Sunnova Energy International Inc. [NOVA] Filings

10-Q 1 nova-20220930.htm 10-Q nova-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________________

FORM 10-Q

_______________________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-38995

_______________________________________________________________________________

Sunnova Energy International Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________________________________________

Delaware

30-1192746

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

20 East Greenway Plaza, Suite 540

Houston, Texas 77046

(Address, including zip code, of principal executive offices)

(281) 892-1588

(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	NOVA	New York Stock Exchange

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

☐

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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had 114,909,899 shares of common stock outstanding as of October 24, 2022.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Unless the context otherwise requires, the terms "Sunnova," "the Company," "we," "us" and "our" refer to Sunnova Energy International Inc. ("SEI") and its consolidated subsidiaries. Forward-looking statements generally relate to future events or Sunnova's future financial or operating performance. Actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. In some cases, you can identify these statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "plan," "potential," "predict," "project," "seek," "should," "target," "will" 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 report include, but are not limited to, statements about:

•our future operations and financial performance following the acquisition of SunStreet Energy Group, LLC, a Delaware limited liability company ("SunStreet");

•the effects of the coronavirus ("COVID-19") pandemic on our business and operations, results of operations and financial position;

•the impact of Hurricane Fiona and Hurricane Ian on our business and operations, results of operations and financial position;

•federal, state and local statutes, regulations and policies;

•determinations of the Internal Revenue Service ("IRS") of the fair market value of our solar energy systems;

•the price of centralized utility-generated electricity and electricity from other sources and technologies;

•technical and capacity limitations imposed by operators of the power grid;

•the availability of tax rebates, credits and incentives, including changes to the rates of, or expiration of, federal tax credits and the availability of related safe harbors;

•our need and ability to raise capital to finance the installation and acquisition of distributed residential solar energy systems, refinance existing debt or otherwise meet our liquidity needs;

•our expectations concerning relationships with third parties, including the attraction, retention, performance and continued existence of our dealers;

•our ability to manage our supply chains and distribution channels and the impact of natural disasters and other events beyond our control, such as hurricanes and the COVID-19 pandemic;

•our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets;

•our investment in our platform and new product offerings and the demand for and expected benefits of our platform and product offerings;

•the ability of our solar energy systems, energy storage systems or other product offerings to operate or deliver energy for any reason, including if interconnection or transmission facilities on which we rely become unavailable;

•our ability to maintain our brand and protect our intellectual property and customer data;

•our ability to manage the cost of solar energy systems, energy storage systems and our service offerings;

•the willingness of and ability of our dealers and suppliers to fulfill their respective warranty and other contractual obligations;

•our expectations regarding litigation and administrative proceedings; and

•our ability to renew or replace expiring, canceled or terminated solar service agreements at favorable rates or on a long-term basis.

Our actual results and timing of these events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed under "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. 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. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

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TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Balance Sheets	4
	Unaudited Condensed Consolidated Statements of Operations	5
	Unaudited Condensed Consolidated Statements of Cash Flows	6
	Unaudited Condensed Consolidated Statements of Redeemable Noncontrolling Interests and Equity	8
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	59

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	60
	Signatures	62

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts and share par values)


	As of September 30, 2022		As of December 31, 2021


Assets
Current assets:
Cash and cash equivalents	$	412,581	$	243,101
Accounts receivable—trade, net	35,743		18,584
Accounts receivable—other	152,942		57,736

Other current assets, net of allowance of $5,306 and $1,646 as of September 30, 2022 and December 31, 2021, respectively	336,047		296,321
Total current assets	937,313		615,742

Property and equipment, net	3,537,177		2,909,613
Customer notes receivable, net of allowance of $62,682 and $39,492 as of September 30, 2022 and December 31, 2021, respectively	2,072,264		1,204,073
Intangible assets, net	169,187		190,520
Goodwill	13,150		13,150
Other assets	920,634		571,136
Total assets (1)	$	7,649,725	$	5,504,234

Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities:
Accounts payable	$	94,647	$	55,033
Accrued expenses	121,195		81,721
Current portion of long-term debt	191,131		129,793
Other current liabilities	51,093		44,350
Total current liabilities	458,066		310,897

Long-term debt, net	4,807,107		3,135,681
Other long-term liabilities	631,137		436,043
Total liabilities (1)	5,896,310		3,882,621

Commitments and contingencies (Note 15)

