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What changed in SPRUCE POWER HOLDING CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SPRUCE POWER HOLDING CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+390 added−257 removedSource: 10-K (2024-04-09) vs 10-K (2023-03-30)

Top changes in SPRUCE POWER HOLDING CORP's 2023 10-K

390 paragraphs added · 257 removed · 118 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

44 edited+219 added−29 removed1 unchanged
Biggest changeAs a result of the strategic review, in the first quarter of 2022 the Company made the following decisions relating to a restructuring of its Drivetrain business: (i) the elimination of a substantial majority of the Company’s hybrid drivetrain products; (ii) the elimination of its Plug-In Hybrid Electric Vehicles (“PHEV”) products; (iii) the reduction in the size of the Company’s workforce by approximately 50 employees; (iv) the closure of the Company’s production center and warehouse in Quincy, IL; (v) the closure of the Company’s engineering activities in its Boston office; and (vi) the termination of the Company’s partnership with eNow.
Biggest changeAs a result of the strategic review, we made the following decisions relating to the restructuring of our Drivetrain business in the first quarter of 2022: (i) the elimination of a substantial majority of our hybrid drivetrain products; (ii) the elimination of our plug-in hybrid electric vehicles products; (iii) the reduction in the size of our workforce by approximately 50 employees; (iv) the closure of our production center and warehouse in Quincy, IL; (v) the closure of engineering activities in our Boston office; and (vi) the termination of our partnership with eNow. 7 Tab l e of Contents Following the strategic review, we decided to pursue transformational mergers and acquisition (“M&A”) opportunities, which included the implementation of a process to institutionalize the M&A effort and resulted in the formation of an investment committee comprised of senior members of our executive team (“Management”) and members of our Board of Directors.
The Company's website address is www.sprucepower.com and the information contained in, or that can be accessed through, the Company's website is not part of this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.
Our website address is www.sprucepower.com and the information contained in, or that can be accessed through our website, is not part of this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.
Corporate History and Background On December 21, 2020 (the “Closing Date”), Pivotal Investment Corporation II, a special purpose acquisition company incorporated on March 20, 2019 (“Pivotal”), consummated a business combination pursuant to that certain Agreement and Plan of Reorganization, dated as of September 17, 2020 (the “Merger Agreement”), by and among Pivotal, PIC II Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of Pivotal (“Merger Sub”), and XL Hybrids, Inc., a Delaware corporation (“Legacy XL”).
For reference, on December 21, 2020 (the “Closing Date”), Pivotal Investment Corporation II (“Pivotal”), a special purpose acquisition company (“SPAC”) incorporated on March 20, 2019, consummated a business combination pursuant to that certain Agreement and Plan of Reorganization, dated as of September 17, 2020 (the “Merger Agreement”), by and among (i) Pivotal, PIC II Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of Pivotal (“Merger Sub”) and (ii) XL Hybrids, Inc., a Delaware corporation (“Legacy XL”).
Competition Distributed solar generation is a capital-intensive, evolving business with numerous industry participants. While Spruce Power’s solar generation portfolios are currently contracted, Spruce Power may compete in the future primarily on the basis of price of electricity, quality of service and low/no carbon energy.
Competition Distributed solar generation is a capital-intensive, evolving business with numerous industry participants. While our solar generation portfolios are currently contracted, we may compete in the future primarily on the basis of price of electricity, quality of service and low/no carbon energy.
Profitably growing return on assets by focusing on channels with below-average customer acquisition cost – The Company will seek to grow its subscriber revenues by focusing on the channels that have below-average customer acquisition costs and the ability to increase return on assets, including: acquiring existing systems from other companies or investment funds, selling additional services to existing subscribers, selling services to new customers online and partnering with selected independent installers to provide a subscription-based solution for their customers. c.
Profitably growing return on assets by focusing on channels with the lowest customer acquisition cost We seek to grow our subscriber revenues by focusing on those channels that have lowest customer acquisition costs and the ability to increase return on assets, including acquiring existing systems from other companies or investment funds, selling additional services to existing subscribers, selling services to new customers online and partnering with selected independent installers to provide a subscription-based solution for their customers.
Solar energy generation is becoming one of the lowest cost energy generation technologies in many regions in the U.S. which is expected to lead to significant growth in the renewable energy industry. Solar technology is improving as solar cell efficiencies improve and installation costs are declining.
Solar energy generation is becoming one of the lowest cost energy generation technologies in many regions in the U.S. which is expected to lead to significant growth in the renewable energy industry. Solar technology is improving as solar cell efficiencies improve and installation costs are declining. Intellectual Property Generally, the solar installation business is not dependent on intellectual property.
The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available to you free of charge through the Investor Relations section of the Company's website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available free of charge through the Investor Relations section of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company includes its web site address in this Annual Report on Form 10-K only as an inactive textual reference.
The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. We include our website address in this Annual Report on Form 10-K only as an inactive textual reference.
Spruce Power utilizes scalable, cost-effective customer service platforms and systems in its operations which support efficient integration and service of acquired portfolios and third party owned portfolios. These platforms also provide customers with self-service options to make payments and select other services. Competitiveness of renewable energy. Renewable energy technology has improved in recent years.
Flexible customer service platforms We utilize scalable, cost-effective customer service platforms and systems in our operations, which support efficient integration and service of acquired portfolios and third party owned portfolios. These service platforms also provide our customers with self-service options to make payments and other services. Competitiveness of renewable energy Renewable energy technology has improved in recent years.
The contracted nature and diversification of off-takers in Spruce Power's portfolio of residential solar assets supports stable long-term cash flows. Residential solar assets in Spruce Power's portfolio are contracted under long-term contracts that generally provide for lease payments or production-based power purchase payments over the contract term.
Contracted assets with stable cash flows The contracted nature and diversification of off-takers in our portfolio of home solar assets supports stable long-term cash flows. Home solar assets in our portfolio are contracted under long-term contracts, which generally provide for lease payments or production-based power purchase payments over the contract term.
Information Available on the Internet The Company's internet address is www.sprucepower.com, to which the Company regularly post copies of its press releases as well as additional information about us.
Information Available on the Internet Our website address is www.sprucepower.com, to which we regularly post copies of our press releases as well as additional information about us.
Spruce Power’s solar residential asset portfolios have a total weighted average remaining contract term of approximately 13 years as of December 31, 2022. Newer, well-maintained portfolio. Approximately 65% of Spruce Power's portfolio, based on expected contributions to cash generated, of residential solar energy systems have been operating on average for fewer than 8 years.
Our home solar asset portfolios have a total weighted average remaining contract term of approximately 12 years as of December 31, 2023. Newer, well-maintained portfolio Based on expected contributions to cash generated, approximately 50% of our portfolio of home solar energy systems have been operating on average for fewer than 9 years.
Over the last 18 months, Spruce Power has focused on delivering best-in-class customer service, with investment into process and platform improvement for on-site monitoring, customer billing and working with qualified partners for field services. b.
We are focused on delivering best-in-class customer service, with investment into process and platform improvement for on-site monitoring, customer billing and working with qualified partners for field services.
These benefits have generally been retained by the Company's subsidiaries that own the systems, with the exception of the investment tax credit under Section 48 of the Internal Revenue Code ("IRC"), which were generally passed through to the various financing partners of the solar energy systems. The Company also engages in the energy efficiency and solar loan servicing business.
These benefits have generally been retained by our subsidiaries that own the solar energy systems, with the exception of the investment tax credit (“ITC”) under Section 48 of the Internal Revenue Code as amended, (the “IRC”), which were generally passed through to the various financing partners of the solar energy systems.
The Company holds subsidiary fund companies that own and operate portfolios of residential solar energy systems. The solar energy systems are subject to solar lease agreements ("SLAs") and power purchase agreements ("PPAs", together with the SLAs, "Customer Agreements") with residential customers who benefit from the production of electricity produced by the solar energy systems.
We hold subsidiary fund companies that own and operate portfolios of home solar energy systems, which are subject to solar lease agreements (“SLAs”) and power purchase agreements (“PPAs”, together with the SLAs, “Customer Agreements”) with home solar customers who benefit from the production of electricity generated by the solar energy systems.
In furtherance of its growth strategy, on March 23, 2023, the Company completed the acquisition of all the issued and outstanding interests in SS Holdings 2017, LLC and its subsidiaries ("SEMTH" and the “SEMTH Acquisition”) from certain funds managed by HPS Investment Partners, LLC (“HPS”), pursuant to a Membership Interest Purchase And Sale Agreement (“Purchase Agreement”) dated as of March 23, 2023.
In the first quarter of 2023, we completed the acquisition of all issued and outstanding interests in SS Holdings 2017, LLC and its subsidiaries (“SEMTH”) from certain funds managed by HPS Investment Partners, LLC, pursuant to a membership interest purchase and sale agreement as of that date (the “SEMTH Acquisition”).
