VIVINT SOLAR, INC., 10-Q filed on 5/9/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 01, 2019
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
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 Emerging Growth Company true  
Entity Ex Transition Period true  
Entity Common Stock, Shares Outstanding   120,611,637
v3.19.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 213,474 $ 219,591
Accounts receivable, net 19,992 14,207
Inventories 11,532 13,257
Prepaid expenses and other current assets 29,294 31,201
Total current assets 274,292 278,256
Restricted cash and cash equivalents 75,010 71,305
Solar energy systems, net 1,590,888 1,938,874
Property and equipment, net 10,180 10,730
Other non-current assets, net 478,013 28,090
TOTAL ASSETS [1] 2,428,383 2,327,255
Current liabilities:    
Accounts payable 38,937 45,929
Distributions payable to non-controlling interests and redeemable non-controlling interests 6,591 7,846
Accrued compensation 21,121 25,520
Current portion of long-term debt 147,952 12,155
Current portion of deferred revenue 26,246 30,199
Current portion of finance lease obligation 769 1,921
Accrued and other current liabilities 49,658 42,860
Total current liabilities 291,274 166,430
Long-term debt, net of current portion 1,123,888 1,203,282
Deferred revenue, net of current portion 14,746 13,524
Finance lease obligation, net of current portion 874 505
Deferred tax liability, net 463,156 437,120
Other non-current liabilities 66,369 24,610
Total liabilities [1] 1,960,307 1,845,471
Commitments and contingencies (Note 19)
Redeemable non-controlling interests 118,667 119,572
Stockholders’ equity:    
Common stock, $0.01 par value—1,000,000 authorized, 120,612 shares issued and outstanding as of March 31, 2019; 1,000,000 authorized, 120,114 shares issued and outstanding as of December 31, 2018 1,206 1,201
Additional paid-in capital 577,961 574,248
Accumulated other comprehensive loss (11,870) (7,223)
Accumulated deficit (306,028) (279,631)
Total stockholders’ equity 261,269 288,595
Non-controlling interests 88,140 73,617
Total equity 349,409 362,212
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY $ 2,428,383 $ 2,327,255
[1] The Company’s assets as of March 31, 2019 and December 31, 2018 include $1,915.2 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 $1,448.0 million and $1,752.3 million as of March 31, 2019 and December 31, 2018; other non-current assets, net of $390.7 million and $10.9 million as of March 31, 2019 and December 31, 2018; cash and cash equivalents of $57.7 million and $62.4 million as of March 31, 2019 and December 31, 2018; accounts receivable, net, of $13.0 million and $6.6 million as of March 31, 2019 and December 31, 2018; restricted cash and cash equivalents of $4.1 million and $2.4 million as of March 31, 2019 and December 31, 2018; and prepaid expenses and other current assets of $1.8 million and $1.3 million as of March 31, 2019 and December 31, 2018. The Company’s liabilities as of March 31, 2019 and December 31, 2018 included $122.2 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to non-controlling interests and redeemable non-controlling interests of $6.6 million and $7.8 million as of March 31, 2019 and December 31, 2018; deferred revenue of $13.0 million and $12.0 million as of March 31, 2019 and December 31, 2018; long-term debt of $96.4 million and $55.0 million as of March 31, 2019 and December 31, 2018; accrued and other current liabilities of $5.2 million and $4.9 million as of March 31, 2019 and December 31, 2018; and other non-current liabilities of $1.0 million and $1.0 million as of March 31, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.
v3.19.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 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 120,612,000 120,114,000
Common stock, shares outstanding 120,612,000 120,114,000
Total assets [1] $ 2,428,383 $ 2,327,255
Solar energy systems, net 1,590,888 1,938,874
Cash and cash equivalents 213,474 219,591
Accounts receivable, net 19,992 14,207
Other non-current assets, net 478,013 28,090
Restricted cash and cash equivalents 75,010 71,305
Prepaid expenses and other current assets 29,294 31,201
Total liabilities [1] 1,960,307 1,845,471