Redeemable noncontrolling interests	153,469		145,336

Stockholders' equity:
Common stock, 114,895,870 and 113,386,600 shares issued as of September 30, 2022 and December 31, 2021, respectively, at $0.0001 par value	11		11
Additional paid-in capital—common stock	1,633,507		1,649,199
Accumulated deficit	(387,073)		(459,715)
Total stockholders' equity	1,246,445		1,189,495
Noncontrolling interests	353,501		286,782
Total equity	1,599,946		1,476,277
Total liabilities, redeemable noncontrolling interests and equity	$	7,649,725	$	5,504,234

(1) The consolidated assets as of September 30, 2022 and December 31, 2021 include $2,721,620 and $2,148,398, respectively, of assets of variable interest entities ("VIEs") that can only be used to settle obligations of the VIEs. These assets include cash of $33,695 and $23,538 as of September 30, 2022 and December 31, 2021, respectively; accounts receivable—trade, net of $9,834 and $6,167 as of September 30, 2022 and December 31, 2021, respectively; accounts receivable—other of $739 and $410 as of September 30, 2022 and December 31, 2021, respectively; other current assets of $273,175 and $272,421 as of September 30, 2022 and December 31, 2021, respectively; property and equipment, net of $2,362,041 and $1,817,471 as of September 30, 2022 and December 31, 2021, respectively; and other assets of $42,136 and $28,391 as of September 30, 2022 and December 31, 2021, respectively. The consolidated liabilities as of September 30, 2022 and December 31, 2021 include $59,908 and $47,225, respectively, of liabilities of VIEs whose creditors have no recourse to Sunnova Energy International Inc. These liabilities include accounts payable of $8,965 and $6,014 as of September 30, 2022 and December 31, 2021, respectively; accrued expenses of $178 and $88 as of September 30, 2022 and December 31, 2021, respectively; other current liabilities of $2,894 and $3,845 as of September 30, 2022 and December 31, 2021, respectively; and other long-term liabilities of $47,871 and $37,278 as of September 30, 2022 and December 31, 2021, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

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SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	149,364	$	68,901	$	362,098	$	176,733

Operating expense:
Cost of revenue—depreciation	24,663		19,665		69,935		55,621
Cost of revenue—inventory sales	40,917		—		89,884		—
Cost of revenue—other	15,567		7,342		32,974		13,572
Operations and maintenance	9,774		6,035		23,787		14,640
General and administrative	75,897		53,372		214,362		144,028
Other operating expense (income)	10,267		(9,337)		(4,186)		(5,303)
Total operating expense, net	177,085		77,077		426,756		222,558

Operating loss	(27,721)		(8,176)		(64,658)		(45,825)

Interest expense, net	18,328		26,588		36,275		84,748

Interest income	(16,185)		(9,098)		(40,428)		(24,266)
Loss on extinguishment of long-term debt, net	—		—		—		9,824

Other (income) expense	(12)		189		(327)		60
Loss before income tax	(29,852)		(25,855)		(60,178)		(116,191)

Income tax expense	—		64		—		64
Net loss	(29,852)		(25,919)		(60,178)		(116,255)
Net income attributable to redeemable noncontrolling interests and noncontrolling interests	32,195		1,622		72,455		7,665
Net loss attributable to stockholders	$	(62,047)	$	(27,541)	$	(132,633)	$	(123,920)






Net loss per share attributable to common stockholders—basic and diluted	$	(0.54)	$	(0.25)	$	(1.16)	$	(1.12)
Weighted average common shares outstanding—basic and diluted	114,816,879		112,159,698		114,293,251		110,185,333

See accompanying notes to unaudited condensed consolidated financial statements.

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SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(60,178)	$	(116,255)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	78,401		62,286
Impairment and loss on disposals, net	2,971		3,522
Amortization of intangible assets	21,333		14,111
Amortization of deferred financing costs	9,690		11,556
Amortization of debt discount	6,273		8,231

Non-cash effect of equity-based compensation plans	20,059		13,937


Unrealized gain on derivatives	(35,685)		(5,574)
Unrealized gain on fair value instruments	(4,136)		(4,665)
Loss on extinguishment of long-term debt, net	—		9,824

Other non-cash items	(14,087)		12,622
Changes in components of operating assets and liabilities:
Accounts receivable	(100,537)		(27,194)

Other current assets	(139,946)		(99,731)
Other assets	(84,142)		(41,404)
Accounts payable	1,403		(5,226)
Accrued expenses	41,571		19,923
Other current liabilities	(4,243)		(1,617)


Other long-term liabilities	(4,542)		(1,193)
Net cash used in operating activities	(265,795)		(146,847)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(637,556)		(344,044)
Payments for investments and customer notes receivable	(902,773)		(553,475)
Proceeds from customer notes receivable	79,870		47,300

