Fubotv earnings beat by $0.10, revenue topped estimates
Hannon Armstrong Sustainable Infrastructure Capital Inc (HASI) reported its financial results for the second quarter of 2025, revealing an earnings miss. The company posted an adjusted earnings per share (EPS) of $0.60, falling short of the $0.64 forecast, marking a 6.25% negative surprise. Revenue also came in below expectations at $85.69 million compared to the anticipated $91.08 million. According to InvestingPro analysis, the stock appears undervalued at its current trading level of $24.38, despite showing a slight decline of 0.25% from the previous close. Seven analysts have recently revised their earnings expectations downward for the upcoming period.
Key Takeaways
- Hannon Armstrong missed both EPS and revenue forecasts for Q2 2025.
- The company’s adjusted recurring net investment income increased by 25% year-over-year.
- Managed assets saw a significant increase, growing to $14.6 billion.
- The stock showed minimal movement in aftermarket trading, closing at $24.38.
- The company reaffirmed its commitment to 8-10% EPS growth through 2027.
Company Performance
Hannon Armstrong reported a mixed quarter, with earnings and revenue falling short of expectations. However, the company demonstrated strong operational performance, with a 25% year-over-year increase in adjusted recurring net investment income and a substantial rise in managed assets to $14.6 billion. The company’s diverse investment portfolio and strategic initiatives in renewable energy continue to position it well in the market.
Financial Highlights
- Revenue: $85.69 million, below the forecast of $91.08 million.
- Earnings per share: $0.60, missing the forecast of $0.64.
- Managed assets grew to $14.6 billion, a 1,316% increase from the previous year.
- Portfolio yield stands at 8.3%, with expectations of further increases.
Earnings vs. Forecast
Hannon Armstrong’s Q2 2025 results showed an EPS of $0.60, missing the $0.64 forecast by 6.25%. Revenue also fell short, coming in at $85.69 million against the expected $91.08 million, marking a 5.92% negative surprise. This miss highlights potential challenges in meeting market expectations, affecting investor sentiment.
Market Reaction
Despite the earnings miss, Hannon Armstrong’s stock remained relatively stable, closing at $24.38 in aftermarket trading, a minor decrease of 0.25% from the previous close. The lack of significant movement suggests that investors may have anticipated the results or are awaiting further developments.
Outlook & Guidance
The company reaffirmed its guidance of 8-10% compound annual adjusted EPS growth through 2027. Hannon Armstrong anticipates higher transaction volumes in the second half of 2025 and continues to explore international expansion opportunities. The company expects gain on sale revenue to align with levels seen from 2021 to 2023. Analyst consensus remains bullish, with price targets ranging from $28 to $48 per share, suggesting significant upside potential. The company maintains a P/E ratio of 21.64x and has demonstrated its commitment to shareholder returns through six consecutive years of dividend increases.
Executive Commentary
CEO Jeff Lipson emphasized the company’s strategic focus on climate-positive investments, stating, "Our business model is the ideal strategy for today’s environment." CFO Chuck Melco highlighted the company’s approach to generating returns through accretive transactions and minimizing capital costs. Chief Revenue and Strategy Officer Mark Pangburn discussed the potential to replace tax equity as tax credits phase out, creating more opportunities for investors.
Risks and Challenges
- The earnings miss raises concerns about future revenue and profit growth.
- Market conditions and regulatory changes could impact renewable energy investments.
- Potential challenges in maintaining high portfolio yields amidst economic fluctuations.
- The company’s ability to manage debt levels and liquidity remains crucial.
Q&A
During the earnings call, analysts queried the performance of the SunStrong joint venture with Sunnova and the residential solar lease portfolio. Executives also addressed questions on capital efficiency, return on equity expectations, and the strategy for replacing tax equity in the future.
Full transcript - Hannon Armstrong Sustainable Infrastructure Capital Inc (HASI) Q2 2025:
Conference Operator: Greetings, and welcome to the Hassi Second Quarter twenty twenty five Earnings Conference Call and Webcast. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chew, Vice President of Investor Relations.
Aaron Chew, Vice President of Investor Relations, HASI: Thank you, operator, and good afternoon to everyone joining us today for HASI’s second quarter twenty twenty five conference call. Earlier this afternoon, HASI distributed a press release reporting our second quarter twenty twenty five results, a copy of which is available on our website along with the slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website where a replay will be available later today. Some of the comments made in this call are forward looking statements, which are subject to risks and uncertainties described in the Risk Factors section of the company’s Form 10 ks and other filings with the SEC. Actual results may differ materially from those stated.
