Company Quick10K Filing
Sunnova Energy
Price11.65 EPS-1
Shares61 P/E-8
MCap709 P/FCF-38
Net Debt1,067 EBIT-84
TEV1,776 TEV/EBIT-21
TTM 2019-09-30, in MM, except price, ratios
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8-K 2018-01-23

NOVA 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 exhibit101-ezopamendmentno.htm
EX-10.5 exhibit105-tepharcreditagr.htm
EX-10.6 exhibit106-tepharparentgua.htm
EX-10.7 exhibit107-tepinvamendment.htm
EX-10.8 exhibit108-stockpurchaseag.htm
EX-31.1 exhibit311-q12021.htm
EX-31.2 exhibit312-q12021.htm
EX-32.1 exhibit321-q12021.htm
EX-32.2 exhibit322-q12021.htm

Sunnova Energy Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin

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Washington, D.C. 20549

(Mark One)
For the quarterly period ended March 31, 2021
For the transition period from _________ to _________
Commission File Number: 001-38995
Sunnova Energy International Inc.
(Exact name of registrant as specified in its charter)
(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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per shareNOVANew 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 filerAccelerated 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 111,970,130 shares of common stock outstanding as of April 26, 2021.

Table of Contents

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:

the benefits of the Acquisition;
our future operations and financial performance following the Acquisition;
the effects of the coronavirus ("COVID-19") pandemic 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 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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Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


Table of Contents

Item 1. Financial Statements.

(in thousands, except share amounts and share par values)
As of 
 March 31, 2021
As of 
 December 31, 2020
Current assets:
Cash$150,892 $209,859 
Accounts receivable—trade, net11,802 10,243 
Accounts receivable—other21,536 21,378 
Other current assets, net of allowance of $837 and $707 as of March 31, 2021 and December 31, 2020, respectively
192,580 215,175 
Total current assets376,810 456,655 
Property and equipment, net2,446,103 2,323,169 
Customer notes receivable, net of allowance of $20,082 and $16,961 as of March 31, 2021 and December 31, 2020, respectively
622,901 513,386 
Other assets310,794 294,372 
Total assets (1)$3,756,608 $3,587,582 
Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities:
Accounts payable$33,903 $39,908 
Accrued expenses44,309 34,049 
Current portion of long-term debt116,205 110,883 
Other current liabilities22,932 26,013 
Total current liabilities217,349 210,853 
Long-term debt, net1,994,734 1,924,653 
Other long-term liabilities183,618 171,395 
Total liabilities (1)2,395,701 2,306,901 
Commitments and contingencies (Note 14)
Redeemable noncontrolling interests137,122 136,124 
Stockholders' equity:
Common stock, 108,553,802 and 100,412,036 shares issued as of March 31, 2021 and December 31, 2020, respectively, at $0.0001 par value
11 10 
Additional paid-in capital—common stock1,547,375 1,482,716 
Accumulated deficit(524,511)(530,995)
Total stockholders' equity1,022,875 951,731 
Noncontrolling interests200,910 192,826 
Total equity1,223,785 1,144,557 
Total liabilities, redeemable noncontrolling interests and equity$3,756,608 $3,587,582 

(1) The consolidated assets as of March 31, 2021 and December 31, 2020 include $1,510,026 and $1,471,796, respectively, of assets of variable interest entities ("VIEs") that can only be used to settle obligations of the VIEs. These assets include cash of $15,532 and $13,407 as of March 31, 2021 and December 31, 2020, respectively; accounts receivable—trade, net of $3,822 and $2,953 as of March 31, 2021 and December 31, 2020, respectively; accounts receivable—other of $813 and $583 as of March 31, 2021 and December 31, 2020, respectively; other current assets of $121,832 and $182,646 as of March 31, 2021 and December 31, 2020, respectively; property and equipment, net of $1,349,815 and $1,257,953 as of March 31, 2021 and December 31, 2020, respectively; and other assets of $18,212 and $14,254 as of March 31, 2021 and December 31, 2020, respectively. The consolidated liabilities as of March 31, 2021 and December 31, 2020 include $35,959 and $32,345, respectively, of liabilities of VIEs whose creditors have no recourse to Sunnova Energy International Inc. These liabilities include accounts payable of $3,303 and $2,744 as of March 31, 2021 and December 31, 2020, respectively; accrued expenses of $886 and $827 as of March 31, 2021 and December 31, 2020, respectively; other current liabilities of $3,740 and $3,284 as of March 31, 2021 and December 31, 2020, respectively; and other long-term liabilities of $28,030 and $25,490 as of March 31, 2021 and December 31, 2020, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents
(in thousands, except share and per share amounts)