Distributions payable to non-controlling interests and redeemable non-controlling interests 6,591 7,846
Accrued and other current liabilities 49,658 42,860
Other non-current liabilities 66,369 24,610
Variable Interest Entities    
Total assets 1,915,241 1,835,834
Solar energy systems, net 1,448,012 1,752,271
Cash and cash equivalents 57,660 62,350
Accounts receivable, net 13,033 6,593
Other non-current assets, net 390,711 10,888
Restricted cash and cash equivalents 4,071 2,443
Prepaid expenses and other current assets 1,754 1,289
Total liabilities 122,168 80,760
Distributions payable to non-controlling interests and redeemable non-controlling interests 6,591 7,846
Deferred revenue 13,000 12,000
Long-term debt 96,400 55,000
Accrued and other current liabilities 5,194 4,860
Other non-current liabilities $ 993 $ 1,023
[1] The Company’s assets as of March 31, 2019 and December 31, 2018 include $1,915.2 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 $1,448.0 million and $1,752.3 million as of March 31, 2019 and December 31, 2018; other non-current assets, net of $390.7 million and $10.9 million as of March 31, 2019 and December 31, 2018; cash and cash equivalents of $57.7 million and $62.4 million as of March 31, 2019 and December 31, 2018; accounts receivable, net, of $13.0 million and $6.6 million as of March 31, 2019 and December 31, 2018; restricted cash and cash equivalents of $4.1 million and $2.4 million as of March 31, 2019 and December 31, 2018; and prepaid expenses and other current assets of $1.8 million and $1.3 million as of March 31, 2019 and December 31, 2018. The Company’s liabilities as of March 31, 2019 and December 31, 2018 included $122.2 million and $80.8 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to non-controlling interests and redeemable non-controlling interests of $6.6 million and $7.8 million as of March 31, 2019 and December 31, 2018; deferred revenue of $13.0 million and $12.0 million as of March 31, 2019 and December 31, 2018; long-term debt of $96.4 million and $55.0 million as of March 31, 2019 and December 31, 2018; accrued and other current liabilities of $5.2 million and $4.9 million as of March 31, 2019 and December 31, 2018; and other non-current liabilities of $1.0 million and $1.0 million as of March 31, 2019 and December 31, 2018. For further information see Note 14—Investment Funds.
v3.19.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Revenue:    
Total revenue $ 69,371 $ 68,250
Cost of revenue:    
Total cost of revenue 57,454 64,732
Gross profit 11,917 3,518
Operating expenses:    
Sales and marketing 29,634 11,125
Research and development 469 486
General and administrative 23,049 19,987
Total operating expenses 53,152 31,598
Loss from operations (41,235) (28,080)
Interest expense, net 19,127 16,922
Other expense (income), net 1,385 (2,261)
Loss before income taxes (61,747) (42,741)
Income tax expense 27,487 18,643
Net loss (89,234) (61,384)
Net loss attributable to non-controlling interests and redeemable non-controlling interests (62,992) (48,408)
Net loss attributable to common stockholders $ (26,242) $ (12,976)
Net loss per share attributable to common stockholders:    
Basic and diluted $ (0.22) $ (0.11)
Weighted-average shares used in computing net loss per share attributable to common stockholders:    
Basic and diluted 120,307 115,155
Customer Agreements and Incentives    
Revenue:    
Total revenue $ 39,603 $ 31,114
Cost of revenue:    
Total cost of revenue 40,191 38,687
Solar Energy System and Product Sales    
Revenue:    
Total revenue 29,768 37,136
Cost of revenue:    
Total cost of revenue $ 17,263 $ 26,045
v3.19.1
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]    
Net loss attributable to common stockholders $ (26,242) $ (12,976)
Other comprehensive (loss) income:    
Unrealized (losses) gains on cash flow hedging instruments (net of tax effect of $(1,777) and $1,394) (4,883) 3,749
Less: Interest (expense) income on derivatives recognized into earnings (net of tax effect of $(86) and $103) (236) 278
Total other comprehensive (loss) income (4,647) 3,471
Comprehensive loss $ (30,889) $ (9,505)
v3.19.1
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]    
