SPRUCE POWER HOLDING CORP Q3 FY2024 earnings call

• Focus on growing distributed energy platform through acquiring operating residential solar assets and expanding Spruce Pro. • Commercial teams poised to convert growth pipeline opportunities. • Third quarter results: revenue $21.4M, operating EBITDA $17.7M; core business supported by predictable cash flows from over 75,000 solar assets/contracts. • Near-term growth initiatives: signed non-binding LOI to acquire ~10,000 home solar systems, evaluating programmatic offtake, ramping up Spruce Pro servicing business with MOU signed with large residential solar installer. • Disciplined capital allocation strategy: resuming common stock repurchase activity, aiming to balance repurchases with growth opportunities. • Long-term strategy: growing portfolio of cash flow generating assets, debt reduction, potential shareholder returns.

The core business delivered solid results with third quarter revenue at $21.4 million and operating EBITDA at $17.7 million. It is supported by the predictable monthly cash flows from over 75,000 solar assets and contracts. The revenue contribution from the core business comes from the consistent cash inflows from these assets and contracts.

• Spruce is adjusting full year 2024 guidance. Now expects midpoint adjusted operating EBITDA to be $60 million and adjusted free cash flow to be negative $10 million below previous low ends. • Full year 2024 operating EBITDA range revised to $57 million to $62 million. • Negative variance from previous guidance due to higher than anticipated O&M expenses and corporate level expenses like legal costs.

• Uncertainties around M&A deals as nothing is certain until ink is dry. • Stock price decline leading to non-cash Goodwill impairment charge of ~$29 million. • Higher than expected O&M expenses and legal costs impacting financial results. • Potential weather-related issues affecting fourth quarter financials as seen in prior year.

Q: About the acquisition's financial impact and profitability compared to existing portfolio, can you share details?

A: Chris Hayes says they're excited about the opportunity but can't comment on specific deal economics, working to close the acquisition quickly and will provide incremental details upon successful close.

Q: About Spruce Pro MOU, expand on the opportunity and success definition for 2025?

A: Chris Hayes states the MOU is a proof-point for Spruce Pro, capital-light endeavor leveraging existing servicing platform, working towards executed service agreement in fourth quarter; success defined by quality of pipeline with high probability of closing deals in 2025.

Q: Macro question about power demand, grid electricity rates, and rooftop solar?

A: Chris Hayes says utility rates are likely to continue rising, which is a backwind for their business as rising rates make solar more economically compelling and increase underlying contracts.

Q: Guidance for fourth quarter and commentary on O&M and legal items?

A: Sarah Wells says they're sticking to the updated guidance provided earlier.

Q: Comment on stocks trading below cash and market sentiment?

A: Chris Hayes mentions the share buyback plan is bullish, company is in starting blocks with bullish growth prospects for Spruce Pro, and legal expenses are materially through one-time charges and close to being behind us