Spruce Power Holding Corp: Form 10-Q for the period ended Mar 31, 2026

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. This discussion and analysis should be read together with our results of operations and financial condition and the unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2026 as amended by the Annual Report on Form 10-K/A filed with the SEC on April 3, 2026 (the “Annual Report”). In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions. 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 Quarterly Report on Form 10-Q and under “Risk Factors” in Item 1A of the Annual Report.

Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our unaudited condensed consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

As used in this discussion and analysis, references to “SPRU,” “the Company,” “we,” “us” or “our” refer only to Spruce Power Holding Corporation and its consolidated subsidiaries.

Company Overview

We are a leading owner and operator of distributed solar energy assets across the U.S., offering subscription-based services to approximately 84,000 home solar assets and customer contracts, making renewable energy more accessible to everyone. We offer asset management and operating and maintenance services and are contracted to service approximately 60,000 systems owned by third parties, as well as to our Portfolio, through our Spruce Pro servicing platform.

Corporate Strategy

We believe the combination of our existing customer 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 growth in distributed solar and battery storage services, while creating a path to more predictable revenues, profits and cash flow for our shareholders. Our corporate strategy has three key elements:

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. 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. 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.

Profitably growing return on assets by focusing on channels with the lowest customer acquisition cost

We seek to grow our customer 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 customers, selling services to new customers online and partnering with selected independent installers to provide a subscription-based solution for their customers. Historically, we have grown our number of residential customers through acquisitions, while also organically developing our Spruce Pro servicing platform.

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 from our residential customers and by leveraging our Spruce Pro servicing platform for portfolio managed services.

Operating Highlights

For the three months ended March 31, 2026 and 2025, our revenues totaled $23.4 million and $23.8 million, respectively, while our net loss attributable to stockholders was $2.9 million and $15.3 million, respectively. Our financial performance during the three months ended March 31, 2026 was impacted by reductions in our operations and maintenance costs, reductions in our selling, general and administrative expenses, and fluctuations in the value of our interest rate swaps. See the section below titled “Results of Operations” in this Quarterly Report on Form 10-Q for more information on our operating results for the three months ended March 31, 2026 and 2025.

We focus on several core pillars in our operations and we strive to deliver operational excellence to our clean energy customers and the communities we serve. For the three months ended March 31, 2026, our portfolio generated approximately 105 thousand MWh of power, compared to the 123 thousand MWh of power for the three months ended March 31, 2025. We prioritize a high level of customer satisfaction through our in-house call centers and customer service support teams. For three months ended March 31, 2026, our customer satisfaction score was 81%. We also concentrate our efforts on a growth strategy focusing on accretive acquisitions and a capital-light approach expanding our existing service offerings through our Sprue Pro services platform. As a result of fully integrating the NJR Acquisition and limited deployment of new growth capital in 2025, revenues remained relatively flat for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Certain information above constitutes key operating metrics that we use to evaluate our operations, measure our performance and identify trends in our business. Some of our key operating metrics are estimates that are based on our management’s beliefs and assumptions and on information currently available to management. Although we believe we have a reasonable basis for each of these estimates, we caution that these estimates are based on a combination of assumptions that may prove to be inaccurate over time, and any inaccuracies could be material to our actual results when compared to our calculations. See the section titled “Risk Factors” in Item 1A of our Annual Report for more information. Furthermore, other companies may calculate these operating metrics differently than we do now or in the future, which would reduce their usefulness as a comparative measure.

Acquisition

In November 2024, we completed the NJR Acquisition acquiring 9,800 solar energy systems for approximately $132.5 million, pursuant to an asset purchase agreement. The NJR Acquisition was funded by proceeds from the concurrent issuance of the SP5 Facility (defined below) and $22.7 million of our cash.

During the three months ended March 31, 2025, we acquired 83 additional solar energy systems pursuant to the NJR Acquisition, for approximately $1.6 million in cash, inclusive of transaction costs of $0.1 million. During the three months ended March 31, 2026, no additional systems were acquired.

SP1 Facility Amendment

On March 27, 2026, the Company entered into an amendment (the “SP1 Facility Amendment”) to the SP1 Facility with Silicon Valley Bank (the “SP1 Facility”) which extends the maturity date to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the Amended SP1 Maturity Date will be January 30, 2027. Under the terms of the SP1 Facility Amendment, the applicable margin is 2.75% per annum from the effective date of the extension to October 30, 2026, and 3.25% per annum until maturity. The SP1 Facility Amendment includes a cross-default provision with the Second Key Bank Credit Agreement.

