Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Spruce Power Holding Corp (NYSE:SPRU) reported solid third-quarter results with revenue of $21.4 million and operating EBITDA of $17.7 million, supported by predictable cash flows from over 75,000 solar assets.
• The company maintains a strong balance sheet with total cash of $150 million at quarter-end, unchanged from the previous quarter.
• Spruce Power Holding Corp (NYSE:SPRU) signed a nonbinding letter of intent to acquire a portfolio of nearly 10,000 home solar systems, expected to close in the fourth quarter, which could generate impressive cash returns.
• The company is ramping up its Spruce Pro servicing business, entering a memorandum of understanding with a large residential solar installer to provide servicing solutions, indicating strong growth potential.
• Spruce Power Holding Corp (NYSE:SPRU) plans to resume its common stock repurchase program, reflecting confidence in its growth prospects and capital allocation strategy.

Negative Points

• Third-quarter revenue decreased compared to the prior year period, primarily due to lower SREC revenues and higher performance guarantee payments.
• The company reported a GAAP net loss attributable to stockholders of $53.5 million, partly due to increased legal costs and ongoing legal proceedings.
• Spruce Power Holding Corp (NYSE:SPRU) recorded a noncash goodwill impairment charge of approximately $29 million due to a decline in stock price and market capitalization.
• The company adjusted its full-year 2024 guidance, expecting adjusted operating EBITDA to be $60 million and adjusted free cash flow to be negative $10 million, below previous expectations.
• Higher than expected non-routine operations and maintenance expenses and corporate-level expenses, including legal costs, have negatively impacted financial performance.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Signs with SPRU.

Q: Can you share any perspective details about the financial impact of the announced acquisition? How should we think about the profitability of this asset compared to your existing portfolio? A: (Chris Hayes, CEO) We're excited about this opportunity. If completed, it will build on our high-margin cash flow base and realize synergies within our servicing organization. We can't comment on specific deal economics, but any acquisition activity should align with our historical framework. We're working to close the acquisition efficiently and will provide details at the appropriate time.

Q: Can you expand on the recent memorandum of understanding (MOU) signed for Spruce Pro? How would you define success for Spruce Pro entering 2025? A: (Chris Hayes, CEO) The MOU is a significant proof point for Spruce Pro, leveraging our existing servicing platform. We aim to execute a service agreement in the fourth quarter. Success in 2025 would be defined by the quality of our pipeline and closing a deal or two, although we are not issuing specific revenue guidance for Spruce Pro.

Q: How do you view the impact of the recent election on Spruce Power, and how durable is your business model in the face of potential policy changes? A: (Chris Hayes, CEO) We are a third-party owner of solar, and our success depends on continued solar installations and strong economics. We are not heavily influenced by policy changes, and there is an active M&A pipeline for us. We remain bullish on our business environment.

Q: Can you provide any guidance on the fourth quarter, especially considering last year's weather-related issues? A: (Sarah Wells, CFO) We have provided updated guidance in our script and will stick with that for now.

Q: With your stock trading below cash, what are some key things the market might be missing? A: (Chris Hayes, CEO) We have initiated a share buyback plan, purchasing $1 million per quarter, which we hope is seen as a bullish sentiment. We are bullish on our growth prospects and Spruce Pro. We are also through most one-time legal expenses, which are now behind us.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.