Company Strategy The Company believes that the combination of Spruce Power’s existing Customer Agreements' subscriber-base proven servicing platform, together with the Company’s capital resources and relationships gives it the ability to take advantage of rapid growth in distributed solar, energy storage and electric vehicle adoption while creating a path to more predictable revenues, profits and cash flow for the Company’s shareholders.
Corporate Strategy We believe the combination of our existing subscriber-base and proven servicing platform related to our Customer Agreements, together with our capital resources and relationships, gives us the ability to take advantage of rapid growth in distributed solar and battery storage services, while creating a path to more predictable revenues, profits, and cash flow for our shareholders.
Increasing shareholder value by delivering predictable revenues, profits and cash flow – By focusing on subscription-based solutions with long-term customer agreements, and the adjacent businesses of servicing and managing those systems, the Company will seek to generate consistent revenues, profits and cash flow.
Increasing shareholder value by delivering predictable revenues, profits and cash flow By focusing on subscription-based solutions with long-term customer contracts, we seek to generate consistent revenues, profits and cash flow.
Leveraging the Spruce Power platform to become a leading provider of subscription-based solutions for distributed energy resources – Spruce Power has more than a decade of experience owning and operating rooftop solar systems, and the Customer Agreements associated with those systems, as well as energy efficiency upgrades.
Our corporate strategy has three key elements: 8 Tab l e of Contents Leveraging the Spruce Power platform to become a leading provider of subscription-based solutions for distributed energy resources We have more than a decade of experience owning and operating rooftop solar systems, as well as energy efficiency upgrades.
Under the XL Fleet name, the Company was historically a provider of fleet electrification solutions for commercial vehicles in North America, offering its systems for vehicle electrification (the “Drivetrain” segment) and through its energy efficiency and infrastructure solutions business, including offering and installing charging stations to enable customers to effectively and cost-effectively develop the charging infrastructure required for their electrified vehicles (the “XL Grid” segment).
Corporate History and Background Historically, we provided fleet electrification solutions for commercial vehicles in North America, offering our systems for vehicle electrification (the “Drivetrain” business) and through our energy efficiency and infrastructure solutions business, offering and installing charging stations to enable customers develop the charging infrastructure required for their electrified vehicles (the “XL Grid” business).
Spruce Power has a dedicated corporate development team that has historically been successful in acquiring high quality portfolios of solar systems that are already in operations and have long-term contracts with the homeowners. Spruce Power’s in-house M&A team acquires operating residential solar energy systems “in-bulk” from other companies.
We have a dedicated corporate development M&A team that has historically been successful in acquiring high quality portfolios of solar energy systems that are already in operation and have existing long-term contracts with homeowners.
In almost all cases, interconnection permissions are issued on the basis of a standard process that has been pre-approved by the local public utility commission or other regulatory body with jurisdiction over net metering policies.
In almost all cases, interconnection permissions are issued on the basis of a standard process which has been pre-approved by the local public utility commission or other regulatory body with jurisdiction over net metering policies. As such, no additional regulatory approvals are required once interconnection permission is given. Our collection activities are regulated in various states in which they operate.
The Company obtains interconnection permission from the applicable local primary electric utility. Depending on the size of the solar energy system and local law requirements, interconnection permission is provided by the local utility directly to the Company and/or its customers.
Depending on the size of the solar energy system and local law requirements, interconnection permission is provided by the local utility to our customers upon initial installation.
In addition to providing management services to its own portfolio, the Company also provides management services to over 7,500 systems owned by other companies. These services include (i) billing and collections, (ii) account management services, (iii) financial reporting, (iv) homeowner support and (v) maintenance monitoring and dispatch.
In addition to providing management services to our portfolio, we also provide portfolio management services through our Spruce Pro platform to approximately 5,000 systems owned by other companies, which include (i) billing and collections, (ii) account management services, (iii) financial reporting, (iv) homeowner support and (v) maintenance monitoring and dispatch.
Spruce Power believes that it is well-positioned to execute its strategy over the long term based on the following competitive strengths: Spruce Power management and operational expertise. Spruce Power believes it benefits from Management's seasoned experience in industry (renewables, utilities, and financial services), corporate development (M&A) and customer focused, cost-efficient operations. Contracted assets with stable cash flows.
We believe we are well-positioned to execute our strategy over the long term based on the following competitive strengths: 9 Tab l e of Contents Our management and operational expertise We benefit from our Management’s seasoned experience in industry (renewables, utilities and financial services), corporate development (M&A) and customer focused, cost-efficient operations.
With the March 2023 SEMTH Acquisition, Spruce Power’s portfolio of over 72,000 systems is geographically diverse across 18 states in the United States which reduces exposure to localized weather events, natural disasters, regional underperformance, and adverse regulatory actions providing a more stable stream of cash flows over the long term than a non-diversified portfolio. Flexible customer service platforms .
Geographic and resource diversification With the SEMTH and Tredegar Acquisitions, our portfolio of approximately 75,000 home solar systems and customer contracts is geographically diverse across 18 states in the U.S., which reduces exposure to localized weather events, natural disasters, regional underperformance, and adverse regulatory actions and provides a more stable stream of cash flows over the long term when compared to a non-diversified portfolio.
The Company’s in-house capabilities include: customer billing and collections, cash administration, account management services, homeowner support, maintenance monitoring and dispatch, and portfolio accounting and financial reporting. The Company has made progress in elevating its customer service and continues to invest resources in its goal of becoming best-in-class.
A noteworthy differential is our in-house capabilities which include customer billing and collections, account management services, customer support, systems monitoring and maintenance, and portfolio accounting and financial reporting. We have made progress in elevating our customer service and continue to invest resources in our goal of becoming best-in-class customer experience.
Pursuant to the terms of the Merger Agreement, a business combination between Pivotal and Legacy XL was affected through the merger of Merger Sub with and into Legacy XL, with Legacy XL surviving as the surviving company and as a wholly-owned subsidiary of Pivotal (the “Merger” and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”).
Pursuant to the terms of the Merger Agreement, a business combination between Pivotal and Legacy XL was effected through the merger of Merger Sub with and into Legacy XL, resulting in Legacy XL as the surviving company and a wholly-owned subsidiary of Pivotal. On the Closing Date, Pivotal changed its name to XL Fleet Corp (“XL Fleet”).
In addition, Spruce Power competes with other companies to acquire operating portfolios of residential solar energy systems with stable contracted cash flows. Spruce Power considers its primary competitors for opportunities in North America as other solar companies with vertically integrated business models, existing solar servicing companies, purely finance focused organizations, and regulated utility holding companies.
We consider our primary competitors for opportunities in North America as other solar companies with vertically integrated business models, existing solar servicing companies, purely finance focused organizations and regulated utility holding companies.
Item 1. Business. Company Overview The Company is a leading owner and operator of distributed solar energy assets across the United States, offering subscription-based services to more than 72,000 customers with the March 2023 SEMTH Acquisition discussed below and making renewable energy more accessible to everyone.
Item 1. Business Company Overview Spruce Power (formerly known as XL Fleet Corp.) is a leading owner and operator of distributed solar energy assets across the United States (the “U.S.”), offering subscription-based services to approximately 75,000 home solar assets and customer contracts, making renewable energy more accessible to everyone.
Human Capital Management The Company’s mission is to power our customers’ clean and efficient energy use, for a stable future. The Company believes that starts with its employees. The Company’s culture is built upon its values of coordination, being purpose-driven where work is results oriented.
Human Capital Management With our mission of “Powering Our Customers’ Clean and Efficient Energy use, for a Sustainable Future”, we believe that starts with our employees. We aim to attract top talent by building a culture upon our values of coordination, purpose-driven and results oriented.
The XL Grid segment included World Energy Efficiency Services, LLC (“World Energy”) after its acquisition in May 2021. 1 Table of Contents In the first quarter of 2022, the Company initiated a strategic review of its overall business operations which included assessing its offerings, strategy, processes and growth opportunities.
In the first quarter of 2022, we initiated a strategic review of our overall business operations, which included assessing our offerings, strategy, processes and growth opportunities.
The Company generates revenues primarily through the sale of electricity generated by its residential solar energy systems to homeowners pursuant to long-term agreements that obligate the Company’s subscribers to make recurring monthly payments, and the servicing of those agreements for other institutional owners of residential solar energy systems.
Our primary customers are homeowners and our core solar service offerings generate revenues primarily through (i) the sale of electricity generated by our home solar energy systems to homeowners pursuant to long-term agreements, which requires our subscribers to make recurring monthly payments, (ii) third party contracts to sell solar renewable energy credits (“ SRECs”) generated by the solar energy systems for fixed prices and (iii) the servicing of those agreements for other institutional owners of home solar energy systems.
