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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, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-37511 
Sunrun Inc.
(Exact name of registrant as specified in its charter)
Delaware26-2841711
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

225 Bush Street, Suite 1400
San Francisco, California 94104
(Address of principal executive offices and Zip Code)

(415) 580-6900
(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareRUNNasdaq Global Select Market

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 definition 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 filerSmaller 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 Exchange Act).    Yes      No  

As of November 1, 2021, the number of shares of the registrant’s common stock outstanding was 207,004,907.




Table of Contents
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

1


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The discussion in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” 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 Quarterly Report on Form 10-Q include, but are not limited to, statements about:

the potential effects of the COVID-19 pandemic on our business and operations, results of operations and financial position;

the expected benefits and potential value created by the merger with Vivint Solar for our stockholders;

the inherent risks, costs and uncertainties associated with integrating the businesses in the merger with Vivint Solar successfully and risks of not achieving all or any of the anticipated benefits of the merger with Vivint Solar, or the risk that the anticipated benefits of the acquisition may not be fully realized or take longer to realize than expected;

the amount of any costs, fees, expenses, impairments and charges relating to the merger with Vivint Solar;

the availability of rebates, tax credits and other financial incentives, and decreases to federal solar tax credits;

determinations by the Internal Revenue Service of the fair market value of our solar energy systems;

the retail price of utility-generated electricity or electricity from other energy sources;

regulatory and policy development and changes;

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 industry’s, and specifically our, continued ability to manage costs (including, but not limited to, equipment costs) associated with solar service offerings;

our strategic partnerships and expected benefits of such partnerships;

our ability to realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and risk that the integration of these acquisitions may disrupt our business and management;

the sufficiency of our cash, investment fund commitments and available borrowings to meet our anticipated cash needs;

our need and ability to raise capital, refinance existing debt, and finance our operations and solar energy systems from new and existing investors;

the potential impact of interest rates on our interest expense;

our business plan and our ability to effectively manage our growth, including our rate of revenue growth;

our ability to further penetrate existing markets, expand into new markets and our expectations regarding market growth (including, but not limited to, expected cancellation rates);

2


our expectations concerning relationships with third parties, including the attraction, retention and continued existence of qualified solar partners;

the impact of seasonality on our business;

our investment in research and development and new product offerings;

our ability to protect our intellectual property and customer data, as well as to maintain our brand;

the willingness of and ability of our solar partners to fulfill their respective warranty and other contractual obligations;

our ability to renew or replace expiring, cancelled or terminated Customer Agreements at favorable rates or on a long-term basis;

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

our expectations regarding certain performance objectives and the renewal rates and purchase value of our solar energy systems after expiration of our Customer Agreements;

the calculation of certain of our key financial and operating metrics and accounting policies; and

our ability to capitalize on the market opportunities created by the electrification of the U.S. economy with renewable energy.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this 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. These risks and uncertainties may be amplified by the ongoing COVID-19 pandemic, which has caused significant economic uncertainty and negative impacts on capital and credit markets. The extent to which the COVID-19 pandemic impacts our business, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous factors, many of which are unpredictable, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the pandemic or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. 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.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission (the “SEC”) as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.


3


SELECTED RISKS AFFECTING OUR BUSINESS

Investing in our common stock involves numerous risks, including the risks described in “Part II, Item 1A. Risk Factors”, of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations and prospects.

Selected Risks Related to the Impacts of COVID-19

The COVID-19 pandemic has had and could continue to have an adverse impact on our business, operations and the markets and communities in which we operate. Efforts to mitigate or contain the pandemic and the resulting weakened economic conditions may disrupt and adversely affect our business.

Selected Risks Related to the Solar Industry

The solar energy industry is an emerging market which is constantly evolving and may not develop to the size or at the rate we expect.
We have historically benefited from declining costs in our industry, and our business and financial results may be harmed not only as a result of any increases in costs associated with our solar service offerings but also any failure of these costs to continue to decline as we currently expect. If we do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired.
We face competition from traditional energy companies as well as solar and other renewable energy companies.

