SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes thereto included elsewhere in this prospectus. The selected consolidated financial data presented in this section is not intended to replace the consolidated financial statements and is qualified in its entirety by reference to the consolidated financial statements and related notes included elsewhere in this prospectus.
The consolidated statements of operations data for the fiscal years ended December 31, 2019, December 31, 2020, and December 31, 2021 and the consolidated balance sheet data as of December 31, 2020 and December 31, 2021 are derived from the audited consolidated financial statements of Calloway-Briggs Renewables Inc. (the "Company," "we," "us," or "our") included elsewhere in this prospectus, which were audited by Ashford & Pemberton LLP, the Company's independent registered public accounting firm. The report of Ashford & Pemberton LLP on the consolidated financial statements for such periods is included elsewhere in this prospectus. The consolidated balance sheet data as of December 31, 2019 is derived from the audited consolidated financial statements for such period, which are not included in this prospectus.
The consolidated statements of operations data for the three months ended March 31, 2022 and March 31, 2021, and the consolidated balance sheet data as of March 31, 2022, are derived from the unaudited condensed consolidated interim financial statements of the Company included elsewhere in this prospectus. The unaudited interim financial data has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, includes all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial information set forth in those statements. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022, or for any other future annual or interim period. Historical results are not necessarily indicative of results to be expected in the future.
The Company was founded in 2014 by Garrett Calloway and Elaine Briggs. The Company is a Delaware corporation headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746. Since inception, the Company has grown its portfolio of renewable energy generation assets through a combination of organic development, strategic acquisitions, and investment in large-scale solar and wind projects across the southwestern and south-central United States. The Company's operations are principally comprised of the development, construction, ownership, and operation of utility-scale renewable energy generation facilities, including solar photovoltaic and onshore wind projects.
Selected Consolidated Statements of Operations Data
The following table presents selected consolidated statements of operations data for each of the periods indicated. All dollar amounts are presented in thousands, except per share data.
Selected Consolidated Balance Sheet Data
The following table presents selected consolidated balance sheet data as of the dates indicated. All dollar amounts are presented in thousands.
Selected Operating Data
The following table presents selected non-financial operating data for the Company as of and for the periods indicated. This operating data is derived from the Company's internal records and management estimates.
As of the date of this prospectus, the Company's 22 operating projects include 14 utility-scale solar photovoltaic facilities and 8 onshore wind generation facilities. Capacity under construction of 1.4 GW includes the Mesquite Wind project (420 MW) located in Crockett County, Texas, the Cimarron Solar project (350 MW) located in Doña Ana County, New Mexico, and additional projects in earlier stages of construction across Texas and Arizona. The Company's development pipeline of 6.2 GW represents projects that have received internal approval for continued development and that the Company expects to reach construction commencement within the next three to five years, subject to permitting, power purchase agreement execution, financing, and other conditions.
Footnotes
(1) Adjusted EBITDA Reconciliation
Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net income (loss) plus (i) interest expense, net, (ii) income tax expense (benefit), (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) loss on extinguishment of debt, (vi) acquisition and transaction-related costs, and (vii) other non-recurring items. The Company presents Adjusted EBITDA because it is a key measure used by the Company's management and board of directors to understand and evaluate the Company's core operating performance and trends, to prepare and approve the Company's annual budget, and to develop short-term and long-term operational plans. In particular, the Company believes that the exclusion of the items eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the Company's business.
The Company's use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered an alternative to net income (loss) as a measure of operating performance or as an alternative to cash flows from operating activities as a measure of liquidity. The Company's calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. Other companies may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Investors should not rely on any single financial measure to evaluate the Company's business and should review Adjusted EBITDA alongside the Company's GAAP results.
The following table reconciles net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA for each of the periods indicated. All dollar amounts are presented in thousands.
Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Further, the amounts of certain adjustments described above may vary significantly from period to period.
(2) Pro Forma Per Share Information
Pro forma basic and diluted net income per share for the fiscal year ended December 31, 2021 and the three months ended March 31, 2022 give effect to the issuance and sale by the Company of 23,713,636 shares of common stock in the base offering at an assumed initial public offering price of $22.00 per share, after deducting the underwriting discount of 5.50% and estimated offering expenses payable by the Company. Pre-IPO shares outstanding totaled 100,000,000 shares of common stock on a fully diluted basis after giving effect to the conversion and reclassification of all outstanding equity interests into shares of common stock, par value $0.01 per share, in connection with the corporate reorganization transactions described under "Corporate Reorganization" elsewhere in this prospectus.
On a pro forma basis, assuming the base offering (without exercise of the underwriters' overallotment option), the total number of shares of common stock outstanding immediately following the completion of this offering would be 123,713,636 shares. If the underwriters exercise their overallotment option in full, the total number of shares of common stock issued in the offering would be 27,272,727 shares, and the total number of shares of common stock outstanding immediately following the completion of this offering would be 127,272,727 shares. The pro forma per share data presented in the table above reflects only the base offering and does not give effect to the exercise of the underwriters' overallotment option.
Pro forma basic net income per share is computed by dividing pro forma net income by the pro forma weighted-average number of shares of common stock outstanding during the period. Pro forma diluted net income per share is computed by dividing pro forma net income by the pro forma weighted-average number of shares of common stock outstanding during the period, adjusted for the dilutive effect of stock options and other equity-based awards.
