Spruce Power (NYSE:SPRU) said it has taken a step toward refinancing three project-level debt facilities, but warned that the proposed transaction is not binding and that upcoming maturities continue to raise doubt about its ability to continue as a going concern.
The residential solar company also reported lower third-quarter revenue as electricity production and solar renewable energy credit sales declined. Reduced corporate expenses helped keep operating income nearly flat, while a non-cash gain on interest rate swaps contributed to a swing to net income.
Refinancing remains the priority
Chief Executive Officer Chris Hayes said Spruce executed a non-binding term sheet on October 30 covering its SP1, SP2 and SP3 facilities. That satisfied a condition to extend SP1’s maturity to January 30, 2027, but Hayes emphasized that the refinancing had not been committed or completed.
“Preserving liquidity and completing the refinancing are our immediate priorities,” Hayes said. The proposed transaction remains subject to negotiations, definitive documentation and closing conditions, Chief Financial Officer Tom Cimino said.
As of September 30, SP1 had approximately $163.1 million of principal outstanding. SP2 had approximately $65.8 million outstanding and matures May 14, 2027, while SP3 had approximately $45.9 million outstanding and matures November 13, 2027.
Cimino said that, absent successful refinancing or other actions, liquidity would not be sufficient to repay the relevant facilities at maturity. The company’s financial statements therefore include a going concern disclosure.
Asked whether a completed refinancing could remove that disclosure, Hayes said he would expect it to do so because the debt would be paid off. Cimino added that the financing would address all three facilities.
Revenue slips as operating costs fall
Third-quarter revenue totaled $29.7 million, down approximately 3% from a year earlier. Cimino attributed the decline primarily to lower non-cash amortization revenue and lower revenue from solar renewable energy credits, or SRECs, partly offset by higher lease and other revenue.
Power purchase agreement revenue fell approximately 2% to $11.2 million, while lease revenue rose approximately 5% to $10.3 million. SREC revenue declined approximately 10% to $5.9 million, reflecting in part lower electricity production and lower pricing on uncontracted credits.
Hayes said challenging weather contributed to the production decline, including record summer heat that reduced panel efficiency and heavier rainfall, cloud cover and storms in the Northeast and California.
Total operating expenses fell approximately 5% to $21.2 million. Selling, general and administrative expense declined approximately 23% to $10.3 million, reflecting a leaner staffing model, lower professional services spending and the absence of certain prior-year transaction costs.
Operations and maintenance expense rose approximately 72% to $3.3 million as Spruce expanded servicing responsibilities and worked through outstanding service requests. Cimino said the company remained on track to reduce that expense for the full year; for the first nine months, it was approximately 13% below the prior-year period.
Operating income was $8.5 million, essentially flat year over year. Net income attributable to stockholders was $6 million, compared with a net loss a year earlier, and diluted earnings per share were $0.28.
Cimino cautioned that the net income improvement was substantially influenced by a $5.2 million non-cash fair value gain on interest rate swaps. That compared with a loss a year earlier, an approximately $6.7 million favorable swing, and did not represent an equivalent increase in recurring operating cash generation.
Cash flow and outlook
Adjusted cash flow from operations for the first nine months of 2026 was $30.6 million, up approximately 52% year over year, according to Cimino. Spruce repaid $38.1 million of debt during that period.
At September 30, the company held $40.1 million in cash and cash equivalents and $47.3 million in restricted cash. Cimino cautioned that restricted cash was not equivalent to freely available corporate liquidity. Total debt principal outstanding was $657.6 million; the debt is structured at the project level and is generally non-recourse to the parent, subject to the relevant agreements.
Hayes said Spruce had reduced staffing by more than 25% while deploying AI-enabled tools. The company had approximately 83,000 residential solar customer contracts at quarter end and reported a 79% customer satisfaction score.
Looking ahead, Cimino said fourth-quarter revenue is typically affected by seasonal solar production. He declined to endorse an analyst’s suggestion of a 20% sequential revenue decline, noting that lease payment escalators and changes in California power purchase agreement rates could affect results. He also said quarterly SG&A could taper down further.
Hayes said Spruce continues to have a pipeline of potential acquisitions, while its Spruce PRO third-party servicing business remains the primary growth focus. The company said it would prioritize signed servicing contracts with attractive economics rather than add overhead ahead of revenue.
About Spruce Power (NYSE:SPRU)
Spruce Power Holdings Corporation (NYSE: SPRU) is a renewable energy company focused on owning and operating residential solar energy systems. The company provides homeowners with access to solar-generated electricity through long-term customer agreements, while retaining ownership of the systems and managing their ongoing operation. Its activities include acquiring residential solar portfolios, monitoring system performance, coordinating maintenance and repairs, handling customer service and billing, and managing related contractual arrangements.
