Hannon Armstrong Sustainable Infrastructure Capital, Inc.
("Hannon Armstrong," "we," "our" or the "Company") (NYSE: HASI), a
leading investor in climate change solutions, today reported
results for the second quarter of 2020.
Recent Highlights
- Delivered $0.16 GAAP EPS on a fully diluted basis in the second
quarter of 2020, compared with $0.19 in the second quarter of
2019
- Delivered $0.40 Core EPS (pre-CECL provision) and $0.36 Core
EPS on a fully diluted basis in the second quarter of 2020,
compared to $0.30 Core EPS in the second quarter of 2019
- Announced a partnership with ENGIE in July for Hannon Armstrong
to invest approximately $540 million in a 2.3 GW portfolio of
highly-contracted, grid-connected wind and solar assets
- Increased GAAP Net Investment Income for the first half of 2020
by 18% to $21 million, compared to $18 million in the first half of
2019
- Increased Core Net Investment Income for the first half of 2020
by 29% to $49 million, compared to $38 million in the first half of
2019
- Declared quarterly dividend of $0.34 per share payable in
October 2020
- Closed $178 million of transactions in the quarter, compared to
$204 million in the same period in 2019, and remain on track to
close more than $1 billion of transactions for the full year
2020
- Launched multiple diversity, equity, inclusion, and justice
initiatives, including a multi-year plan
- Estimated that 66,000 metric tons of annual carbon emissions
will be avoided annually by our transactions this quarter, equating
to a CarbonCount® score of 0.37 metric tons per $1,000
invested
"We closed another strong quarter with 33% year-on-year growth
in core earnings and remain on track for our full year guidance,"
said Jeffrey W. Eckel, Hannon Armstrong Chairman and Chief
Executive Officer.
"Despite COVID-19, Hannon Armstrong continues to execute and
support our clients’ rapid penetration of climate change solutions,
such as wind, solar, and efficiency. These assets are performing
and proving durable during this historic crisis."
A summary of our results is shown in the tables below:
For the three months
ended
June 30, 2020
For the three months
ended
June 30, 2019
$ in thousands
Per Share
(Diluted)
$ in thousands
Per Share
(Diluted)
GAAP Net Income
$
12,008
$
0.16
$
12,740
$
0.19
Core Earnings (1)
27,058
0.36
19,773
0.30
(1)
Includes a provision for loss on
receivables of $2.5 million related to the new credit loss
standard, which we may refer to in this press release as CECL or
Topic 326. On a pre-CECL provision basis comparable to last year,
the per share core earnings are $0.40 for the three months ended
June 30, 2020. A reconciliation of our GAAP net income to core
earnings is included in this press release.
For the six months
ended
June 30, 2020
For the six months
ended
June 30, 2019
$ in thousands
Per Share
(Diluted)
$ in thousands
Per Share
(Diluted)
GAAP Net Income
$
36,317
$
0.51
$
26,386
$
0.41
Core Earnings (1)
57,258
0.79
40,707
0.63
(1)
Includes a provision for loss on
receivables of $3.2 million for the adoption of CECL. On a pre-CECL
provision basis comparable to last year, the per share core
earnings are $0.84 for the six months ended June 30, 2020. A
reconciliation of our GAAP net income to core earnings is included
in this press release.
Financial Results
"In the second quarter, we demonstrated the strength of our dual
revenue model, achieving growth in recurring core net investment
income generated from our balance sheet portfolio and our public
capital raising - while simultaneously recording significant gain
on sale revenue utilizing our traditional securitization
counterparties," said Hannon Armstrong Chief Financial Officer
Jeffrey A. Lipson.
"With over $500 million in available cash on our balance sheet,
we remain well-positioned to fund the ENGIE co-investment and other
near-term anticipated transactions."
Comparison of the three months ended June 30, 2020 to the same
period in 2019
Total revenue increased by approximately $17 million, or 55%.