Unrealized losses on cash flow hedging instruments, tax $ (1,777) $ 1,394
Interest expense on derivatives recognized into earnings, tax $ (86) $ 103
v3.19.1
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 2,969     2,969     2,969  
Issuance of common stock, net 207   $ 2 205     207  
Issuance of common stock, net (in shares)     230          
Contributions from non-controlling interests and redeemable non-controlling interests   42,771            
Distributions to non-controlling interests and redeemable non-controlling interests (7,093) (2,093)           (7,093)
Total other comprehensive (loss) income 3,471       3,471   3,471  
Net loss (28,369) (33,015)       (12,976) (12,976) (15,393)
Balance at Mar. 31, 2018 358,423 130,107 $ 1,153 562,962 13,694 (277,015) 300,794 57,629
Balance (in Shares) at Mar. 31, 2018     115,329          
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 3,679     3,679     3,679  
Issuance of common stock, net 39   $ 5 34     39  
Issuance of common stock, net (in shares)     498          
Contributions from non-controlling interests and redeemable non-controlling interests 74,555 9,813           74,555
Distributions to non-controlling interests and redeemable non-controlling interests (5,567) (2,191)           (5,567)
Total other comprehensive (loss) income (4,647)       (4,647)   (4,647)  
Net loss (80,707) (8,527)       (26,242) (26,242) (54,465)
Balance at Mar. 31, 2019 $ 349,409 $ 118,667 $ 1,206 $ 577,961 $ (11,870) $ (306,028) $ 261,269 $ 88,140
Balance (in Shares) at Mar. 31, 2019 120,612   120,612          
v3.19.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (89,234) $ (61,384)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 17,659 16,443
Deferred income taxes 27,727 18,969
Stock-based compensation 3,679 2,969
Loss on solar energy systems and property and equipment 1,233 570
Non-cash interest and other expense 1,645 2,007
Reduction in lease pass-through financing obligation (695) (687)
Losses (gains) on interest rate swaps 1,384 (2,262)
Changes in operating assets and liabilities:    
Accounts receivable, net (5,785) 1,429
Inventories 1,725 6,807
Prepaid expenses and other current assets 2,746 11,746
Other non-current assets, net (26,539) 385
Accounts payable 1,876 374
Accrued compensation (4,068) (2,351)
Deferred revenue (2,731) (9,083)
Accrued and other liabilities (615) (103)
Net cash used in operating activities (69,993) (14,171)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Payments for the cost of solar energy systems (64,526) (72,208)
Payments for property and equipment (291) (40)
Proceeds from disposals of solar energy systems and property and equipment 649 775
Net cash used in investing activities (64,168) (71,473)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from investment by non-controlling interests and redeemable non-controlling interests 84,368 42,771
Distributions paid to non-controlling interests and redeemable non-controlling interests (9,013) (18,122)
Proceeds from long-term debt 61,355 40,000
Payments on long-term debt (5,593) (7,748)
Proceeds from lease pass-through financing obligation 864 852
Principal payments on finance lease obligations (271) (1,015)
Proceeds from issuance of common stock 39 207
Net cash provided by financing activities 131,749 56,945
NET DECREASE IN CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS (2,412) (28,699)
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—Beginning of period 290,896 154,938
CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED AMOUNTS—End of period 288,484 126,239
NONCASH INVESTING AND FINANCING ACTIVITIES:    
Costs of solar energy systems included in changes in accounts payable, accrued compensation and accrued and other liabilities 40,256 (2,518)
Right-of-use assets obtained in exchange for new operating lease liabilities 6,910  
Right-of-use assets obtained in exchange for new finance lease liabilities $ 1,053 199
Solar energy system sales    
NONCASH INVESTING AND FINANCING ACTIVITIES:    
Receivable for state tax credits recorded as a reduction to solar energy system costs   $ 4
v3.19.1
Organization
3 Months Ended
Mar. 31, 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.

