Hannon Armstrong Sustainable Infrastructure Capital, Inc.
("Hannon Armstrong," "we," "our" or the "Company") (NYSE: HASI), a
leading investor in climate solutions, today reported results for
the third quarter of 2021.
Financial Highlights
- Delivered $(0.04) GAAP EPS on a fully diluted basis for the
third quarter of 2021, compared with $0.28 for the same period in
2020
- Delivered $0.41 Distributable EPS on a fully diluted basis for
the third quarter of 2021, compared to $0.36 Distributable EPS for
the same period in 2020, representing a 14% YOY increase
- Reported GAAP-based Net Investment Income of $5.3 million for
the third quarter of 2021, compared to $3.9 million for the same
period in 2020
- Increased Distributable Net Investment Income for the third
quarter of 2021 by 79% YOY to $32.0 million, compared to $17.9
million for the same period in 2020
- Closed $1.1 billion of investments in the first three quarters
of 2021, including over $200 million in the third quarter in a
seasoned portfolio of residential solar assets
- Launched $100 million CarbonCount®-based Commercial Paper Note
Program, the first such program in the United States
- Grew Portfolio 45% YOY to $3.2 billion and Managed Assets 28%
YOY to $8.2 billion
- Declared dividend of $0.35 per share
ESG Highlights
- Received award for Corporate Philanthropist of 2021 in Anne
Arundel County, Md
- Initial cohort of the Hannon Armstrong Climate Solutions
Scholars were announced by Morgan State and Miami Universities
- An estimated over 100,000 metric tons of carbon emissions will
be avoided annually by our transactions closed this quarter,
equating to a CarbonCount score of 0.3 metric tons per $1,000
invested
"We continue to produce outstanding results driven by the
flexibility to invest in multiple asset classes and a declining
cost of capital," said Jeffrey W. Eckel, Hannon Armstrong Chairman
and Chief Executive Officer.
"In addition, we continue our leadership on ESG with CarbonCount
and our philanthropic efforts targeted at the intersection of
social justice and climate action."
A summary of our results is shown in the table below:
For the three months ended
September 30, 2021
For the three months ended
September 30, 2020
$ in thousands
Per Share (Diluted)
$ in thousands
Per Share (Diluted)
GAAP Net Income
$
(2,838
)
$
(0.04
)
$
21,175
$
0.28
Distributable earnings
34,787
0.41
27,746
0.36
For the nine months ended
September 30, 2021
For the nine months ended
September 30, 2020
$ in thousands
Per Share
$ in thousands
Per Share
GAAP Net Income
$
64,159
$
0.79
$
57,491
$
0.78
Distributable earnings
118,036
1.42
88,175
1.19
Financial Results
"In the third quarter, we continued to expand our
well-diversified, low-cost, flexible funding platform by launching
a $100 million CarbonCount-based Commercial Paper Note Program, the
first such program in the United States," said Jeffrey A. Lipson,
Chief Financial Officer and Chief Operating Officer. “With this and
the other pillars of our funding platform in place, we now have
over $960 million of potential liquidity available to fund
scheduled and anticipated investments.”
Comparison of the quarter ended September 30, 2021 to the
quarter ended September 30, 2020
Total revenue was unchanged, as higher interest income, the
result of a larger portfolio and higher average rate, was offset by
lower gain on sale and fee income due to a change in our
securitized asset mix and lower advisory fee generating
opportunities.
Interest expense increased $1 million, or 5%, primarily as a
result of higher outstanding debt balances. We recorded a $1
million provision for loss on receivables driven primarily by loans
and loan commitments made during the period. Other expenses
(compensation and benefits and general and administrative expenses)
increased by approximately $4 million primarily due to an increase
in our employee headcount, compensation, and investment in
corporate infrastructure.
We recognized a $7 million loss using the hypothetical
liquidation at book value method (HLBV) for our equity method
investments in the third quarter of 2021, compared to $17 million
for the same period in 2020, primarily due to the impact of
increasing power prices and the resulting unrealized mark to market
losses on economic hedges used by some of our projects to reduce
the impact of power price fluctuations.
Income tax benefit (expense) increased approximately $4 million
in the third quarter of 2021 compared to the same period in
2020.
GAAP net income (loss) in the third quarter of 2021 was $(3)
million, compared to $21 million in the same period in 2020.