Gain on sale and fee income increased by approximately $11 million
and interest and rental income increased by approximately $6
million. These increases were primarily due to higher-yielding
assets with a higher average balance as well as a change in the mix
of assets being securitized.
Interest expense increased approximately $7 million as a result
of a higher outstanding balance and cost of debt, including as a
result of the new $400 million debt offering in April 2020. We
recorded an approximate $3 million provision for loss on
receivables as a result of the potential economic impacts resulting
from the COVID-19 pandemic and loan commitments made during the
period. Other expenses (compensation and benefits and general and
administrative expenses) increased by $3 million primarily due to
an increase in our employee headcount and incentive
compensation.
For the quarter, we recognized a $1 million loss using the
hypothetical liquidation at book value method (HLBV) for our equity
method investments. This compared to $8 million of HLBV income in
the same period last year when income was higher as the result of
tax attribute allocations which had the impact of increasing
earnings.
GAAP net income was $12 million, or a decrease of $1 million.
Core earnings was $27 million, or an increase of $7 million, or
37%, primarily due to the higher interest income, gain on sale and
fee income, and core equity method income offset partially by
higher interest expense.
A reconciliation of our GAAP net income to core earnings is
included in this press release.
Leverage
The calculation of our fixed-rate debt and leverage ratios as of
June 30, 2020 and 2019 are shown in the chart below:
June 30, 2020
% of Total
June 30, 2019
% of Total
($ in millions)
($ in millions)
Floating-rate borrowings (1)
$
30
2
%
$
269
24
%
Fixed-rate debt (2)
1,687
98
%
830
76
%
Total
$
1,717
100
%
$
1,099
100
%
Leverage (3)
1.6 to 1
1.2 to 1
(1)
Floating-rate borrowings include borrowings under our
floating-rate credit facilities and approximately $59 million of
non-recourse debt with floating rate exposure as of June 30,
2019.
(2)
Fixed-rate debt also includes the present notional value of
non-recourse debt that is hedged using interest rate swaps. Debt
excludes securitizations that are not consolidated on our balance
sheet.
(3)
Leverage, as measured by our debt-to-equity ratio. This
calculation excludes securitizations that are not consolidated on
our balance sheet (where the collateral is typically financing
receivables with U.S. government obligors).
Portfolio
Our Portfolio totaled approximately $2.1 billion as of June 30,
2020, which included approximately $1.3 billion of behind-the-meter
assets and approximately $0.8 billion of grid-connected assets. The
following is an analysis of the performance our Portfolio as of
June 30, 2020:
Portfolio Performance
1 (1)
2 (2)
3 (3)
Total
(dollars in millions)
Government
Commercial
Government
Commercial
Government
Commercial
Total receivables
257
853
—
10
—
8
1,128
Less: Allowance for loss on
receivables
—
(18
)
—
(3
)
—
(8
)
(29
)
Net receivables (4)
257
835
—
7
—
—
1,099
Investments
35
11
—
—
—
—
46
Real estate
—
361
—
—
—
—
361
Equity method (5) investments
—
532
—
24
—
—
556
Total
$
292
$
1,739
$
—
$
31
$
—
$
—
$
2,062
Percent of Portfolio
14
%
84
%
—
%
2
%
—
%
—
%
100
%
Average remaining balance (6)
$
7
$
11
$
—
$
11
$
—
$
4
$
10
(1)
This category includes our assets
where based on our credit criteria and performance to date we
believe that our risk of not receiving our invested capital remains
low.
(2)
This category includes our assets
where based on our credit criteria and performance to date we
believe there is a moderate level of risk to not receiving some or
all of our invested capital.
(3)
This category includes our assets
where based on our credit criteria and performance to date, we
believe there is substantial doubt regarding our ability to recover
some or all of our invested capital. Included in this category are
two commercial receivables with a combined total carrying value of
approximately $8 million as of June 30, 2020 which we consider
impaired and have held on non-accrual status since 2017. We
recorded an allowance for the entire asset amounts as described in
our Annual Report on Form 10-K filed with the SEC on February 25,
2020. We expect to continue to pursue our legal claims with regards
to these assets.