As such, there is a wide variation in terms of the capabilities, resources, nature and identity in the companies Spruce Power competes with depending on the market. In residential distributed solar generation, customers' needs are met through long-term bilateral contracts which supply power and maintenance services.
Distributed solar generation is a growing industry in the U.S. and diverse in terms of industry structure, and as such, there is a wide variation in terms of the capabilities, resources, nature and identity in the companies we compete with depending on the market.
Spruce Power considers the long-term contracted profile of its solar generation assets, among other strengths discussed below, as competitive advantages. Distributed solar generation is a growing industry in the United States and diverse in terms of industry structure.
We consider the long-term contracted profile of our solar generation assets, among other strengths discussed below, as competitive advantages.
Information contained in the Company's website does not constitute a part of this report or its other filings with the SEC.
Information contained on our website does not constitute a part of this report or our other filings with the SEC. 11 Tab l e of Contents 1A. Risk Factors Risk Factors An investment in our securities is speculative and involves a high degree of risk.
As such, the Company obtains and maintains collection agency licenses in the states in which it operates as required by law and is subject to regulatory examination of such collection activities on a regular basis. Corporate Information The Company's principal executive offices are located at 1875 Lawrence Street, Denver, Colorado 80202, and its telephone number is (888) 390-1131.
As such, we obtain and maintain collection agency licenses in the states in which we operate, as required by law, and are subject to regulatory examination of such collection activities on a regular basis.
The Company offers services which include asset management services and operating and maintenance services for residential solar photovoltaic projects, in addition to, loan servicing support that allows residential consumers to finance energy efficiency home improvements and residential solar energy systems.
Our business offers services which include asset management services and operating and maintenance services for home solar energy systems.
Because its portfolio of projects are relatively new relative to their expected useful life and use industry-standard technology, Spruce Power believes that it will achieve the expected levels of performance. Geographic and resource diversification.
Due to the portfolio of our projects being in the first half of their expected useful life and using industry-standard technology, we believe the projects will achieve the expected levels of performance.
Shyft also assumed completion of the Company’s pilot development agreement with the Department of Defense related to vehicle hybridization (with the Company retaining rights to potential future royalties from the program). The Company also announced that it had sold certain battery inventory and its legacy hybrid technology to RMA Group, an automotive and equipment supplier in Southeast Asia.
We also sold certain battery inventory and our legacy hybrid technology to RMA Group, an automotive and equipment supplier in Southeast Asia, during the fourth quarter of 2022.
In the fourth quarter of 2022, the Company entered into a non-binding letter of intent (“LOI”) for the sale of World Energy for an immaterial amount, with the divestiture closing in January 2023 and the Company ceased XL Grid operations after the closing of the divestiture. Both the Drivetrain and XL Grid operations are presented as discontinued operations.
Furthermore, we assessed the operations of our XL Grid business to evaluate its strategic fit with Legacy Spruce Power, and in the fourth quarter of 2022, we entered into a non-binding letter of intent for the sale of World Energy Efficiency Services, LLC (“World Energy”).
Customer Operations Spruce Power has over ten years of experience servicing rooftop solar systems including servicing both the over 72,000 systems (with the March 2023 SEMTH Acquisition) from its own portfolios and over 7,500 systems owned by third parties.
Customer Operations We have more than a decade of experience servicing rooftop solar systems, including servicing approximately 75,000 home solar systems and customer contracts from our own portfolios and approximately 5,000 systems owned by third parties.
Through leveraging the Spruce Power platform, the Company intends to grow its revenues by providing subscription-based solutions for rooftop solar, energy storage, EV chargers and other energy-related products, as well as the servicing and management of those systems, to homeowners and small businesses.
We believe our proven platform for managing home solar can be extended to other categories of distributed energy resources, and by leveraging our platform, we intend to grow our revenues by providing subscription-based solutions for rooftop solar and energy storage and other future energy-related products to homeowners and businesses, including commercial and industrial (“C&I”) solar developers.
Government Regulations Although the Company is not regulated as a public utility in the United States under applicable national, state or other local regulatory regimes where it conducts business, the Company competes primarily with regulated utilities. As a result, the Company maintains a team that focuses on the key regulatory and legislative issues impacting the entire industry.
Our ongoing support of our employees’ financial, health and wellness needs will continue to be essential. Government Regulations Although we are not regulated as a public utility in the U.S. under applicable federal, state, or other local regulatory regimes where we conduct business, we compete primarily with regulated utilities.
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On the Closing Date, and in connection with the closing of the Business Combination (the “Closing”), Pivotal Investment Corporation II changed its name to XL Fleet Corp ("XL Fleet").
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Our mission is to provide our customers with clean, affordable solar energy systems and an extraordinary customer experience. We are engaged in the ownership and maintenance of home solar energy systems for homeowners in the U.S. We provide clean, solar energy typically at savings compared to traditional utility energy.
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Following the strategic review, the Company announced its decision to pursue transformational mergers and acquisition (“M&A”) opportunities, enabled by a significant cash balance resulting from the Company’s go-public transaction completed in December 2020.
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In addition, we generate cash flows and earn interest income from an investment through a master lease agreement.
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As a result of these efforts, on September 9, 2022, the Company acquired 100% of the membership interests of Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC, and Spruce Manager LLC (collectively and together with their subsidiaries, “Legacy Spruce Power”) for $32.6 million which consisted of cash payments of $61.8 million less cash and restricted cash acquired of $29.2 million.
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The objective of the investment committee was to continue the exploration of value-generative opportunities in the decarbonization and energy transition ecosystem, focused on three core requirements: (i) a business that makes an impact on decarbonization, (ii) a leader in an established, growing market segment and (iii) a company that generates positive earnings before interest, taxes, depreciation and amortization (“EBITDA”).
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With the acquisition of Legacy Spruce Power, the Company also assumed $542.5 million of long-term debt . In November 2022, the Company changed its corporate name from “XL Fleet Corp” to “Spruce Power Holding Corporation”.
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As a result of these efforts, on September 9, 2022, we acquired 100% of the membership interests of Legacy Spruce Power, which was one of the largest privately held owner and operator of home solar energy systems in the U.S. at the time of the transaction, with approximately 51,000 customer subscribers as of December 31, 2022.
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Additionally, the Company changed its ticker symbol from “XL” to “SPRU.” Discontinued Operations With the completion of the acquisition of Legacy Spruce Power, the Company announced that it would analyze strategic alternatives related to its Drivetrain business.
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In November 2022, following the acquisition of Legacy Spruce Power, we changed our corporate name from “XL Fleet Corp.” to “Spruce Power Holding Corporation.” Additionally, we changed our ticker symbol from “XL” to “SPRU.” With the completion of the acquisition of Legacy Spruce Power, we analyzed strategic alternatives related to our Drivetrain business, and subsequently in December 2022, set plans to exit our Drivetrain business and sold a portion of the business to Shyft Group USA (“Shyft”), which closed in January 2023.
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In December 2022, the Company announced that it was exiting its Drivetrain business and would be selling a portion of the business for an immaterial amount to Shyft Group USA (“Shyft”) which closed on January 1, 2023. Shyft bought certain technical equipment and assumed the Company’s Wixom, Michigan facility and also offered employment to certain engineers and other sales personnel.
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Shyft also (i) acquired certain technical equipment and assumed our Wixom, Michigan facility, (ii) offered employment to certain engineers and sales personnel and (iii) assumed completion of our pilot development agreement with the Department of Defense related to vehicle hybridization, wherein we retained the rights to potential future royalties from the program.
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As of December 31, 2022, the Company had ceased Drivetrain operations and began to restructure most of its related Corporate functions. The Company also began reviewing the operations of its XL Grid business to evaluate its strategic fit with Spruce Power.
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The divestiture of World Energy closed in January 2023, and we subsequently ceased our XL Grid business.
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As described above, over the past several quarters, the Company’s Management and Board of Directors conducted a comprehensive review of the Company’s existing business as well as potential acquisitions that could accelerate growth and increase profitability.
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On March 28, 2023, we were notified by the NYSE that we were not in compliance with Section 802.01C of the NYSE Listed Company Manual (the “NYSE Manual”) because the average closing price of our common stock was less than $1.00 over a consecutive 30 day trading period.
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Based on that review, as well as learnings from the operation of the XL Grid segment, the Company determined to refocus its business on providing subscription-based solutions to homeowners for rooftop solar and servicing of assets and customers to other owners of similar portfolios.