Selected Risks Related to Our Operating Structure and Financing Activities

We need to raise capital to finance the continued growth of our operations and solar service business. If capital is not available to us on acceptable terms, as and when needed, our business and prospects would be materially and adversely impacted. In addition, our business is affected by general economic conditions and related uncertainties affecting markets in which we operate. Volatility in current economic conditions could adversely impact our business, including our ability to raise financing.
Rising interest rates would adversely impact our business.
We expect to incur substantially more debt in the future, which could intensify the risks to our business.

Selected Risks Related to Regulation and Policy

We rely on net metering and related policies to offer competitive pricing to customers in all of our current markets, and changes to such policies may significantly reduce demand for electricity from our solar service offerings.
Electric utility statutes and regulations and changes to such statutes or regulations may present technical, regulatory and economic barriers to the purchase and use of our solar service offerings that may significantly reduce demand for such offerings.
Regulations and policies related to rate design could deter potential customers from purchasing our solar service offerings, reduce the value of the electricity our systems produce, and reduce any savings that our customers could realize from our solar service offerings.

Selected Risks Related to Our Business Operations

Our growth depends in part on the success of our relationships with third parties, including our solar partners.
We and our solar partners depend on a limited number of suppliers of solar panels, batteries, and other system components to adequately meet anticipated demand for our solar service offerings. Any shortage, delay or component price change from these suppliers, or the acquisition of any of these suppliers by a competitor, could result in sales and installation delays, cancellations and loss of market share
We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt our business and our management.
A failure to hire and retain a sufficient number of employees and service providers in key functions would constrain our growth and our ability to timely complete customers' Projects and successfully manage customer accounts.
4


Regulations may limit the type of electricians qualified to install and service our solar and battery systems in California, which may result in workforce shortages, operational delays, and increased costs.
Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of our common stock.
Our actual financial results may differ materially from any guidance we may publish from time to time.

Selected Risks Related to Taxes and Accounting

Our ability to provide our solar service offerings to customers on an economically viable basis depends in part on our ability to finance these systems with fund investors who seek particular tax and other benefits.
If the Internal Revenue Service makes determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our fund investors, and our business, financial condition and prospects may be materially and adversely affected.
Our business currently depends on the availability of utility rebates, tax credits and other benefits, tax exemptions and other financial incentives. The expiration, elimination or reduction of these benefits, rebates, or incentives could adversely impact our business.

If we are unable to adequately address these and other risks we face, our business may be harmed.
5



Sunrun Inc.
Consolidated Balance Sheets
(In Thousands, Except Share Par Values)
(Unaudited)
September 30, 2021December 31, 2020
Assets
Current assets:
Cash$717,593 $519,965 
Restricted cash223,380 188,095 
Accounts receivable (net of allowances for credit losses of $11,349 and $4,861 as of September 30, 2021 and December 31, 2020, respectively)
177,826 95,141 
Inventories444,519 283,045 
Prepaid expenses and other current assets31,342 51,483 
Total current assets1,594,660 1,137,729 
Restricted cash148 148 
Solar energy systems, net9,126,451 8,202,788 
Property and equipment, net60,659 62,182 
Intangible assets, net14,233 18,262 
Goodwill4,280,169 4,280,169 
Other assets1,013,349 681,665 
Total assets (1)
$16,089,669 $14,382,943 
Liabilities and total equity
Current liabilities:
Accounts payable$347,068 $207,441 
Distributions payable to noncontrolling interests and redeemable noncontrolling interests
33,350 28,627 
Accrued expenses and other liabilities364,481 325,614 
Deferred revenue, current portion109,162 108,452 
Deferred grants, current portion8,302 8,251 
Finance lease obligations, current portion11,163 11,037 
Line of credit209,284  
Non-recourse debt, current portion193,834 195,036 
Pass-through financing obligation, current portion6,982 16,898 
Total current liabilities1,283,626 901,356 
Deferred revenue, net of current portion739,356 690,824 
Deferred grants, net of current portion205,684 213,269 
Finance lease obligations, net of current portion12,409 12,929 
Line of credit 230,660 
Convertible senior notes390,049  
Non-recourse debt, net of current portion5,343,639 4,370,449 
Pass-through financing obligation, net of current portion316,905 323,496 
Other liabilities188,784 268,684 
Deferred tax liabilities70,807 81,905 
Total liabilities (1)
8,551,259 7,093,572 
Commitments and contingencies (Note 15)
Redeemable noncontrolling interests596,901 560,461 
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 200,000 shares as of September 30, 2021 and December 31, 2020; no shares issued and outstanding as of September 30, 2021 and December 31, 2020
  