(3) Pro Forma Balance Sheet Data
Pro forma balance sheet data as of March 31, 2022 gives effect to the following transactions as if they had occurred on March 31, 2022:
(a) the receipt of estimated net proceeds from the sale of 23,713,636 shares of common stock in the base primary offering at an assumed initial public offering price of $22.00 per share, resulting in gross proceeds of approximately $521,700,000 to the Company from the primary shares (not including secondary shares), less the underwriting discount of 5.50% (approximately $28,694,000) and estimated offering expenses of approximately $4,300,000, for estimated net proceeds to the Company of approximately $488,706,000;
(b) the application of approximately $200,000,000 of net proceeds to repay a portion of the outstanding borrowings under the Company's Term Loan B, including an estimated prepayment premium of 1.00% of the principal amount prepaid ($2,000,000), for a total cash outlay of $202,000,000 and a reduction in outstanding debt principal of $200,000,000;
(c) the application of approximately $100,000,000 of net proceeds to fund a portion of the construction costs of the Cimarron Solar project, a 350 MW solar photovoltaic generating facility located in Doña Ana County, New Mexico, which is expected to achieve commercial operation in the first quarter of 2025;
(d) the retention of the remaining net proceeds of approximately $186,706,000 (of which approximately $71,700,000 has been designated for general corporate purposes, including potential acquisitions, working capital, and capital expenditures, and the balance is expected to be used for additional debt reduction and project development activities); and
(e) the sale of 6,818,182 shares of common stock by Pinnacle Vista Capital Partners III, LP, the selling stockholder, at the assumed initial public offering price of $22.00 per share, for aggregate gross proceeds to the selling stockholder of approximately $150,000,000. The Company will not receive any of the proceeds from the sale of shares by the selling stockholder. The shares sold by the selling stockholder represent a portion of the shares of common stock currently held by Pinnacle Vista Capital Partners III, LP.
The pro forma adjustments reflected in the selected consolidated balance sheet data are based on estimates and assumptions that may differ from the actual amounts and the actual application of the net proceeds. See "Use of Proceeds" for additional information regarding the Company's intended use of the net proceeds from this offering.
(4) Debt Detail
As of December 31, 2021, the Company's total debt of approximately $1,710,000 (in thousands) was composed of corporate-level debt and project-finance debt, as described below:
Corporate-Level Debt
Corporate Revolving Credit Facility. The Company maintains a senior secured revolving credit facility (the "Corporate Revolving Credit Facility") with a syndicate of lenders, with Veltrano National Bank as Administrative Agent, providing for revolving credit commitments of up to $400,000,000. As of December 31, 2021, $115,000,000 was drawn under the Corporate Revolving Credit Facility. The Corporate Revolving Credit Facility matures in January 2027 and bears interest at a rate per annum equal to, at the Company's election, either (a) an adjusted term SOFR rate plus an applicable margin ranging from 1.75% to 2.50% per annum, or (b) a base rate plus an applicable margin ranging from 0.75% to 1.50% per annum, in each case based on the Company's consolidated total net leverage ratio.
Term Loan B. The Company is party to a term loan facility (the "Term Loan B") with a syndicate of lenders, with Veltrano National Bank as Administrative Agent, providing for a term loan in the original principal amount of $650,000,000. As of December 31, 2021, $612,500,000 was outstanding under the Term Loan B. The Term Loan B matures in January 2029 and bears interest at a rate per annum equal to adjusted term SOFR plus 3.25%, subject to a SOFR floor of 0.50%. The Term Loan B amortizes at 1.00% per annum in equal quarterly installments, with the remaining principal balance payable at maturity.
Project-Finance Debt
Mesquite Wind Construction-to-Term Facility. Mesquite Wind Holdings LLC, a wholly owned subsidiary of the Company, is party to a construction-to-term credit facility (the "Mesquite Wind Facility") with Prairie Commercial Bank, N.A. as Administrative Agent, providing for construction loan commitments of up to $165,000,000 to finance the development and construction of the Mesquite Wind project, a 420 MW onshore wind generation facility located in Crockett County, Texas. As of December 31, 2021, $142,300,000 was outstanding under the Mesquite Wind Facility. The construction loan under the Mesquite Wind Facility is expected to convert to a term loan upon the satisfaction of certain conversion conditions (including achievement of commercial operation), with a target conversion date of December 2024 and a final maturity date of December 2042.
Cimarron Solar Construction-to-Term Facility. Cimarron Solar Holdings LLC, a wholly owned subsidiary of the Company, is party to a construction-to-term credit facility (the "Cimarron Solar Facility") with Prairie Commercial Bank, N.A. as Administrative Agent, providing for construction loan commitments of up to $143,000,000 to finance the development and construction of the Cimarron Solar project, a 350 MW solar photovoltaic generating facility located in Doña Ana County, New Mexico. As of December 31, 2021, $60,200,000 was outstanding under the Cimarron Solar Facility. The construction loan under the Cimarron Solar Facility is expected to convert to a term loan upon the satisfaction of certain conversion conditions, with a target conversion date of March 2025 and a final maturity date of March 2045.
Tax-Equity Financing
Solaris West Tax-Equity Partnership. The Company, through its wholly owned subsidiary Solaris West Tax-Equity Holdings LLC, has entered into a tax-equity partnership arrangement with Veltara Basin Financial LLC (the "Solaris West Partnership"), pursuant to which Veltara Basin Financial LLC has committed to invest up to $280,000,000 in a portfolio of solar photovoltaic generating facilities developed by the Company. As of December 31, 2021, the full $280,000,000 had been funded by Veltara Basin Financial LLC. Under the terms of the Solaris West Partnership, the allocation of tax benefits (including investment tax credits and accelerated depreciation) is expected to "flip" from Veltara Basin Financial LLC to the Company in 2028, at which point the Company will have the option to acquire Veltara Basin Financial LLC's remaining interest in the partnership at fair market value. The obligations under the Solaris West Partnership are non-recourse to the Company and are secured solely by the assets of the Solaris West Partnership.