v3.19.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 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 consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K dated as of March 5, 2019. 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 three months ended March 31, 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 variable interest entities (“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.

The condensed consolidated statements of operations items formerly captioned “Operating leases and incentives” and “Cost of revenue—operating leases and incentives” will now be captioned “Customer agreements and incentives” and “Cost of revenue—customer agreements and incentives” beginning in the current period. The condensed consolidated balance sheet items formerly captioned “Current portion of capital lease obligation” and “Capital lease obligation, net of current portion” will now be captioned “Current portion of finance lease obligation” and “Finance lease obligation, net of current portion” beginning in the current period. Amounts in these balance sheet items were capital leases under ASC 840 in periods ending prior to January 1, 2019, while amounts in these balance sheet items are finance leases under ASC 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 fair market price that the Company would charge for these services if offered separately from the sale of the solar energy system. As of March 31, 2019 and December 31, 2018, the Company had allocated deferred revenue of $3.7 million and $3.3 million to monitoring services that will be recognized over the term of the monitoring services.

Leases

The Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (“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 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 ASC 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 ASC 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 ASC 606. For Solar Leases, the Company concluded that the impact of applying ASC 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 ASC 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 ASC 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.

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

 

December 31, 2018

 

 

March 31, 2019

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

 

As Reported

 

Solar energy systems, net

$

1,938,874

 

 

$

(388,087

)

 

$

1,550,787

 

 

$

1,590,888

 

Other non-current assets, net

 

28,090

 

 

 

388,087

 

 

 

416,177

 

 

 

478,013

 

 

 

Three Months Ended March 31,

 

 

2018

 

 

2019

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

 

As Reported

 

Cost of revenue—customer agreements and incentives

$

38,687

 

 

$

(4,080

)

 

$

34,607

 

 

$

40,191

 

Cost of revenue—solar energy system and product sales

 

26,045

 

 

 

(5,857

)

 

 

20,188

 

 

 

17,263

 

Total cost of revenue

 

64,732

 

 

 

(9,937

)

 

 

54,795

 

 

 

57,454

 

Gross profit

 

3,518

 

 

 

9,937

 

 

 

13,455

 

 

 

11,917

 

Sales and marketing

 

11,125

 

 

 

9,937

 

 

 

21,062

 

 

 

29,634

 

Total operating expenses

 

31,598

 

 

 

9,937

 

 

 

41,535

 

 

 

53,152

 

 

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. Entities 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. No prior periods were impacted as a result of adopting this ASU.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) 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 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.

v3.19.1
Fair Value Measurements
3 Months Ended
Mar. 31, 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):

 

 

March 31, 2019

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 

 

$

13

 

 

$

 

 

$

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 

 

$

18,751

 

 

$

 

 

$

18,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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. The Company has interest rate swaps for its Aggregation Facility, which are not designated as hedges, the fair value of which is represented in financial liabilities above. The Company also has interest rate swaps for its Solar Asset Backed Notes, Series 2018-2, which are designated as hedges, the fair value of which is represented in financial liabilities above.

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

 

March 31, 2019

 

 

December 31, 2018

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

Floating-rate long-term debt

$

645,263

 

 

$

645,263

 

 

$

587,358

 

 

$

587,358

 

Fixed-rate long-term debt

 

650,888

 

 

 

685,471

 

 

 

653,031

 

 

 

673,917

 

Total

$

1,296,151

 

 

$

1,330,734

 

 

$

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.

v3.19.1
Inventories
3 Months Ended
Mar. 31, 2019
Inventory Disclosure [Abstract]  
Inventories

4.