Common stock, $0.0001 par value—authorized, 2,000,000 shares as of September 30, 2021 and December 31, 2020; issued and outstanding, 206,887 and 201,406 shares as of September 30, 2021 and December 31, 2020, respectively
21 20 
Additional paid-in capital6,264,830 6,107,802 
Accumulated other comprehensive loss(77,681)(106,755)
Retained earnings35,940 76,844 
Total stockholders’ equity6,223,110 6,077,911 
Noncontrolling interests718,399 650,999 
Total equity6,941,509 6,728,910 
Total liabilities, redeemable noncontrolling interests and total equity$16,089,669 $14,382,943 

6








1)The Company’s consolidated assets as of September 30, 2021 and December 31, 2020 include $7,883,232 and $7,190,866, respectively, in assets of variable interest entities (“VIEs”) that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, as of September 30, 2021 and December 31, 2020 of $7,252,540 and $6,748,127, respectively; cash as of September 30, 2021 and December 31, 2020 of $311,416 and $219,502, respectively; restricted cash as of September 30, 2021 and December 31, 2020 of $48,293 and $34,559, respectively; accounts receivable, net as of September 30, 2021 and December 31, 2020 of $58,102 and $35,152, respectively; inventories as of September 30, 2021 and December 31, 2020 of $50,226 and 23,306, respectively; prepaid expenses and other current assets as of September 30, 2021 and December 31, 2020 of $2,607 and $2,629, respectively; and other assets as of September 30, 2021 and December 31, 2020 of $160,048 and $127,591, respectively. The Company’s consolidated liabilities as of September 30, 2021 and December 31, 2020 include $2,100,425 and $1,857,967, respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of September 30, 2021 and December 31, 2020 of $28,824 and $15,609, respectively; distributions payable to noncontrolling interests and redeemable noncontrolling interests as of September 30, 2021 and December 31, 2020 of $33,350 and $28,577, respectively; accrued expenses and other current liabilities as of September 30, 2021 and December 31, 2020 of $28,723 and $24,660, respectively; deferred revenue as of September 30, 2021 and December 31, 2020 of $508,942 and $538,067, respectively; deferred grants as of September 30, 2021 and December 31, 2020 of $25,944 and $26,898, respectively; non-recourse debt as of September 30, 2021 and December 31, 2020 of $1,449,165 and $1,192,411, respectively; and other liabilities as of September 30, 2021 and December 31, 2020 of $25,477 and $31,745, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
7


Sunrun Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue:
Customer agreements and incentives$231,869 $114,485 $625,939 $319,704 
Solar energy systems and product sales206,896 95,275 548,786 282,081 
Total revenue438,765 209,760 1,174,725 601,785 
Operating expenses:
Cost of customer agreements and incentives174,457 77,350 512,073 239,049 
Cost of solar energy systems and product sales
172,538 75,679 458,208 231,023 
Sales and marketing171,462 70,720 442,174 210,691 
Research and development5,602 5,205 16,624 14,222 
General and administrative51,290 41,829 199,836 111,659 
Amortization of intangible assets1,341 1,167 4,029 3,817 
Total operating expenses576,690 271,950 1,632,944 810,461 
Loss from operations(137,925)(62,190)(458,219)(208,676)
Interest expense, net(89,096)(51,368)(238,365)(152,013)
Other (expenses) income, net(4,332)864 18,462 766 
Loss before income taxes(231,353)(112,694)(678,122)(359,923)
Income tax benefit (expense)9,980 (27,293)(19,058)(30,424)
Net loss(241,333)(85,401)(659,064)(329,499)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
(265,462)(122,848)(618,160)(325,425)
Net income (loss) attributable to common stockholders$24,129 $37,447 $(40,904)$(4,074)
Net income (loss) per share attributable to common stockholders
Basic$0.12 $0.30 $(0.20)$(0.03)
Diluted$0.11 $0.28 $(0.20)$(0.03)
Weighted average shares used to compute net income (loss) per share attributable to common stockholders
Basic206,103 125,003 204,355 121,813 
Diluted213,016 134,548 204,355 121,813 

The accompanying notes are an integral part of these consolidated financial statements.