(4)
Total reconciles to the total of
the government receivables and commercial receivables lines of the
consolidated balance sheets.
(5)
Some of the individual projects
included in portfolios that make up our equity method investments
have government off takers. As they are part of large portfolios,
they are not classified separately.
(6)
Average remaining balance is
calculated gross of allowance for loss on receivables and excludes
approximately 130 transactions each with outstanding balances that
are less than $1 million and that in the aggregate total $49
million.
Guidance
The Company expects that annual core earnings per share in 2020
(pre-CECL provision) will exceed the previously communicated
guidance midpoint of $1.43, reflecting 2018 to 2020 annual Core EPS
growth above the midpoint of the 2% to 6% from the 2017 baseline.
This guidance reflects the Company’s estimates of (i) yield on its
existing Portfolio; (ii) yield on incremental Portfolio
investments, inclusive of the Company’s existing pipeline; (iii)
the volume and profitability of securitization transactions; (iv)
amount, timing, and costs of debt and equity capital to fund new
investments; (v) changes in costs and expenses reflective of the
Company’s forecasted operations, (vi) the ongoing impact of the
current outbreak of COVID-19 and (vii) the general interest rate
and market environment. All guidance is based on current
expectations of the future impact of COVID-19 and the economic
conditions, the regulatory environment, the dynamics of the markets
in which we operate and the judgment of the Company’s management
team. We do not undertake a duty to update such guidance. The
Company has not provided GAAP guidance as discussed in the
Forward-Looking Statements section of this press release.
Dividend
The Company is announcing today that its Board of Directors
approved a quarterly cash dividend of $0.34 per share of common
stock. This dividend will be paid on October 9, 2020, to
stockholders of record as of October 2, 2020.
Conference Call and Webcast Information
Hannon Armstrong will host an investor conference call today,
Thursday, August 6, 2020, at 5:00 p.m. eastern time. The conference
call can be accessed live over the phone by dialing 1-866-652-5200
or for international callers, 1-412-317-6016. Please ask to be
connected to the Hannon Armstrong call. A replay will be available
two hours after the call and can be accessed by dialing
1-877-344-7529, or for international callers, 1-412-317-0088. The
passcode for the replay is 10146124. The replay will be available
until August 13, 2020.
Interested investors and other parties may also listen to a
simultaneous webcast of the conference call by logging onto the
Investor Relations section of the Company's website at www.hannonarmstrong.com. The online replay will be
available for a limited time beginning immediately following the
call.
About Hannon Armstrong
Hannon Armstrong (NYSE: HASI) is the first U.S. public company
solely dedicated to investments in climate change solutions,
providing capital to leading companies in energy efficiency,
renewable energy, and other sustainable infrastructure markets.
With more than $6 billion in managed assets as of June 30, 2020.
Hannon Armstrong’s core purpose is to make climate-positive
investments with superior risk-adjusted returns. For more
information, please visit www.hannonarmstrong.com. Follow Hannon
Armstrong on LinkedIn and Twitter @HannonArmstrong.
Forward-Looking Statements:
Some of the information contained in this press release is
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended that are subject to
risks and uncertainties. For these statements, we claim the
protections of the safe harbor for forward-looking statements
contained in such Sections. These forward-looking statements
include information about possible or assumed future results of our
business, financial condition, liquidity, results of operations,
plans and objectives. When we use the words "believe," "expect,"
"anticipate," "estimate," "plan," "continue," "intend," "should,"
"may" or similar expressions, we intend to identify forward-looking
statements.
Forward-looking statements are subject to significant risks and
uncertainties. Investors are cautioned against placing undue
reliance on such statements. Actual results may differ materially
from those set forth in the forward-looking statements. Factors
that could cause actual results to differ materially from those
described in the forward-looking statements include those discussed
under the caption “Risk Factors” included in our most recent Annual
Report on Form 10-K as well as in other periodic reports that we
file with the U.S. Securities and Exchange Commission.