Operating Segments

For information about our operating segments, see “Segment reporting” in Note 2. Summary of Significant Accounting Policies and Note 14. Segment Information.

Key Factors Affecting Operating Results

We are a leading owner and operator of distributed solar energy assets across the U.S., offering subscription-based services to owners of home solar assets and customer contracts. Additionally, we provide servicing functions for our assets and customers, as well as for other institutional owners of home solar energy systems. Our operating results and ability to grow our business over time could be impacted by certain factors and trends that affect our industry, as well as elements of our strategy, including the following factors, as well as the risk factors disclosed in Part I, Item 1A, “Risk Factors,” in our Annual Report and other risk factors set forth elsewhere in this Quarterly Report on Form 10-Q:

Development of Distributed Energy Assets

Our future growth depends significantly on our ability to acquire operating home solar energy systems “in-bulk” from other companies. Industry data suggests there is a substantial existing base of operating home solar energy systems, providing us the opportunity to pursue acquisitions. Over the long-term, our continued ability to pursue acquisitions will be dependent on development of distributed energy assets, namely home solar energy systems, by third parties. This development may be impacted by numerous factors that influence homeowner demand for home solar energy systems including but not limited to macroeconomic dynamics, utility rates, climate change impacts and government policy and incentives.

Availability of Financing

Our ability to raise capital from third parties at reasonable terms is a critical element in supporting ownership of our existing home solar energy assets as well as enabling our future growth. We have historically utilized non-recourse, project-level debt as a primary source of capital for acquisitions. Our ability to raise debt either as a means to refinance existing indebtedness or for future acquisitions may be impacted by general macroeconomic conditions, the health of debt capital markets, the interest rate environment and general concerns over its industry or specific concerns over our business.

Results of Operations

Comparison of the Three Months Ended March 31, 2026 and 2025

Information with respect to the unaudited condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025 is presented below:

(in thousands)

34

Revenues

Revenues decreased by $0.4 million, or 2%, to $23.4 million in the three months ended March 31, 2026 as compared to the same period in 2025. The decrease was due primarily to a $0.6 million reduction in non-cash amortization revenues related to capitalized intangible solar agreements as well as a $0.3 million decrease in PPA revenues due to buyouts and weather related impacts. This was partially offset by a modest $0.1 million increase in SLA revenues primarily related to the incremental NJR system acquisitions closed in the second half of 2025 and a $0.6 million net increase in SREC and performance based revenues.

Cost of Revenues — Solar Energy Systems Depreciation

Cost of revenues - solar energy systems depreciation was flat at $7.3 million in the three months ended March 31, 2026 as compared to the same period in 2025. A modest increase from incremental depreciation related to the NJR incremental acquisitions was offset by a reduction from buyouts.

Cost of Revenues — Operations and Maintenance

Cost of revenues - operations and maintenance (“O&M”) decreased by $2.7 million, or 70%, to $1.2 million in the three months ended March 31, 2026 as compared to $3.9 million in the same period in 2025 primarily due to cost reductions resulting from certain O&M efficiencies implemented in 2025 and carried forward into the first quarter 2026. These efficiencies include greater leverage of our asset management platform to streamline third party vendors management and return material authorizations processing as well as utilizing more in-house servicing teams. Additionally, the first half of 2025 included a significant meter upgrade effort on our solar energy systems which has been completed.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses decreased by $3.1 million, or 21%, to $11.6 million in the three months ended March 31, 2026 as compared to $14.7 million in the same period in 2025 primarily due to a decrease in compensation and benefits driven by a decrease in labor force, lower professional and audit related fees, and a marginal decrease in net legal fees including litigation settlements. This was partially offset by a marginal increase in bad debt expense and other expenses associated with the debt extension.

Interest Income

Interest income of $4.8 million in the three months ended March 31, 2026 related to $4.3 million of interest income from the SEMTH Master Lease and $0.5 million interest earned on investments. In comparison, interest income of $5.3 million for the three months ended March 31, 2025 related to $4.5 million of interest income from the SEMTH Master Lease and $0.8 million of interest earned on investments.