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As a result, on October 6, 2023, we filed an Amendment to our Second Amended and Restated Certificate of Incorporation (the “Amended Certificate of Incorporation”) to effect a 1-for-8 reverse stock split of our issued and outstanding shares of common stock, par value $0.0001 per share (the “Reverse Stock Split”).
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In addition, offering consumer power products such as energy storage, EV chargers and other energy-related products would yield greater value for the Company’s shareholders. Key elements of the Company’s new corporate strategy include: 2 Table of Contents a.
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On November 17, 2023, we received a notice from the NYSE confirming we regained compliance with the continued listing standards set forth in the NYSE Manual.
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The Company believes that Spruce Power’s proven platform for managing residential solar can be extended to other categories of distributed energy resources.
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The SEMTH related asset includes a 20-year use rights to customer payment streams of approximately 22,500 home SLAs and PPAs (the “SEMTH Master Lease”). Subsequently on August 18, 2023, we acquired approximately 2,400 home solar assets and contracts, with an average remaining contract life of approximately 11 years, from a publicly traded, regulated utility company (the “Tredegar Acquisition”).
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Spruce Power’s in-house customer operations is intended to position the Company to be able to leverage existing relationships to expand beyond solar to comprehensive home energy management. The Company believes that Spruce Power’s customer operations infrastructure has created a scalable opportunity where it is able to improve profitability through growth with lower incremental operational costs.
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With the completion of the SEMTH and Tredegar Acquisitions, we have, in the aggregate, 12 portfolios of rooftop solar Customer Agreements with a combined capacity of approximately 426 MWdc. In the aggregate, as of December 31, 2023, we offered subscription-based services and owned the cash flows from approximately 75,000 home solar assets and customer contracts.
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Corporate Development Spruce Power’s growth strategy is different than other public third-party asset owner organizations. Spruce Power does not sell new solar systems directly to consumers and does not have its own sales force.
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Our in-house capabilities and operations infrastructure has established a scalable platform where we are able to continually improve profitability through growth while reducing incremental operational costs. Corporate Development Our corporate growth strategy provides a unique differential from our competitors.
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This approach has positioned Spruce Power to achieve step change growth while minimizing its customer acquisition costs.
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While our competitors lose future long-term value creation for short-term cash flow by selling new solar systems outright directly to consumers, we focus on long-term positive cash flow.
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The SEMTH assets include 20-year use rights to the customer payment stream of approximately 22,500 residential solar leases and power purchase agreements. The Company acquired SEMTH for approximately $23 million of cash, net of cash received, and assumed $125 million of outstanding senior indebtedness held by SS Holdings 2017, LLC, and its subsidiaries at the close of the acquisition.
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Our in-house M&A team acquires operating home solar energy systems “in-bulk” from other companies, and such approach has enabled us to achieve step-change growth while minimizing our customer acquisition costs. Our corporate development M&A team also brings significant experience in renewable energy credit markets, and other tax incentives programs, which enables additional value creation alongside our acquisition strategy.
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Since 2019, with the acquisition of SEMTH in March 2023, Spruce Power has acquired 11 rooftop solar portfolios' Customer Agreements with a combined capacity of approximately 285 MWdc over 54,000 systems. 3 Table of Contents Spruce Power’s corporate development team additionally brings significant experience in renewable energy credit markets, a critical area of expertise in residential solar power markets that allows additional value creation alongside Spruce Power’s acquisition strategy.
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In residential distributed solar generation, customers’ needs are met through long-term bilateral contracts, which supply power and maintenance services. We also compete with other companies to acquire operating portfolios of home solar energy systems with stable contracted cash flows.
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Seasonality The Company’s revenue is impacted by seasonal weather patterns as the amount of electricity its solar energy systems produce is dependent in part on the amount of sunlight where the assets are located. Less daylight hours in winter months and adverse weather conditions will reduce the output of solar energy systems. Customers purchase electricity under PPAs and SLAs.
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Within our residential business, we utilize licensed software, which enables our organization to efficiently manage thousands of customer portfolios. The success of our business depends, in part, on our ability to maintain and protect our proprietary information, license agreements and other contractual provisions, processes and know-how.
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As PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs, the associated revenue is impacted by seasonality.
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We make investments in talent management and employee engagement initiatives, in order to foster a culture of belonging and inclusion. As of December 31, 2023, we had 142 full time employees primarily located in Denver, Colorado and Houston, Texas. As of December 31, 2023, no employees were covered by collective bargaining agreements, and we have not experienced any work stoppages.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties The Company’s corporate headquarters is located in leased office space in Denver, CO. The Company’s CEO and several key members of the Company’s leadership team are located in Denver, and other team members and leadership roles will relocate in the future. The lease expires in January 2024.
Biggest changeItem 2. Properties Our corporate headquarters is located in leased office space in Denver, Colorado. Our Chief Executive Officer and several key members of the leadership team are located in Denver. We also lease office space in Houston, Texas, where our accounting and finance, human resources, customer operations, asset operations and business development, and information technology functions are located.
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The Company also leases space in Houston, TX where its accounting and finance, human resources, customer operations, asset operations and business development, and information technology functions are located. The lease expires in June 2027 with an option to extend for five years.
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The Company leased a facility in Wixom, MI, which was the Company’s previous corporate headquarters and the primary facility for its Drivetrain operations. The lease obligation was transferred on January 1, 2023 as a part of the exiting of the Drivetrain operations. The Company leased a facility in Foothill Ranch, CA which housed certain members of the Drivetrain engineering team.
Removed
The lease obligation was transferred in February 2023. The Company leased a facility in Worcester, MA and one in Cromwell, CT related to XL Grid operations. The lease obligations for these facilities were transferred with the sale of World Energy in January 2023. The Company subleases the previous headquarters for XL Grid in Worcester, MA.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business.
Added
Item 3. Legal Proceedings See Note 15. Commitments and Contingencies in Part II, Item 8. Financial Statements and Supplementary Data for a description of our material pending legal proceedings. Item 4. Mine Safety Disclosures Not Applicable. 26 Tab l e of Contents Part II
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Regardless of outcome, such proceedings or claims can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors and there can be no assurances that favorable outcomes will be obtained.
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On March 8, 2021, two putative class action complaints were filed in the federal district court for the Southern District of New York against the Company and certain of its former and current officers and directors. The cases were consolidated as In re XL Fleet Corp.
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Securities Litigation , Case No 1:21-cv-02171, a lead plaintiff was appointed, and an amended consolidated complaint was filed on July 20, 2021. The amended complaint alleges that certain public statements made by the defendants between September 18, 2020 and March 31, 2021 violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder.
Removed
The Company believes that the allegations asserted in the securities class action are without merit and is vigorously defending the action. There can be no assurance, however, that the Company will be successful. At this time, the Company is unable to estimate potential losses, if any, related to this action.
Removed
On September 20, 2021, and October 19, 2021, two class actions were filed in the Delaware Court of Chancery against certain of the Company’s current officers and directors, and the Company’s SPAC sponsor, Pivotal Investment Holdings II LLC. The actions were consolidated as In re XL Fleet (Pivotal) Stockholder Litigation , C.A.
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No. 2121-0808, and an amended consolidated class action complaint was filed on January 31, 2022.
Removed
The amended complaint alleges various breaches of fiduciary duty, and aiding and abetting breaches of fiduciary duty, for purported actions relating to the negotiation and approval of the December 21, 2020 merger and organization of Legacy XL to become XL Fleet Corp., and purportedly materially misleading statements made in connection with the merger.
Removed
The Company believes that the allegations asserted in the action are without merit and is vigorously defending the lawsuit. At this time, the Company is unable to estimate potential losses, if any, related to this action.
Removed
On January 6, 2022, the Company received a subpoena from the Securities and Exchange Commission (“SEC”) requesting the production of certain documents related to, among other things, the Company’s business combination with XL Hybrids, Inc. and the related PIPE financing, the Company’s sales pipeline and revenue projections, purchase orders, suppliers, CARB approvals, fuel economy from Drivetrain products, customer complaints, and disclosures and other matters in connection with the foregoing.
Removed
According to the subpoena, the investigation is a fact-finding inquiry and does not mean that the SEC has concluded that there is a violation of the law. To date, the Company has provided the requested information and cooperating fully with the SEC investigation. At this time, the Company is unable to estimate potential losses, if any, related to this action.
Removed
On June 23, 2022, the Company received a shareholder derivative complaint filed in the U.S. District Court, District of Massachusetts, captioned Val Kay derivatively on behalf of nominal defendant XL Fleet Corp , against all current directors 32 Table of Contents and prior officers and directors.
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The action was filed by a shareholder purportedly on behalf of the Company, and raises claims for contribution, as well as claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment, and abuse of control.