Proceeds from investments in solar receivables	9,388		—

Other, net	(282)		3,038
Net cash used in investing activities	(1,451,353)		(847,181)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt	2,308,033		1,890,185
Payments of long-term debt	(571,261)		(815,710)


Payments on notes payable	—		(34,555)
Payments of deferred financing costs	(24,748)		(27,031)
Payments of debt discounts	—		(2,324)
Purchase of capped call transactions	(48,420)		(91,655)
Proceeds from issuance of common stock, net	(3,345)		9,911


Contributions from redeemable noncontrolling interests and noncontrolling interests	236,661		226,432
Distributions to redeemable noncontrolling interests and noncontrolling interests	(20,847)		(10,407)
Payments of costs related to redeemable noncontrolling interests and noncontrolling interests	(10,380)		(8,159)
Other, net	(601)		(283)
Net cash provided by financing activities	1,865,092		1,136,404
Net increase in cash, cash equivalents and restricted cash	147,944		142,376
Cash, cash equivalents and restricted cash at beginning of period	391,897		377,893
Cash, cash equivalents and restricted cash at end of period	539,841		520,269
Restricted cash included in other current assets	(14,584)		(52,042)
Restricted cash included in other assets	(112,676)		(60,071)
Cash and cash equivalents at end of period	$	412,581	$	408,156

Table of Contents


	Nine Months Ended September 30,
	2022		2021
Non-cash investing and financing activities:

Change in accounts payable and accrued expenses related to purchases of property and equipment	$	14,019	$	50,057
Change in accounts payable and accrued expenses related to payments for investments and customer notes receivable	$	21,750	$	(37,086)




Non-cash issuance of common stock related to the settlement of contingent consideration	$	16,014	$	—
Non-cash conversion of convertible senior notes for common stock	$	—	$	95,648

Supplemental cash flow information:
Cash paid for interest	$	105,375	$	70,415
Cash paid for income taxes	$	—	$	94

See accompanying notes to unaudited condensed consolidated financial statements.

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SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

(in thousands, except share amounts)


	Redeemable Noncontrolling Interests		Common Stock			Additional Paid-in Capital - Common Stock		Accumulated Deficit		Total Stockholders' Equity		Noncontrolling Interests		Total Equity


			Shares	Amount
December 31, 2020	$	136,124	100,412,036	$	10	$	1,482,716	$	(530,995)	$	951,731	$	192,826	$	1,144,557
Cumulative-effect adjustment	—		—	—		—		2,254		2,254		—		2,254
Net income (loss)	2,110		—	—		—		(32,983)		(32,983)		6,809		(26,174)
Issuance of common stock, net	—		8,141,766	1		65,541		—		65,542		—		65,542
Equity component of debt instrument	—		—	—		(8,807)		—		(8,807)		—		(8,807)
Contributions from noncontrolling interests	—		—	—		—		—		—		40,802		40,802
Distributions to redeemable noncontrolling interests and noncontrolling interests	(1,090)		—	—		—		—		—		(1,743)		(1,743)
Costs related to noncontrolling interests	—		—	—		—		—		—		(55)		(55)
Equity in subsidiaries attributable to parent	40		—	—		—		37,213		37,213		(37,253)		(40)
Equity-based compensation expense	—		—	—		7,924		—		7,924		—		7,924
Other, net	(62)		—	—		1		—		1		(476)		(475)
March 31, 2021	137,122		108,553,802	11		1,547,375		(524,511)		1,022,875		200,910		1,223,785
Net income (loss)	4,236		—	—		—		(63,396)		(63,396)		(7,112)		(70,508)
Issuance of common stock, net	—		3,431,715	—		138,020		—		138,020		—		138,020
Capped call transactions	—		—	—		(91,655)		—		(91,655)		—		(91,655)
Contributions from noncontrolling interests	—		—	—		—		—		—		75,808		75,808
Distributions to redeemable noncontrolling interests and noncontrolling interests	(1,128)		—	—		—		—		—		(2,300)		(2,300)
Costs related to noncontrolling interests	—		—	—		—		—		—		(3,035)		(3,035)
Equity in subsidiaries attributable to parent	2		—	—		—		57,971		57,971		(57,973)		(2)
Equity-based compensation expense	—		—	—		2,920		—		2,920		—		2,920
Other, net	(47)		—	—		(1)		—		(1)		(654)		(655)
June 30, 2021	140,185		111,985,517	11		1,596,659		(529,936)		1,066,734		205,644		1,272,378
Net income (loss)	3,332		—	—		—		(27,541)		(27,541)		(1,710)		(29,251)
Issuance of common stock, net	—		279,137	—		1,188		—		1,188		—		1,188