8


Sunrun Inc.
Consolidated Statements of Comprehensive Loss
(In Thousands)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income (loss) attributable to common stockholders$24,129 $37,447 $(40,904)$(4,074)
Unrealized (loss) gain on derivatives, net of income taxes(968)(335)17,620 (75,510)
Adjustment for net loss on derivatives recognized into earnings, net of income taxes4,731 4,579 11,454 5,243 
Other comprehensive income (loss)3,763 4,244 29,074 (70,267)
Comprehensive income (loss)$27,892 $41,691 $(11,830)$(74,341)

9


Sunrun Inc.
Consolidated Statements of Redeemable Noncontrolling Interests and Equity
Three Months Ended September 30, 2021 and 2020
(In Thousands)
(Unaudited)
Three Months Ended September 30, 2021
Redeemable
Noncontrolling
Interests
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at June 30, 2021$599,313 205,374 $21 $6,226,069 $(81,444)$11,811 $6,156,457 $736,336 $6,892,793 
Exercise of stock options
— 483 — 4,343 — — 4,343 — 4,343 
Issuance of restricted stock units
— 1,030  — — —  —  
Stock-based compensation
— — — 41,980 — — 41,980 — 41,980 
Contributions from noncontrolling interests and redeemable noncontrolling interests
90,000 — — — — — — 234,342 234,342 
Distributions to noncontrolling interests and redeemable noncontrolling interests
(15,104)— — — — — — (37,124)(37,124)
Net loss(58,453)— — — — 24,129 24,129 (207,009)(182,880)
Acquisition of noncontrolling interests(18,855)— — (7,562)— — (7,562)(8,146)(15,708)
Other comprehensive loss, net of taxes— — — — 3,763 — 3,763 — 3,763 
Balance at September 30, 2021
$596,901 206,887 $21 $6,264,830 $(77,681)$35,940 $6,223,110 $718,399 $6,941,509 
Three Months Ended September 30, 2020
Redeemable
Noncontrolling
Interests
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at June 30, 2020$450,682 122,307 $12 $806,702 $(127,264)$208,717 $888,167 $353,338 $1,241,505 
Exercise of stock options
— 2,791 — 20,469 — — 20,469 — 20,469 
Issuance of restricted stock units, net of tax withholdings
— 379 1  — — 1 1 
Stock-based compensation
— — — 8,217 — — 8,217 8,217 
Contributions from noncontrolling interests and redeemable noncontrolling interests
151,906 — — — — — — 85,000 85,000 
Distributions to noncontrolling interests and redeemable noncontrolling interests
(10,082)— — — — — — (12,940)(12,940)
Net (loss) income(84,445)— — — — 37,447 37,447 (38,403)(956)
Shares issued in connection with a subscription agreement— 2,075 — 75,000 — — 75,000 — 75,000 
Other comprehensive income, net of taxes— — — — 4,244 — 4,244 — 4,244 
Balance at September 30, 2020
$508,061 127,552 $13 $910,388 $(123,020)$246,164 $1,033,545 $386,995 $1,420,540 