Three Months Ended 
 March 31,
Revenue$41,276 $29,829 
Operating expense:
Cost of revenue—depreciation17,408 12,986 
Cost of revenue—other1,234 1,043 
Operations and maintenance3,620 2,219 
General and administrative42,320 27,893 
Other operating income (6)
Total operating expense, net64,582 44,135 
Operating loss(23,306)(14,306)
Interest expense, net8,051 67,318 
Interest income(7,180)(4,620)
Other income(113) 
Loss before income tax(24,064)(77,004)
Income tax  
Net loss(24,064)(77,004)
Net income (loss) attributable to redeemable noncontrolling interests and noncontrolling interests8,919 (5,929)
Net loss attributable to stockholders$(32,983)$(71,075)
Net loss per share attributable to common stockholders—basic and diluted$(0.31)$(0.85)
Weighted average common shares outstanding—basic and diluted106,359,220 84,001,151 

See accompanying notes to unaudited condensed consolidated financial statements.


Table of Contents
(in thousands)
Three Months Ended 
 March 31,
Net loss$(24,064)$(77,004)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation19,543 14,946 
Impairment and loss on disposals, net326 331 
Amortization of deferred financing costs2,164 3,494 
Amortization of debt discount1,720 4,663 
Non-cash effect of equity-based compensation plans7,924 2,690 
Unrealized (gain) loss on derivatives(18,705)7,596 
Unrealized gain on fair value option instruments(113) 
Other non-cash items(3,644)3,424 
Changes in components of operating assets and liabilities:
Accounts receivable(1,771)(2,755)
Other current assets(26,808)4,124 
Other assets(7,501)(8,682)
Accounts payable(756)13,768 
Accrued expenses10,626 (17,227)
Other current liabilities(6,869)(6,446)
Other long-term liabilities(1,980)(1,034)
Net cash used in operating activities(49,908)(58,112)
Purchases of property and equipment(117,459)(141,231)
Payments for investments and customer notes receivable(122,532)(50,448)
Proceeds from customer notes receivable13,459 6,940 
State utility rebates and tax credits111 135 
Other, net208 289 
Net cash used in investing activities(226,213)(184,315)
Proceeds from long-term debt311,280 583,681 
Payments of long-term debt(174,800)(408,695)
Payments on notes payable(2,254)(2,398)
Payments of deferred financing costs(6,273)(10,619)
Payments of debt discounts(20)(229)
Proceeds from issuance of common stock, net(1,037)(41)
Contributions from redeemable noncontrolling interests and noncontrolling interests40,802 102,342 
Distributions to redeemable noncontrolling interests and noncontrolling interests(2,833)(1,373)
Payments of costs related to redeemable noncontrolling interests and noncontrolling interests(3,146)(1,295)
Other, net(28)(1)
Net cash provided by financing activities161,691 261,372 
Net increase (decrease) in cash and restricted cash(114,430)18,945 
Cash and restricted cash at beginning of period377,893 150,291 
Cash and restricted cash at end of period263,463 169,236 
Restricted cash included in other current assets(43,603)(30,502)
Restricted cash included in other assets(68,968)(65,298)
Cash at end of period$150,892 $73,436 

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Three Months Ended 
 March 31,
Non-cash investing and financing activities:
Change in accounts payable and accrued expenses related to purchases of property and equipment$3,272 $9,357 
Change in accounts payable and accrued expenses related to payments for investments and customer notes receivable$(9,107)$(4,523)
Non-cash conversion of convertible senior notes for common stock$95,648 $ 
Supplemental cash flow information:
Cash paid for interest$28,180 $25,369 
Cash paid for income taxes$ $ 

See accompanying notes to unaudited condensed consolidated financial statements.