Distributable earnings in the third quarter of 2021 was
approximately $35 million, or an increase of approximately $7
million from the same period in 2020 due primarily to new assets
added to our portfolio.
Leverage
The calculation of our fixed-rate debt and leverage ratios as of
September 30, 2021 and December 31, 2020 are shown in the table
below:
September 30, 2021
% of Total
December 31, 2020
% of Total
($ in millions)
($ in millions)
Floating-rate borrowings (1)
$
25
1
%
$
23
1
%
Fixed-rate debt (2)
2,365
99
%
2,166
99
%
Total
$
2,390
100
%
$
2,189
100
%
Leverage (3)
1.6 to 1
1.8 to 1
(1)
Floating-rate borrowings include
borrowings under our floating-rate credit facilities.
(2)
Debt excludes securitizations that are not
consolidated on our balance sheet.
(3)
Leverage, as measured by our
debt-to-equity ratio.
Portfolio
Our balance sheet portfolio totaled approximately $3.2 billion
as of September 30, 2021, which included approximately $1.7 billion
of behind-the-meter assets and approximately $1.5 billion of
grid-connected assets. The following is an analysis of the
performance of our portfolio as of September 30, 2021:
Portfolio Performance
Government
Commercial
1 (1)
1 (1)
2 (2)
3 (3)
Total
(dollars in millions)
Total receivables
126
1,242
14
8
1,390
Less: Allowance for loss on
receivables
—
(26
)
(5
)
(8
)
(39
)
Net receivables (4)
126
1,216
9
—
1,351
Investments
11
7
—
—
18
Real estate
—
357
—
—
357
Equity method investments (5)
—
1,442
26
—
1,468
Total
$
137
$
3,022
$
35
$
—
$
3,194
Percent of Portfolio
4
%
95
%
1
%
—
%
100
%
Average remaining balance (6)
$
6
$
13
$
10
$
4
$
12
(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 of 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 September 30, 2021 which we have
held on non-accrual status since 2017. We have recorded an
allowance for the entire asset amounts. We expect to continue to
pursue our legal claims with regards to these assets. This category
previously contained an equity method investment in a wind project
with no book value due to our allocation of impairment losses
recorded by the project sponsor. We sold this equity method
investment in the third quarter for nominal proceeds.
(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 152 transactions each with outstanding balances that
are less than $1 million and that in the aggregate total $72
million.
Guidance
The Company expects that annual distributable earnings per share
will grow at a compounded annual rate of 7% to 10% from 2021 to
2023, relative to the 2020 baseline of $1.55 per share, which is
equivalent to a 2023 midpoint of $1.98 per share. The Company also
expects that annual dividends per share will grow at a compound
annual rate of 3% to 5% from 2021 to 2023, relative to the 2020
baseline of $1.36 per share, which is equivalent to a 2023 midpoint
of $1.53 per share. This guidance reflects the Company’s judgments
and 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; and
(vi) the general interest rate and market environment. All guidance
is based on current expectations of the ongoing and future impact
of COVID-19 and the speed and efficacy of vaccine distribution on
economic conditions, the regulatory environment, the dynamics of
the markets in which we operate and the judgment of the Company’s
management team. 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 $0.35 per share of common
stock. This dividend will be paid on January 11, 2022, to
stockholders of record as of December 28, 2021.
Conference Call and Webcast Information
Hannon Armstrong will host an investor conference call today,
Thursday, November 4, 2021, at 5:00 p.m. eastern time. The
conference call can be accessed live over the phone by dialing
1-844-200-6205 or for international callers, +1-929-526-1599. The
participant access code is 653037. A replay will be available two
hours after the call and can be accessed by dialing 1-866-813-9403
or for international callers, +44 204-525-0658. The access code for
the replay is 112851. The replay will be available until November
11, 2021.
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 immediately following the call.
About Hannon Armstrong
Hannon Armstrong (NYSE: HASI) is the first U.S. public company
solely dedicated to investments in climate solutions, providing
capital to leading companies in energy efficiency, renewable
energy, and other sustainable infrastructure markets. With more
than $8 billion in managed assets, 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 (the
"SEC").
Other important factors that we think could cause our actual
results to differ materially from expected results are summarized
below, including 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 new virus variants and uncertainty
regarding whether "herd immunity" can be achieved through
vaccination campaigns.