See "Description of Indebtedness" elsewhere in this prospectus for further information regarding the terms of the Company's outstanding indebtedness.
Key Valuation Context
At the assumed midpoint initial public offering price of $22.00 per share (before giving effect to any exercise of the underwriters' overallotment option), the Company's implied equity and enterprise valuations are as follows:
Implied Pre-Money Equity Valuation. The implied pre-money equity valuation is approximately $2,200,000,000, based on 100,000,000 pre-IPO shares of common stock outstanding (on a fully diluted, post-conversion and reclassification basis) multiplied by the assumed initial public offering price of $22.00 per share.
Implied Post-Money Equity Valuation (Base Offering). The implied post-money equity valuation is approximately $2,721,700,000, based on 123,713,636 shares of common stock outstanding immediately following the completion of the base offering (including shares held by the selling stockholder) multiplied by the assumed initial public offering price of $22.00 per share.
Enterprise Value (Fiscal Year 2021). The implied enterprise value is approximately $4,246,700,000, calculated as the sum of the implied post-money equity valuation of approximately $2,721,700,000 plus total debt as of December 31, 2021 of approximately $1,710,000,000, less cash and cash equivalents as of December 31, 2021 of approximately $185,000,000.
EV / Adjusted EBITDA Multiple (Fiscal Year 2021). Based on the implied enterprise value and the Company's Adjusted EBITDA for the fiscal year ended December 31, 2021 of $218,600,000 (in thousands, as set forth above), the implied enterprise value-to-Adjusted EBITDA multiple is approximately 19.4x.
The foregoing valuation and multiple data are presented for informational purposes only and are based on the assumed initial public offering price of $22.00 per share and historical financial data. The actual initial public offering price may be above or below the assumed price, and the Company's actual enterprise value and valuation multiples may differ materially from those described above. Investors are cautioned not to place undue reliance on these illustrative metrics. See "Risk Factors" for a discussion of risks and uncertainties that may cause the Company's actual results, performance, or financial condition to differ materially from the expectations reflected in this prospectus.
The Company qualifies as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"), because the Company's total annual gross revenue for the fiscal year ended December 31, 2021 of $487,300,000 did not exceed the $1.235 billion revenue threshold applicable to emerging growth companies. As an emerging growth company, the Company has elected to take advantage of certain reduced reporting and disclosure requirements available to emerging growth companies under the JOBS Act, including, without limitation, (i) the exemption from the requirement to provide an auditor's attestation report on the Company's internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (ii) reduced executive compensation disclosure, and (iii) the exemption from the requirements to hold a non-binding advisory vote on executive compensation and to disclose any golden parachute payments not previously approved. The Company will remain an emerging growth company until the earliest of (a) the last day of the fiscal year in which the Company's total annual gross revenue equals or exceeds $1.235 billion, (b) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (c) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the preceding three-year period, or (d) the date on which the Company is deemed to be a "large accelerated filer" under the rules of the Securities and Exchange Commission.
Cross-References
For a more detailed discussion of the factors and trends affecting the Company's financial condition and results of operations, including discussions of revenue growth, operating expenses, capital expenditures, and liquidity, you should read "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
For a presentation of the Company's capitalization as of March 31, 2022 and on a pro forma basis after giving effect to the transactions described in this prospectus, you should read "Capitalization" included elsewhere in this prospectus.
For a discussion of the dilutive effect of this offering on new investors and the difference between the initial public offering price per share and the pro forma net tangible book value per share, you should read "Dilution" included elsewhere in this prospectus.
For details regarding the Company's intended use of the estimated net proceeds from this offering, including the application of approximately $200,000,000 to repay a portion of the Term Loan B, approximately $100,000,000 to fund construction of the Cimarron Solar project, and approximately $71,700,000 for general corporate purposes, you should read "Use of Proceeds" included elsewhere in this prospectus.
The Company's consolidated financial statements for the fiscal years ended December 31, 2019, December 31, 2020, and December 31, 2021 were audited by Ashford & Pemberton LLP, the Company's independent registered public accounting firm. The audit was led by Gregory Sondheim, lead engagement partner, and Irene Valdez, audit manager. The report of Ashford & Pemberton LLP on such consolidated financial statements is included elsewhere in this prospectus. See "Experts" for additional information.