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(in thousands, except share amounts)
Common StockAdditional
Capital -
December 31, 2019$127,129 83,980,885 $8 $1,007,751 $(361,824)$645,935 $45,176 $691,111 
Cumulative-effect adjustment— — — — (9,908)(9,908)— (9,908)
Net income (loss)1,576 — — — (71,075)(71,075)(7,505)(78,580)
Issuance of common stock, net— 45,405 — 214 — 214 — 214 
Contributions from redeemable noncontrolling interests and noncontrolling interests3,170 — — — — — 99,172 99,172 
Distributions to redeemable noncontrolling interests(1,373)— — — — — — — 
Costs related to redeemable noncontrolling interests and noncontrolling interests187 — — — — — (894)(894)
Equity in subsidiaries attributable to parent145 — — — 24,164 24,164 (24,309)(145)
Equity-based compensation expense— — — 2,690 — 2,690 — 2,690 
Other, net(44)— — — — — (3)(3)
March 31, 2020$130,790 84,026,290 $8 $1,010,655 $(418,643)$592,020 $111,637 $703,657 
Common StockAdditional
Capital -
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 parent40 — — — 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 

See accompanying notes to unaudited condensed consolidated financial statements.

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(1) Description of Business and Basis of Presentation

We are a leading residential solar and energy storage service provider, serving over 116,000 customers in more than 25 United States ("U.S.") states and territories. Sunnova Energy Corporation was incorporated in Delaware on October 22, 2012 and formed Sunnova Energy International Inc. ("SEI") as a Delaware corporation on April 1, 2019. We completed our initial public offering on July 29, 2019 (our "IPO"); and in connection with our IPO, all of Sunnova Energy Corporation's ownership interests were contributed to SEI. Unless the context otherwise requires, references in this report to "Sunnova," the "Company," "we," "our," "us," or like terms, refer to SEI and its consolidated subsidiaries.

We have a differentiated residential solar dealer model in which we partner with local dealers who originate, design and install our customers' solar energy systems and energy storage systems on our behalf. Our focus on our dealer model enables us to leverage our dealers' specialized knowledge, connections and experience in local markets to drive customer origination while providing our dealers with access to high quality products at competitive prices, as well as technical oversight and expertise. We believe this structure provides operational flexibility, reduces exposure to labor shortages and lowers fixed costs relative to our peers, furthering our competitive advantage.

We provide our services through long-term residential solar service agreements with a diversified pool of high credit quality customers. Our solar service agreements typically are structured as either a legal-form lease (a "lease") of a solar energy system or energy storage system to the customer, the sale of the solar energy system's output to the customer under a power purchase agreement ("PPA") or the purchase of a solar energy system or energy storage system with financing provided by us (a "loan"). The initial term of our solar service agreements is typically 10, 15 or 25 years, during which time we provide or arrange for ongoing services to customers, including monitoring, maintenance and warranty services. Our lease and PPA agreements typically include an opportunity for customers to renew for up to an additional 10 years, via two five-year renewal options. Customer payments and rates can be fixed for the duration of the solar service agreement or escalated at a pre-determined percentage annually. We also receive tax benefits and other incentives from leases and PPAs, a portion of which we finance through tax equity, non-recourse debt structures and hedging arrangements in order to fund our upfront costs, overhead and growth investments. Our future success depends in part on our ability to raise capital from third-party investors and commercial sources. We have an established track record of attracting capital from diverse sources. From our inception through March 31, 2021, we have raised more than $6.9 billion in total capital commitments from equity, debt and tax equity investors.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements ("interim financial statements") include our consolidated balance sheets, statements of operations, statements of redeemable noncontrolling interests and equity and statements of cash flows and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") from records maintained by us. We have condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to the applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. As such, these interim financial statements should be read in conjunction with our 2020 annual audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K filed with the SEC on February 25, 2021. Our interim financial statements reflect all normal recurring adjustments necessary, in our opinion, to state fairly our financial position and results of operations for the reported periods. Amounts reported for interim periods may not be indicative of a full year period because of our continual growth, seasonal fluctuations in demand for power, timing of maintenance and other expenditures, changes in interest expense and other factors.

