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Summary of Significant Accounting Policies (Policies) | 6 Months Ended
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Jun. 30, 2018
Accounting Policies [Abstract] |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2017. The Company has restated certain prior period amounts to conform to the current period presentation as described in the Recently Issued and Adopted Accounting Standards section below. The results of the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2018 or other future periods. The consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries, including Funds, in which the Company has a controlling financial interest. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity. However, a controlling financial interest may also exist in entities, such as variable interest entities (“VIEs”), through arrangements that do not involve controlling voting interests. In accordance with the provisions of Financial Accounting Standards Board (“FASB”), Accounting Standards Codification Topic 810 (“Topic 810”) Consolidation, the Company consolidates any VIE of which it is the primary beneficiary. The primary beneficiary, as defined in Topic 810, is the party that has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it continues to be the primary beneficiary. The consolidated financial statements reflect the assets and liabilities of VIEs that are consolidated. All intercompany transactions and balances have been eliminated in consolidation.
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to current period presentation.
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions, including, but not limited to, for revenue recognition, constraints which result in variable consideration, and the discount rate used to adjust the promised amount of consideration for the effects of a significant financing component, the estimates that affect the collectability of accounts receivable, the valuation of inventories, the useful lives of solar energy systems, the useful lives of property and equipment, the valuation and useful lives of intangible assets, the effective interest rate used to amortize pass-through financing obligations, the discount rate used for operating and finance leases, the valuation of stock-based compensation, the determination of valuation allowances associated with deferred tax assets, the fair value of debt instruments disclosed and the redemption value of redeemable noncontrolling interests. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Actual results may differ from such estimates.
Segment Information | Segment Information The Company has one operating segment with one business activity, providing solar energy services and products to customers. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who manages operations on a consolidated basis for purposes of allocating resources. When evaluating performance and allocating resources, the CODM reviews financial information presented on a consolidated basis. Revenue from external customers (including, but not limited to homeowners) for each group of similar products and services is as follows (in thousands):
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Customer agreements |  | $ | 66,658 |  |  | $ | 51,220 |  |  | $ | 128,307 |  |  | $ | 97,545 |
Incentives |  | 24,947 |  |  | 6,891 |  |  | 30,288 |  |  | 9,656 |
Customer agreements and incentives |  | 91,605 |  |  | 58,111 |  |  | 158,595 |  |  | 107,201 |
Solar energy systems |  | 40,734 |  |  | 28,079 |  |  | 74,732 |  |  | 48,698 |
Products |  | 38,199 |  |  | 44,432 |  |  | 81,574 |  |  | 79,832 |
Solar energy systems and product sales |  | 78,933 |  |  | 72,511 |  |  | 156,306 |  |  | 128,530 |
Total revenue |  | $ | 170,538 |  |  | $ | 130,622 |  |  | $ | 314,901 |  |  | $ | 235,731 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company defines fair value as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses valuation approaches to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. The FASB establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
• | Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
• | Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
• | Level 3—Inputs that are unobservable, significant to the measurement of the fair value of the assets or liabilities and are supported by little or no market data.
Recently Issued and Adopted Accounting Standards | Recently Issued and Adopted Accounting Standards Accounting standards adopted January 1, 2018 causing restatement of prior periods: In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements, and expands disclosure requirements. The Company adopted Topic 606 effective January 1, 2018, using the full retrospective method, which required the Company to restate each prior reporting period presented. The Company has elected to use the practical expedient under Topic 606 and has excluded disclosures of transaction prices allocated to remaining performance obligations and when the Company expects to recognize such revenue for all periods prior to the date of initial application. In February 2016, the FASB issued ASU No. 2016-02 to replace existing lease guidance with Accounting Standards Codification Topic 842 ("Topic 842"), Leases. Topic 842 changes how the definition of a lease is applied and judgment may be required in applying the definition of a lease to certain arrangements. The Company elected to early adopt the standard effective January 1, 2018 concurrent with the adoption of Topic 606 related to revenue recognition, using the modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements, which required the Company to restate each prior reporting period presented. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. The clarifications address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. These amendments have the same effective date and transition requirements as the new leases standard, as such the Company adopted the new ASU and the impact of adopting this standard was not material to its financial statements. Upon the adoption of Topic 842, the Company's Customer Agreements are accounted for under Topic 606 due to changes in the definition of a lease under Topic 842 when the Company was considered a lessor. For operating leases in which the Company is the lessee, the Company concluded that all existing operating leases under Accounting Standards Codification Topic 840 ("Topic 840"), Leases, continue to be classified as operating leases under Topic 842, and all existing capital leases under Topic 840 are classified as finance leases under Topic 842. The Company has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component. The Company accounts for short-term leases on a straight-line basis over the lease term. Under Topic 606, total consideration for Customer Agreements, including price escalators and performance guarantees, is estimated and recognized over the term of the Customer Agreement. This accounting for price escalators creates an unbilled receivable balance for the first half of the Customer Agreement, which is then reduced over the second half. Customer Agreements and SRECs with a prepaid element are deemed to include a significant financing component, as defined under Topic 606, which increases both revenue and interest expense. For pass-through financing obligation funds that report investment tax credit revenue, the ITC revenue is now recognized in full at PTO. SREC revenue is estimated net of any variable consideration related to possible liquidated damages, and recognized upon delivery of SRECs to the counterparty. The accounting did not materially differ for revenue currently recognized as solar energy systems and product sales. The adoption of Topic 606 also resulted in an adjustment to the Company's deferred tax liabilities, and impacted the analysis of the realizability of deferred tax assets, resulting in the release of valuation allowance related to state deferred tax assets. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, which requires a statement of cash flows to present the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. The Company adopted Topic 230 effective January 1, 2018, using the retrospective transition method, which required the Company to restate each prior reporting period presented. As a result, the Company no longer presents transfers between cash and restricted cash in the consolidated cash flow statements. Adjustments to Previously Reported Financial Statements from the Adoption of Accounting Standards The primary impact of adopting Topic 606 and Topic 842 includes the recognition of revenue from Customer Agreements, and certain incentives revenue, namely SRECs and ITCs. Previously, under Topic 840, the Company recognized revenue related to certain Customer Agreements as contingent revenue when earned. Under Topic 606, because the Company has a continuous obligation to provide fully functional systems that provide electricity over the term of the Customer Agreement, it recognizes revenue evenly over the term of the Customer Agreements taking into account price escalators and performance guarantees when estimating variable consideration. Previously, the Company recognized revenue related to the sale of SRECs to the extent the cumulative value of delivered SRECs per contract exceeded any possible liquidated damages for non-delivery, if any. Under Topic 606, the Company estimates revenue net of any variable consideration related to possible liquidated damages, and recognizes revenue upon delivery of SRECs to the counterparty. Under Topic 605 and Topic 840, the Company previously reported ITC revenue over five years: following when the related solar system was granted PTO, with one-fifth of the monetized ITCs recognized on each anniversary of the solar energy systems' PTO date. Under Topic 606, the Company recognizes ITC revenue in full at PTO. Previously, under Topic 840, the Company capitalized direct and incremental costs as a component of Solar systems, net on the consolidated balance sheets. Under Topic 606, the Company capitalizes incremental costs incurred to obtain a contract in Other Assets in the consolidated balance sheets. These amounts are amortized on a straight-line basis over the term of the Customer Agreements, and are included in Sales and marketing in the consolidated statements of operations. In addition to the impact of revenue recognition related to Customer Agreements, the impact of adopting Topic 842 includes a change in accounting for leases when the Company is the lessee, primarily the inclusion of right-of use ("ROU") assets included in other assets on the consolidated balance sheets, and operating lease liabilities included in accrued expenses and other liabilities and other liabilities on the consolidated balance sheets. The income tax impact as a result of the adoption of Topic 842 was immaterial. The following table presents the effect of the adoption of Topic 606 and Topic 842 on the Company's condensed consolidated balance sheet as of December 31, 2017 (in thousands):
|  | December 31, 2017
|  | Previously Reported |  | Adoption Impact |  | Restated
Accounts receivable, net of allowances for doubtful accounts |  | $ | 76,198 |  |  | $ | 35,871 |  |  | $ | 112,069 |
Solar energy systems, net |  | 3,319,708 |  |  | (158,138 | ) |  | 3,161,570 |
Other assets |  | 37,225 |  |  | 157,529 |  |  | 194,754 |
Accrued expenses and other liabilities |  | 85,639 |  |  | 11,591 |  |  | 97,230 |
Deferred revenue, current portion |  | 77,310 |  |  | (34,701 | ) |  | 42,609 |
Deferred grants, current portion |  | 8,269 |  |  | (76 | ) |  | 8,193 |
Pass-through financing obligation, current portion |  | 6,087 |  |  | (700 | ) |  | 5,387 |
Deferred revenue, net of current portion |  | 584,427 |  |  | (62,184 | ) |  | 522,243 |