Today’s discussion also includes some non GAAP financial measures. A reconciliation of GAAP to non GAAP financial measures is available in our earnings release and presentation. Joining us on the call today are Jeff Lipson, the company’s President and CEO as well as Chuck Melco, our Chief Financial Officer. And also available for Q and A are Susan Nicky, our Chief Client Officer and Mark Pangburn, our Chief Revenue and Strategy Officer. To kick things off, I will first turn it over to our President and CEO, Jeff Lipson, who will open the presentation today on Slide three.
Jeff?
Jeff Lipson, President and CEO, HASI: Thank you, Aaron, and thanks, everyone, for joining our Q2 twenty twenty five call. We are pleased to report another strong quarter and remain very confident in our business model and strategy. Our business model, focused on climate positive investments with programmatic clients investing in noncyclical revenue producing projects, is indeed the ideal strategy for today’s environment. In addition, our thoughtful approach to leverage capital and liquidity likewise positions us well for long term growth in all policy and macroeconomic environments. Importantly, we also value diversification, investing in several different asset classes and consistently expanding our scope to create additional opportunities for growth and avoiding any material impacts of slowdowns in a particular market.
Our FTN business has grown meaningfully over the past few years, and we continue to explore opportunities beyond our historical focus, including investments that have very limited public policy ramifications. The impact of this consistent approach to our business has led to a number of accomplishments in the second quarter. We have increased our pipeline, which now exceeds $6,000,000,000 and our new business year to date has an average yield greater than 10.5%. On the capital raising side, we issued $1,000,000,000 of term debt and used $900,000,000 of the proceeds to pay off maturing convertible notes and near term senior debt. We also successfully closed nearly $600,000,000 debt offering on our CCH1 joint venture, expanding its capacity and extending the investment period until late twenty twenty six.
Our adjusted EPS for the quarter was $0.60 slightly down from last quarter simply due to the timing of gain on sale revenue. And we are introducing a new metric that reflects the recurring revenue nature of our business entitled adjusted recurring net investment income, which is 19% higher year to date as compared to 2024. I’m also pleased to reaffirm our guidance of 8% to 10% compound annual adjusted EPS growth through 2027 as we remain on track to meet this target over the next three years. Turning to page four, I’d like to provide context for why certain recent macroeconomic, legislative, and policy items will result in positive outcomes for our business. First, The United States remains at a current and forecasted level of power demand that requires an all of the above energy strategy.
In fact, even with an all of the above approach, supply is unlikely to keep pace, leading to higher power prices, which in turn will drive additional development, including renewables. The impact of changes in tax credit policy for renewables is still a few years away and given existing safe harboring more than enough time for the industry to adapt, particularly when economic viability without tax credits has fundamentally already occurred. Storage ITC will also incrementally improve solar economics well into the next decade, and RNG remains an attractive asset class bolstered by the extension of the clean fuels PTC. For our business, these developments have a number of implications. The value of our existing portfolio increases as power prices increase.
And although we don’t mark to market our assets, we may see a higher yield on these investments over time. Our pipeline remains unimpacted by any policy changes, which I will discuss more in a moment. We also maintain a diversified approach to the business, and we continue to expand our scope. This approach, coupled with lower risk asset level investing, allows us to be significantly more insulated from policy changes than other business models. The lack of tax equity in the project capital stack a few years from now may create additional opportunities for Hassie Capital to fill the void, and we are also well positioned to continue our long standing client solution of providing capital recycling.
Finally, we expect policy we expect the policy environment to result in less competition for project level investments. In summary, we have no need to make any material changes to our existing strategy to thrive in the current operating environment. Turning to page five, we emphasize that our investments are funded after development risk has been eliminated. This slide also reinforces that our existing pipeline is insulated from policy changes. This slide provides an example of the chronology of HASI’s participation in utility scale investments.
The underlying projects are already at an advanced stage when we add the investment to our pipeline. The project is even further advanced by the time we close our commitment and typically at or very near commercial operation when we fund our investment. This is a reminder that our investments occur at a derisked stage of development, and we typically do not incur permitting or policy risk. Further, this graphic provides a depiction of the stage of the investments in our pipeline and strong evidence that our pipeline is not at risk related to permitting tariffs or subsequent tax policy changes. Turning to page six.
