Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Letters of Credit

As of December 31, 2024 and 2023, the Company had $47.3 million and $37.0 million, respectively, of unused letters of credit outstanding, which each carry fees of 0.50% - 3.25%, respectively.

Guarantees

Certain tax equity funds and debt facilities require the Company to maintain an aggregate amount of $35.0 million of unencumbered cash and cash equivalents at the end of each month.

Operating and Finance Leases

The Company leases real estate under non-cancellable operating leases and equipment under finance leases.

The components of lease expense were as follows (in thousands):


	For the Year Ended December 31,
	2024		2023		2022
Finance lease cost:
Amortization of right-of-use assets	$	29,332	$	18,827	$	15,873
Interest on lease liabilities	5,704		3,291		1,127
Operating lease cost	31,742		34,937		31,966
Short-term lease cost	2,857		2,025		2,602
Variable lease cost	9,828		11,516		9,246
Sublease income	(3,132)		(4,667)		(3,780)
Total lease cost	$	76,331	$	65,929	$	57,034

Other information related to leases was as follows (in thousands):


	For the Year Ended December 31,
	2024			2023			2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	35,473		$	39,157		$	34,233
Operating cash flows from finance leases	5,588			2,952			896
Financing cash flows from finance leases	27,240			23,279			14,146
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	14,461			21,417			38,543
Finance leases	36,991			87,726			21,030
Weighted average remaining lease term (years):
Operating leases	4.56			4.92			5.26
Finance leases	3.48			4.07			2.86
Weighted average discount rate:
Operating leases	5.3		%	4.4		%	3.8		%
Finance leases	5.9		%	5.6		%	3.7		%

Future minimum lease commitments under non-cancellable leases as of December 31, 2024 were as follows (in thousands):


	Operating Leases		Sublease Income		Net Operating Leases		Finance leases
2025	$	33,334	$	2,700	$	30,634	$	30,556
2026	28,409		2,191		26,218		29,601
2027	18,353		1,366		16,987		25,883
2028	10,626		—		10,626		14,273
2029	9,259		—		9,259		1,348
Thereafter	15,833		—		15,833		—
Total future lease payments	115,814		6,257		109,557		101,661
Less: Amount representing interest	(12,945)		—		(12,945)		(9,477)
Present value of future payments	102,869		6,257		96,612		92,184
Less: Amount for tenant incentives	—		—		—		—
Revised Present value of future payments	102,869		6,257		96,612		92,184
Less: Current portion	(28,784)		(2,700)		(26,084)		(26,045)
Long term portion	$	74,085	$	3,557	$	70,528	$	66,139

Purchase Commitment

The Company entered into a purchase commitment, which has the ability to be canceled without significant penalties, with a supplier to purchase $574.0 million of batteries by the end of the fourth quarter of 2025.

Warranty Accrual

The Company accrues warranty costs when revenue is recognized for solar energy systems sales, based on the estimated future costs of meeting its warranty obligations. Warranty costs primarily consist of replacement costs for supplies and labor costs for service personnel since warranties for equipment and materials are covered by the original manufacturer’s warranty (other than a small deductible in certain cases). As such, the warranty reserve is immaterial in all periods presented. The Company makes and revises these estimates based on the number of solar energy systems under warranty, the Company’s historical experience with warranty claims, assumptions on warranty claims to occur over a systems’ warranty period and the Company’s estimated replacement costs. A warranty is provided for solar energy systems sold. However, for the solar energy systems under Customer Agreements, the Company does not accrue a warranty liability because those systems are owned by consolidated subsidiaries of the Company. Instead, any repair costs on those solar energy systems are expensed when they are incurred as a component of customer agreements and incentives costs of revenue.

Commercial ITC Indemnification

The Company is contractually committed to compensate its investors for any losses that they may suffer in certain limited circumstances resulting from reductions in Commercial ITCs, including any reduction in depreciable basis. Generally, such obligations would arise as a result of reductions to the value of the underlying solar energy systems as assessed by the Internal Revenue Service (the “IRS”). The Company set the purchase prices and claimed values based on fair market values determined with the assistance of an independent third-party appraisal with respect to the systems that generate Commercial ITCs (and the associated depreciable basis) that are passed-through to, and claimed by, the Fund investors. In April 2018, the Company purchased an insurance policy providing for certain payments by the insurers in the event there is a final determination (including a judicial determination) that reduced the Commercial ITCs and depreciation claimed in respect of solar energy systems sold or transferred to most Funds through April 2018, or later, in the case of Funds added to the policy after such date. In general, the policy indemnifies the Company and related parties for additional taxes (including penalties and interest) owed in respect of lost Commercial ITCs, depreciation, gross-up costs and expenses incurred in defending such claim, subject to negotiated exclusions from, and limitations to, coverage. The Company purchased similar additional insurance policies in January 2021, October 2022 and May 2023.

At each balance sheet date, the Company assesses and recognizes, when applicable, the potential exposure from this obligation based on all the information available at that time, including any audits undertaken by the IRS.

In 2018, the IRS opened an audit of one of the Company’s investors and reviewed the tax basis of the Company’s solar energy systems in the investment fund, which is covered by the Company’s 2018 insurance policy. In December 2024, this IRS audit resolved with no adverse findings involving the fair market value of the price paid by the investment fund for the Company’s solar energy systems. The Company incurred no out-of-pocket costs except the time, procedural, and administrative expenses associated with such a multi-year process. The Company does not expect increases in insurance premiums as a result of this audit.

Litigation

The Company is subject to certain legal proceedings, claims, investigations and administrative proceedings in the ordinary course of its business. The Company records a provision for a liability when it is both probable that the liability has been incurred and the amount of the liability can be reasonably estimated. The Company evaluates the adequacy of its legal reserves based on its assessment of many factors, including interpretations of the law and assumptions that ultimately may or may not be correct about the future outcome of each case based on available information. These provisions, if any, are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows, or financial position in a particular period.

In the normal course of business, the Company has from time to time been named as a party to various legal claims, actions, or complaints. While the outcome of these matters cannot currently be predicted with certainty, the Company does not currently believe that the outcome of any of these claims will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations, or cash flows.