| Year Ended December 31, 2019 | Year Ended December 31, 2020 | Year Ended December 31, 2021 | Three Months Ended March 31, 2021 (Unaudited) | Three Months Ended March 31, 2022 (Unaudited) |
| Revenue | $312,800 | $401,500 | $487,300 | $108,400 | $131,400 |
| Cost of revenue (exclusive of depreciation and amortization shown below) | (174,200) | (218,600) | (258,100) | (58,700) | (69,200) |
| Gross profit | 138,600 | 182,900 | 229,200 | 49,700 | 62,200 |
Operating expenses:
| General and administrative | (38,900) | (42,300) | (48,700) | (11,200) | (13,600) |
| Depreciation and amortization | (94,800) | (108,400) | (121,600) | (28,900) | (33,100) |
| Acquisition and transaction-related costs | (6,200) | (3,800) | (2,100) | (400) | (1,700) |
| Total operating expenses | (139,900) | (154,500) | (172,400) | (40,500) | (48,400) |
| Income (loss) from operations | (1,300) | 28,400 | 56,800 | 9,200 | 13,800 |
| Interest expense, net | (58,700) | (52,300) | (47,600) | (11,200) | (12,100) |
| Loss on extinguishment of debt | (4,100) | — | (1,200) | — | — |
| Other income (expense), net | 1,500 | 900 | 2,400 | 600 | 300 |
| Income (loss) before income taxes | (62,600) | (23,000) | 10,400 | (1,400) | 2,000 |
| Income tax expense (benefit) | 40,200 | 37,100 | (31,300) | (9,500) | (6,300) |
| Net income (loss) | $(22,400) | $14,100 | $41,700 | $8,100 | $8,300 |
Net income (loss) per share attributable to common stockholders:
| Basic | $(0.22) | $0.14 | $0.42 | $0.08 | $0.08 |
| Diluted | $(0.22) | $0.14 | $0.41 | $0.08 | $0.08 |
Weighted-average shares used in computing net income (loss) per share:
| Basic | 100,000,000 | 100,000,000 | 100,000,000 | 100,000,000 | 100,000,000 |
| Diluted | 100,000,000 | 101,200,000 | 101,800,000 | 101,400,000 | 101,900,000 |
Pro forma net income per share (unaudited)(2):
| Basic | — | — | $0.34 | — | $0.07 |
| Diluted | — | — | $0.33 | — | $0.07 |
Other Financial Data:
| Adjusted EBITDA (non-GAAP)(1) | $138,700 | $179,200 | $218,600 | $50,100 | $59,800 |
| Capital expenditures | (286,500) | (341,200) | (412,700) | (72,300) | (108,600) |
| As of December 31, 2019 | As of December 31, 2020 | As of December 31, 2021 | As of March 31, 2022 (Unaudited) | Pro Forma As of March 31, 2022 (Unaudited)(3) |
Assets:
| Cash and cash equivalents | $94,200 | $127,800 | $185,000 | $162,400 | $434,100 |
| Restricted cash | 42,100 | 58,600 | 74,300 | 78,900 | 78,900 |
| Accounts receivable, net | 38,500 | 49,700 | 61,200 | 54,800 | 54,800 |
| Property, plant, and equipment, net | 2,108,400 | 2,572,100 | 3,186,700 | 3,328,500 | 3,328,500 |
| Intangible assets, net | 178,300 | 214,600 | 252,400 | 261,800 | 261,800 |
| Other assets | 148,500 | 157,200 | 180,400 | 183,600 | 183,600 |
| Total assets | $2,610,000 | $3,180,000 | $3,940,000 | $4,070,000 | $4,341,700 |
Liabilities and Stockholders' Equity:
| Current portion of long-term debt | $62,400 | $78,100 | $94,200 | $96,800 | $96,800 |
| Accounts payable and accrued liabilities | 86,300 | 101,400 | 124,700 | 138,200 | 138,200 |
| Long-term debt, net of current portion(4) | 1,217,600 | 1,441,900 | 1,615,800 | 1,643,200 | 1,441,200 |
| Deferred tax liabilities, net | 198,400 | 236,700 | 268,100 | 274,600 | 274,600 |
| Other long-term liabilities | 124,800 | 143,200 | 168,300 | 172,900 | 172,900 |
| Total liabilities | $1,689,500 | $2,001,300 | $2,271,100 | $2,325,700 | $2,123,700 |
| Total debt (including current portion)(4) | $1,280,000 | $1,520,000 | $1,710,000 | $1,740,000 | $1,538,000 |
| Total stockholders' equity / members' equity | $920,500 | $1,178,700 | $1,668,900 | $1,744,300 | $2,218,000 |
| FY 2019 | FY 2020 | FY 2021 | Q1 2022 |
| Operating capacity (GW) | 2.1 | 2.9 | 3.8 | 3.8 |
| Number of operating projects | 14 | 18 | 22 | 22 |
| States of operation | TX, NM, AZ | TX, NM, AZ, CA | TX, NM, AZ, CA, OK | TX, NM, AZ, CA, OK |
| Capacity under construction (GW) | 0.6 | 0.9 | 1.4 | 1.4 |
| Development pipeline (GW) | 3.4 | 4.1 | 5.8 | 6.2 |
| Number of employees (approximate) | 640 | 870 | 1,140 | 1,240 |
| Generation (GWh) | 4,180 | 5,940 | 7,820 | 2,140 |
| Weighted-average remaining PPA term (years) | 17.2 | 16.8 | 16.1 | 15.9 |
| Year Ended December 31, 2019 | Year Ended December 31, 2020 | Year Ended December 31, 2021 | Three Months Ended March 31, 2021 (Unaudited) | Three Months Ended March 31, 2022 (Unaudited) |
| Net income (loss) | $(22,400) | $14,100 | $41,700 | $8,100 | $8,300 |
Add back:
| Interest expense, net | 58,700 | 52,300 | 47,600 | 11,200 | 12,100 |
| Income tax expense (benefit) | (40,200) | (37,100) | 31,300 | 9,500 | 6,300 |
| Depreciation and amortization | 94,800 | 108,400 | 121,600 | 28,900 | 33,100 |
| Stock-based compensation expense | 27,400 | 31,800 | 36,500 | 8,200 | 9,400 |
| Loss on extinguishment of debt | 4,100 | — | 1,200 | — | — |
| Acquisition and transaction-related costs | 6,200 | 3,800 | 2,100 | 400 | 1,700 |
| Other non-recurring items | 10,100 | 5,900 | (63,400) | (16,200) | (11,100) |
| Adjusted EBITDA | $138,700 | $179,200 | $218,600 | $50,100 | $59,800 |
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes thereto included elsewhere in this prospectus. The selected consolidated financial data presented in this section is not intended to replace the consolidated financial statements and is qualified in its entirety by reference to the consolidated financial statements and related notes included elsewhere in this prospectus.