Our pipeline has grown over the past few quarters and now exceeds $6,000,000,000 Our pie chart reinforces the diversification of our business with strong representation from each of our markets and a new slice representing the next frontier asset classes discussed on our February earnings call. The behind the meter pipeline includes a long list of energy efficiency, community solar and residential solar and storage projects with several existing and new clients. The grid connected pipeline is also very active as many developers are in search of capital to execute on their pipelines. And our fuels transportation and nature pipeline continues to reflect the significant opportunity, particularly in renewable natural gas and transportation, which are less impacted by policy changes. Turning to page seven, I’d like to emphasize the significant improvement in the efficiency of our balance sheet.
Putting aside our securitization activity and our retained capital, prior to CCH one closing in $2,124 of equity raising resulted in $300 of investments. Following CCH one, we have doubled the investment dollars for each dollar of equity. Now that we have closed the debt facility at CCH One with a vehicle leverage target of 0.5, the investment dollars for each dollar of equity has tripled from the original business model. As a reminder, we also earn fees on both the KKR equity investment and the funded CCH1 debt balance. This slide is a powerful reminder of the significant strides we have made in our efforts to grow earnings while limiting additional equity issuance.
And with that, I will pass the call over to Chuck Melco to discuss our financial results.
Chuck Melco, Chief Financial Officer, HASI: Thanks, Jeff. Before I get into our quarterly results, I would like to take a minute to discuss the ways we create value for our shareholders. First, we generate returns from closing accretive transactions into our portfolio, either through our CCH1 structure or directly onto our balance sheet and minimizing the cost of capital related to our funding sources. Second, once we have funded the investment, we can further optimize the portfolio and also reinvest cash received into other high yielding investments. And lastly, we generate recurring and onetime fees related to our securitization activities and CCH1.
These fees typically do not require any equity capital, which further enhances our return on equity. Now to take a look at our transaction activity. On slide eight, we have closed approximately $900,000,000 in transactions in the first half of this year, which is 9% higher than last year. Q2 was lower than Q1 and was not the result of a particular theme, rather normal course changes in the closing time line. Given the strength of our pipeline, we feel good about the outlook of closings the remainder of the year and the total being higher than 2024.
We continue to be successful in closing transactions with double digit yields and had a weighted average closing yield of greater than 10.5% and continue to execute across all of our asset classes. On Slide nine, we are meaningfully scaling our platform with managed assets of $14,600,000,000 and a portfolio of $7,200,000,000 up 1316%, respectively, from the same time last year. Our CCH1 co investment structure is now at $1,100,000,000 of funded assets and with the recent debt transaction at CCH1, has 1,500,000,000 of additional capacity that we expect will be filled before the 2026. As a reminder, the investments in CCH1 are comprised of both receivables and equity investments, but due to the structure, show up in equity method investments on our balance sheet. Our portfolio yield is 8.3%, and we expect it to increase over time as we fund the higher yielding investments that we have closed over the past year.
To sum it up, we have built a base of diversified transactions, creating a recurring income stream that is a reliable source of income year after year, especially given the high quality performance of the assets, as is evidenced by our realized loss rate of less than 10 basis points. On Slide 10, we are making a modification to one of our metrics, adjusted net investment income, to include other recurring sources of revenue, and it is now called adjusted recurring net investment income. In addition to the income generated from our portfolio, we’re also beginning to generate meaningful recurring fees from our retained interest in securitizations and CCH1 asset management fees. Combining these other recurring income sources with our portfolio income will provide a metric that is a helpful indicator of the growing high quality recurring income that we are generating. When comparing our adjusted recurring net investment income for the 2025 of $164,000,000 to the same period last year, it has grown 19%.
As a reminder, this is not our only source of income. And we also have income from gain on sale from our securitization activities and upfront fees from our CCH1 co investment structure, which are more dependent on new transactions. On Slide 11, the efforts we have put into scaling a high quality investment platform have resulted in our third investment grade rating. We already had this rating with Moody’s and Fitch, and we are recently upgraded to investment grade by S and P. Having three investment grade ratings assists us in minimizing our cost of debt.
