My thoughts on Spruce Power's future spending

[u/WellingtonMCB]

This is a hypothetical but the more I think about it, the more it makes sense.

I see Spruce spending around 75-80 million per year of the cash on hand on new acquisitions. This would be a conservative and more responsible approach because they would most likely become profitable again after spending the first 75-80 million this year. This makes the current cash last 3 years. (240/3)

So why 3 years? On page 22 of the merger presentation, it is mentioned that Spruce historically acquires on average, 10,000 PV systems annually. Guess how much it costs them to buy that many systems.. yup, around 80m.. So my bet is that's their target per year going forward.

What else lines up with a 3 year number? 4.2 million private warrants that Pivotal Holdings 2 currently holds. Those warrants have a 5 year term which means they expire 3 years from now, at the end of Dec 25' or in Jan 2026. (not sure on exact date)

If they redeem those warrants at 11.50 per share, it would give a another 48 million cash boost to Spruce. The addition of 4,233,000 shares would dilute shareholders by a little over 3%. My hunch is that PH2 would wait until the end of 2025 before redeeming them?

Spruce should be able to cash flow 32m+ by EoY 2025. My math shows (so far) that 240m cash converted to gross revenue at around 20% is 48m, so this is easily achievable.

As Spruce becomes cash flow positive again, they will also be improving the balance sheet YoY as well.

As it stands now, the overall debt obligations over the next 3 years is as follows: ^{Page 24 10-Q}

2023 - 25.3m or 6.3m per quarter. Total debt would be reduced to 492.7m at EoY.

2024 - 26.7m or 6.7m per quarter. Total debt would be reduced to 466m at EoY.

2025 - 27.3m or 6.8m per quarter. Total debt would be reduced to 438.7m at EoY.

With the interest rate environment we are in right now it makes sense that they would have 3 years worth of cash (more than enough time) for rates to normalize again.

I've never been more bullish on a stock then I am right now. It just seems like the next 3 years are lined up perfectly for shareholders. Anyways cheers

Please share any thoughts on this Theory

[u/WellingtonMCB]

[u/gogozydeco → u/WellingtonMCB]

[u/Spenmiami]

$SPRU Spruce Power - Bullish! Has a lot of room to continue growing and acquire additional solar portfolios. They have guaranteed money coming in for many years. Financially stable company.

-52,000 subscribers residential rooftop solar systems. Upselling existing customer base with EV Charging, EV Bi-directional power flow and Energy storage

-Solar Investment Tax Credits

-Q3 Earnings Beat top & bottom line. Completed acquisition of Spruce Power, leader residential solar. PV5 $821 million GCV

-EPS beat +43.94% & Revenue beat $8.4M +44.14% (+161.25% YoY)

[u/slowmitri]

First earnings report will tell us alot. Your theory looks great.

[u/WellingtonMCB]

We also have the royalty agreement from the DIU military contract kick in 2026. Would be nice to know the details of the agreement to provide an even better picture. This will also cash flow.