10


Sunrun Inc.
Consolidated Statements of Redeemable Noncontrolling Interests and Equity
Nine Months Ended September 30, 2021 and 2020
(In Thousands)
(Unaudited)
Nine Months Ended September 30, 2021
Redeemable
Noncontrolling
Interests
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at December 31, 2020$560,461 201,406 $20 $6,107,802 $(106,755)$76,844 $6,077,911 $650,999 $6,728,910 
Exercise of stock options
— 1,832 — 16,587 — — 16,587 — 16,587 
Issuance of restricted stock units
— 3,206 1 — — — 1 — 1 
Shares issued in connection with the Employee Stock Purchase Plan
— 443 — 6,761 — — 6,761 — 6,761 
Stock-based compensation
— — — 168,970 — — 168,970 — 168,970 
Contributions from noncontrolling interests and redeemable noncontrolling interests
157,127 — — — — — — 743,205 743,205 
Distributions to noncontrolling interests and redeemable noncontrolling interests
(47,318)— — — — — — (99,441)(99,441)
Net income (loss)(49,942)— — — — (40,904)(40,904)(568,218)(609,122)
Capped call transaction— — — (28,000)— — (28,000)— (28,000)
Acquisition of noncontrolling interests(23,427)— — (7,290)— — (7,290)(8,146)(15,436)
Other comprehensive income, net of taxes— — — — 29,074 — 29,074 — 29,074 
Balance at September 30, 2021
$596,901 206,887 $21 $6,264,830 $(77,681)$35,940 $6,223,110 $718,399 $6,941,509 
Nine Months Ended September 30, 2020
Redeemable
Noncontrolling
Interests
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance at December 31,2019$306,565 118,451 $12 $766,006 $(52,753)$251,466 $964,731 $366,701 $1,331,432 
Cumulative effect of adoption of new ASU (No. 2016-13)— — — — — (1,228)(1,228)— (1,228)
Exercise of stock options
— 4,188 — 29,127 — — 29,127 — 29,127 
Issuance of restricted stock units, net of tax withholdings
— 2,509 1 (1,026)— — (1,025)— (1,025)
Shares issued in connection with the Employee Stock Purchase Plan
— 329 — 3,737 — — 3,737 — 3,737 
Stock-based compensation
— — — 37,544 — — 37,544 — 37,544 
Contributions from noncontrolling interests and redeemable noncontrolling interests
471,858 — — — — — — 139,997 139,997 
Distributions to noncontrolling interests and redeemable noncontrolling interests
(25,179)— — — — — — (39,461)(39,461)
Net loss(245,183)— — — — (4,074)(4,074)(80,242)(84,316)
Shares issued in connection with a subscription agreement— 2,075 — 75,000 — — 75,000 — 75,000 
Other comprehensive loss, net of taxes
— — — — (70,267)— (70,267)— (70,267)
Balance at September 30, 2020
$508,061 127,552 $13 $910,388 $(123,020)$246,164 $1,033,545 $386,995 $1,420,540 
    
11


Sunrun Inc.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
12


Nine Months Ended September 30,
20212020
Operating activities:
Net loss$(659,064)$(329,499)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, net of amortization of deferred grants286,001 156,257 
Deferred income taxes(18,709)(30,424)
Stock-based compensation expense160,754 37,544 
Interest on pass-through financing obligations16,288 17,480 
Reduction in pass-through financing obligations(32,160)(28,907)
Other noncash items38,656 31,247 
Changes in operating assets and liabilities:
Accounts receivable(90,170)2,727 
Inventories(161,474)82,604 
Prepaid and other assets(273,948)(37,958)
Accounts payable120,412 (57,513)
Accrued expenses and other liabilities27,953 (25,964)
Deferred revenue49,632 15,647 
Net cash used in operating activities(535,829)(166,759)
Investing activities:
Payments for the costs of solar energy systems(1,186,330)(619,012)
Purchase of equity method investment (65,356)
Purchases of property and equipment, net(11,640)(2,384)
Net cash used in investing activities(1,197,970)(686,752)
Financing activities:
Proceeds from state tax credits, net of recapture 6,027 
Proceeds from line of credit526,980 126,950 
Repayment of line of credit(548,356)(141,525)
Proceeds from issuance of convertible senior notes, net of capped call transaction371,998  
Proceeds from issuance of non-recourse debt1,691,255 442,950 
Repayment of non-recourse debt(753,046)(208,371)
Payment of debt fees(42,757)(8,353)
Proceeds from pass-through financing and other obligations7,857 5,728 
Early repayment of pass-through financing obligation(18,050) 
Payment of finance lease obligations(9,243)(7,763)
Contributions received from noncontrolling interests and redeemable noncontrolling interests900,332 611,855 
Distributions paid to noncontrolling interests and redeemable noncontrolling interests(142,036)(62,541)
Acquisition of noncontrolling interest(41,572) 
Net proceeds related to stock-based award activities23,350 31,839 
Proceeds from shares issued in connection with a subscription agreement 75,000 
Net cash provided by financing activities1,966,712 871,796 
Net change in cash and restricted cash232,913 18,285 
Cash and restricted cash, beginning of period708,208 363,229 
Cash and restricted cash, end of period$941,121 $381,514 
Supplemental disclosures of cash flow information
Cash paid for interest$169,737 $85,503 
Cash paid for income taxes$ $ 
Supplemental disclosures of noncash investing and financing activities
Purchases of solar energy systems and property and equipment included in accounts payable and accrued expenses$56,818 $82,301 
Right-of-use assets obtained in exchange for new finance lease liabilities$9,424 $1,092 
Portion of solar energy systems financed with seller financing, included within non-recourse debt$37,000 $ 