This upgrade from S and P is a notable validation of our business model, especially given the macroeconomic backdrop that we have seen thus far in 2025. Subsequent to receiving our S and P upgrade, we issued $1,000,000,000 of bonds with 600,000,000 that matures in 2031 and $400,000,000 that matures in 02/1935. The proceeds were largely used to refinance $900,000,000 of debt, and this transaction displays our capabilities in managing our debt structure to minimize risk and cost. To further illustrate these capabilities, we partially tendered the twenty twenty six bonds that were issued in 2021 when the ten year treasury was at 75 basis points, and it was evident that interest rates could be much higher when we refinanced the bonds. We managed our business and scaled our platform to give us access to the investment grade market and also executed some hedges and we’re able to refinance at a cost that keeps us well positioned to meet our earnings guidance and hit our target ROE.
This is a great example of the resilient balance sheet we have built and the capabilities of our liability platform. Related to our capital structure, we ended the quarter with a debt to equity ratio of 1.8x and continue to operate within our target range of 1.5x to 2x. Lastly, we continue to operate with strong levels of liquidity, which was $1,400,000,000 at the end of the second quarter. This liquidity will provide us flexibility in funding our business and managing the refinancing of our remaining 2026 bond maturity. On Slide 12, we illustrate the trend in our portfolio yield and our realized cost of debt.
We have been able to maintain our margins even as interest rates have risen and expect to see our portfolio yield further increase as our higher yielding investments are funded. We will see a slight increase in our cost of debt next quarter when the recent debt issuance impacts our interest expense. The effective weighted average cost of this recent issuance was 6.28%, and we expect it to impact our total average cost by approximately 20 basis points. On Slide 13, our Q2 adjusted EPS was $0.60 and we are continuing to deliver an attractive return with our ROE of 11.9% in Q2. Our newly modified metric, adjusted recurring investment income, was $85,000,000 for the quarter and increased 25% from the same period in the prior year.
Our gain on sale, origination fee and other income was $9,000,000 As highlighted on our Q1 call, our full year gain on sale activity is expected to be more in line with the levels seen between 2021 and 2023, and we expect the majority of the total gain on sale this year to come through in the second half of the year due to the expected timing of closings. Overall, we are executing on the activities that will continue to deliver value through the growth of our adjusted recurring investment income and the efficiency created from CCH1 on the need for equity capital. And we believe we are well on track to deliver on our guidance to grow earnings into 2027. Before I hand the call back to Jeff, in an effort to ensure we are providing information that is most useful to our investors, we will be publishing on our website a summary of our key historical metrics that should assist in building models. We hope that it is helpful and certainly would like to hear your feedback.
With that, I will pass it back to Jeff for a few topics in closing.
Jeff Lipson, President and CEO, HASI: Thanks, Chuck. Turning to Page 14, we present our sustainability and impact highlights, noting our cumulative carbon count and water count numbers reflect the significant impact of our investment strategy over time. Including on page 15, our business model has produced the powerful combination of robust investment activity, access to deep pools of capital, attractive margins, and results that are noncyclical and sustainable in all interest rate and policy environments. The core components of this resilient business model have been in place for several years, validating its true durability. Successful execution of this business model relies on a talented team, and my Hassi colleagues continue to flawlessly and relentlessly overcome all obstacles reflected in our ongoing ability to achieve our goals.
As always, thank you to this outstanding team. Operator, please open the line for questions.
Conference Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from Chris Dandrinos with RBC Capital Markets. Please go ahead.
Chris Dandrinos, Analyst, RBC Capital Markets: Thank you, and good evening. Maybe to start here, we noted that, you all were, an acquirer, I think, of the ServiceCo from from Nova. So can you maybe chat a little bit about that that transaction and and what that does for you all going forward? Thanks.
Jeff Lipson, President and CEO, HASI: Sure. Thanks for the question, Chris. So just to clarify, SunStrong is a joint venture that’s 50% owned by HASI and is a servicer of residential solar leases. SunStrong has been awarded the servicing by the purchasers of Sunnova of the Sunnova portfolio. And, you know, we’re certainly pleased by that.
We’re pleased by the progress of SunStrong overall. We have a good management team there. The company is well positioned in the current environment, and the Sunnova transaction will provide scale to the business. So we’re certainly very pleased with the progress of our of our SunStrong team. But that’s that’s a 50% joint venture in terms of HASI’s ownership.
Chris Dandrinos, Analyst, RBC Capital Markets: Got it. Thank you. And then, I mean, I guess, you know, any any kind of color you can provide on how that might impact EPS going forward? And then I have a a a quick follow-up as well.