Deferred grants, net of current portion |  | 228,603 |  |  | (1,084 | ) |  | 227,519 |
Pass-through financing obligation, net of current portion |  | 138,124 |  |  | (5,301 | ) |  | 132,823 |
Other liabilities |  | 13,520 |  |  | 29,223 |  |  | 42,743 |
Deferred tax liabilities |  | 59,131 |  |  | 23,988 |  |  | 83,119 |
Redeemable noncontrolling interests |  | 123,737 |  |  | 64 |  |  | 123,801 |
Additional paid-in capital |  | 684,141 |  |  | (1,191 | ) |  | 682,950 |
Retained earnings |  | 131,959 |  |  | 70,775 |  |  | 202,734 |
Noncontrolling interests |  | 354,076 |  |  | 4,858 |  |  | 358,934 |
The following table presents the effect of the adoption of Topic 606 and Topic 842 on the Company's condensed consolidated statement of operations for the three and six months ended June 30, 2017 (in thousands except per share amounts):
|  | Three Months Ended June 30, 2017 |  | Six Months Ended June 30, 2017
|  | Previously Reported |  | Adoption Impact |  | Restated |  | Previously Reported |  | Adoption Impact |  | Restated
Revenue: Customer agreements and incentives |  | $ | 65,337 |  |  | $ | (7,226 | ) |  | $ | 58,111 |  |  | $ | 113,435 |  |  | $ | (6,234 | ) |  | $ | 107,201 |
Cost of customer agreements and incentives |  | 47,114 |  |  | (1,825 | ) |  | 45,289 |  |  | 91,450 |  |  | (3,548 | ) |  | 87,902 |
Sales and marketing |  | 32,784 |  |  | 2,272 |  |  | 35,056 |  |  | 64,460 |  |  | 3,728 |  |  | 68,188 |
General and administrative |  | 25,230 |  |  | (2 | ) |  | 25,228 |  |  | 49,851 |  |  | (15 | ) |  | 49,836 |
Interest expense, net |  | 16,602 |  |  | 5,369 |  |  | 21,971 |  |  | 31,879 |  |  | 10,650 |  |  | 42,529 |
Income tax expense |  | 15,453 |  |  | (4,672 | ) |  | 10,781 |  |  | 22,791 |  |  | (6,610 | ) |  | 16,181 |
Net loss |  | (65,242 | ) |  | (8,368 | ) |  | (73,610 | ) |  | (138,326 | ) |  | (10,439 | ) |  | (148,765 | )
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests |  | (90,364 | ) |  | (1,592 | ) |  | (91,956 | ) |  | (176,175 | ) |  | (818 | ) |  | (176,993 | )
Net income available to common stockholders |  | 25,122 |  |  | (6,776 | ) |  | 18,346 |  |  | 37,849 |  |  | (9,621 | ) |  | 28,228 |
Basic net income per share available to common stockholders |  | 0.24 |  |  | (0.07 | ) |  | 0.17 |  |  | 0.36 |  |  | (0.09 | ) |  | 0.27 |
Diluted net income per share available to common stockholders |  | 0.23 |  |  | (0.06 | ) |  | 0.17 |  |  | 0.35 |  |  | (0.09 | ) |  | 0.26 |
The following table presents the effect of the adoption of Topic 230, Topic 606 and Topic 842 on the Company's condensed consolidated statement of cash flows for the six months ended June 30, 2017 (in thousands):
|  | Six Months Ended June 30, 2017
|  | Previously Reported |  | Adoption Impact |  | Restated
Net loss |  | $ | (138,326 | ) |  | $ | (10,439 | ) |  | $ | (148,765 | )
Net cash used in operating activities |  | (33,457 | ) |  | (15,714 | ) |  | (49,171 | )
Net cash used in investing activities |  | (361,190 | ) |  | 16,747 |  |  | (344,443 | )
Net cash provided by financing activities |  | 399,604 |  |  | 2,592 |  |  | 402,196 |
Net change in cash and restricted cash(1) |  | 4,957 |  |  | 3,625 |  |  | 8,582 |
Cash and restricted cash, beginning of period(1) |  | 206,364 |  |  | 17,999 |  |  | 224,363 |
Cash and restricted cash, end of period(1) |  | 211,321 |  |  | 21,624 |  |  | 232,945 |
(1)Pursuant to Topic 230, restricted cash is included in the restated balances in the statement of cashflows, as described above. The amounts in the previously reported column include only cash. Accounting standards to be adopted: In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology with a current expected credit losses model. The amendment applies to entities which hold financial assets and net investment in leases that are not accounted for at fair value through net income as well as loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a modified retrospective approach, with certain aspects requiring a prospective approach. The Company is currently evaluating this guidance and the impact it may have on the Company’s consolidated financial statements. In August 2017, the FASB issued 2017-12, Derivatives and Hedging, Targeted Improvements to Accounting for Hedging Activities, which expands an entity's ability to hedge nonfinancial and financial risk components, eliminates the requirement to separately measure and report hedge ineffectiveness, and aligned the recognition and presentation of the effects of hedging instruments in the financial statements. The ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU is applied using a modified retrospective approach. The Company is currently evaluating this guidance and the impact it may have on the Company's consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, which is intended to align the accounting for share-based payment awards issued to employees and nonemployees, however, this amendment does not apply to instruments issued in a financing transaction nor to equity instruments granted to a customer under a contract in the scope of Topic 606. Currently, performance conditions are recognized once the performance conditions are met. Under this new amendment, equity-classified nonemployee share-based payments will be measured at the grant-date fair value and will be recognized based on the probable outcome of the performance conditions. This ASU is effective for fiscal periods beginning after December 15, 2018.The Company is currently evaluating this guidance and the impact it may have on the Company's consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. The majority of the amendments in ASU 2018-09 are effective for periods beginning after December 15, 2018. The Company is currently evaluating this guidance and the impact it may have on the Company's consolidated financial statements.

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