The consolidated statements of operations data for the fiscal years ended December 31, 2019, December 31, 2020, and December 31, 2021 and the consolidated balance sheet data as of December 31, 2020 and December 31, 2021 are derived from the audited consolidated financial statements of Calloway-Briggs Renewables Inc. (the "Company," "we," "us," or "our") included elsewhere in this prospectus, which were audited by Ashford & Pemberton LLP, the Company's independent registered public accounting firm. The report of Ashford & Pemberton LLP on the consolidated financial statements for such periods is included elsewhere in this prospectus. The consolidated balance sheet data as of December 31, 2019 is derived from the audited consolidated financial statements for such period, which are not included in this prospectus.
The consolidated statements of operations data for the three months ended March 31, 2022 and March 31, 2021, and the consolidated balance sheet data as of March 31, 2022, are derived from the unaudited condensed consolidated interim financial statements of the Company included elsewhere in this prospectus. The unaudited interim financial data has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, includes all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial information set forth in those statements. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022, or for any other future annual or interim period. Historical results are not necessarily indicative of results to be expected in the future.
The Company was founded in 2014 by Garrett Calloway and Elaine Briggs. The Company is a Delaware corporation headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746. Since inception, the Company has grown its portfolio of renewable energy generation assets through a combination of organic development, strategic acquisitions, and investment in large-scale solar and wind projects across the southwestern and south-central United States. The Company's operations are principally comprised of the development, construction, ownership, and operation of utility-scale renewable energy generation facilities, including solar photovoltaic and onshore wind projects.
Selected Consolidated Statements of Operations Data
The following table presents selected consolidated statements of operations data for each of the periods indicated. All dollar amounts are presented in thousands, except per share data.
Selected Consolidated Balance Sheet Data
The following table presents selected consolidated balance sheet data as of the dates indicated. All dollar amounts are presented in thousands.
Selected Operating Data
The following table presents selected non-financial operating data for the Company as of and for the periods indicated. This operating data is derived from the Company's internal records and management estimates.
As of the date of this prospectus, the Company's 22 operating projects include 14 utility-scale solar photovoltaic facilities and 8 onshore wind generation facilities. Capacity under construction of 1.4 GW includes the Mesquite Wind project (420 MW) located in Crockett County, Texas, the Cimarron Solar project (350 MW) located in Doña Ana County, New Mexico, and additional projects in earlier stages of construction across Texas and Arizona. The Company's development pipeline of 6.2 GW represents projects that have received internal approval for continued development and that the Company expects to reach construction commencement within the next three to five years, subject to permitting, power purchase agreement execution, financing, and other conditions.
Footnotes
(1) Adjusted EBITDA Reconciliation
Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net income (loss) plus (i) interest expense, net, (ii) income tax expense (benefit), (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) loss on extinguishment of debt, (vi) acquisition and transaction-related costs, and (vii) other non-recurring items. The Company presents Adjusted EBITDA because it is a key measure used by the Company's management and board of directors to understand and evaluate the Company's core operating performance and trends, to prepare and approve the Company's annual budget, and to develop short-term and long-term operational plans. In particular, the Company believes that the exclusion of the items eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the Company's business.
The Company's use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered an alternative to net income (loss) as a measure of operating performance or as an alternative to cash flows from operating activities as a measure of liquidity. The Company's calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. Other companies may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Investors should not rely on any single financial measure to evaluate the Company's business and should review Adjusted EBITDA alongside the Company's GAAP results.
The following table reconciles net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA for each of the periods indicated. All dollar amounts are presented in thousands.
Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Further, the amounts of certain adjustments described above may vary significantly from period to period.
(2) Pro Forma Per Share Information
Pro forma basic and diluted net income per share for the fiscal year ended December 31, 2021 and the three months ended March 31, 2022 give effect to the issuance and sale by the Company of 23,713,636 shares of common stock in the base offering at an assumed initial public offering price of $22.00 per share, after deducting the underwriting discount of 5.50% and estimated offering expenses payable by the Company. Pre-IPO shares outstanding totaled 100,000,000 shares of common stock on a fully diluted basis after giving effect to the conversion and reclassification of all outstanding equity interests into shares of common stock, par value $0.01 per share, in connection with the corporate reorganization transactions described under "Corporate Reorganization" elsewhere in this prospectus.
On a pro forma basis, assuming the base offering (without exercise of the underwriters' overallotment option), the total number of shares of common stock outstanding immediately following the completion of this offering would be 123,713,636 shares. If the underwriters exercise their overallotment option in full, the total number of shares of common stock issued in the offering would be 27,272,727 shares, and the total number of shares of common stock outstanding immediately following the completion of this offering would be 127,272,727 shares. The pro forma per share data presented in the table above reflects only the base offering and does not give effect to the exercise of the underwriters' overallotment option.
Pro forma basic net income per share is computed by dividing pro forma net income by the pro forma weighted-average number of shares of common stock outstanding during the period. Pro forma diluted net income per share is computed by dividing pro forma net income by the pro forma weighted-average number of shares of common stock outstanding during the period, adjusted for the dilutive effect of stock options and other equity-based awards.