Statements regarding the following subjects, among others, may
be forward-looking:
- negative impacts from a 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 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
including continued low natural gas prices, interest rates, the
capital markets or the general economy;
- our business and investment strategy;
- the availability of opportunities to invest in climate
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 of 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;
- 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 or commodity price
volatility;
- impact of and changes in accounting guidance;
- our ability to maintain our qualification as a real estate
investment trust ("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 distributable 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
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
Revenue
Interest income
$
26,236
$
23,508
$
76,352
$
71,046
Rental income
6,430
6,469
19,361
19,408
Gain on sale of receivables and
investments
13,072
13,628
54,988
34,449
Fee income
3,144
4,984
8,769
13,115
Total revenue
48,882
48,589
159,470
138,018
Expenses
Interest expense
27,349
26,085
95,394
65,884
Provision for loss on receivables
1,485
2,458
2,896
5,629
Compensation and benefits
12,218
9,012
39,850
27,223
General and administrative
4,964
3,918
14,814
11,181
Total expenses
46,016
41,473
152,954
109,917
Income before equity method
investments
2,866
7,116
6,516
28,101
Income (loss) from equity method
investments
(7,215
)
16,506
69,519
32,505
Income (loss) before income
taxes
(4,349
)
23,622
76,035
60,606
Income tax (expense) benefit
1,250
(2,345
)
(11,510
)
(2,860
)
Net income (loss)
$
(3,099
)
$
21,277
$
64,525
$
57,746
Net income (loss) attributable to
non-controlling interest holders
(261
)
102
366
255
Net income (loss) attributable to
controlling stockholders
$
(2,838
)
$
21,175
$
64,159
$
57,491
Basic earnings (loss) per common share
$
(0.04
)
$
0.28
$
0.81
$
0.80
Diluted earnings (loss) per common
share
$
(0.04
)
$
0.28
$
0.79
$
0.78
Weighted average common shares
outstanding—basic
79,335,173
74,012,788
78,407,028
71,376,004
Weighted average common shares
outstanding—diluted
79,335,173
76,131,252
82,069,464
72,644,626
HANNON ARMSTRONG SUSTAINABLE
INFRASTRUCTURE CAPITAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
September 30, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
413,259
$
286,250
Equity method investments
1,468,282
1,279,651
Commercial receivables, net of allowance
of $39 million and $36 million, respectively
1,224,741
965,452
Government receivables
126,412
248,455
Real estate
356,861
359,176
Investments
17,637
55,377
Securitization assets
203,625
164,342
Other assets
130,046
100,364
Total Assets
$
3,940,863
$
3,459,067
Liabilities and Stockholders’
Equity
Liabilities:
Accounts payable, accrued expenses and
other
$
77,395
$
59,944
Credit facilities
25,483
22,591
Non-recourse debt (secured by assets of
$574 million and $723 million, respectively)
438,051
592,547
Senior unsecured notes
1,771,264
1,283,335
Convertible notes
155,285
290,501
Total Liabilities
2,467,478
2,248,918
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, 84,275,179 and 76,457,415 shares
issued and outstanding, respectively
843
765
Additional paid in capital
1,671,747
1,394,009
Accumulated deficit
(225,933
)
(204,112
)
Accumulated other comprehensive income
(loss)
7,746
12,634
Non-controlling interest
18,982
6,853
Total Stockholders’ Equity
1,473,385
1,210,149
Total Liabilities and Stockholders’
Equity
$
3,940,863
$
3,459,067
EXPLANATORY NOTES
Non-GAAP Financial Measures
Distributable Earnings
We calculate distributable earnings as GAAP net income (loss)
excluding non-cash equity compensation expense, provisions for loss
on receivables, amortization of intangibles, non-cash provision
(benefit) for taxes, gains or (losses) from modification or
extinguishment of debt facilities, 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. We will use judgment in
determining when we will reflect the losses on receivables in our
distributable earnings. In making this determination we will
consider certain circumstances such as the time period in default
and sufficiency of collateral as well as the outcomes of any
related litigation. In the future, distributable earnings may also
exclude one-time events pursuant to changes in GAAP and certain
other adjustments as approved by a majority of our independent
directors.
We believe a Non-GAAP measure, such as distributable earnings,
that adjusts for the items discussed above is and has been a
meaningful indicator of our economic performance and is useful to
our investors as well as management in evaluating our performance
as it relates to expected dividend payments over time. As a REIT,
we are required to distribute substantially all of our taxable
income to investors in the form of dividends, which are a principal
focus of our investors. Additionally, we believe that our investors
also use distributable 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
distributable earnings is useful to our investors.