Our interim financial statements include our accounts and those of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, Consolidation, we consolidate any VIE of which we are the primary beneficiary. We form VIEs with our investors in the ordinary course of business to facilitate the funding and monetization of certain attributes associated with our solar energy systems. The typical condition for a controlling financial interest is holding a majority of the voting interests of an entity. However, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve holding a majority of the voting interests. A primary beneficiary is defined as the party that has (a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb losses or receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. We have considered the provisions within the contractual arrangements that grant us power to manage and make decisions that affect the operation of our VIEs, including determining the solar energy systems contributed to the VIEs, and the installation, operation and maintenance of the solar energy systems. We consider the rights granted to the other investors under the

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contractual arrangements to be more protective in nature rather than substantive participating rights. As such, we have determined we are the primary beneficiary of our VIEs and evaluate our relationships with our VIEs on an ongoing basis to determine whether we continue to be the primary beneficiary. We have eliminated all intercompany transactions in consolidation.


We have revised our previously issued interim financial statements to correct immaterial classification errors pertaining to the Class A members' interests in certain of our tax equity funds. We incorrectly classified the Class A members' interests as redeemable noncontrolling interests whereas these interests should have been classified as noncontrolling interests. These misclassifications impacted our consolidated statements of redeemable noncontrolling interests and equity. The following table presents the impact of these revisions on the financial statements:
As Previously
As Previously
(in thousands)
December 31, 2019$172,305 $(45,176)$127,129 $ $45,176 $45,176 
Net income (loss)(5,929)7,505 1,576  (7,505)(7,505)
Contributions from redeemable noncontrolling interests and noncontrolling interests102,342 (99,172)3,170  99,172 99,172 
Distributions to redeemable noncontrolling interests(1,373) (1,373)   
Costs related to redeemable noncontrolling interests and noncontrolling interests(707)894 187  (894)(894)
Equity in subsidiaries attributable to parent(24,164)24,309 145  (24,309)(24,309)
Other, net(47)3 (44) (3)(3)
March 31, 2020$242,427 $(111,637)$130,790 $ $111,637 $111,637 

Coronavirus ("COVID-19") Pandemic

The ongoing COVID-19 pandemic has resulted and may continue to result in widespread adverse impacts on the global economy. Our first priority in our response to this pandemic has been the health and safety of our employees, customers and dealers. To that end, we quickly implemented preventative measures to minimize unnecessary risk of exposure, which we have continued to follow. We have experienced some resulting disruptions to our business operations as the COVID-19 virus has continued to circulate through the states and U.S. territories in which we operate.

To adjust to federal social distancing guidelines, stay-at-home orders and similar government measures, our dealers expanded the use of digital tools and origination channels and created new methods that offset restrictions on their ability to meet with potential new customers in person. The service and installation of solar energy systems has continued during the COVID-19 pandemic. This reflects residential solar services' designation as an essential service in all of our service territories. In order to adhere to all applicable state and federal health and safety guidelines, we and our dealers have moved to a contact-free process for installers and service technicians. In addition, an increasing number of jurisdictional authorities, as well as local utilities, are accepting electronic submissions for permits, and inspections are being performed in many locations through video calls and other electronic means. Throughout the COVID-19 pandemic, we have seen minimal impact to our supply chain as our technicians and dealers have largely been able to successfully procure the equipment needed to service and install solar energy systems.

We cannot predict the full impact the COVID-19 pandemic or the significant disruption and volatility currently being experienced in the capital markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time due to numerous uncertainties. The ultimate impact will depend on future developments, including, among other

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things, the ultimate duration of the COVID-19 virus, the distribution, acceptance and efficacy of the vaccine, the depth and duration of the economic downturn and other economic effects of the COVID-19 pandemic, the consequences of governmental and other measures designed to prevent the spread of the COVID-19 virus, actions taken by governmental authorities, customers, suppliers, dealers and other third parties, our ability and the ability of our customers, potential customers and dealers to adapt to operating in a changed environment and the timing and extent to which normal economic and operating conditions resume.