(3) Pro Forma Balance Sheet Data
Pro forma balance sheet data as of March 31, 2022 gives effect to the following transactions as if they had occurred on March 31, 2022:
(a) the receipt of estimated net proceeds from the sale of 23,713,636 shares of common stock in the base primary offering at an assumed initial public offering price of $22.00 per share, resulting in gross proceeds of approximately $521,700,000 to the Company from the primary shares (not including secondary shares), less the underwriting discount of 5.50% (approximately $28,694,000) and estimated offering expenses of approximately $4,300,000, for estimated net proceeds to the Company of approximately $488,706,000;
(b) the application of approximately $200,000,000 of net proceeds to repay a portion of the outstanding borrowings under the Company's Term Loan B, including an estimated prepayment premium of 1.00% of the principal amount prepaid ($2,000,000), for a total cash outlay of $202,000,000 and a reduction in outstanding debt principal of $200,000,000;
(c) the application of approximately $100,000,000 of net proceeds to fund a portion of the construction costs of the Cimarron Solar project, a 350 MW solar photovoltaic generating facility located in Doña Ana County, New Mexico, which is expected to achieve commercial operation in the first quarter of 2025;
(d) the retention of the remaining net proceeds of approximately $186,706,000 (of which approximately $71,700,000 has been designated for general corporate purposes, including potential acquisitions, working capital, and capital expenditures, and the balance is expected to be used for additional debt reduction and project development activities); and
(e) the sale of 6,818,182 shares of common stock by Pinnacle Vista Capital Partners III, LP, the selling stockholder, at the assumed initial public offering price of $22.00 per share, for aggregate gross proceeds to the selling stockholder of approximately $150,000,000. The Company will not receive any of the proceeds from the sale of shares by the selling stockholder. The shares sold by the selling stockholder represent a portion of the shares of common stock currently held by Pinnacle Vista Capital Partners III, LP.
The pro forma adjustments reflected in the selected consolidated balance sheet data are based on estimates and assumptions that may differ from the actual amounts and the actual application of the net proceeds. See "Use of Proceeds" for additional information regarding the Company's intended use of the net proceeds from this offering.
(4) Debt Detail
As of December 31, 2021, the Company's total debt of approximately $1,710,000 (in thousands) was composed of corporate-level debt and project-finance debt, as described below:
Corporate-Level Debt
Corporate Revolving Credit Facility. The Company maintains a senior secured revolving credit facility (the "Corporate Revolving Credit Facility") with a syndicate of lenders, with Veltrano National Bank as Administrative Agent, providing for revolving credit commitments of up to $400,000,000. As of December 31, 2021, $115,000,000 was drawn under the Corporate Revolving Credit Facility. The Corporate Revolving Credit Facility matures in January 2027 and bears interest at a rate per annum equal to, at the Company's election, either (a) an adjusted term SOFR rate plus an applicable margin ranging from 1.75% to 2.50% per annum, or (b) a base rate plus an applicable margin ranging from 0.75% to 1.50% per annum, in each case based on the Company's consolidated total net leverage ratio.
Term Loan B. The Company is party to a term loan facility (the "Term Loan B") with a syndicate of lenders, with Veltrano National Bank as Administrative Agent, providing for a term loan in the original principal amount of $650,000,000. As of December 31, 2021, $612,500,000 was outstanding under the Term Loan B. The Term Loan B matures in January 2029 and bears interest at a rate per annum equal to adjusted term SOFR plus 3.25%, subject to a SOFR floor of 0.50%. The Term Loan B amortizes at 1.00% per annum in equal quarterly installments, with the remaining principal balance payable at maturity.
Project-Finance Debt
Mesquite Wind Construction-to-Term Facility. Mesquite Wind Holdings LLC, a wholly owned subsidiary of the Company, is party to a construction-to-term credit facility (the "Mesquite Wind Facility") with Prairie Commercial Bank, N.A. as Administrative Agent, providing for construction loan commitments of up to $165,000,000 to finance the development and construction of the Mesquite Wind project, a 420 MW onshore wind generation facility located in Crockett County, Texas. As of December 31, 2021, $142,300,000 was outstanding under the Mesquite Wind Facility. The construction loan under the Mesquite Wind Facility is expected to convert to a term loan upon the satisfaction of certain conversion conditions (including achievement of commercial operation), with a target conversion date of December 2024 and a final maturity date of December 2042.
Cimarron Solar Construction-to-Term Facility. Cimarron Solar Holdings LLC, a wholly owned subsidiary of the Company, is party to a construction-to-term credit facility (the "Cimarron Solar Facility") with Prairie Commercial Bank, N.A. as Administrative Agent, providing for construction loan commitments of up to $143,000,000 to finance the development and construction of the Cimarron Solar project, a 350 MW solar photovoltaic generating facility located in Doña Ana County, New Mexico. As of December 31, 2021, $60,200,000 was outstanding under the Cimarron Solar Facility. The construction loan under the Cimarron Solar Facility is expected to convert to a term loan upon the satisfaction of certain conversion conditions, with a target conversion date of March 2025 and a final maturity date of March 2045.