Chuck Melco, Chief Financial Officer, HASI: Go ahead, Chuck. Yeah. Hey, Chris. It’s Chuck. So right now, SunStrong, as Jeff mentioned, is a JV, and the JV that we’ll be servicing at this current current time, you know, is is not really coming through in our results that you can can see.
But as the servicing platform does get some scale, you know, with with the Sunnova assets coming into it over time, whatever other activities it might get into, we will start to see some of the margins from that business come through most likely with where you see our other equity investments coming in.
Chris Dandrinos, Analyst, RBC Capital Markets: Got it. And then, yes, guess just a related note on resi performance. I think there was an article in The Wall Street Journal a couple of weeks back highlighting some underperformance of loans out there. I think they mentioned kind of GoodLeap specifically, but anything to comment on as far as that portfolio is performing? I think you’ve highlighted that you have really low losses, so I assumed that you all weren’t being impacted, but any kind of thoughts there?
Thanks.
Jeff Lipson, President and CEO, HASI: Thanks for the question. And and you did say loans in your question, and the Wall Street Journal article specifically referenced loans. More than 95% of the HASI portfolio is leases, and lease customers have significant incentives to continue to make the payments much more so than loan customers. And our portfolio continues to perform very, very well. And many of the issues that were brought about in that article were present in resi solar loans are just not present in leases.
So that’s a little bit of apples and oranges there.
Chris Dandrinos, Analyst, RBC Capital Markets: Got it. That was very helpful. Thank you.
Chuck Melco, Chief Financial Officer, HASI: Thank you.
Conference Operator: Thank you. Our next question comes from Brian Lee with Goldman Sachs. Please go ahead.
Tyler Bisson, Analyst, Goldman Sachs: Hey, guys. This is Tyler Bisson on for Brian. Thanks for taking our questions. You’ve seen steadily increasing adjusted ROEs, suggesting ROEs on new deals is meaningfully higher than your legacy deals. You also called out some incremental ROEs of, like, 19% and up to 28% with the additional CCH one leverage.
So can you discuss, like, how you expect your adjusted ROE to trend from here? And, you know, could you see a meaningful bump as you work through the CCH one funding?
Jeff Lipson, President and CEO, HASI: Thanks for the question. Maybe I will start and Chuck can add on. I just wanna make a clarification that the ROEs that are on slide seven are incremental ROE dollars invested without taking into account expenses, you know, our SG and A or anything like that. They’re illustrative ROEs of of incremental dollars put to work under the more and more capital efficient structure that we’re displaying on that slide. So that doesn’t relate directly to the ROEs on HASI’s business.
But ROEs on HASI’s business do have an upward trend influenced by some of the same impact on this slide, but I wouldn’t compare them specifically to the ROEs on the full business when we include, the operating expenses of the business. And, Chuck, if you wanna add anything to that.
Chuck Melco, Chief Financial Officer, HASI: Yeah. I think the other thing I’d add is, you know, in the prepared remarks, we’ve mentioned some commentary around capital efficiency. And to the extent, you know, that we continue on that trend to reduce the amount of equity needed to fund our investments and some of these activities we’re getting into with asset management fees with CCH one. To the extent we’re increasing our earnings there because they don’t need equity, you we will see a steady increase in ROE, but I wouldn’t say that there’s gonna be any big jump. It’ll most likely just be a gradual increase.
Super
Tyler Bisson, Analyst, Goldman Sachs: helpful. And then on the CCH one debt, how will this, like, mechanically flow through your income statement? And how do credit rating agencies treat this debt? Like, is this gonna be applied to your leverage ratio?
Chuck Melco, Chief Financial Officer, HASI: Yeah. So on the first part on how the debt comes through in our financials, so the the debt so CCH one is is not in its entirety on its balance sheet. It is a joint venture. So the the debt is being put was placed at CCH one. It does not show up in our financials, and the way that it come will come through in our results is through increasing our returns a bit on CCH one as investments are funded with the proceeds.
In terms of the rating agencies, you know, we have talked to the rating agencies about this, of course. And in fact, I think S and P may have actually written this in their report that when they look at these kinds of structures, that as long as you are keeping the debt to equity ratio under point five to one, they don’t really factor it in. So it’s just kind of nonevent. And we don’t have any intent to go any higher than that leverage ratio. So I think we’re going to be just fine from a rating agency standpoint.