Interest Expense, Net

Interest expense, net in the three months ended March 31, 2026 of $12.3 million consisted of $12.1 million of interest expense, $1.6 million related to the amortization deferred financing costs, partially offset by realized gains from settlements of our interest rate swaps of $1.4 million.

In comparison, interest expense, net in the three months ended March 31, 2025 consisted of $12.7 million $13.2 million of interest expense related to the principal amounts of our outstanding non-recourse debt and $1.6 million related to the amortization of debt discount and deferred financing costs, both partially offset by $2.1 million of net realized gains from settlements of our interest rate swaps.

Interest expense, net decreased marginally year over year due to the lower debt balance resulting from repaying principal debt in 2025. See Note 7. Non-Recourse Debt for further information on our debt and Note 8. Interest Rate Swaps for further information on our interest rate swaps.

Other Expense, net

Other expense, net of $0.8 million gain for the three months ended March 31, 2026 primarily related to the change in fair value of interest rate swaps due to changes in forecasted market interest rates, while other expense, net of $6.2 million loss for the three months ended March 31, 2025 primarily related to the change in fair value of interest rate swaps.

Liquidity and Capital Resources

As of March 31, 2026, we had negative working capital of $119.7 million resulting from the presentation of the principal amounts outstanding under the SP1 Facility as current debt as of that date. Our negative working capital included cash and cash equivalents and restricted cash of $85.6 million. We had net losses attributable to stockholders of $2.9 million and $15.3 million for the three months ended March 31, 2026 and 2025, respectively.

Our principal sources of liquidity include cash and cash equivalents and cash inflows from operations. We receive cash from certain of our wholly-owned subsidiaries specifically related to the portfolio servicing fees provided for under the relevant servicing agreements between us and the subsidiaries, as well as reimbursement for any expenses we pay on behalf of those subsidiaries, which are allowed under certain agreements related to those subsidiaries. Our cash requirements depend on many factors, including the execution of our business strategy. We may be required to utilize our cash to support certain current and future operations of our subsidiaries. We remain focused on managing costs, including capital expenditures, maintaining a strong balance sheet, and ensuring adequate liquidity. Our primary cash needs are debt servicing, acquisition of solar energy portfolios, operating expenses, and working capital to support the growth in our business. Working capital is impacted by the timing and extent of our business needs. See below discussions under “Cash Flows Summary” for the impact of our operations on our cash balances during the three months ended March 31, 2026 and 2025.

As of March 31, 2026, our aggregate debt balance was $668.3 million, net of $15.1 million of unamortized fair value adjustment and $3.9 million of unamortized deferred financing costs, all of which is non-recourse project-level debt. Our debt consists of five senior debt facilities and one subordinated debt facility, of which the earliest maturity date is October 30, 2026, unless a signed term sheet for a long-term financing is obtained, in which case the earliest maturity date is January 30, 2027 and has been classified as current at March 31, 2026. For additional information on our debt, refer to Note 7. Non-Recourse Debt included within the accompanying unaudited condensed consolidated financial statements.

These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.

The Company’s debt obligations under the SP1 Facility and SP2 Facility are non-recourse to the Company (see Note 7. Non-Recourse Debt). With regards to the SP1 Facility, on March 27, 2026, the Company entered into the SP1 Facility Amendment, as defined below, to extend the maturity of this facility to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the extended maturity date will be January 30, 2027. With regards to the SP2 Facility, the maturity date is May 14, 2027 (the “SP2 Maturity Date”). Because (i) the Amended SP1 Maturity Date and the SP2 Maturity Date are within twelve months from the date the accompanying unaudited condensed consolidated financial statements are issued, (ii) the Company has not yet entered into a commitment to refinance the SP1 or SP2 Facility, (iii) the Company has determined that it is unlikely to have sufficient cash on hand or proceeds from currently available liquidity sources to satisfy the SP1 Facility at the Amended SP1 Maturity Date or the SP2 Facility at the SP2 Maturity Dates, (iv) the Company had negative working capital of $119.7 million as of March 31, 2026 solely due to the current maturity of the SP1 Facility at that date, and (v) the Company has experienced recurring net losses and negative cash flows from operations for the three months ended March 31, 2026 and 2025, these conditions raise substantial doubt about the Company’s ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