The accompanying notes are an integral part of these consolidated financial statements.
13


Sunrun Inc.
Notes to Consolidated Financial Statements
(Unaudited)

Note 1. Organization
Sunrun Inc. (“Sunrun” or the “Company”) was originally formed in 2007 as a California limited liability company and was converted into a Delaware corporation in 2008. The Company is engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States.
Sunrun acquires customers directly and through relationships with various solar and strategic partners (“Partners”). The Projects are constructed either by Sunrun or by Sunrun’s Partners and are owned by the Company. Sunrun’s customers enter into an agreement to utilize the solar energy system (“Customer Agreement”) which typically has an initial term of 20 or 25 years. Sunrun monitors, maintains and insures the Projects. The Company also sells solar energy systems and products, such as panels and racking and solar leads generated to customers.
The Company has formed various subsidiaries (“Funds”) to finance the development of Projects. These Funds, structured as limited liability companies, obtain financing from outside investors and purchase or lease Projects from Sunrun under master purchase or master lease agreements. The Company currently utilizes three legal structures in its investment Funds, which are referred to as: (i) pass-through financing obligations, (ii) partnership-flips and (iii) joint venture (“JV”) inverted leases.


Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the "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 for the year ended December 31, 2020.
The consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries, including Funds, in which the Company has a controlling financial interest. Beginning October 8, 2020, the Company's consolidated subsidiaries also included Vivint Solar, Inc. ("Vivint Solar"). The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity. However, a controlling financial interest may also exist in entities, such as variable interest entities (“VIEs”), through arrangements that do not involve controlling voting interests. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810 (“ASC 810”) Consolidation, the Company consolidates any VIE of which it is the primary beneficiary. The primary beneficiary, as defined in ASC 810, is the party that has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it continues to be the primary beneficiary. The consolidated financial statements reflect the assets and liabilities of VIEs that are consolidated. All intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation.
14


Use of Estimates
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company regularly makes estimates and assumptions, including, but not limited to, revenue recognition constraints that result in variable consideration, the discount rate used to adjust the promised amount of consideration for the effects of a significant financing component, the estimates that affect the collectability of accounts receivable, the valuation of inventories, the useful lives of solar energy systems, the useful lives of property and equipment, the valuation and useful lives of intangible assets, the effective interest rate used to amortize pass-through financing obligations, the discount rate uses for operating and financing leases, the fair value of contingent consideration, the fair value of assets acquired and liabilities assumed in a business combination, the valuation of stock-based compensation, the determination of valuation allowances associated with deferred tax assets, the fair value of debt instruments disclosed and the redemption value of redeemable noncontrolling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Actual results may differ from such estimates.
Segment Information
The Company has one operating segment with one business activity, providing solar energy services and products to customers. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who manages operations on a consolidated basis for purposes of allocating resources. When evaluating performance and allocating resources, the CODM reviews financial information presented on a consolidated basis.
Revenue from external customers (including, but not limited to homeowners) for each group of similar products and services is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Customer agreements$194,924 $102,213 $549,689 $294,991 
Incentives36,945 12,272 76,250 24,713 
Customer agreements and incentives231,869 114,485 625,939 319,704 
Solar energy systems127,936 52,238 307,408 168,094 
Products78,960 43,037 241,378