Contributions from noncontrolling interests	—		—	—		—		—		—		109,822		109,822
Distributions to redeemable noncontrolling interests and noncontrolling interests	(1,146)		—	—		—		—		—		(3,000)		(3,000)
Costs related to noncontrolling interests	—		—	—		—		—		—		(3,037)		(3,037)
Equity in subsidiaries attributable to parent	5		—	—		—		51,683		51,683		(51,688)		(5)
Equity-based compensation expense	—		—	—		3,093		—		3,093		—		3,093
Other, net	1		—	—		—		1		1		(1,392)		(1,391)
September 30, 2021	$	142,377	112,264,654	$	11	$	1,600,940	$	(505,793)	$	1,095,158	$	254,639	$	1,349,797

Table of Contents


	Redeemable Noncontrolling Interests		Common Stock			Additional Paid-in Capital - Common Stock		Accumulated Deficit		Total Stockholders' Equity		Noncontrolling Interests		Total Equity


			Shares	Amount
December 31, 2021	$	145,336	113,386,600	$	11	$	1,649,199	$	(459,715)	$	1,189,495	$	286,782	$	1,476,277

Net income (loss)	(2,432)		—	—		—		(33,583)		(33,583)		15,386		(18,197)
Issuance of common stock, net	—		524,788	—		(2,976)		—		(2,976)		—		(2,976)
Contributions from redeemable noncontrolling interests and noncontrolling interests	3,757		—	—		—		—		—		48,132		48,132
Distributions to redeemable noncontrolling interests and noncontrolling interests	(1,122)		—	—		—		—		—		(4,732)		(4,732)
Costs related to redeemable noncontrolling interests and noncontrolling interests	(57)		—	—		—		—		—		(2,292)		(2,292)
Equity in subsidiaries attributable to parent	(173)		—	—		—		69,769		69,769		(69,596)		173
Equity-based compensation expense	—		—	—		10,864		—		10,864		—		10,864
Other, net	(123)		—	—		—		—		—		174		174
March 31, 2022	145,186		113,911,388	11		1,657,087		(423,529)		1,233,569		273,854		1,507,423
Net income (loss)	4,563		—	—		—		(37,003)		(37,003)		22,743		(14,260)
Issuance of common stock, net	—		745,829	—		15,828		—		15,828		—		15,828
Contributions from redeemable noncontrolling interests and noncontrolling interests	13,423		—	—		—		—		—		111,967		111,967
Distributions to redeemable noncontrolling interests and noncontrolling interests	(1,239)		—	—		—		—		—		(5,237)		(5,237)
Costs related to redeemable noncontrolling interests and noncontrolling interests	(193)		—	—		—		—		—		(2,417)		(2,417)
Equity in subsidiaries attributable to parent	(10,168)		—	—		—		83,316		83,316		(73,148)		10,168
Equity-based compensation expense	—		—	—		4,732		—		4,732		—		4,732
Other, net	(65)		—	—		—		(1)		(1)		(2,010)		(2,011)
June 30, 2022	151,507		114,657,217	11		1,677,647		(377,217)		1,300,441		325,752		1,626,193
Net income (loss)	(1,507)		—	—		—		(62,047)		(62,047)		33,702		(28,345)
Issuance of common stock, net	—		238,653	—		(183)		—		(183)		—		(183)
Capped call transactions	—		—	—		(48,420)		—		(48,420)		—		(48,420)
Contributions from redeemable noncontrolling interests and noncontrolling interests	5,990		—	—		—		—		—		53,392		53,392
Distributions to redeemable noncontrolling interests and noncontrolling interests	(1,203)		—	—		—		—		—		(7,314)		(7,314)
Costs related to redeemable noncontrolling interests and noncontrolling interests	(8)		—	—		—		—		—		(226)		(226)
Equity in subsidiaries attributable to parent	(1,240)		—	—		—		52,191		52,191		(50,951)

Sunnova Energy International Inc. [NOVA] Filings
10-Q	[2022-10-27]
10-Q	[2022-07-28]
10-Q	[2022-04-28]
10-K	[2022-02-24]
10-Q	[2021-10-28]
10-Q	[2021-07-29]
10-Q	[2021-04-29]
10-K	[2021-02-25]
10-Q	[2020-10-29]
10-Q	[2020-07-30]
S-1	[2020-06-29]
10-Q	[2020-05-15]
10-K	[2020-02-25]
10-Q	[2019-10-31]
10-Q	[2019-08-19]
S-1	[2019-06-27]