Removed
The factual allegations concern alleged false or misleading statements about the Company’s sales pipeline, supply chain issues, low reorder rates, and the Company’s technology. The Company believes that the allegations asserted in the action are without merit and is vigorously defending the lawsuit. At this time, the Company is unable to estimate potential losses, if any, related to the lawsuit.
Removed
On February 9, 2023, US Bank, through its affiliate Firstar Development LLC, filed a motion for summary judgment in lieu of a complaint in New York Supreme Court (the trial level in New York) alleging that the Company failed to fulfill its reimbursement obligations under a 2019 tax recapture guaranty agreement between the parties arising from the alleged recapture by the IRS of tax credits taken by Firstar Development LLC as an investor in the Company's subsidiary Ampere Solar Owner I, LLC.
Removed
The $2.5 million alleged liability claim was fully reserved at the time of the Company’s acquisition of Legacy Spruce Power in September 2022, and is not expected to be material to the Company. The Company believes that the allegations asserted in the action are without merit and is vigorously defending the lawsuit.
Removed
At this time, the Company is unable to estimate potential losses, if any, related to the lawsuit. Item 4. Mine Safety Disclosures Not Applicable. 33 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis figure does not include shareholders whose certificates are held in the name of their broker-dealers or other nominees. Dividends: (c) The Company has not paid any cash dividends on its Common Stock to date.
Biggest changeThis figure does not include shareholders whose certificates are held in the name of their broker-dealers or other nominees. Dividends We have not paid any cash dividends on our Common Stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future.
Any decision to declare and pay dividends in the future will be made at the discretion of the Company's board of directors and will depend on, among other things, the Company's results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant.
Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our Board of Directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans: (d) See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under the Company's equity compensation plans.
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans.
In addition, the Company's ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness the Company or its subsidiaries incur. The Company does not anticipate declaring any cash dividends to holders of the Common Stock in the foreseeable future.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of our Common Stock in the foreseeable future.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information: (a) The Company's Common Stock is currently listed on the NYSE under the symbol “SPRU.” Holders: (b) As of March 17, 2023, there were approximately 75 holders of record of the Company's Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock is currently listed on the NYSE under the symbol “SPRU.” Holders As of April 3, 2024, there were approximately 51 holders of record of our Common Stock.
Recent Sales of Unregistered Securities: (e) The Company had no sales of unregistered equity securities during the period covered by this Annual Report on Form 10-K that were not previously reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q. Issuer Purchases of Equity Securities: (f) None. Item 6. [Reserved] 34 Table of Contents
Recent Sales of Unregistered Securities We had no sales of unregistered equity securities during the period covered by this Annual Report on Form 10-K that were not previously reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.
Removed
The Company may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future.
Added
Issuer Purchases of Equity Securities In May 2023, our Board of Directors approved a share repurchase program for the repurchase of up to $50.0 million of our outstanding common stock through May 15, 2025 (the “Repurchase Program”). We are not obligated to repurchase any specific number of shares or dollar amount and may discontinue the Repurchase Program at any time.
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The following table provides information with respect to shares of our Common Stock we repurchased under the Repurchase Program during the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program (in '000s) October 1 - October 31, 2023 — $ — — $ 44,881 November 1 - November 30, 2023 — $ — — $ 44,881 December 1 - December 31, 2023 69,903 $ 4.35 69,903 $ 44,694 69,903 69,903 The IRA introduced a 1% excise tax on all stock repurchases effective January 2023.
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In relation to the Repurchase Program, this excise tax had no material impact on our financial position, results of operations or cash flows as of and for the year ended December 31, 2023. 27 Tab l e of Contents Future share repurchases under our Repurchase Program are subject to the business judgment of our Board of Directors or Management, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, current economic environment and other factors considered relevant.
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As of December 31, 2023, we had approximately $44.7 million available under the Repurchase Program. Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within this Annual Report on Form 10-K for additional information on our share repurchases.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease in the fair value of the warrant liability reflects the decrease in the value of the Company’s stock in 2022 from 2021. In 2022, the Company recognized a $4.5 million gain on the extinguishment of debt related to the wind-down of the New Market Tax Credit obligation.
Biggest changeOther (Income) Expense, Net Other expense, net of $3.3 million for 2023 consists of $4.8 million of unrealized losses from the change in fair value of interest rate swaps, partially offset by $1.3 million of other income, net and $0.2 million of change in fair value of warrant liabilities, while other income, net of $16.7 million for 2022 primarily consisted of $5.6 million of unrealized gains from the change in fair value of interest rate swaps, $5.1 million of change in fair value of warrant liabilities and $4.5 million gain on the extinguishment of debt related to the wind-down of the New Market Tax Credit obligation.
As these inputs are based on observable data and valuations of similar instruments, the interest rate derivatives are primarily categorized in Level 2 in the fair value hierarchy. The fair value of interest rate swaps are recorded on the Consolidated Balance Sheets.
As these inputs are based on observable data and valuations of similar instruments, the interest rate derivatives are primarily categorized as Level 2 in the fair value hierarchy. The fair value of interest rate swaps are recorded on the consolidated balance sheets.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides information which the Company's Management believes is relevant to an assessment and understanding of our financial condition and results of operations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides information which our Management believes is relevant to an assessment and understanding of our financial condition and results of operations.
NPNS are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. The Company's SREC contracts meet these requirements and are designated as NPNS contracts.
NPNS are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Certain SREC contracts meet these requirements and are designated as NPNS contracts.
Consideration given in the form of non-monetary assets, liabilities incurred or equity instruments issued is measured based on either the cost to the Company or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated fair values.
Consideration given in the form of non-monetary assets, liabilities incurred or equity instruments issued is measured based on either the cost to us or the fair value of the assets or net assets acquired, whichever is more clearly evident. The cost of an asset acquisition is allocated to the assets acquired based on their estimated fair values.
Goodwill is recognized if the aggregate fair value of the total purchase consideration and the noncontrolling interests is in excess of the aggregate fair value of the assets acquired and liabilities assumed. Asset acquisitions are measured based on the cost to the Company, including transaction costs.
Goodwill is recognized if the aggregate fair value of the total purchase consideration and the noncontrolling interests is in excess of the aggregate fair value of the assets acquired and liabilities assumed. Asset acquisitions are measured based on the cost to us, including transaction costs.
See the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or elsewhere in this Annual Report on Form 10-K.
Refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or elsewhere in this Annual Report on Form 10-K.
Revenue is recognized from contracts with customers as performance obligations are satisfied at a transaction price reflecting an amount of consideration based upon an estimated rate of return which is expressed as the solar rate per kilowatt hour or a flat rate per month as defined in the customer contracts. • PPAs - Under ASC 606, Revenue from Contracts with Customers ("ASC 606") , PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs. • SLAs - The Company has SLAs, which do not meet the definition of a lease under ASC 842, Leases ("ASC 842"), and are accounted for as contracts with customers under ASC 606.
Revenue is recognized from contracts with customers as performance obligations are satisfied at a transaction price reflecting an amount of consideration based upon an estimated rate of return which is expressed as the solar rate per kilowatt hour or a flat rate per month as defined in the customer contracts. • PPAs - Under ASC 606, Revenue from Contracts with Customers (“ASC 606”) , PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs. • SLAs - We have SLAs, which do not meet the definition of a lease under ASC 842, Leases , and are accounted for as contracts with customers under ASC 606.
Estimating the redemption value of the redeemable noncontrolling interests requires the use of significant assumptions and estimates, such as projected future cash flows. Interest Rate Swaps: The Company utilizes interest rate swaps to manage interest rate risk on existing and planned future debt issuance s. These swaps are not designated as cash flow hedges or fair value hedges.
Estimating the redemption value of the redeemable noncontrolling interests requires the use of significant assumptions and estimates, such as projected future cash flows. Interest Rate Swaps We utilize interest rate swaps to manage interest rate risk on existing and planned future debt issuance s. These swaps are not designated as cash flow hedges or fair value hedges.
Factors used in the HLBV calculation include GAAP income (loss), taxable income (loss), capital contributions, investment tax credits, distributions and the stipulated targeted investor return specified in the subsidiaries' operating agreements. Changes in these factors could have a significant impact on the amounts that investors would receive upon a hypothetical liquidation.
Factors used in the HLBV calculation include GAAP income (loss), taxable income (loss), capital contributions, ITCs, distributions and the stipulated targeted investor return specified in the subsidiaries' operating agreements. Changes in these factors could have a significant impact on the amounts that investors would receive upon a hypothetical liquidation.
Quantitative and Qualitative Disclosures About Market Risk The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.
Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Realized gains and losses on interest rate swaps are recognized in Interest Expense, Net on the Consolidated Statements of Operations. Unrealized gains and losses on interest rate swaps are recognized in Other (Income) Expense on the Consolidated Statements of Operations and as a non-cash reconciling item in operating activities on the Consolidated Statements of Cash Flows.
