Hannon Armstrong Sustainable Infrastructure Capital, Inc.
("Hannon Armstrong," "we," "our" or the "Company") (NYSE: HASI), a
leading investor in climate solutions, today reported results for
the fourth quarter and full year of 2021.
Financial Highlights
- Delivered $1.51 GAAP EPS on a fully diluted basis in 2021,
compared with $1.10 in 2020
- Delivered $1.88 Distributable EPS on a fully diluted basis in
2021, compared to $1.55 Distributable EPS in 2020, representing 21%
year-on-year growth
- Grew Portfolio 24% in 2021 to $3.6 billion and managed assets
22% to $8.8 billion as of the end of 2021
- Reported GAAP-based Net Investment Income of $11 million in
2021, compared to $29 million in 2020
- Increased Distributable Net Investment Income in 2021 by 52%
year-on-year to $134 million, compared to $88 million in 2020
- Closed $1.7 billion of investments in 2021, compared to $1.9
billion in 2020, resulting in a five-year average of $1.4
billion
- Reported pipeline of greater than $4 billion as of the end of
2021, compared to greater than $3 billion as of the end of
2020
- Increased our unsecured line of credit commitment to $600
million and extended its duration to three years
- Increased dividend to $0.375 per share for the first quarter of
2022, representing a 7% increase over the dividend declared in the
fourth quarter of 2021
Guidance
- Increased and extended guidance that annual distributable
earnings per share is expected to grow at a compounded annual rate
of 10% to 13% from 2021 to 2024, relative to the 2020 baseline of
$1.55 per share, which is equivalent to a 2024 midpoint of $2.40
per share
- Increased and extended guidance that annual dividends per share
is expected to grow at a compounded annual rate of 5% to 8%
ESG Highlights
- Declared Social Dividend of $1.6 million in the first quarter
of 2022 to support Hannon Armstrong Foundation climate justice
initiatives
- Received 2021 Corporate Governance Award for Best ESG
Reporting
- Estimated more than 800,000 metric tons of carbon emissions
will be avoided annually by our transactions closed in 2021,
equating to a CarbonCount® score of 0.5 metric tons per $1,000
invested
"In the face of macroeconomic and industry headwinds, we had
another outstanding year, growing distributable earnings per share
by 21% through strong growth in our portfolio and the resulting net
investment income," said Jeffrey W. Eckel, Hannon Armstrong
Chairman and Chief Executive Officer. "The confidence we have in
this business to continue this strong performance causes us to
raise and extend guidance for distributable earnings to 10% to 13%
and dividends to 5% to 8% per share annually through 2024."
"We believe our strong financial performance is in part due to
our ESG leadership, which attracts and retains the best,
mission-aligned people and clients. Our team continues to innovate
on our CarbonCount metric for measuring the efficiency of our
capital to reduce carbon as well the Hannon Armstrong Foundation's
contributions at the intersection of social justice and climate
action."
A summary of our results is shown in the table below:
For the three months ended
December 31, 2021
For the three months ended
December 31, 2020
$ in thousands
Per Share (Diluted)
$ in thousands
Per Share (Diluted)
GAAP Net Income
$
62,420
$
0.71
$
24,925
$
0.32
Distributable earnings
40,687
0.47
29,325
0.37
For the year ended December
31, 2021
For the year ended December
31, 2020
$ in thousands
Per Share
$ in thousands
Per Share
GAAP Net Income
$
126,579
$
1.51
$
82,416
$
1.10
Distributable earnings
158,723
1.88
117,500
1.55
Financial Results
"We continue to reduce our cost of funds and strengthen our
margins while expanding our well-diversified and flexible funding
platform. We raised over $1.5 billion in CarbonCount-based debt,
including an upsized unsecured revolving credit facility, a
Commercial Paper Program, and a green bond offering," said Jeffrey
A. Lipson, Chief Financial Officer and Chief Operating Officer.
“With these and the other pillars of our funding platform in
place, we now have over $850 million of potential liquidity
available to fund our forward flow commitments in addition to other
anticipated growth opportunities.”
Comparison of the year ended December 31, 2021 to the year ended
December 31, 2020
Total revenue increased by $26 million, or 14%. Gain on sale and
fee income increased by $15 million, or 23%, and interest and
rental income increased by $11 million, or 9%. These increases were
primarily driven by higher yielding assets and a larger portfolio
as well as a change in the volume and mix of assets that were
securitized, partially offset by lower advisory fee generating
opportunities.
Interest expense increased $30 million, or 32%, due to a
one-time loss of $15 million on the redemption of the 2024 senior
unsecured notes, as well as additional expense from a larger
average outstanding debt balance partially offset by a lower cost
of debt. We recorded a $0.5 million provision for loss on
receivables based on loans and loan commitments during the year in
accordance with CECL, as compared to a $10 million provision
recorded in 2020. Other expenses (compensation and benefits and
general and administrative expenses) increased by $20 million
primarily due to increases in employee headcount, compensation, and
investments in corporate infrastructure.
We recognized a $126 million gain using the hypothetical
liquidation at book value method (HLBV) for our equity method
investments in 2021, compared to $48 million of HLBV income in
2020, driven primarily by new investments in our portfolio, a
subset of which had large one-time allocations of income under HLBV
due to tax benefits recognized by our co-investors.