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 those equity method investments where
we apply HLBV 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 distributable
earnings, for certain of these investments where there are
characteristics as 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 equity
method investment adjustment to our GAAP net income (loss) in
calculating our distributable 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 nine months ended September
30, 2021 and 2020,
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
(in millions)
Income (loss) under GAAP
$
(7
)
$
17
$
70
$
33
Distributable earnings
$
26
$
13
$
77
$
40
Return of capital/(deferred cash
collections)
(13
)
16
(42
)
95
Cash collected
$
13
$
29
$
35
$
135
Distributable 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
distributable earnings may differ from the methodologies employed
by other companies to calculate the same or similar supplemental
performance measures, and accordingly, our reported distributable
earnings may not be comparable to similar metrics reported by other
companies.
Reconciliation of our GAAP Net Income to Distributable
Earnings
We have calculated our distributable earnings and provided a
reconciliation of our GAAP net income to distributable earnings for
the three and nine months ended September 30, 2021 and 2020 in the
tables below.
For the three months ended
September 30, 2021
For the three months ended
September 30, 2020
(dollars in thousands, except per
share amounts)
$
per share
$
per share
Net income attributable to controlling
stockholders (1)
$
(2,838
)
$
(0.04
)
$
21,175
$
0.28
Distributable earnings adjustments:
Reverse GAAP (income) loss from equity
method investments
7,215
(16,506
)
Add equity method investments earnings
25,898
13,258
Equity-based compensation charges
3,715
4,091
Provision for loss on receivables
1,485
2,458
Other adjustments (2)
(688
)
3,270
Distributable earnings (3)
$
34,787
$
0.41
$
27,746
$
0.36
(1)
The per share amounts represent GAAP
diluted earnings per share and is the most comparable GAAP measure
to our distributable earnings per share.
(2)
See Other adjustments table below.
(3)
Distributable earnings per share for the
three months ended September 30, 2021 and 2020, are based on
83,912,769 shares and 77,041,509 shares outstanding, respectively,
which represents the weighted average number of fully-diluted
shares outstanding including our restricted stock awards,
restricted stock units, long-term incentive plan units, and the
non-controlling interest in our Operating Partnership. We include
any potential common stock issuance in our distributable earnings
per share 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. To the extent a convertible note is
converted during the period, we include its dilution using the
treasury stock method until the date of conversion, after which we
include the shares issued upon conversion. We believe the use of
the treasury stock method is an appropriate representation of the
potential dilution when considering the economic behaviors of the
holders of the instrument.
For the nine months ended
September 30, 2021
For the nine months ended
September 30, 2020
(dollars in thousands, except per
share amounts)
$
per share
$
per share
Net income attributable to controlling
stockholders (1)
$
64,159
$
0.79
$
57,491
$
0.78
Distributable earnings adjustments:
Reverse GAAP (income) loss from equity
method investments
(69,519
)
(32,505
)
Add equity method investments earnings
76,570
40,361
Equity-based compensation charges
13,503
11,615
Provision for loss on receivables
2,896
5,629
(Gain) loss on debt modification or
extinguishment
16,083
—
Other adjustments (2)
14,344
5,584
Distributable earnings (3)
$
118,036
$
1.42
$
88,175
$
1.19
(1)
The per share amounts represent GAAP
diluted earnings per share and is the most comparable GAAP measure
to our distributable earnings per share.
(2)
See Other adjustments table below.
(3)
Distributable earnings per share for the
nine months ended September 30, 2021 and 2020, are based on
83,118,733 shares and 73,819,517 shares outstanding, respectively,
which represents the weighted average number of fully-diluted
shares outstanding including our restricted stock awards,
restricted stock units, long-term incentive plan units, and the
non-controlling interest in our Operating Partnership. We include
any potential common stock issuance in our distributable earnings
per share 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. To the extent a convertible note is
converted during the period, we include its dilution using the
treasury stock method until the date of conversion, after which we
include the shares issued upon conversion. We believe the use of
the treasury stock method is an appropriate representation of the
potential dilution when considering the economic behaviors of the
holders of the instrument.
