1Q24 Results: "Strongest Position in Its Corporate History"
Spruce announced 1Q24 earnings and hosted an analyst briefing with the company’s new CEO Chris Hayes. Spruce is a leading owner-operator in residential solar. The company has acquired 13 portfolios in the last four years and owns the cash flow from approximately 75,000 residential solar systems. CEO said that Spruce is in the strongest position in its corporate history. According to Hayes, this is underpinned by: (1) the core solar business inflecting toward positive cash flow; (2) the company having a strong balance sheet and abundant liquidity; and (3) items related to the Legacy XL Fleet restructuring are diminishing and allowing the company to look forward and focus on generating positive cash flow. Hayes said that Spruce has the most comprehensive servicing platform on the market. The platform is technology driven, such that the company can provide integrated seamless services to both Spruce and third-party assets. He believes the platform is hard to replicate and effectively provides a servicing “moat”. Net loss attributable to shareholders narrowed to $2.5 million in 1Q24 from a loss of $19.4 million in 1Q23. The most meaningful drivers Y/Y included a modest rise in revenue, a $2.2 million fall in SG&A (reduced legal fees related to Legacy XL Fleet lawsuit and restructuring charges), an additional $3.5 million interest income related to the SEMTH acquisition (March 2023), and a $12 million swing to gain from loss in the fair value of interest rate swaps (see Figure 1). Spruce maintained guidance for 2024 operating EBITDA of $68-86 million and adjusted FCF in the range of $0-5 million. Since the 1Q24 operating EBITDA of $10.7 million is in a range of 12-16% of full-year guidance, this suggests improved performance in subsequent quarters (see Figure 3 for calculation of operating EBITDA). Total cash equivalents and restricted cash was $149.7 million in 1Q24 versus $172.9 million in 4Q23. The decline was primarily related to the one-off net payment of $15 million related to Legacy XL Fleet legal matters. We recently hosted CEO Chris Hayes for our first fireside chat. The fireside chat and related Management Series can be accessed on demand. Links accessible in our full report.
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