The Company plans to refinance the SP1 Facility prior to the Amended SP1 Maturity Date and the SP2 Facility by the SP2 Maturity Date consistent with the Company’s historical financing strategy for investing in solar assets on a leveraged basis. The Company has commenced preliminary discussions with potential lenders with respect to refinancing the SP1 Facility, which are currently being reviewed by management. The Company’s management believes that such refinancing will be completed prior to the Amended SP1 Maturity Date. However, the Company can offer no assurances it will be able to obtain financing at acceptable terms or at all. Therefore, the Company has concluded that there is substantial doubt about its ability to continue as a going concern. Should the Company be unsuccessful in refinancing the SP1 Facility or the SP2 Facility, this could result in a foreclosure of collateral and negatively impact operations. Further, an event of default on the SP1 Facility, if not cured in the permittable time allowed under the agreement, would result in a cross default on the Second Key Bank Credit Agreement, which is also non-recourse.

Cash Flows Summary

Presented below is a summary of our operating, investing and financing cash flows:

(Amounts in thousands)

Cash Flows Used in Operating Activities

Operating cash inflows include cash from the sale of solar energy power generated by our home solar energy systems and the servicing of long-term agreements for other institutional owners of home solar energy systems. These operating cash inflows are primarily offset by operating expenses, operating lease payments and interest payments on our outstanding debt. The related cash flows for our discontinued operating activities for the years presented relate to ongoing operating and maintenance costs. The net cash used in continuing operating activities consists of our corporate costs and certain other costs that were not allocated to our discontinued operations.

Net cash used in operating activities improved by $6.4 million in the three months ended March 31, 2026 compared to the same period in 2025 primarily due to a decrease in the Net Loss primarily related to lower O&M and SG&A expenses during the three months ended March 31, 2026, discussed above. Net working capital changes remained consistent compared to the prior year quarter while accounts receivable increased primarily due to SREC receivables resulting in a negative impact on cash.

Cash Flows Provided by Investing Activities

The net cash provided by investing activities in the three months ended March 31, 2026 was $5.3 million, which primarily related to $3.9 million of proceeds from our investments under the SEMTH Master Lease and $1.4 million of proceeds from the sale of solar energy systems. There were no payments related to the acquisition or purchases of property and equipment in 2026 compared to $1.6 million paid for incremental NJR solar systems and $0.1 million paid for equipment in 2025.

The net cash provided by investing activities in the three months ended March 31, 2025 primarily related to $4.5 million of proceeds from the SEMTH investment and $1.4 million of proceeds from the sale of solar energy systems, partially offset by $1.6 million of net payments related to the NJR Acquisition.

Cash Flows Used in Financing Activities

The net cash used in financing activities in the three months ended March 31, 2026 was $10.2 million, which primarily related to $8.2 million for repayments of our non-recourse debt, and $1.9 million related to deferred financing costs incurred as part of the SP1 extension.

The net cash used in financing activities in the three months ended March 31, 2025 primarily related to $6.8 million for repayments of our non-recourse debt and $0.8 million related to shares repurchased under our Repurchase Program.

Critical Accounting Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. Preparation of these unaudited condensed 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. Our most critical accounting 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. 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 critical accounting estimates are discussed within Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report. Other than the valuation models used in determining future principal debt amortization on certain of our credit facilities, there have been no other material changes to our critical accounting estimates during the three months ended March 31, 2026.

Our significant accounting policies are consistent with those discussed in Note 2. Summary of Significant Accounting Policies of our audited condensed consolidated financial statements in our Annual Report and Note 2. Summary of Significant Accounting Policies of our unaudited condensed consolidated financial statements in this Form 10-Q, and should be reviewed in connection with our critical accounting policies that require difficult, subjective and complex judgments.

New and Recently Adopted Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our unaudited condensed consolidated financial statements, see Note 2. Summary of Significant Accounting Policies of our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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.

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures as of March 31, 2026. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of that date. It should be noted that in designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has designed its disclosure controls and procedures to reach a level of reasonable assurance of achieving desired control objectives and, based on the evaluation described above, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at reaching that level of reasonable assurance.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks and uncertainties relating to the Company’s business disclosed in Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Additional risks that we are not yet aware of or that we currently believe are immaterial may also impair our business operations.