Other important factors that we think could cause our actual
results to differ materially from expected results are summarized
below. One of the most significant factors, however, is the ongoing
impact of the current outbreak of the novel coronavirus (COVID-19),
on the U.S., regional and global economies, the U.S. sustainable
infrastructure market and the broader financial markets. The
current outbreak of COVID-19 has also impacted, and is likely to
continue to impact, directly or indirectly, many of the other
important factors below and the risks described in the Form 10-K
and in our subsequent filings under the Securities Exchange Act of
1934, as amended. Other factors besides those listed could also
adversely affect us. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
In particular, it is difficult to fully assess the impact of
COVID-19 at this time due to, among other factors, uncertainty
regarding the severity and duration of the outbreak domestically
and internationally, uncertainty regarding the effectiveness of
federal, state and local governments’ efforts to contain the spread
of COVID-19 and respond to its direct and indirect impact on the
U.S. economy and economic activity.
Statements regarding the following subjects, among others, may
be forward-looking:
- negative impacts from continued spread of COVID-19, including
on the U.S. or global economy or on our business, financial
position or results of operations;
- our expected returns and performance of our investments;
- the state of government legislation, regulation and policies
that support or enhance the economic feasibility of projects that
reduce carbon emissions or increase resilience to climate change,
which we refer to as climate change solutions, including energy
efficiency and renewable energy projects and the general market
demands for such projects;
- market trends in our industry, energy markets, commodity
prices, interest rates, the debt and lending markets or the general
economy;
- our business and investment strategy;
- availability of opportunities to invest in climate change
solutions including energy efficiency and renewable energy projects
and our ability to complete potential new opportunities in our
pipeline;
- our relationships with originators, investors, market
intermediaries and professional advisers;
- competition from other providers of capital;
- our or any other company’s projected operating results;
- actions and initiatives of the federal, state and local
governments and changes to federal, state and local government
policies, regulations, tax laws and rates and the execution and
impact of these actions, initiatives and policies;
- the state of the U.S. economy generally or in specific
geographic regions, states or municipalities and economic
trends;
- our ability to obtain and maintain financing arrangements on
favorable terms, including securitizations;
- general volatility of the securities markets in which we
participate;
- the credit quality of our assets;
- changes in the value of our assets, our portfolio of assets and
our investment and underwriting process;
- the impact of weather conditions, natural disasters, accidents
or equipment failures or other events that disrupt the operation of
our investments or negatively impact the value our assets;
- rates of default or decreased recovery rates on our
assets;
- interest rate and maturity mismatches between our assets and
any borrowings used to fund such assets;
- changes in interest rates and the market value of our assets
and target assets;
- changes in commodity prices, including continued low natural
gas prices;
- effects of hedging instruments on our assets or
liabilities;
- the degree to which our hedging strategies may or may not
protect us from risks, such as interest rate volatility;
- impact of and changes in accounting guidance;
- our ability to maintain our qualification as a real estate
investment trust (a “REIT”) for U.S. federal income tax
purposes;
- our ability to maintain our exemption from registration under
the Investment Company Act of 1940, as amended (the “1940
Act”);
- availability of and our ability to attract and retain qualified
personnel;
- estimates relating to our ability to generate sufficient cash
in the future to operate our business and to make distributions to
our stockholders; and
- our understanding of our competition.
The risks included here are not exhaustive. Forward-looking
statements are based on beliefs, assumptions and expectations as of
the date of this press release. Any forward- looking statement
speaks only as of the date on which it is made. New risks and
uncertainties arise over time, and it is not possible for us to
predict those events or how they may affect us. Except as required
by law, we are not obligated to, and do not intend to, update or
revise any forward-looking statements after the date of this
earnings release, whether as a result of new information, future
events or otherwise.