Realized gains and losses on interest rate swaps are recognized in interest expense, net on the consolidated statements of operations. Unrealized gains and losses on interest rate swaps are reflected in the consolidated statements of operations and as a non-cash reconciling item in operating activities on the consolidated statements of cash flows.
Critical Accounting Policies and Estimates The Company’s Consolidated Financial Statements are prepared in accordance with U.S. GAAP. Preparation of these financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
Certain contracts that meet the definition of a derivative may be exempted as normal purchase or normal sales transactions ("NPNS").
Certain contracts that meet the definition of a derivative may be exempted as normal purchase or normal sales transactions (“NPNS”).
Valuation of deferred tax assets: The Company accounts for income taxes using the asset and liability method, under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards.
Valuation of deferred tax assets We account for income taxes using the asset and liability method, under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards.
The Company’s most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations and which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
Our most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations and which require us to make its most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
Results of Operations Comparison of Years Ended December 31, 2022 and 2021 The results of operations related to the Company’s Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net loss from discontinued operations in the Company’s Consolidated Statements of Operations.
Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The results of operations related to our Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net loss from discontinued operations in our consolidated statements of operations.
The Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows.
We group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows.
Impairment of long-lived assets: The Company reviews long-lived assets, including solar energy systems, property and equipment, and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable.
Impairment of long-lived assets We review long-lived assets, including solar energy systems, property and equipment, and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable.
The Company classifies certain noncontrolling interests with redemption features that are not solely within the Company’s control outside of permanent equity in the consolidated balance sheets. Redeemable noncontrolling interests are reported using the greater of the carrying value at each reporting date as determined by the HLBV method or the estimated redemption value at the end of each reporting period.
We classify certain noncontrolling interests with redemption features that are not solely within our control outside of permanent equity in the consolidated balance sheets. Redeemable noncontrolling interests are reported using the greater of the carrying value at each reporting date as determined by the HLBV method or the estimated redemption value at the end of each reporting period.
The Company has identified the following as its most critical accounting policies and judgments. Although Management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions. The Company’s significant accounting policies are discussed in Note 2.
We have identified the following as its most critical accounting policies and judgments. Although Management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions. Our significant accounting policies are discussed in Note 2.
Such SRECs are exempted from the derivative accounting and reporting requirements, and the Company recognizes revenues in accordance with ASC 606. The Company recognizes revenue for SRECs based on pricing predetermined within the respective contracts at a point of time when the SRECs are transferred.
Such SRECs are exempted from the derivative accounting and reporting requirements, and we recognize revenues in accordance with ASC 606. We recognize revenue for SRECs based on pricing predetermined within the respective contracts at a point in time when the SRECs are transferred.
If the Company believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill.
If we believe that, as a result of our qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill.
Reportable Segments Segment reporting is based on the “management approach,” following the method that Management organizes the Company’s reportable segments for which separate financial information is made available to, and evaluated regularly by, the Company’s chief operating decision maker (“CODM”) in allocating resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.
Reportable Segments Segment reporting is based on the management approach, following the method Management organizes our reportable segments for which separate financial information is made available to and evaluated regularly by our chief operating decision maker (“CODM”) in allocating resources and in assessing performance. Our CODM is our Chief Executive Officer.
Cash Flows Used in Investing Activities The net cash used in investing activities in 2022 was $30.3 million which consisted of cash paid for Legacy Spruce Power, net of cash acquired of $32.6 million partially offset by proceeds from the sale of fixed assets and solar energy systems.
The net cash used in continuing investing activities in 2022 was $30.3 million, which consisted of cash paid for Legacy Spruce Power, net of cash acquired, of $32.6 million, partially offset by $2.3 million of proceeds from the sale of solar energy systems.
The Company remains focused on carefully managing costs, including capital expenditures, maintaining strong balance sheet, and ensuring adequate liquidity. The Company's primary cash needs are debt service, acquisition of solar energy portfolios, operating expenses, working capital and capital expenditures to support the growth in its business. Working capital is impacted by the timing and extent of the Company's business needs.
We remain focused on carefully managing costs, including capital expenditures, maintaining a strong balance sheet and ensuring adequate liquidity. Our primary cash needs are debt service, acquisition of solar energy portfolios, operating expenses, working capital and capital expenditures to support the growth in our business. Working capital is impacted by the timing and extent of our business needs.
Subsequent to the acquisition of Legacy Spruce Power on September 9, 2022, cash inflows included cash from power generated by its residential solar energy systems and the servicing of long-term agreements for other institutional owners of residential solar energy systems.
Subsequent to the acquisition of Legacy Spruce Power on September 9, 2022, operating cash inflows further included cash from power generated by our home solar energy systems and the servicing of long-term agreements for other institutional owners of home solar energy systems.
The differences between revenue recognition and cash payments received are reflected in accounts receivable, other assets or deferred revenue, as appropriate. Solar renewable energy credit s - The Company has contracts with third parties to sell Solar Renewable Energy Credits ("SRECs") generated by the solar energy systems for fixed prices.
The differences between revenue recognition and cash payments received are reflected in accounts receivable, other assets or deferred revenue, as appropriate. Solar renewable energy credit revenues We enter into contracts with third parties to sell SRECs generated by the solar energy systems for fixed prices.
As a result, the continuing operational results reflect the operations 37 Table of Contents related to the Company’s corporate functions and the results of operations for Spruce Power since its acquisition on September 9, 2022.
As a result, the continuing operational results reflect the operations related to our corporate functions and the results of operations for Legacy Spruce Power since its acquisition on September 9, 2022.
In the fourth quarter of 2022, the Company determined that there was an indicator of impairment for intangible assets in its discontinued operations of the Drivetrain and XL Grid businesses and that the asset was not recoverable.
In the fourth quarter of 2022, we determined there was an indicator of impairment for intangible assets in our discontinued operations of the Drivetrain and XL Grid businesses and concluded the asset was not recoverable.
The Company formed or acquired VIEs which are partially funded by tax equity investors in order to facilitate the funding and monetization of certain attributes associated with solar energy systems.
We consolidate any VIE of which we are the primary beneficiary. We formed or acquired VIEs which are partially funded by tax equity investors in order to facilitate the funding and monetization of certain attributes associated with solar energy systems.
As a result, the Company allocates income or loss to the noncontrolling interest holders of the Funds utilizing the hypothetical liquidation of book value ("HLBV") method, in which income or loss is allocated based on the change in each member's claim on the net assets at the end of each reporting period, adjusted for any distributions or contributions made during such periods.
As a result, we allocate income or loss to the noncontrolling interest holders of the Funds and Prior Funds (before any ceased being a VIE) utilizing the hypothetical liquidation of book value (“HLBV”) method, in which income or loss is allocated based on the change in each member's claim on the net assets at the end of each reporting period, adjusted for any distributions or contributions made during such periods.
The Company has provided valuation allowances as of December 31, 2022 and 2021 aggregating $69.4 million and $34.9 million, respectively, against such assets based on its assessment of past operating results, estimates of future taxable income, and the feasibility of tax planning strategies.
We have provided valuation allowances as of December 31, 2023 and 2022 aggregating $74.9 million and $69.4 million, respectively, against such assets based on our assessment of past operating results, estimates of future taxable income and the feasibility of tax planning strategies.
The distribution rights and priorities for the Funds as set forth in their respective operating agreements differ from the underlying percentage ownership interests of the members.
The distribution rights and priorities for the Funds and Prior Funds (before any ceased being a VIE) as set forth in their respective operating agreements differ from the underlying percentage ownership interests of the members.
Operating cash inflows included cash from fleet electrification and related servicing, customer deposits, and delivery of turnkey energy efficiency and electric vehicle charging stations.
Prior to the acquisition of Legacy Spruce Power, operating cash inflows included cash from fleet electrification and related servicing, customer deposits and delivery of turnkey energy efficiency and electric vehicle charging stations.
Cash Flows Provided by (Used in) Financing Activities The net cash used in financing activities in 2022 was $19.1 million which primarily consisted of $9.4 million of long-term debt principal payments, $8.3 million used to buyout non-controlling interests and $1.9 million of capital distributions to non-controlling interests partially offset by $0.6 million of stock option proceeds received in 2022.
The net cash used in continuing financing activities in 2022 was $19.1 million, which primarily consisted of $9.3 million of long-term debt principal repayments, $8.3 million related to the buyout of redeemable non-controlling interest and $1.9 million of capital distributions to non-controlling interests, partially offset by $0.6 million of proceeds from the exercise of stock options in 2022.
The Company continually evaluates its cash needs to raise additional funds or seek alternative sources to invest in growth opportunities and other purposes.