Tax-Equity Financing
Solaris West Tax-Equity Partnership. The Company, through its wholly owned subsidiary Solaris West Tax-Equity Holdings LLC, has entered into a tax-equity partnership arrangement with Veltara Basin Financial LLC (the "Solaris West Partnership"), pursuant to which Veltara Basin Financial LLC has committed to invest up to $280,000,000 in a portfolio of solar photovoltaic generating facilities developed by the Company. As of December 31, 2021, the full $280,000,000 had been funded by Veltara Basin Financial LLC. Under the terms of the Solaris West Partnership, the allocation of tax benefits (including investment tax credits and accelerated depreciation) is expected to "flip" from Veltara Basin Financial LLC to the Company in 2028, at which point the Company will have the option to acquire Veltara Basin Financial LLC's remaining interest in the partnership at fair market value. The obligations under the Solaris West Partnership are non-recourse to the Company and are secured solely by the assets of the Solaris West Partnership.
See "Description of Indebtedness" elsewhere in this prospectus for further information regarding the terms of the Company's outstanding indebtedness.
Key Valuation Context
At the assumed midpoint initial public offering price of $22.00 per share (before giving effect to any exercise of the underwriters' overallotment option), the Company's implied equity and enterprise valuations are as follows:
Implied Pre-Money Equity Valuation. The implied pre-money equity valuation is approximately $2,200,000,000, based on 100,000,000 pre-IPO shares of common stock outstanding (on a fully diluted, post-conversion and reclassification basis) multiplied by the assumed initial public offering price of $22.00 per share.
Implied Post-Money Equity Valuation (Base Offering). The implied post-money equity valuation is approximately $2,721,700,000, based on 123,713,636 shares of common stock outstanding immediately following the completion of the base offering (including shares held by the selling stockholder) multiplied by the assumed initial public offering price of $22.00 per share.
Enterprise Value (Fiscal Year 2021). The implied enterprise value is approximately $4,246,700,000, calculated as the sum of the implied post-money equity valuation of approximately $2,721,700,000 plus total debt as of December 31, 2021 of approximately $1,710,000,000, less cash and cash equivalents as of December 31, 2021 of approximately $185,000,000.
EV / Adjusted EBITDA Multiple (Fiscal Year 2021). Based on the implied enterprise value and the Company's Adjusted EBITDA for the fiscal year ended December 31, 2021 of $218,600,000 (in thousands, as set forth above), the implied enterprise value-to-Adjusted EBITDA multiple is approximately 19.4x.
The foregoing valuation and multiple data are presented for informational purposes only and are based on the assumed initial public offering price of $22.00 per share and historical financial data. The actual initial public offering price may be above or below the assumed price, and the Company's actual enterprise value and valuation multiples may differ materially from those described above. Investors are cautioned not to place undue reliance on these illustrative metrics. See "Risk Factors" for a discussion of risks and uncertainties that may cause the Company's actual results, performance, or financial condition to differ materially from the expectations reflected in this prospectus.
The Company qualifies as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"), because the Company's total annual gross revenue for the fiscal year ended December 31, 2021 of $487,300,000 did not exceed the $1.235 billion revenue threshold applicable to emerging growth companies. As an emerging growth company, the Company has elected to take advantage of certain reduced reporting and disclosure requirements available to emerging growth companies under the JOBS Act, including, without limitation, (i) the exemption from the requirement to provide an auditor's attestation report on the Company's internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (ii) reduced executive compensation disclosure, and (iii) the exemption from the requirements to hold a non-binding advisory vote on executive compensation and to disclose any golden parachute payments not previously approved. The Company will remain an emerging growth company until the earliest of (a) the last day of the fiscal year in which the Company's total annual gross revenue equals or exceeds $1.235 billion, (b) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (c) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the preceding three-year period, or (d) the date on which the Company is deemed to be a "large accelerated filer" under the rules of the Securities and Exchange Commission.
Cross-References
For a more detailed discussion of the factors and trends affecting the Company's financial condition and results of operations, including discussions of revenue growth, operating expenses, capital expenditures, and liquidity, you should read "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
For a presentation of the Company's capitalization as of March 31, 2022 and on a pro forma basis after giving effect to the transactions described in this prospectus, you should read "Capitalization" included elsewhere in this prospectus.
For a discussion of the dilutive effect of this offering on new investors and the difference between the initial public offering price per share and the pro forma net tangible book value per share, you should read "Dilution" included elsewhere in this prospectus.
For details regarding the Company's intended use of the estimated net proceeds from this offering, including the application of approximately $200,000,000 to repay a portion of the Term Loan B, approximately $100,000,000 to fund construction of the Cimarron Solar project, and approximately $71,700,000 for general corporate purposes, you should read "Use of Proceeds" included elsewhere in this prospectus.
The Company's consolidated financial statements for the fiscal years ended December 31, 2019, December 31, 2020, and December 31, 2021 were audited by Ashford & Pemberton LLP, the Company's independent registered public accounting firm. The audit was led by Gregory Sondheim, lead engagement partner, and Irene Valdez, audit manager. The report of Ashford & Pemberton LLP on such consolidated financial statements is included elsewhere in this prospectus. See "Experts" for additional information.