The Company has not provided GAAP guidance as forecasting a
comparable GAAP financial measure, such as net income, would
require that the Company apply the HLBV method to these
investments. In order to forecast under the HLBV method, the
Company would be required to make various assumptions related to
expected changes in the net asset value of the various entities and
how such changes would be allocated under HLBV. GAAP HLBV earnings
over a period of time are very sensitive to these assumptions
especially in regard to when a partnership transaction flips and
thus the liquidation scenarios change materially. The Company
believes that these assumptions would require unreasonable efforts
to complete and if completed, the wide variation in projected GAAP
earnings based upon a range of scenarios would not be meaningful to
investors. Accordingly, the Company has not included a GAAP
reconciliation table related to any core earnings guidance.
Estimated carbon savings are calculated using the estimated
kilowatt hours, gallons of fuel oil, million British thermal units
of natural gas and gallons of water saved as appropriate, for each
project. The energy savings are converted into an estimate of
metric tons of CO2 equivalent emissions based upon the project’s
location and the corresponding emissions factor data from the U.S.
Government and International Energy Agency. Portfolios of projects
are represented on an aggregate basis.
HANNON ARMSTRONG SUSTAINABLE
INFRASTRUCTURE CAPITAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
For the Three Months
Ended
June 30,
For the Six Months
Ended
June 30,
2020
2019
2020
2019
Revenue
Interest income
$
23,649
$
17,294
$
47,539
$
34,949
Rental income
6,469
6,469
12,939
12,945
Gain on sale of receivables and
investments
15,916
2,167
20,820
9,006
Fee income
2,561
5,338
8,130
7,511
Total revenue
48,595
31,268
89,428
64,411
Expenses
Interest expense
21,664
14,869
39,798
30,300
Provision for loss on receivables
2,523
—
3,171
—
Compensation and benefits
9,314
6,650
18,212
14,089
General and administrative
3,853
3,739
7,262
7,080
Total expenses
37,354
25,258
68,443
51,469
Income before equity method
investments
11,241
6,010
20,985
12,942
Income (loss) from equity method
investments
(590
)
7,624
15,999
12,131
Income (loss) before income
taxes
10,651
13,634
36,984
25,073
Income tax (expense) benefit
1,407
(839
)
(515
)
1,430
Net income (loss)
$
12,058
$
12,795
$
36,469
$
26,503
Net income (loss) attributable to
non-controlling interest holders
50
55
152
117
Net income (loss) attributable to
controlling stockholders
$
12,008
$
12,740
$
36,317
$
26,386
Basic earnings (loss) per common share
$
0.16
$
0.20
$
0.51
$
0.41
Diluted earnings (loss) per common
share
$
0.16
$
0.19
$
0.51
$
0.41
Weighted average common shares
outstanding—basic
72,914,145
63,772,549
70,043,125
62,766,318
Weighted average common shares
outstanding—diluted
73,382,217
64,429,155
70,662,377
63,394,220
HANNON ARMSTRONG SUSTAINABLE
INFRASTRUCTURE CAPITAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
June 30,
2020
December 31,
2019
Assets
Cash and cash equivalents
$
541,825
$
6,208
Equity method investments
556,450
498,631
Government receivables
255,757
263,175
Commercial receivables, net of allowance
of $29 million and $8 million, respectively
843,223
896,432
Real estate
360,720
362,265
Investments
45,926
74,530
Securitization assets
139,793
123,979
Other assets
93,246
162,054
Total Assets
$
2,836,940
$
2,387,274
Liabilities and Stockholders’
Equity
Liabilities:
Accounts payable, accrued expenses and
other
$
52,123
$
54,351
Credit facilities
30,377
31,199
Non-recourse debt (secured by assets of
$800 million and $921 million, respectively)
625,884
700,225
Senior unsecured notes
910,665
512,153
Convertible notes
149,927
149,434
Total Liabilities
1,768,976
1,447,362
Stockholders’ Equity:
Preferred stock, par value $0.01 per
share, 50,000,000 shares authorized, no shares issued and
outstanding
—
—
Common stock, par value $0.01 per share,
450,000,000 shares authorized, 73,318,552 and 66,338,120 shares
issued and outstanding, respectively
733
663
Additional paid in capital
1,250,976
1,102,303
Accumulated deficit
(198,719
)
(169,786
)
Accumulated other comprehensive income
(loss)
9,619
3,300
Non-controlling interest
5,355
3,432
Total Stockholders’ Equity
1,067,964
939,912
Total Liabilities and Stockholders’
Equity
$
2,836,940
$
2,387,274
EXPLANATORY NOTES Non-GAAP Financial Measures Core
Earnings
We calculate core earnings as GAAP net income (loss) excluding
non-cash equity compensation expense, certain provisions for loss
on receivables, amortization of intangibles, any one-time
acquisition related costs or non-cash tax charges and the earnings
attributable to our non-controlling interest of our Operating
Partnership. We also make an adjustment to our equity method
investments in the renewable energy projects as described below. In
the future, core earnings may also exclude one-time events pursuant
to changes in GAAP and certain other non-cash charges as approved
by a majority of our independent directors.