We continually evaluate our cash needs to raise additional funds or seek alternative sources to invest in growth opportunities and other purposes.
Summary of Significant Accounting Policies, included in accompanying audited Consolidated Financial Statements, and should be reviewed in connection with the following discussion of accounting policies that require difficult, subjective and complex judgments. 41 Table of Contents Acquisitions: Business combinations are accounted for using the acquisition method of accounting.
Summary of Significant Accounting Policies, included in accompanying audited consolidated financial statements, and should be reviewed in connection with the following discussion of accounting policies that require difficult, subjective and complex judgments.
The Company considers the rights granted to the other investors under the contractual arrangements to be more protective in nature rather than substantive participating rights. As such, the Company was determined to be the primary beneficiary and the assets, liabilities and activities of the Funds are consolidated by the Company.
We consider the rights granted to the other investors under the contractual arrangements to be more protective in nature rather than substantive participating rights. As such, we were determined to be the primary beneficiary, and the assets, liabilities and activities of the Funds and Prior Funds (before any ceased being a VIE) were consolidated by us.
Cash Flows Summary Presented below is a summary of the Company's operating, investing and financing cash flows: Years Ended December 31, (Amounts in thousands) 2022 2021 Net cash provided by (used in) Continuing operating activities $ (47,717) $ (28,185) Discontinued operating activities (15,772) (20,309) Continuing investing activities (30,296) (3,000) Discontinued investing activities 1,290 (11,829) Continuing financing activities (19,088) 85,860 Discontinued financing activities (99) (502) Net change in cash and cash equivalents and restricted cash $ (111,682) $ 22,035 Cash Flows Used in Operating Activities Historically, the Company's cash flows from operating activities were significantly affected by its cash investments to support the growth of the business in areas such as research and development and selling, general and administrative expense and working capital.
Cash Flows Summary Presented below is a summary of our operating, investing and financing cash flows: Years Ended December 31, (Amounts in thousands) 2023 2022 Net cash provided by (used in) Continuing operating activities $ (31,714) $ (47,717) Discontinued operating activities (1,947) (15,772) Continuing investing activities (17,060) (30,296) Discontinued investing activities 325 1,290 Continuing financing activities (16,807) (19,088) Discontinued financing activities — (99) Net change in cash and cash equivalents and restricted cash $ (67,203) $ (111,682) Cash Flows Used in Operating Activities Historically and prior to the acquisition of Legacy Spruce Power, our cash flows from operating activities were significantly affected by our cash investments to support the growth of the business in areas such as research and development, selling, general and administrative expense and working capital.
At December 31, 2022, the Drivetrain business and XL Grid business are reported in discontinued operations. Residential Solar Revenues Energy generation - Customers purchase electricity under PPAs or SLAs.
As of and for the years ended December 31, 2023 and 2022, the Drivetrain business and XL Grid business are reported as discontinued operations. Energy generation Customers purchase electricity under PPAs or SLAs.
This discussion and analysis should be read together with our results of operations and financial condition and the audited and unaudited consolidated financial statements and related notes that are included elsewhere in this Annual Report on Form 10-K.
This discussion and analysis should be read together with our results of operations and financial condition and the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions.
Net Loss from Discontinued Operations Net loss from discontinued operations of $40.1 million in 2022 and $23.8 million in 2021 includes the discontinued operations of the Company’s Drivetrain and XL Grid businesses.
Net Loss from Discontinued Operations Net loss from discontinued operations of $4.1 million in 2023 and $40.1 million in 2022 includes the discontinued operations of our Drivetrain and XL Grid businesses. The net loss from discontinued operations in 2023 consists of a net loss from the Drivetrain business of $4.1 million.
Overview The Company is a leading owner and operator of distributed solar energy assets across the United States, offering subscription-based services to approximately 51,000 customers as of December 31, 2022 and making renewable energy more accessible to everyone.
Company Overview We are a leading owner and operator of distributed solar energy assets across the U.S., offering subscription-based services to approximately 75,000 home solar assets and customer contracts, making renewable energy more accessible to everyone.
With the acquisition of Legacy Spruce Power in September 2022, the Company assumed all of the outstanding debt of Legacy Spruce Power which had a principal balance of $542.5 million on the date of the acquisition. As of December 31, 2022, the Company’s debt balance was $499.8 million, net of $33.4 million of unamortized fair value adjustment.
With the acquisition of Legacy Spruce Power in September 2022, we assumed all of the outstanding debt of Legacy Spruce Power, which had a principal balance of $542.5 million on the date of the acquisition.
Although the Company believes that its approach to estimates and judgments as described herein is reasonable, actual results could differ and the Company may be exposed to increases or decreases in income taxes that could be material.
Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in income taxes that could be material. Redeemable noncontrolling interests and noncontrolling interests Noncontrolling interests represent third-party interests in the net assets of certain consolidated subsidiaries.
New and Recently Adopted Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K Item 7A.
New and Recently Adopted Accounting Pronouncements Refer to Note 2. Summary of Significant Accounting Policies to the consolidated financial statements, included below in Item 8. Financial Statements and Supplementary Data. Item 7A.
In addition, there were lower collections of accounts receivables due to reduced revenues in 2022. These amounts were partially offset by lower purchases of inventory in 2022. The net cash used in operating activities in 2021 was $28.2 million.
In addition, there were lower collections of accounts receivables due to reduced revenues in 2022, which were partially offset by lower purchases of inventory.
The Company elected to forego the qualitative test and proceeded to perform a quantitative test. The Company compared the book value of its single reporting unit to the fair value of its public float. The market capitalization was below the fair value of the Company by an amount in excess of its reported value of goodwill.
As a result, we performed an assessment of our goodwill for impairment. We elected to forego the qualitative test and proceeded to perform a quantitative test. We compared the book value of our single reporting unit to the fair value of its public float.
Goodwill is not recognized in an asset acquisition. The fair values of the assets acquired and liabilities assumed are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Significant estimates include, but are not limited to, discount rates and forecasted cash flows. These estimates are inherently uncertain and unpredictable.
Goodwill is not recognized in an asset acquisition. The Company concluded that SEMTH does not meet the definition of a business or variable interest entity. The fair values of the assets acquired and liabilities assumed are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.
These cash inflows were offset by payments to suppliers for production materials and parts used in the Company's manufacturing process, operating expenses, operating lease payments and interest payments on our financing. In the fourth quarter of 2022, the Company discontinued its Drivetrain and XL Grid businesses. The net cash used in operating activities in 2022 was $47.7 million.
These operating cash inflows were primarily offset by payments to suppliers for production materials and parts used in the manufacturing process, operating expenses, operating lease payments and interest payments on our outstanding debt.
An assessment can be performed by first 44 Table of Contents completing a qualitative assessment on the Company’s single reporting unit. The Company can also bypass the qualitative assessment in any period and proceed directly to the quantitative impairment test, and then resume the qualitative assessment in any subsequent period.
We can also bypass the qualitative assessment in any period and proceed directly to the quantitative impairment test, and then resume the qualitative assessment in any subsequent period.
The Company considered the provisions within the contractual arrangements that grant it power to manage and make decisions that affect the operation of the VIEs, including determining the solar energy systems contributed to the VIEs, and the operation and maintenance of the solar energy systems.
We subsequently purchased 100% of the membership interests in Level Solar Fund IV LLC during 2023 and it ceased being a VIE upon purchase. 37 Tab l e of Contents We considered the provisions within the contractual arrangements that grant us power to manage and make decisions that affect the operation of the VIEs, including determining the solar energy systems contributed to the VIEs, and the operation and maintenance of the solar energy systems.
The net loss from discontinued operations in 2022 consists of a net loss from the Drivetrain business of $30.4 million and a net loss from the XL Grid business of $1.1 million and a goodwill impairment charge related to both businesses of $8.6 million.
The net loss from discontinued operations in 2022 consists of a net loss from the Drivetrain business of $30.4 million, a net loss from the XL Grid business of $1.1 million and an impairment of goodwill of $8.6 million. 32 Tab l e of Contents Liquidity and Capital Resources Our cash requirements depend on many factors, including the execution of our business strategy and plan.
As of December 31, 2022, the Company had working capital of $215.3 million, including cash and cash equivalents and restricted cash of $240.1 million. The Company had a net loss of $93.9 million for the year ended December 31, 2022 and net income of $28.8 million for the year ended 2021.
As of December 31, 2023, we had working capital of $131.6 million, including cash and cash equivalents and restricted cash of $172.9 million. We had net losses attributable to stockholders of $65.8 million and $93.9 million for the years ended December 31, 2023 and 2022, respectively.