Inventories

Inventories consisted of the following (in thousands):

 

March 31,

 

 

December 31,

 

 

2019

 

 

2018

 

Solar energy systems held for sale

$

10,565

 

 

$

12,321

 

Photovoltaic installation products

 

967

 

 

 

936

 

Total inventories

$

11,532

 

 

$

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.

v3.19.1
Solar Energy Systems
3 Months Ended
Mar. 31, 2019
Solar Energy Systems Disclosure [Abstract]  
Solar Energy Systems

5.

Solar Energy Systems

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

 

 

March 31,

 

 

December 31,

 

 

2019

 

 

2018

 

System equipment costs

$

1,718,400

 

 

$

1,667,440

 

Initial direct costs related to solar energy systems

 

 

 

 

435,084

 

 

 

1,718,400

 

 

 

2,102,524

 

Less: Accumulated depreciation

 

(162,004

)

 

 

(195,890

)

 

 

1,556,396

 

 

 

1,906,634

 

Solar energy system inventory

 

34,492

 

 

 

32,240

 

Solar energy systems, net

$

1,590,888

 

 

$

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 $13.1 million and $15.4 million for the three months ended March 31, 2019 and 2018.

v3.19.1
Property and Equipment
3 Months Ended
Mar. 31, 2019
Property Plant And Equipment [Abstract]  
Property and Equipment

6.

Property and Equipment

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

 

 

 

Estimated

 

March 31,

 

 

December 31,

 

 

 

Useful Lives

 

2019

 

 

2018

 

Leasehold improvements

 

1-12 years

 

$

10,576

 

 

$

10,560

 

Furniture and computer and other equipment

 

3 years

 

 

4,030

 

 

 

3,816

 

Vehicles acquired under finance leases

 

3-5 years

 

 

1,975

 

 

 

6,907

 

 

 

 

 

 

16,581

 

 

 

21,283

 

Less: Accumulated depreciation and amortization

 

 

 

 

(6,401

)

 

 

(10,553

)

Property and equipment, net

 

 

 

$

10,180

 

 

$

10,730

 

 

The Company recorded depreciation and amortization expense related to property and equipment of $0.1 million and $1.7 million for the three months ended March 31, 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 ASC 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.

v3.19.1
Other Non-Current Assets
3 Months Ended
Mar. 31, 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):

 

March 31,

 

 

December 31,

 

 

2019

 

 

2018

 

Costs to obtain contracts

$

462,495

 

 

$

 

Accumulated amortization of costs to obtain contracts

 

(50,928

)

 

 

 

Operating lease right-of-use assets

 

39,697

 

 

 

 

Sales incentives

 

9,292

 

 

 

8,588

 

Other non-current assets

 

17,457

 

 

 

19,502

 

Total other non-current assets

$

478,013

 

 

$

28,090

 

The Company recorded amortization of costs to obtain contracts of $3.9 million for the three months ended March 31, 2019. Costs to obtain contracts are amortized over the initial terms of customer contracts, which are typically 20 years.

v3.19.1
Intangible Assets
3 Months Ended
Mar. 31, 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):

 

 

March 31,

 

 

December 31,

 

 

2019

 

 

2018

 

Cost:

 

 

 

 

 

 

 

Internal-use software

$

520

 

 

$

1,020

 

Developed technology

 

522

 

 

 

522

 

Trademarks/trade names

 

201

 

 

 

201

 

Total carrying value

 

1,243

 

 

 

1,743

 

Accumulated amortization:

 

 

 

 

 

 

 

Internal-use software

 

(338

)

 

 

(781

)

Developed technology

 

(343

)

 

 

(324

)

Trademarks/trade names

 

(105

)

 

 

(99

)

Total accumulated amortization

 

(786

)

 

 

(1,204

)

Total intangible assets, net

$

457

 

 

$

539

 

 

The Company recorded amortization expense of $0.1 million for each of the three-month periods ended March 31, 2019 and 2018, which is included within general and administrative expense on the condensed consolidated statements of operations.

v3.19.1
Accrued Compensation
3 Months Ended
Mar. 31, 2019
Accrued Compensation Disclosure [Abstract]  
Accrued Compensation

9.