Certain of our equity method investments in renewable energy and
energy efficiency projects are structured using typical partnership
“flip” structures where the investors with cash distribution
preferences receive a pre-negotiated return consisting of priority
distributions from the project cash flows, in many cases, along
with tax attributes. Once this preferred return is achieved, the
partnership “flips” and the common equity investor, often the
operator or sponsor of the project, receives more of the cash flows
through its equity interests while the previously preferred
investors retain an ongoing residual interest. We have made
investments in both the preferred and common equity of these
structures. Regardless of the nature of our equity interest, we
typically negotiate the purchase prices of our equity investments,
which have a finite expected life, based on our assessment of the
expected cash flows we will receive from these projects discounted
back to the net present value, based on a target investment rate,
with the expected cash flows to be received in the future
reflecting both a return on the capital (at the investment rate)
and a return of the capital we have committed to the project. We
use a similar approach in the underwriting of our receivables.
Under GAAP, we account for these equity method investments
utilizing the HLBV method. Under this method, we recognize income
or loss based on the change in the amount each partner would
receive, typically based on the negotiated profit and loss
allocation, if the assets were liquidated at book value, after
adjusting for any distributions or contributions made during such
quarter. The HLBV allocations of income or loss may be impacted by
the receipt of tax attributes, as tax equity investors are
allocated losses in proportion to the tax benefits received, while
the sponsors of the project are allocated gains of a similar
amount. In addition, the agreed upon allocations of the project’s
cash flows may differ materially from the profit and loss
allocation used for the HLBV calculations.
The cash distributions for our equity method investments are
segregated into a return on and return of capital on our cash flow
statement based on the cumulative income (loss) that has been
allocated using the HLBV method. However, as a result of the
application of the HLBV method, including the impact of tax
allocations, the high levels of depreciation and other non-cash
expenses that are common to renewable energy projects and the
differences between the agreed upon profit and loss and the cash
flow allocations, the distributions and thus the economic returns
(i.e. return on capital) achieved from the investment are often
significantly different from the income or loss that is allocated
to us under the HLBV method. Thus, in calculating core earnings,
for certain of these investments where there are the
characteristics described above, we further adjust GAAP net income
(loss) to take into account our calculation of the return on
capital (based upon the investment rate) from our renewable energy
equity method investments, as adjusted to reflect the performance
of the project and the cash distributed. We believe this core
equity method investment adjustment to our GAAP net income (loss)
in calculating our core earnings measure is an important supplement
to the HLBV income allocations determined under GAAP for an
investor to understand the economic performance of these
investments where HLBV income can differ substantially from the
economic returns.
The following table provides our results related to our equity
method investments for the three and six months ended June 30, 2020
and 2019,
Three months ended
June 30,
Six months ended
June 30,
2020
2019
2020
2019
(in millions)
Income (loss) under GAAP
(1
)
8
16
12
Core earnings
11
10
27
19
Return of capital
19
17
79
35
Cash collected
30
27
106
54
We believe that core earnings provides an additional measure of
our core operating performance by eliminating the impact of certain
non-cash expenses and facilitating a comparison of our financial
results to those of other comparable companies with fewer or no
non-cash charges and comparison of our own operating results from
period to period. Our management uses core earnings in this way. We
believe that our investors also use core earnings, or a comparable
supplemental performance measure, to evaluate and compare our
performance to that of our peers, and as such, we believe that the
disclosure of core earnings is useful to our investors.