Conference Operator: Our next question comes from Maheep Panloi with Mizuho. Please go ahead.
Maheep Panloi, Analyst, Mizuho: Hey, good evening. Thanks for the question here. On Slide six, was looking at the mixer. Could you just talk about what is included in next trend? I think it’s the first time we saw this broken out.
So it’s nice to see what’s in there. And secondly, just on the mix of BTM solar and BTM energy efficiency. Can you talk about, like, historically, how’s that trended? Are you seeing more of energy efficiency now? Or how do think about that?
Thanks.
Jeff Lipson, President and CEO, HASI: Thanks, Maheep. So on the next frontier, just as a reminder, in our February call, we put forth this notion of next frontier where we may expand the business. I talked a little bit about that in the prepared remarks. The relevant slide is on page 17 in the appendix in this afternoon’s deck. And so the progression from disclosing in February where we may take the business next to disclosing that we have some of these investments in the pipeline is is where the natural chronology.
We’re not gonna talk specifically about exactly what’s in the pipeline. You know, the third step of that will be to actually close a transaction, and then and then we’ll talk about it. But I will say I am very pleased that in relatively short order, we’ve identified NextFrontier Investments, and they’re at a stage where they are in the pipeline. So I think we feel good about that and the diversification that it’ll bring to the business. On the second part of your question, I think the breakout in behind the meter between solar, which is primarily community and resi solar and storage and a little bit of C and I solar and the energy efficiency is just something we thought would be helpful.
I think that split is which this quarter is roughly fifty fifty is relatively consistent in terms of the what has been the behind the meter slice and the relevant sizes of those two pieces of business. So hopefully, that’s helpful in understanding what’s in the pipeline.
Maheep Panloi, Analyst, Mizuho: No. That’s helpful. And maybe just one clarification. I I think someone on the slide eight I mean, it’s like four, saw you guys talking about replacing tax equity. Just to clarify, that’s for post tax credit timeline, or is it something you’re looking to invest in even or replacing tax equity in the next few years here as well?
Jeff Lipson, President and CEO, HASI: Okay. I’m gonna ask Mark to answer that one. Hey, Meep. It’s Mark.
Mark Pangburn, Chief Revenue and Strategy Officer, HASI: We would not anticipate replacing tax equity in the in the in the current structure. But as tax credits go away, there is less need for tax equity, and that will create more room in the capital stack for investors like us who focus on monetizing cash positions. So this is primarily a post tax credit opportunity.
Maheep Panloi, Analyst, Mizuho: Perfect. Thank you.
Mark Pangburn, Chief Revenue and Strategy Officer, HASI: Thank you.
Conference Operator: Thank you. Our next question comes from Noah Kaye with Oppenheimer. Please go ahead.
Noah Kaye, Analyst, Oppenheimer: Oh, great. Thanks for taking the questions. You know, last quarter, you talked about, I think, a record volume of inbound client requests, and we saw that with the pipeline expanding quarter over quarter. I would just like to get a sense of what you and really your customers are trying to solve for in the current environment. I think you made some comments in your opening remarks around you know, the the shifting policy environment, and your expectations that transactions will, you know, kinda continue to pick up in the back half.
But, you know, we just sort of love to get an understanding of, you know, how you and your clients are, you know, approaching some of the the policy and regulatory changes here as it relates to developing not only the 12 lines pipeline, but, you know, further out opportunities.
Jeff Lipson, President and CEO, HASI: Sure. Thanks for the question, Noah. I’m actually gonna ask Susan to go ahead and answer that.
Susan Nicky, Chief Client Officer, HASI: Yeah. Thanks, Noah. And, really, the fundamentals are so strong. That’s what’s the core tailwinds for our clients’ business, and then, obviously, we follow on, as those projects and their pipelines mature. But with the demand side of the business, not only on the utility scale side, but behind the meter, Sunrun, and then some of their clients have reported out.
That’s really where the fundamentals are. And then, you know, clearly, everyone’s now navigating through what’s passed with the OBB, but have invested through safe harboring to be able to continue and plan and build out their pipelines, you know, for not only next year, but for the next several years. But our pipeline, again, is that we report on is for twelve months.
