consolidated financial statements and related disclosures but currently anticipates that the impact will not be significant.

v3.19.3
Fair Value Measurements
9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements

3.

Fair Value Measurements

The Company measures and reports its cash equivalents at fair value. The following tables set forth the fair value of the Company’s financial assets and liabilities included on the condensed consolidated balance sheets measured on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

September 30, 2019

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 

 

$

35,301

 

 

$

 

 

$

35,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 

 

$

130

 

 

$

 

 

$

130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 

 

$

11,146

 

 

$

 

 

$

11,146

 

 

The interest rate swaps (Level 2) were valued using a discounted cash flow model that incorporates an assessment of the risk of non-performance by the interest rate swap counterparties and the Company. The valuation model uses various observable inputs including contractual terms, interest rate curves, credit spreads and measures of volatility. Financial liabilities as of September 30, 2019 include interest rate swaps for the Warehouse Facility, which are not designated as hedges, and interest rate swaps for the Solar Asset Backed Notes, Series 2018-2, which are designated as hedges. Financial liabilities as of December 31, 2018 included interest rate swaps for the Aggregation Facility, which were not designated as hedges, and interest rate swaps for the Solar Asset Backed Notes, Series 2018-2, which are designated as hedges. Financial assets as of December 31, 2018 primarily related to interest rate swaps for the Aggregation Facility, which were not designated as hedges. See Note 11—Debt Obligations for additional details about these debt instruments.

The carrying values and fair values of the Company’s long-term debt were as follows (in thousands):

 

September 30, 2019

 

 

December 31, 2018

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

Floating-rate long-term debt

$

814,795

 

 

$

814,795

 

 

$

587,358

 

 

$

587,358

 

Fixed-rate long-term debt

 

638,486

 

 

 

705,100

 

 

 

653,031

 

 

 

673,917

 

Total

$

1,453,281

 

 

$

1,519,895

 

 

$

1,240,389

 

 

$

1,261,275

 

The Company’s outstanding principal balance of long-term debt is carried at cost. The Company estimated the fair values of its floating-rate debt facilities (Level 2) to approximate their carrying values as interest accrues at floating rates based on market rates. The Company’s fixed-rate debt facilities (Level 2) were valued using quoted prices for the fixed rate debt facilities that are publicly traded, or quoted prices for corporate debt with similar terms for debt facilities that are not publicly traded.

v3.19.3
Inventories
9 Months Ended
Sep. 30, 2019
Inventory Disclosure [Abstract]  
Inventories

4.

Inventories

Inventories consisted of the following (in thousands):

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

Solar energy systems held for sale

$

12,925

 

 

$

12,321

 

Photovoltaic installation products

 

802

 

 

 

936

 

Total inventories

$

13,727

 

 

$

13,257

 

Solar energy systems held for sale are solar energy systems under construction that have yet to be interconnected to the power grid and that will be sold to customers. Solar energy systems held for sale are stated at the lower of cost, on a first-in, first-out basis, or net realizable value. Photovoltaic installation products are stated at the lower of cost, on an average cost basis, or net realizable value.

v3.19.3
Solar Energy Systems
9 Months Ended
Sep. 30, 2019
Solar Energy Systems Disclosure [Abstract]  
Solar Energy Systems

5.

Solar Energy Systems

Solar energy systems, net consisted of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

System equipment costs

$

1,856,664

 

 

$

1,667,440

 

Initial direct costs related to solar energy systems

 

 

 

 

435,084

 

 

 

1,856,664

 

 

 

2,102,524

 

Less: Accumulated depreciation

 

(190,224

)

 

 

(195,890

)

 

 

1,666,440

 

 

 

1,906,634

 

Solar energy system inventory

 

29,689

 

 

 

32,240

 

Solar energy systems, net

$

1,696,129

 

 

$

1,938,874

 

 

Solar energy system inventory represents the solar components and materials used in the installation of solar energy systems prior to being installed on customers’ roofs. As such, no depreciation is recorded related to this line item. The Company recorded depreciation expense related to solar energy systems of $14.4 million and $17.0 million for the three months ended September 30, 2019 and 2018. The Company recorded depreciation expense related to solar energy systems of $41.3 million and $48.5 million for the nine months ended September 30, 2019 and 2018. The Company did not record any initial direct costs or amortization of initial direct costs related to solar energy systems in 2019 due to the adoption of Topic 842. See Note 2—Summary of Significant Accounting Policies.

v3.19.3
Property and Equipment
9 Months Ended
Sep. 30, 2019
Property Plant And Equipment [Abstract]  
Property and Equipment

6.

Property and Equipment

Property and equipment, net consisted of the following (in thousands):

 

 

 

Estimated

 

September 30,

 

 

December 31,

 

 

 

Useful Lives

 

2019

 

 

2018

 

Leasehold improvements

 

1-12 years

 

$

10,486

 

 

$

10,560

 

Furniture and computer and other equipment

 

3 years

 

 

4,282

 

 

 

3,816

 

Vehicles acquired under finance leases

 

3-5 years

 

 

7,106

 

 

 

6,907

 

 

 

 

 

 

21,874

 

 

 

21,283

 

Less: Accumulated depreciation and amortization

 

 

 

 

(7,542

)

 

 

(10,553

)

Property and equipment, net

 

 

 

$

14,332

 

 

$

10,730

 

 

The Company recorded depreciation and amortization expense related to property and equipment of $0.8 million and $0.9 million for the three months ended September 30, 2019 and 2018. The Company recorded depreciation and amortization expense related to property and equipment of $1.8 million and $3.9 million for the nine months ended September 30, 2019 and 2018.