However, core earnings does not represent cash generated from
operating activities in accordance with GAAP and should not be
considered as an alternative to net income (determined in
accordance with GAAP), or an indication of our cash flow from
operating activities (determined in accordance with GAAP), or a
measure of our liquidity, or an indication of funds available to
fund our cash needs, including our ability to make cash
distributions. In addition, our methodology for calculating core
earnings may differ from the methodologies employed by other
companies to calculate the same or similar supplemental performance
measures, and accordingly, our reported core earnings may not be
comparable to similar metrics reported by other companies.
Reconciliation of our GAAP Net Income to Core Earnings
We have calculated our core earnings and provided a
reconciliation of our GAAP net income to core earnings for the
three and six months ended June 30, 2020 and 2019 in the tables
below. In the current year we adopted Topic 326, which requires us
to recognize a provision for loss on receivables expected over the
life of the receivable rather than probable incurred losses. We
provide below core earnings which reflects the Topic 326 provision.
To provide comparable metrics to periods prior to the adoption of
Topic 326, we have also provided core earnings which adds back the
Topic 326 provision for loss on receivables.
For the three months
ended June 30, 2020
For the three months
ended June 30, 2019
(dollars in thousands, except per
share amounts)
$
per share
$
per share
Net income attributable to controlling
stockholders (1)
$
12,008
$
0.16
$
12,740
$
0.19
Core earnings adjustments:
Reverse GAAP (income) loss from equity
method investments
590
(7,624
)
Add back core equity method investments
earnings (2)
11,018
9,538
Non-cash equity-based compensation charges
(3)
3,975
3,411
Other core adjustments (4)
(533
)
1,708
Core earnings (including Topic 326
provision) (5)
$
27,058
$
0.36
$
19,773
$
0.30
Add back provision for loss on receivables
under Topic 326 (6)
2,523
—
Core earnings (pre-Topic 326 provision)
(5)
$
29,581
$
0.40
$
19,773
$
0.30
(1)
Represents GAAP diluted earnings
per share and is the most comparable GAAP measure to our core
earnings per share.
(2)
Reflects adjustment for equity
method investments described above.
(3)
Reflects adjustment for non-cash
equity-based compensation.
(4)
See detail below.
(5)
Core earnings per share for the
three months ended June 30, 2020 and 2019, are based on 74,543,045
shares and 65,749,618 shares outstanding, respectively, which
represents the weighted average number of fully-diluted shares
outstanding including our restricted stock awards and restricted
stock units and the long-term incentive plan units and
non-controlling interest in our Operating Partnership. We include
any potential common stock issuance in this calculation related to
our convertible notes using the treasury stock method and any
potential common stock issuances related to share based
compensation units in the amount we believe is reasonably certain
to vest.
(6)
As discussed above, to provide a
comparable metric to prior year metrics we are adding back the
provision for loss on receivables recognized under Topic 326.
For the six months
ended
June 30, 2020
For the six months
ended
June 30, 2019
(dollars in thousands, except per
share amounts)
$
per share
$
per share
Net income attributable to controlling
stockholders (1)
$
36,317
$
0.51
$
26,386
$
0.41
Core earnings adjustments:
Reverse GAAP (income) loss from equity
method investments
(15,999
)
(12,131
)
Add back core equity method investments
earnings (2)
27,103
19,143
Non-cash equity-based compensation charges
(3)
7,524
6,990
Other core adjustments (4)
2,313
319
Core earnings (including Topic 326
provision) (5)
$
57,258
$
0.79
$
40,707
$
0.63
Add back provision for loss on receivables
under Topic 326 (6)
3,171
—
Core earnings (pre-Topic 326 provision)
(5)
$
60,429
$
0.84
$
40,707
$
0.63
(1)
Represents GAAP diluted earnings
per share and is the most comparable GAAP measure to our core
earnings per share.