Noah Kaye, Analyst, Oppenheimer: Yep. And to follow-up on the previous question, I mean, I believe, certainly for grid connected, but, you know, probably for a decent chunk of the overall portfolio, there’s been substantial safe harboring already. And so this future opportunity around replacing tax equity, I imagine that might flow first to behind the meter and later to utility, but over a multiyear period. Is that kind of the right way to think about it?
Jeff Lipson, President and CEO, HASI: I I think that’s right, Noah. And, again, as Mark said, that that’s still a couple years out. We just wanted to plant the seed that there’s now going to be a void in the capital stack and, you know, what an outcome of this tax policy change may be that HACI is able to put more dollars to work per project. But, again, this is this is not for a couple years, and I I think the way you laid it out is is likely the way it it it will play out.
Noah Kaye, Analyst, Oppenheimer: Great. If I could sneak one more in. Just wanna talk about cash generation, you know, the the continued helpful disclosures around, adjusted cash flow from ops and other portfolio collections. I do notice that that is somewhat down on a run rate versus 2024. Can you just talk through any kind of expected timing and your cash generation for the back half?
Chuck Melco, Chief Financial Officer, HASI: Noah, this is Chuck. Looking at well, let me start with what’s going into these numbers. When we look at cash collected from our portfolio, certainly, that includes all of the cash distributions that we’re receiving related to the operations of the projects. But there can be other activities that occur at the projects, such as refinancing of debt or initial debt that’s being put onto a project that you know, getting favorable terms on that financing, we oftentimes get a distribution out of it. So, you know, it’s tough to really get a trend of that, of course.
And in 2024, there was a little bit of that going on that is causing this to look like, you know, there’s a little bit of a downtrend here. But I will say that this quarter, you know, we did have a bit of an uptick in cash received from both our equity investments and our our loans. So, you know, we’re seeing a positive trend there. But, yeah, I I would say that, the trend that you’re seeing right now, I mean, the rest of the year will probably continue that same growth rate and will probably mirror the growth in our portfolio.
Conference Operator: Our next question comes from Moses Sutton with BNP Paribas.
Aaron Chew, Vice President of Investor Relations, HASI0: Closed transactions seem rather low. I think you noted the year to date numbers, so it implies around, like, a 190,000,000, if I’m getting that right. So how how should we characterize that in the timing element? And then conversely, on the adjusted cash from operations plus other portfolio collections, that was back up to, like, 200,000,000 from the the negative number in the first quarter. I know that’s also a lumpy thing based on how you get your collections.
Should we think of that as returning to, like, a 300,000,000 plus a quarter number? So just those two on transactions and then the adjusted cash from operations.
Jeff Lipson, President and CEO, HASI: So thanks, Moses, for the question. I’ll I’ll take the first part. I’ll ask Chuck to take the second part of that question. I would encourage you to read absolutely nothing into the second quarter volumes in isolation. I think we’ve consistently talked about the lumpiness in the business and the nature of closings being out of our control and and really driven by our clients.
And so sometimes we have, you know, outsized quarters and and slower quarters in terms of actual investment volume. It’s part of the reason we do guidance over three years. And certainly on a number such as volume in the business, I’d encourage you to at least look at a one year number and not a quarterly number. And as Chuck mentioned in the prepared remarks, it is our expectation at this point that volumes will exceed last year. So I wouldn’t read anything into the second quarter.
For the other part of the question, Chuck?
Chuck Melco, Chief Financial Officer, HASI: Yeah. Hey, Moses. So I think the answer to your question really is tied into the response to Noah’s question here. When you’re looking at the trailing twelve month from last quarter going to this quarter, it drops off a little bit because the core the last quarter and the trailing twelve months that was in there last period had some of the the, I’ll call it, onetime cash distributions coming off of some of our projects. So I I wouldn’t read into that decline in the trailing twelve month at all there in terms of
Aaron Chew, Vice President of Investor Relations, HASI0: a That’s run very helpful. If I could squeeze one more in. If I recall from maybe it was two or three years ago when there was confusion in the investor community on the timing of cash collections or or sort of cash flow waterfall in projects where tax equity got money before you, like, just the structure of of the matter. It implied that at certain point in project life, in aggregate in a sense, when you did a lot of after you did a lot of equity investments, you would actually earn more than the amount that would show up in adjusted earnings. So is there a certain point that we might expect well, this is a further out question on cash flow and cash waterfall where you even though you’re continuing to make equity investments, pref equity investments, JV investments like that, where some of the legacy stuff will be seeing cash come in at at a pretty significantly higher number as TexEquity reaches their hurdle.