(2) Significant Accounting Policies

Included below are updates to significant accounting policies disclosed in our 2020 annual audited consolidated financial statements.

Use of Estimates

The application of GAAP in the preparation of the interim financial statements requires us to make estimates and assumptions that affect the amounts reported in the interim financial statements and accompanying notes. We base our 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.

Accounts Receivable

Accounts ReceivableTrade.    Accounts receivabletrade primarily represents trade receivables from residential customers that are generally collected in the subsequent month. Accounts receivabletrade is recorded net of an allowance for credit losses, which is based on our assessment of the collectability of customer accounts based on the best available data at the time. We review the allowance by considering factors such as historical experience, customer credit rating, contractual term, aging category and current economic conditions that may affect a customer's ability to pay to identify customers with potential disputes or collection issues. We write off accounts receivable when we deem them uncollectible. As of March 31, 2021, we have not experienced a significant increase in delinquent customer accounts and have not made any significant adjustments to our allowance for credit losses related to accounts receivabletrade as a result of the COVID-19 pandemic. The following table presents the changes in the allowance for credit losses recorded against accounts receivabletrade, net in the unaudited condensed consolidated balance sheets:
As of March 31,
(in thousands)
Balance at beginning of period$912 $960 
Impact of ASC 326 adoption— (240)
Provision for current expected credit losses396 402 
Write off of uncollectible accounts(496)(385)
Recoveries36 9 
Other, net 1 
Balance at end of period$848 $747 

Accounts Receivable—Other.    Accounts receivable—other primarily represents receivables related to the sale of inventory.


Inventory is stated at the lower of cost and net realizable value using the first-in, first-out method. Inventory primarily represents raw materials, such as energy storage systems, photovoltaic modules, inverters, meters and other associated equipment purchased. These materials are typically sold to dealers or held for use as original parts on new solar energy systems or replacement parts on existing solar energy systems. We remove these items from inventory and record the transaction in typically one of these manners: (a) expense to operations and maintenance expense when installed as a replacement part for a solar energy system, (b) expense to cost of sales if sold directly or (c) capitalize to property and equipment when installed as an original part on a solar energy system. We periodically evaluate our inventory for unusable and obsolete items based on assumptions about future demand and market conditions. Based on this evaluation, provisions are made to write inventory

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down to market value. The following table presents the detail of inventory as recorded in other current assets in the unaudited condensed consolidated balance sheets:
As of 
 March 31, 2021
As of 
 December 31, 2020
(in thousands)
Energy storage systems and components$29,769 $18,122 
Modules and inverters77,277 83,904 
Meters638 563 
Total$107,684 $102,589 

As of March 31, 2021 and December 31, 2020, we recorded accrued expenses of $13.5 million and $8.9 million, respectively, for inventory purchases.

Fair Value of Financial Instruments

Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or a liability. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes inputs that may be used to measure fair value as follows:

Level 1—Observable inputs that reflect unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2—Observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy must be determined based on the lowest level input that is significant to the fair value measurement. An assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability. Our financial instruments include accounts receivable, notes receivable, accounts payable, accrued expenses, long-term debt and interest rate swaps. The carrying values of accounts receivable, accounts payable and accrued expenses approximate the fair values due to the fact that they are short-term in nature (Level 1). We estimate the fair value of our customer notes receivable based on interest rates currently offered under the loan program with similar maturities and terms (Level 3). We estimate the fair value of our fixed-rate long-term debt based on interest rates currently offered for debt with similar maturities and terms (Level 3). We determine the fair values of the interest rate derivative transactions based on a discounted cash flow method using contractual terms of the transactions. The floating interest rate is based on observable rates consistent with the frequency of the interest cash flows (Level 2). See Note 6, Customer Notes Receivable, Note 7, Long-Term Debt and Note 8, Derivative Instruments.