Revenue Recognition: The Company’s revenue has been derived through three business units: (i) the Residential Solar operations primarily generate revenue through the sale to homeowners of power generated by its residential solar energy systems pursuant to long-term agreements; (ii) the Drivetrain operations generated revenue from the sales of hybrid electric powertrain systems; and (iii) the XL Grid operations generated revenues through turnkey energy efficiency, renewable technology, and other energy solutions.
Previously, we also derived revenue from the Drivetrain operations which generated revenue from the sales of hybrid electric powertrain systems, and the XL Grid operations which generated revenues through turnkey energy efficiency, renewable technology and other energy solutions.
Goodwill is not amortized but instead is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. The Company performs its annual goodwill impairment assessment at October 1 each fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired.
Goodwill Goodwill represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses. Goodwill is not amortized but instead is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.
In the third quarter of 2022, with the acquisition of Legacy Spruce Power, the Company initiated an evaluation of strategic alternatives for the Company’s Drivetrain business and began efforts to evaluate personnel and processes of various corporate functions between Spruce Power and legacy XL Fleet to optimize the future corporate structure.
Restructuring Actions Subsequent to the acquisition of Legacy Spruce Power, we commenced the evaluation of personnel and processes of various corporate functions between Spruce Power and legacy XL Fleet to optimize our future corporate structure and implemented certain restructuring actions.
The net cash provided by financing activities in 2021 was $85.9 million which primarily consisted of proceeds from the exercise of public warrants of $85.6 million. Related Parties The Company was party to a noncancelable lease agreement for office, research and development, and vehicle development and installation facilities with a holder of more than 5% of the Company's Common Stock.
Related Parties We were party to a noncancelable lease agreement for office, research and development, and vehicle development and installation facilities with a holder of more than 5% of our Common Stock. The lease expired in the third quarter of 2022 and the related rent expense under the operating lease for the year ended December 31, 2022 was $0.1 million.
The results of operations related to the Company’s Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net loss from discontinued operations.
Selling, general and administrative expenses related to our Drivetrain and XL Grid businesses are included in net loss from discontinued operations.
In the first quarter of 2022, the Company believed there were indicators that the carrying amount of its goodwill may be impaired due to a decline in the Company’s stock price and market capitalization. As a result, the Company performed an assessment of its goodwill for impairment.
The income approach of computing fair value is based on the present value of the expected future economic benefits generated by the asset or business, such as cash flows or profits which will then be compared to its book value. 36 Tab l e of Contents In the first quarter of 2022, we believed there were indicators that the carrying amount of its goodwill may be impaired due to a decline in our stock price and market capitalization.
The Company does not consolidate a VIE in which it has a majority ownership interest when the Company is not considered the primary beneficiary.
We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. We evaluate our relationships with the VIEs on an ongoing basis to determine if we are the primary beneficiary.
Cash used in operations increased in 2022 compared to 2021 by $19.5 million principally due to higher operating expenditures in the 2022 period primarily due to legal fees, 40 Table of Contents restructuring expenses and transaction expenses related to the acquisition of Legacy Spruce Power and the divestiture of the Drivetrain business.
Cash used in continuing operations decreased in 2023 compared to 2022 by $16.0 million primarily due to decreased stock-based compensation expenses, change in fair value of derivative instruments, offset primarily by increases in depreciation expense, accrued expenses and other current liabilities and interest income related to the SEMTH Master Lease. 33 Tab l e of Contents The net cash used in continuing operating activities in 2022 was $47.7 million, which primarily consisted of high operating expenditures primarily due to legal fees, restructuring expenses and transaction expenses related to the acquisition of Legacy Spruce Power and the divestiture of the Drivetrain business.
The Company generates revenues primarily through the sale of electricity generated by its residential solar energy systems to homeowners pursuant to long-term agreements that obligate the Company’s subscribers to make recurring monthly payments, and the servicing of those agreements for other institutional owners of residential solar energy systems.
Revenue Recognition The Company’s revenue is derived from our home solar energy portfolio, which primarily generates revenue through the sale to homeowners of power generated by our home solar energy systems pursuant to long-term agreements, the rental of solar equipment by homeowners pursuant to long-term agreements, and the sale of solar renewable energy credits to third parties.
Any goodwill impairment is limited to the total amount of goodwill. The Company determines the fair value of its reporting unit using the market approach. Under the market approach method, the Company compared its book value to the fair value of its public float, utilizing the fair value of its common stock on the measurement date.
Any goodwill impairment is limited to the total amount of goodwill. We evaluate the fair value of our reporting unit using the market and income approach. Under the market approach, we use multiples of EBITDA or revenues of the comparable guideline public companies by selecting a population of public companies with similar operations and attributes.
In the fourth quarter of 2022, the Company entered into a non-binding letter of intent (“LOI”) for the sale of World Energy for an immaterial amount, with the divestiture closing in January 2023 and the Company ceased XL Grid operations after the closing of the divestiture. Both the Drivetrain and XL Grid operations are presented as discontinued operations.
Recent Developments Capital Investments, Acquisitions and Divestitures In January 2023, we completed the sale of our legacy operations, including the Drivetrain and XL Grid businesses, each for an immaterial amount. Both businesses are presented as discontinued operations within our consolidated financial statements.
These charges included $3.6 million of severance charges, $5.0 million impact of accelerated vesting of certain equity awards, and $10.6 million of charges related to inventory obsolescence. 36 Table of Contents The charges for severance and accelerated vesting of certain equity awards were included in selling, general and administrative expenses and the inventory obsolescence charges were included in cost of revenues – inventory and other directs costs in the Consolidated Statement of Operations.
Severance charges and accelerated vesting of equity awards are included in selling, general and administrative expenses within our consolidated statements of operations for the years ended December 31, 2023 and 2022.
Removed
In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions.
Added
We offer asset management services and operating and maintenance services for home solar energy systems in our portfolio and approximately 5,000 systems owned by other companies. Refer to Item 1, “Business” within this Annual Report for additional information on our corporate history and background.
Removed
As used in this discussion and analysis, references to the "Company,”, "Spruce Power", “we,” “us” or “our” refer only to Spruce Power Holding Corporation and its consolidated subsidiaries, including Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC, and Spruce Manager LLC (collectively and together with their subsidiaries, “Legacy Spruce Power”) after the acquisition of Legacy Spruce Power on September 9, 2022.
Added
As a result of exiting the Drivetrain business and the restructuring actions, we recognized, in the aggregate, restructuring and related charges of approximately $21.6 million during the year ended December 31, 2022, which included (i) $4.4 million of severance charges paid in 2022, (ii) $5.0 million impact of accelerated vesting of certain equity awards and (iii) $12.3 million of charges related to inventory obsolescence.
Removed
Depending on the context, references to "Spruce Power" may also include the historical business of Legacy Spruce Power prior to September 9, 2022.
Added
During the year ended December 31, 2023, we recognized incremental severance charges of approximately $0.7 million, all of which were paid in 2023. Inventory obsolescence charges are included in net loss from discontinued operations within our consolidated statements of operations for the year ended December 31, 2022.
Removed
The Company holds subsidiary fund companies that own and operate portfolios of residential solar energy systems. The solar energy systems are subject to solar lease agreements ("SLAs") and power purchase agreements ("PPAs", together with the SLAs, "Customer Agreements") with residential customers who benefit from the production of electricity produced by the solar energy systems.
Added
In March 2023, we completed the acquisition of all the issued and outstanding interests of SEMTH to acquire the rights of the SEMTH Master Lease. Total consideration for the SEMTH Acquisition included approximately $23.0 million of cash, net of cash received, and the assumption of $125.0 million of outstanding senior indebtedness held by SEMTH at the close of the acquisition.
Removed
The solar energy systems may qualify for subsidies, renewable energy credits and other incentives as provided by various states and local agencies.
Added
In August 2023, we completed the Tredegar Acquisition acquiring 2,400 home solar assets and contracts for approximately $20.9 million.
Removed
These benefits have generally been retained by the Company's subsidiaries that own the systems, with the exception of the investment tax credit under Section 48 of the Internal Revenue Code ("IRC"), which were generally passed through to various financing partners of the solar energy systems. The Company also engages in the energy efficiency and solar loan servicing business.
Added
The Tredegar Acquisition was concurrently funded by term loan proceeds from the SP2 Facility Amendment (defined below). 29 Tab l e of Contents SP2 Facility Amendment In August 2023, we entered into a second amendment to our existing credit agreement with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “SP2 Facility Amendment”), resulting in incremental term loans of approximately $21.4 million, of which proceeds were primarily used to fund the Tredegar Acquisition.
Removed
The Company offers services which include asset management services and operating and maintenance services for residential solar photovoltaic projects, in addition to, loan servicing support that allows residential consumers to finance energy efficiency home improvements and residential solar energy systems.

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