Effective January 1, 2019, the Company adopted Topic 842. As part of the adoption, the Company reassessed all contracts existing at the adoption date. The Company determined that a number of vehicle leases that were previously classified as capital leases under Topic 840 were no longer classified as finance leases under Topic 842. This resulted in a reduction to the gross asset and accumulated depreciation and amortization balances related to vehicles and will result in lower depreciation and amortization expense related to property and equipment compared to prior periods.

v3.19.3
Other Non-Current Assets
9 Months Ended
Sep. 30, 2019
Other Assets Noncurrent Disclosure [Abstract]  
Other Non-Current Assets

7.

Other Non-Current Assets

Other non-current assets consisted of the following (in thousands):

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

Costs to obtain contracts

$

559,492

 

 

$

 

Accumulated amortization of costs to obtain contracts

 

(65,204

)

 

 

 

Operating lease right-of-use assets

 

38,292

 

 

 

 

Sales incentives

 

10,006

 

 

 

8,588

 

Other non-current assets

 

25,286

 

 

 

19,502

 

Total other non-current assets

$

567,872

 

 

$

28,090

 

The Company recorded amortization of costs to obtain contracts of $6.9 million and $18.2 million for the three and nine months ended September 30, 2019. Costs to obtain contracts are amortized over the initial terms of customer contracts, which are typically 20 years.

v3.19.3
Intangible Assets
9 Months Ended
Sep. 30, 2019
Goodwill And Intangible Assets Disclosure [Abstract]  
Intangible Assets

8.

Intangible Assets

Net intangible assets are included in other non-current assets, net and consisted of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

Cost:

 

 

 

 

 

 

 

Internal-use software

$

1,312

 

 

$

1,020

 

Developed technology

 

522

 

 

 

522

 

Trademarks/trade names

 

201

 

 

 

201

 

Total carrying value

 

2,035

 

 

 

1,743

 

Accumulated amortization:

 

 

 

 

 

 

 

Internal-use software

 

(87

)

 

 

(781

)

Developed technology

 

(376

)

 

 

(324

)

Trademarks/trade names

 

(114

)

 

 

(99

)

Total accumulated amortization

 

(577

)

 

 

(1,204

)

Total intangible assets, net

$

1,458

 

 

$

539

 

 

The Company recorded a de minimis amount and $0.1 million of amortization expense for the three months ended September 30, 2019 and 2018, which is included within general and administrative expense on the condensed consolidated statements of operations. The Company recorded amortization expense of $0.2 million and $0.4 million for the nine months ended September 30, 2019 and 2018.

v3.19.3
Accrued Compensation
9 Months Ended
Sep. 30, 2019
Accrued Compensation Disclosure [Abstract]  
Accrued Compensation

9.

Accrued Compensation

Accrued compensation consisted of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

Accrued payroll

$

19,052

 

 

$

16,352

 

Accrued commissions

 

21,595

 

 

 

9,168

 

Total accrued compensation

$

40,647

 

 

$

25,520

 

 

v3.19.3
Accrued and Other Current Liabilities
9 Months Ended
Sep. 30, 2019
Payables And Accruals [Abstract]  
Accrued and Other Current Liabilities

10.

Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

Accrued unused commitment fees and interest

$

16,151

 

 

$

14,102

 

Litigation Settlement

 

8,325

 

 

 

100

 

Accrued inventory

 

7,567

 

 

 

4,380

 

Current portion of operating lease liabilities

 

7,432

 

 

 

 

Accrued professional fees

 

6,233

 

 

 

6,150

 

Accrued workers' compensation

 

6,024

 

 

 

4,033

 

Current portion of lease pass-through financing obligation

 

5,126

 

 

 

5,038

 

Workmanship accrual

 

3,724

 

 

 

2,630

 

Sales, use and property taxes payable

 

3,393

 

 

 

3,132

 

Other accrued expenses

 

6,263

 

 

 

3,295

 

Total accrued and other current liabilities

$

70,238

 

 

$

42,860

 

 

v3.19.3
Debt Obligations
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Debt Obligations

11.

Debt Obligations

Debt obligations consisted of the following as of September 30, 2019 (in thousands, except interest rates):

 

Principal

 

 

Unamortized Debt

 

 

 

 

 

 

 

 

 

 

Unused

 

 

 

 

 

 

 

 

Borrowings

 

 

Issuance Costs

 

 

Net Carrying Value

 

 

Borrowing

 

 

Interest

 

 

Maturity

 

Outstanding

 

 

Current

 

 

Long-term

 

 

Current

 

 

Long-term

 

 

Capacity

 

 

Rate

 

 

Date

Solar asset backed notes, Series 2018-1(1)

$

454,100

 

 

$

(76

)

 

$

(8,603

)

 

$

3,919

 

 

$

441,502

 

 

$

 

 

 

5.1

%

 

October 2028

Solar asset backed notes, Series 2018-2(2)(3)

 

338,294

 

 

 

(5

)

 

 

(6,457

)

 

 

245

 

 

 

331,587

 

 

 

 

 

 

5.5

 

 

August 2023

2017 Term loan facility

 

183,116

 

 

 

(173

)

 

 

(4,326

)

 

 

6,855

 

 

 

171,762

 

 

 

 

 

 

6.0

 

 

January 2035

2018 Forward flow loan facility

 

125,048

 

 

 

(94

)

 

 

(3,145

)

 

 

2,396

 

 

 

119,413

 

 

 

 

 

 

4.7

 

 

(4)

2019 Forward flow loan facility

 

50,353

 

 

 

 

 

 

(2,902

)

 

 

 

 

 

47,451

 

 

 

99,647

 

 

 

3.9

 

 

(5)

Credit agreement

 

1,270

 

 

 

(1

)

 

 

(99

)

 

 

17

 

 

 

1,153

 

 

 

 

 

 

6.5

 

 

February 2023

Revolving lines of credit(6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse facility

 

170,000