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The following table presents the detail of revenue as recorded in the unaudited condensed consolidated statements of operations:
Three Months Ended 
 March 31,
(in thousands)
PPA revenue$16,834 $12,633 
Lease revenue16,397 11,542 
Solar renewable energy certificate revenue5,957 4,363 
Loan revenue1,195 599 
Other revenue893 692 
Total$41,276 $29,829 

We recognize revenue from contracts with customers as we satisfy our performance obligations at a transaction price reflecting an amount of consideration based upon an estimated rate of return. We express this rate of return as the solar rate per kilowatt hour ("kWh") in the customer contract. The amount of revenue we recognize does not equal customer cash payments because we satisfy performance obligations ahead of cash receipt or evenly as we provide continuous access on a stand-ready basis to the solar energy system. We reflect the differences between revenue recognition and cash payments received in accounts receivable, other assets or deferred revenue, as appropriate. Revenue allocated to remaining performance obligations represents contracted revenue we have not yet recognized and includes deferred revenue as well as amounts that will be invoiced and recognized as revenue in future periods. Contracted but not yet recognized revenue was approximately $1.7 billion as of March 31, 2021, of which we expect to recognize approximately 4% over the next 12 months. We do not expect the annual recognition to vary significantly over approximately the next 20 years as the vast majority of existing solar service agreements have at least 20 years remaining, given the average age of the fleet of solar energy systems under contract is less than four years.

PPAs.    Customers purchase electricity from us under PPAs. Pursuant to ASC 606, we recognize revenue based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs. All customers must pass our credit evaluation process. The PPAs generally have a term of 25 years with an opportunity for customers to renew for up to an additional 10 years, via two five-year renewal options.

Leases.    We are the lessor under lease agreements for solar energy systems and energy storage systems, which do not meet the definition of a lease under ASC 842 and are accounted for as contracts with customers under ASC 606. We recognize revenue on a straight-line basis over the contract term as we satisfy our obligation to provide continuous access to the solar energy system. All customers must pass our credit evaluation process. The lease agreements generally have a term of 25 years with an opportunity for customers to renew for up to an additional 10 years, via two five-year renewal options.

We provide customers under our lease agreements a performance guarantee that each solar energy system will achieve a certain specified minimum solar energy production output, which is a significant proportion of its expected output. The specified minimum solar energy production output may not be achieved due to natural fluctuations in the weather or equipment failures from exposure and wear and tear outside of our control, among other factors. We determine the amount of the guaranteed output based on a number of different factors, including: (a) the specific site information relating to the tilt of the panels, azimuth (a horizontal angle measured clockwise in degrees from a reference direction) of the panels, size of the system, and shading on site; (b) the calculated amount of available irradiance (amount of energy for a given flat surface facing a specific direction) based on historical average weather data and (c) the calculated amount of energy output of the solar energy system. While actual irradiance levels can significantly change year over year due to natural fluctuations in the weather, we expect the levels to average out over the term of a 25-year lease and to approximate the levels used in determining the amount of the performance guarantee. Generally, weather fluctuations are the most likely reason a solar energy system may not achieve a certain specified minimum solar energy production output.

If the solar energy system does not produce the guaranteed production amount, we are required to refund a portion of the previously remitted customer payments, where the repayment is calculated as the product of (a) the shortfall production amount and (b) the dollar amount (guaranteed rate) per kWh that is fixed throughout the term of the contract. These remittances of a

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customer's payments, if needed, are payable in January following the end of the first three years of the solar energy system's placed in service date and then every annual period thereafter. See Note 14, Commitments and Contingencies.

Solar Renewable Energy Certificates.    Each solar renewable energy certificate ("SREC") represents one megawatt hour (1,000 kWh) generated by a solar energy system. SRECs can be sold with or without the actual electricity associated with the renewable-based generation source. We account for the SRECs we generate from our solar energy systems as governmental incentives with no costs incurred to obtain them and do not consider those SRECs output of the underlying solar energy systems. We classify these SRECs as inventory held until sold and delivered to third parties. As we did not incur costs to obtain these governmental incentives, the inventory carrying value for the SRECs was $0 as of March 31, 2021 and December 31, 2020. We enter into economic hedges related to expected production of SRECs through forward contracts. The contracts require us to physically deliver the SRECs upon settlement. We recognize the related revenue under ASC 606 upon satisfaction of the performance obligation to transfer the SRECs to the stated counterparty. Payments are typically received within one month of transferring the SREC to the counterparty. The costs related to the sales of SRECs are generally limited to broker fees (recorded in cost of revenue—other), which are only paid in connection with certain transactions. In certain circumstances we are required to purchase SRECs on the open market to fulfill minimum delivery requirements under our forward contracts.