The table below provides a reconciliation of the Other
adjustments:
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
(in thousands)
(in thousands)
Other adjustments
Amortization of intangibles (1)
$
823
$
823
$
2,468
$
2,469
Non-cash provision (benefit) for income
taxes
(1,250
)
2,345
11,510
2,860
Net income attributable to non-controlling
interest
(261
)
102
366
255
Other adjustments
$
(688
)
$
3,270
$
14,344
$
5,584
(1)
Adds back non-cash amortization of lease
and pre-IPO intangibles.
The table below provides a reconciliation of GAAP SG&A
expenses to Distributable SG&A expenses:
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021
2020
2021
2020
(in thousands)
(in thousands)
GAAP SG&A expenses
Compensation and benefits
$
12,218
$
9,012
$
39,850
$
27,223
General and administrative
4,964
3,918
14,814
11,181
Total SG&A expenses (GAAP)
$
17,182
$
12,930
$
54,664
$
38,404
Distributable SG&A expenses
adjustments:
Non-cash equity-based compensation charge
(1)
$
(3,715
)
$
(4,091
)
$
(13,503
)
$
(11,615
)
Amortization of intangibles (2)
(51
)
(51
)
(151
)
(152
)
Distributable SG&A expenses
adjustments
(3,766
)
(4,142
)
(13,654
)
(11,767
)
Distributable SG&A expenses
$
13,416
$
8,788
$
41,010
$
26,637
(1)
Reflects add back of non-cash amortization
of equity-based compensation. Outstanding grants related to
equity-based compensation are included in the distributable
earnings per share calculation.
(2)
Adds back non-cash amortization of pre-IPO
intangibles.
Distributable Net Investment Income
We have a portfolio of debt and equity investments in climate
change solutions. We calculate distributable net investment income
by adjusting GAAP-based net investment income for those
distributable 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 distributable net investment income in this
way. Our non-GAAP distributable net investment income measure may
not be comparable to similarly titled measures used by other
companies. The following is a reconciliation of our GAAP-based net
investment income to our distributable net investment income:
Three months ended September
30,
Nine months ended September
30,
2021
2020
2021
2020
(in thousands)
Interest income
$
26,236
$
23,508
$
76,352
$
71,046
Rental income
6,430
6,469
19,361
19,408
GAAP-based investment revenue
32,666
29,977
95,713
90,454
Interest expense
27,349
26,085
95,394
65,884
GAAP-based net investment income
5,317
3,892
319
24,570
Equity method earnings adjustment (1)
25,898
13,258
76,570
40,361
(Gain) loss on debt modification or
extinguishment (2)
—
—
16,083
—
Amortization of real estate intangibles
(3)
772
772
2,317
2,317
Distributable net investment
income
$
31,987
$
17,922
$
95,289
$
67,248
(1)
Reflects adjustment for equity method
investments described above.
(2)
Adds back losses related to debt
prepayments included in interest expense in our income
statement.
(3)
Adds back non-cash amortization related to
acquired real estate leases.
Managed Assets
As we both consolidate assets on our balance sheet and
securitize assets, certain of our receivables and other assets are
not reflected on our balance sheet where we may have a residual
interest in the performance of the investment, such as servicing
rights or a retained interest in cash flows. Thus, we present our
investments on a non-GAAP “managed” basis, which assumes that
securitized receivables are not sold. We believe that our Managed
Asset information is useful to investors because it portrays the
amount of both on- and off-balance sheet receivables that we
manage, which enables investors to understand and evaluate the
credit performance associated with our portfolio of receivables,
investments, and residual assets in securitized receivables. Our
non-GAAP Managed Assets measure may not be comparable to similarly
titled measures used by other companies.
The following is a reconciliation of our GAAP-based Portfolio to
our Managed Assets as of September 30, 2021 and December 31,
2020:
As of
September 30, 2021
December 31, 2020
(dollars in millions)
Equity method investments
$
1,468
$
1,280
Government receivables
126
248
Commercial receivables, net of
allowance
1,225
965
Real estate
357
359
Investments
18
55
GAAP-Based Portfolio
3,194
2,907
Assets held in securitization trusts
5,041
4,308
Managed assets
$
8,235
$
7,215
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211104006193/en/
Investor Contact:
Chad Reed investors@hannonarmstrong.com 410-571-6189
Media Contact:
Gil Jenkins media@hannonarmstrong.com 443-321-5753
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