Year Ended December 31, 2019 | Year Ended December 31, 2020 | Year Ended December 31, 2021 | Three Months Ended March 31, 2021 (Unaudited) | Three Months Ended March 31, 2022 (Unaudited)
Revenue | $312,800 | $401,500 | $487,300 | $108,400 | $131,400
Cost of revenue (exclusive of depreciation and amortization shown below) | (174,200) | (218,600) | (258,100) | (58,700) | (69,200)
Gross profit | 138,600 | 182,900 | 229,200 | 49,700 | 62,200
Operating expenses:
General and administrative | (38,900) | (42,300) | (48,700) | (11,200) | (13,600)
Depreciation and amortization | (94,800) | (108,400) | (121,600) | (28,900) | (33,100)
Acquisition and transaction-related costs | (6,200) | (3,800) | (2,100) | (400) | (1,700)
Total operating expenses | (139,900) | (154,500) | (172,400) | (40,500) | (48,400)
Income (loss) from operations | (1,300) | 28,400 | 56,800 | 9,200 | 13,800
Interest expense, net | (58,700) | (52,300) | (47,600) | (11,200) | (12,100)
Loss on extinguishment of debt | (4,100) | — | (1,200) | — | —
Other income (expense), net | 1,500 | 900 | 2,400 | 600 | 300
Income (loss) before income taxes | (62,600) | (23,000) | 10,400 | (1,400) | 2,000
Income tax expense (benefit) | 40,200 | 37,100 | (31,300) | (9,500) | (6,300)
Net income (loss) | $(22,400) | $14,100 | $41,700 | $8,100 | $8,300
Net income (loss) per share attributable to common stockholders:
Basic | $(0.22) | $0.14 | $0.42 | $0.08 | $0.08
Diluted | $(0.22) | $0.14 | $0.41 | $0.08 | $0.08
Weighted-average shares used in computing net income (loss) per share:
Basic | 100,000,000 | 100,000,000 | 100,000,000 | 100,000,000 | 100,000,000
Diluted | 100,000,000 | 101,200,000 | 101,800,000 | 101,400,000 | 101,900,000
Pro forma net income per share (unaudited)(2):
Basic | — | — | $0.34 | — | $0.07
Diluted | — | — | $0.33 | — | $0.07
Other Financial Data:
Adjusted EBITDA (non-GAAP)(1) | $138,700 | $179,200 | $218,600 | $50,100 | $59,800
Capital expenditures | (286,500) | (341,200) | (412,700) | (72,300) | (108,600)
As of December 31, 2019 | As of December 31, 2020 | As of December 31, 2021 | As of March 31, 2022 (Unaudited) | Pro Forma As of March 31, 2022 (Unaudited)(3)
Assets:
Cash and cash equivalents | $94,200 | $127,800 | $185,000 | $162,400 | $434,100
Restricted cash | 42,100 | 58,600 | 74,300 | 78,900 | 78,900
Accounts receivable, net | 38,500 | 49,700 | 61,200 | 54,800 | 54,800
Property, plant, and equipment, net | 2,108,400 | 2,572,100 | 3,186,700 | 3,328,500 | 3,328,500
Intangible assets, net | 178,300 | 214,600 | 252,400 | 261,800 | 261,800
Other assets | 148,500 | 157,200 | 180,400 | 183,600 | 183,600
Total assets | $2,610,000 | $3,180,000 | $3,940,000 | $4,070,000 | $4,341,700
Liabilities and Stockholders' Equity:
Current portion of long-term debt | $62,400 | $78,100 | $94,200 | $96,800 | $96,800
Accounts payable and accrued liabilities | 86,300 | 101,400 | 124,700 | 138,200 | 138,200
Long-term debt, net of current portion(4) | 1,217,600 | 1,441,900 | 1,615,800 | 1,643,200 | 1,441,200
Deferred tax liabilities, net | 198,400 | 236,700 | 268,100 | 274,600 | 274,600
Other long-term liabilities | 124,800 | 143,200 | 168,300 | 172,900 | 172,900
Total liabilities | $1,689,500 | $2,001,300 | $2,271,100 | $2,325,700 | $2,123,700
Total debt (including current portion)(4) | $1,280,000 | $1,520,000 | $1,710,000 | $1,740,000 | $1,538,000
Total stockholders' equity / members' equity | $920,500 | $1,178,700 | $1,668,900 | $1,744,300 | $2,218,000
FY 2019 | FY 2020 | FY 2021 | Q1 2022
Operating capacity (GW) | 2.1 | 2.9 | 3.8 | 3.8
Number of operating projects | 14 | 18 | 22 | 22
States of operation | TX, NM, AZ | TX, NM, AZ, CA | TX, NM, AZ, CA, OK | TX, NM, AZ, CA, OK
Capacity under construction (GW) | 0.6 | 0.9 | 1.4 | 1.4
Development pipeline (GW) | 3.4 | 4.1 | 5.8 | 6.2
Number of employees (approximate) | 640 | 870 | 1,140 | 1,240
Generation (GWh) | 4,180 | 5,940 | 7,820 | 2,140
Weighted-average remaining PPA term (years) | 17.2 | 16.8 | 16.1 | 15.9
Year Ended December 31, 2019 | Year Ended December 31, 2020 | Year Ended December 31, 2021 | Three Months Ended March 31, 2021 (Unaudited) | Three Months Ended March 31, 2022 (Unaudited)
Net income (loss) | $(22,400) | $14,100 | $41,700 | $8,100 | $8,300
Add back:
Interest expense, net | 58,700 | 52,300 | 47,600 | 11,200 | 12,100
Income tax expense (benefit) | (40,200) | (37,100) | 31,300 | 9,500 | 6,300
Depreciation and amortization | 94,800 | 108,400 | 121,600 | 28,900 | 33,100
Stock-based compensation expense | 27,400 | 31,800 | 36,500 | 8,200 | 9,400
Loss on extinguishment of debt | 4,100 | — | 1,200 | — | —
Acquisition and transaction-related costs | 6,200 | 3,800 | 2,100 | 400 | 1,700
Other non-recurring items | 10,100 | 5,900 | (63,400) | (16,200) | (11,100)
Adjusted EBITDA | $138,700 | $179,200 | $218,600 | $50,100 | $59,800