Accrued Compensation

Accrued compensation consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

2019

 

 

2018

 

Accrued payroll

$

12,467

 

 

$

16,352

 

Accrued commissions

 

8,654

 

 

 

9,168

 

Total accrued compensation

$

21,121

 

 

$

25,520

 

 

v3.19.1
Accrued and Other Current Liabilities
3 Months Ended
Mar. 31, 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):

 

 

March 31,

 

 

December 31,

 

 

2019

 

 

2018

 

Accrued unused commitment fees and interest

$

15,354

 

 

$

14,102

 

Current portion of operating lease liabilities

 

6,992

 

 

 

 

Accrued professional fees

 

6,402

 

 

 

6,150

 

Current portion of lease pass-through financing obligation

 

5,061

 

 

 

5,038

 

Accrued workers' compensation

 

4,459

 

 

 

4,033

 

Accrued inventory

 

3,869

 

 

 

4,380

 

Workmanship accrual

 

2,648

 

 

 

2,630

 

Sales, use and property taxes payable

 

2,618

 

 

 

3,132

 

Other accrued expenses

 

2,255

 

 

 

3,395

 

Total accrued and other current liabilities

$

49,658

 

 

$

42,860

 

 

v3.19.1
Debt Obligations
3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Debt Obligations

11.

Debt Obligations

Debt obligations consisted of the following as of March 31, 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)

$

462,826

 

 

$

(73

)

 

$

(8,988

)

 

$

3,657

 

 

$

450,108

 

 

$

 

 

 

5.1

%

 

October 2028

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

 

339,382

 

 

 

(6

)

 

 

(7,085

)

 

 

294

 

 

 

331,997

 

 

 

 

 

 

5.5

 

 

August 2023

2017 Term loan facility

 

186,784

 

 

 

(168

)

 

 

(4,524

)

 

 

6,679

 

 

 

175,413

 

 

 

 

 

 

6.0

 

 

January 2035

Forward flow loan facility

 

99,780

 

 

 

(42

)

 

 

(3,311

)

 

 

1,206

 

 

 

95,221

 

 

 

30,220

 

 

 

4.9

 

 

(4)

Credit agreement

 

1,279

 

 

 

(2

)

 

 

(112

)

 

 

16

 

 

 

1,149

 

 

 

 

 

 

6.5

 

 

February 2023

Revolving lines of credit(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregation facility

 

70,000

 

 

 

 

 

 

 

 

 

 

 

 

70,000

 

 

 

305,000

 

 

 

5.7

 

 

September 2020

Working capital facility(6)

 

136,100

 

 

 

 

 

 

 

 

 

136,100

 

 

 

 

 

 

 

 

 

5.7

 

 

March 2020

Total debt

$

1,296,151

 

 

$

(291

)

 

$

(24,020

)

 

$

147,952

 

 

$

1,123,888

 

 

$

335,220

 

 

 

 

 

 

 

Debt obligations consisted of the following as of December 31, 2018 (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)

$

462,826

 

 

$

(74

)

 

$

(9,172

)

 

$

3,655

 

 

$

449,925

 

 

$

 

 

 

5.1

%

 

October 2028

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

 

342,833

 

 

 

(6

)

 

 

(7,388

)

 

 

294

 

 

 

335,145

 

 

 

 

 

 

5.4

 

 

August 2023

2017 Term loan facility

 

188,922

 

 

 

(170

)

 

 

(4,614

)

 

 

6,679

 

 

 

177,459

 

 

 

 

 

 

6.0

 

 

January 2035

Forward flow loan facility

 

58,425