Spruce Power Holding Corporation Q2 FY2025 earnings call

• Revenue grew 48% YoY and operating EBITDA 71% YoY, driven by NJR Resources acquisition and SREC revenue.
• Core operating expenses down 19% YoY to $17.2 million. Balance sheet is strong with over $90M in cash.
• Discussed challenges in residential solar sector due to policy changes, but Spruce's model is resilient with low fixed costs and not dependent on IRA tax credits.
• Revenue drivers:
  • Opportunistic M&A: Acquiring portfolios of installed systems, e.g., NJR acquisition, with SREC sale to generate hedged revenue.
  • Programmatic offtake: Seeking ongoing acquisition/service of newly installed systems with partners, aiming for double-digit IRRs.
  • Spruce Pro: Third-party solar servicing platform with growing pipeline, unlevered and capital-light.
• Cost containment efforts: Core operating expenses down, O&M expense down 52% YoY, new CRM platform launched, and operational enhancements in place.

Spruce reported a 48% increase in revenue compared to the year earlier period, reaching $33.2 million in the second quarter. Operating EBITDA grew 71% year-over-year to $24.6 million. Core operating expenses (SG&A and O&M) were $17.2 million, down 19% from the prior year. The balance sheet is robust with over $90 million in cash. Revenue contribution was primarily from the November 2024 acquisition of ~9,800 rooftop assets and growth in SREC revenue.

• Focus on containing costs and scaling platform to drive improved financial performance and progress toward positive cash flow.
• Participating in Canaccord Genuity Annual Growth Conference tomorrow with a webcast central presentation.
• Spruce management to host meetings with analysts and investors at RE+ Renewable Energy trade show in Las Vegas on September 9-10.

• Policy changes in residential solar eliminating tax credits and phasing out safe harbor, negatively impacting cash loan deals and larger projects.
• Industry transitions may lead to distressed assets, with uncertainties in financing markets affecting ability to roll over debt.

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