And is that around twenty five, twenty six, twenty seven? Is that a fair view there, and and could you quantify that? Sorry for the long question.
Chuck Melco, Chief Financial Officer, HASI: Yeah. You know, it’s it’s kinda tough to pinpoint exactly when that’s going to happen. Yes. It will start to happen. And as I mentioned a little bit ago, we are starting to get a little bit more cash coming in the door.
But because we are continuing to add investments with that similar profile, you know, we can’t really put a definitive date where that’s going to you’re start you’re gonna start to see that in our portfolio. But it but it has started to happen on old deals.
Aaron Chew, Vice President of Investor Relations, HASI0: Okay. Fair enough. Very helpful. Thank you.
Chuck Melco, Chief Financial Officer, HASI: Thank you.
Conference Operator: Thank you. Our next question comes from Vikram Bagri with Citi.
Noah Kaye, Analyst, Oppenheimer: It’s Ted on for Vic.
Aaron Chew, Vice President of Investor Relations, HASI1: Just one question on the model. I think there’s a comment on the prior quarter call that gain on sale revenue would be more in line with 2021 to 2023 levels. Should
Maheep Panloi, Analyst, Mizuho: we still expect that to
Aaron Chew, Vice President of Investor Relations, HASI1: be the case this year? And if so, what do you expect in terms of cadence for the third and fourth quarters?
Chuck Melco, Chief Financial Officer, HASI: Yeah. That’s the case. We do still expect to see gain on sale on the levels that we mentioned, average of ’21 through ’23. So q three and q four, certainly, will be higher than we saw in q two here. But, you know, I would just prorate Q3, Q4 to get to those total average annual levels.
Conference Operator: Thank you. Our next question comes from Ben Kallo with Baird. Please go ahead.
Maheep Panloi, Analyst, Mizuho: Hey, good evening.
Aaron Chew, Vice President of Investor Relations, HASI2: How are you?
Jeff Lipson, President and CEO, HASI: Good. Thanks, Ben.
Aaron Chew, Vice President of Investor Relations, HASI2: Just on the ITC, can you talk about what you’re seeing in terms of projects being pulled forward from ITC changes? Or is it and I I guess I’m maybe we could break break it down by, you know, solar and everything else, and then and utility solar and everything else. And then when you look at this, the next frontier investments, like geothermal and fuel cells, which now have a favorable tax treatment. How do you do this under that Next Frontier type of investment label? Thank you.
Jeff Lipson, President and CEO, HASI: Thanks, Ben. I think on the first part of the question, we’re not seeing meaningful pull forward. I I think the nature of many of the investments that we make and and the projects that our clients develop is such that they’re normally moving as fast as they can. You know, I think our page five is a good indication of how much work they have to do to get a project to commercial operations. So, you know, we’re not we’re not really hearing or seeing from our clients much in the way of acceleration.
We are seeing our clients remain active. We’re not seeing delays, but but we’re really not seeing much in the way of acceleration. On your second part of your question, I would just answer it more holistically that many of the investment categories in the next frontier are less susceptible, I would say, to policy changes and less driven by tax policy. And that’s one of the evolutions of our business that over time, our business, you know, through the phase out that we’re already seeing in some of the core business and through the next frontier, there’ll be less of a tax policy orientation to our business over time as well. So I think that that’s probably the best way to answer your question there.
Aaron Chew, Vice President of Investor Relations, HASI2: Okay. And if I could sneak one more in, and sorry if you covered it. I’ve jumped around. But in the past, you talked about maybe moving internationally. Could you just give us an update there?
Jeff Lipson, President and CEO, HASI: Sure. I don’t think we really have anything to report, Ben. You know, we’ve talked about it a few times. I think the most likely approach there, if we as we’ve said before, is to work with one of our existing long term clients, many of whom are multinationals on a non US project, and use that as a way to expand our business internationally. But we really just don’t have anything currently to report on that front, on this call.
Aaron Chew, Vice President of Investor Relations, HASI2: Okay. Great. Thank you very much, Jeff.
Jeff Lipson, President and CEO, HASI: Thanks, Ben.
Conference Operator: Thank you. Ladies and gentlemen, at this time, there are no further questions. The conference of Hassi has now concluded. Thank you for your participation. You may now disconnect your lines.
Thank you.
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