Loans.    See discussion of loan revenue in the "Loans" section below.

Other Revenue.    Other revenue includes certain state and utility incentives, revenue from the direct sale of energy storage systems to customers and sales of service plans. We recognize revenue from state and utility incentives in the periods in which they are earned. We recognize revenue from the direct sale of energy storage systems in the period in which the storage components are placed in service. Service plans are available to customers whose solar energy system was not originally sold by Sunnova. We recognize revenue from service plan contracts over the life of the contract, which is typically five years or ten years.


We offer a loan program, under which the customer finances the purchase of a solar energy system or energy storage system through a solar service agreement, typically for a term of 10, 15 or 25 years. We recognize cash payments received from customers on a monthly basis under our loan program (a) as interest income, to the extent attributable to earned interest on the contract that financed the customer's purchase of the solar energy system or energy storage system; (b) as a reduction of a note receivable on the balance sheet, to the extent attributable to a return of principal (whether scheduled or prepaid) on the contract that financed the customer's purchase of the solar energy system or energy storage system; and (c) as revenue, to the extent attributable to payments for operations and maintenance services provided by us. To qualify for the loan program, a customer must pass our credit evaluation process, which requires the customer to have a minimum FICO® score of 650 to 720 depending on certain circumstances, and we secure the loans with the solar energy systems or energy storage systems financed. The credit evaluation process is performed once for each customer at the time the customer is entering into the solar service agreement with us.

Our investments in solar energy systems and energy storage systems related to the loan program that are not yet placed in service are recorded in other assets in the consolidated balance sheets and are transferred to customer notes receivable upon being placed in service. Customer notes receivable are recorded at amortized cost, net of an allowance for credit losses (as described below), in other current assets and customer notes receivable in the consolidated balance sheets. Accrued interest receivable related to our customer notes receivable is recorded in accounts receivable—trade, net in the consolidated balance sheets. Interest income from customer notes receivable is recorded in interest income in the consolidated statements of operations. The amortized cost of our customer notes receivable is equal to the principal balance of customer notes receivable outstanding and does not include accrued interest receivable. Customer notes receivable continue to accrue interest until they are written off against the allowance, which occurs when the balance is 180 days or more past due unless the balance is in the process of collection. Customer notes receivable are considered past due one day after the due date based on the contractual terms of the loan agreement. In all cases, customer notes receivable balances are placed on a nonaccrual status or written off at an earlier date when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously written off and expected to be written off. Accrued interest receivable for customer notes receivable placed on a nonaccrual status is recorded as a reduction to interest income. Interest received on such customer notes receivable is accounted for on a cash basis until the customer notes receivable qualifies for the return to accrual status. Customer notes receivable are returned to accrual status when there is no longer any principal or interest amounts past due and future payments are reasonably assured.

The allowance for credit losses is deducted from the customer notes receivable amortized cost to present the net amount expected to be collected. It is measured on a collective (pool) basis when similar risk characteristics (such as financial asset type, customer credit rating, contractual term and vintage) exist. In determining the allowance for credit losses, we identify

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customers with potential disputes or collection issues and consider our historical level of credit losses and current economic trends that might impact the level of future credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics, such as differences in underwriting standards. Expected credit losses are estimated over the contractual term of the loan agreements based on the best available data at the time, and adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: (a) we have a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual customer or (b) the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by us. As of March 31, 2021, we have not experienced a significant increase in delinquent customer notes receivable and have not made any significant adjustments to our allowance for credit losses related to loans as a result of the COVID-19 pandemic. See Note