(2)
Reflects adjustment for equity
method investments described above.
(3)
Reflects adjustment for non-cash
equity-based compensation.
(4)
See detail below.
(5)
Core earnings per share for the
six months ended June 30, 2020 and 2019, are based on 72,095,539
shares and 64,733,505 shares outstanding, respectively, which
represents the weighted average number of fully-diluted shares
outstanding including our restricted stock awards and restricted
stock units and the long-term incentive plan units and
non-controlling interest in our Operating Partnership. We include
any potential common stock issuance in this calculation related to
our convertible notes using the treasury stock method and any
potential common stock issuances related to share based
compensation units in the amount we believe is reasonably certain
to vest.
(6)
As discussed above, to provide a
comparable metric to prior year metrics we are adding back the
provision for loss on receivables recognized under Topic 326.
The table below provides a reconciliation of the Other core
adjustments:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
(in thousands)
(in thousands)
Other core adjustments
Amortization of intangibles (1)
$
824
$
823
$
1,646
$
1,638
Non-cash provision (benefit) for income
taxes
(1,407
)
830
515
(1,436
)
Net income attributable to non-controlling
interest
50
55
152
117
Other core adjustments
$
(533
)
$
1,708
$
2,313
$
319
(1)
Adds back non-cash amortization of lease
and pre-IPO intangibles.
The table below provides a reconciliation of GAAP SG&A
expenses to Core SG&A expenses:
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
(in thousands)
(in thousands)
GAAP SG&A expenses
Compensation and benefits
$
9,314
$
6,650
$
18,212
$
14,089
General and administrative
3,853
3,739
7,262
7,080
Total SG&A expenses (GAAP)
$
13,167
$
10,389
$
25,474
$
21,169
Core SG&A expenses adjustments:
Non-cash equity-based compensation charge
(1)
$
(3,975
)
$
(3,411
)
$
(7,524
)
$
(6,990
)
Amortization of intangibles (2)
(51
)
(52
)
(100
)
(101
)
Core SG&A expenses adjustments
(4,026
)
(3,463
)
(7,624
)
(7,091
)
Core SG&A expenses
$
9,141
$
6,926
$
17,850
$
14,078
(1)
Reflects add back of non-cash
amortization of equity-based compensation. Outstanding grants
related to equity-based compensation are included in the core
earnings per share calculation.
(2)
Adds back non-cash amortization
of pre-IPO intangibles.
Core Net Investment Income
We have a portfolio of debt and equity investments in climate
change solutions. We calculate core net investment income by
adjusting GAAP net investment income for those core earnings
adjustments described above which impact investment income. We
believe that this measure is useful to investors as it shows the
recurring income generated by our portfolio after the associated
interest cost of debt financing. Our management also uses core net
investment income in this way. Our non-GAAP core net investment
income measure may not be comparable to similarly titled measures
used by other companies.
The following is a reconciliation of our GAAP net investment
income to our core net investment income:
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
(in thousands)
Interest income
$
23,649
$
17,294
$
47,539
$
34,949
Rental income
6,469
6,469
12,939
12,945
GAAP investment revenue
30,118
23,763
60,478
47,894
Interest expense
21,664
14,869
39,798
30,300
GAAP net investment income
8,454
8,894
20,680
17,594
Core equity method earnings adjustment
(1)
11,018
9,538
27,103
19,143
Amortization of real estate intangibles
(2)
773
773
1,546
1,537
Core net investment income
$
20,245
$
19,205
$
49,329
$
38,274
(1)
Reflects adjustment for equity
method investments described above.
(2)
Adds back non-cash amortization
related to acquired real estate leases
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005908/en/
Investor Relations: Chad Reed investors@hannonarmstrong.com
410-571-6189
Media: Gil Jenkins media@hannonarmstrong.com 443-321-5753
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