We recognized income tax expense of $17 million in 2021,
compared to an income tax benefit of $3 million in 2020, driven
primarily by the additional HLBV income described above.
GAAP net income in 2021 was $127 million, compared to $82
million in 2020. Distributable earnings in 2021 was $159 million,
or an increase of approximately $41 million from 2020 due primarily
to an increase in distributable earnings from both newly added in
2021 and existing equity method investments.
Leverage
The calculation of our fixed-rate debt and leverage ratios as of
December 31, 2021 and December 31, 2020 are shown in the table
below:
December 31, 2021
% of Total
December 31, 2020
% of Total
($ in millions)
($ in millions)
Floating-rate borrowings (1)
$
101
4
%
$
23
1
%
Fixed-rate debt (2)
2,392
96
%
2,166
99
%
Total
$
2,493
100
%
$
2,189
100
%
Leverage (3)
1.6 to 1
1.8 to 1
(1)
Floating-rate borrowings include borrowings under our
floating-rate credit facilities.
(2)
Debt excludes securitizations that are not consolidated on
our balance sheet.
(3)
Leverage, as measured by our debt-to-equity ratio.
Portfolio
Our balance sheet portfolio totaled approximately $3.6 billion
as of December 31, 2021, which included approximately $1.9 billion
of behind-the-meter assets and approximately $1.7 billion of
grid-connected assets. The following is an analysis of the
performance of our portfolio as of December 31, 2021:
Portfolio Performance
Government
Commercial
1 (1)
1 (1)
2 (2)
3 (3)
Total
(dollars in millions)
Total receivables held-for-investment
$
125
$
1,316
$
11
$
8
$
1,460
Less: Allowance for loss on
receivables
—
(25
)
(3
)
(8
)
(36
)
Net receivables held-for-investment
(4)
125
1,291
8
—
1,424
Receivables held-for-sale
—
22
—
—
22
Investments
11
7
—
—
18
Real estate
—
356
—
—
356
Equity method investments (5)
—
1,726
34
—
1,760
Total
$
136
$
3,402
$
42
$
—
$
3,580
Percent of Portfolio
4
%
95
%
1
%
—
%
100
%
Average remaining balance (6)
$
6
$
13
$
11
$
4
$
12
(1)
This category includes our assets where based on our credit
criteria and performance to date, we believe that our risk of not
receiving our invested capital remains low.
(2)
This category includes our assets where based on our credit
criteria and performance to date, we believe there is a moderate
level of risk of not receiving some or all of our invested capital.
(3)
This category includes our assets where based on our credit
criteria and performance to date, we believe there is substantial
doubt regarding our ability to recover some or all of our invested
capital. Included in this category are two commercial receivables
with a combined total carrying value of approximately $8 million as
of December 31, 2021 which we have held on non-accrual status since
2017. We have recorded an allowance for the entire asset amounts.
We expect to continue to pursue our legal claims with regards to
these assets. This category previously contained an equity method
investment in a wind project with no book value due to our
allocation of impairment losses recorded by the project sponsor. We
sold this equity method investment in the third quarter for nominal
proceeds.
(4)
Total reconciles to the total of the government receivables
and commercial receivables lines of the consolidated balance
sheets.
(5)
Some of the individual projects included in portfolios that
make up our equity method investments have government off-takers.
As they are part of large portfolios, they are not classified
separately.
(6)
Average remaining balance is calculated gross of allowance
for loss on receivables and excludes approximately 174 transactions
each with outstanding balances that are less than $1 million and
that in the aggregate total $84 million.
Guidance
The Company expects that annual distributable earnings per share
will grow at a compounded annual rate of 10% to 13% from 2021 to
2024, relative to the 2020 baseline of $1.55 per share, which is
equivalent to a 2024 midpoint of $2.40 per share. The Company also
expects growth of annual dividends per share to be at a compounded
annual rate of 5% to 8%. This guidance reflects the Company’s
judgments and estimates of (i) yield on its existing portfolio;
(ii) yield on incremental portfolio investments, inclusive of the
Company’s existing pipeline; (iii) the volume and profitability of
securitization transactions; (iv) amount, timing, and costs of debt
and equity capital to fund new investments; (v) changes in costs
and expenses reflective of the Company’s forecasted operations; and
(vi) the general interest rate and market environment. All guidance
is based on current expectations of the ongoing and future impact
of COVID-19 and the speed and efficacy of vaccine distribution on
economic conditions, the regulatory environment, the dynamics of
the markets in which we operate and the judgment of the Company’s
management team, among other factors. In addition, actual dividend
distributions are subject to approval by the Company’s Board of
Directors on a quarterly basis. The Company has not provided GAAP
guidance as discussed in the Forward-Looking Statements section of
this press release.
Dividend
The Company is announcing today that its Board of Directors
declared a quarterly cash dividend of $0.375 per share of common
stock. This dividend will be paid on April 11, 2022, to
stockholders of record as of April 4, 2022.
Conference Call and Webcast Information
Hannon Armstrong will host an investor conference call today,
Thursday, February 17, 2022, at 5:00 p.m. Eastern time. The
conference call can be accessed live over the phone by dialing
1-877-407-0890 or for international callers, +1-201-389-0918.
Participants should inform the operator they want to be joined to
the Hannon Armstrong call. The conference call will also be
accessible as an audio webcast with slides on the Company’s website
at https://investors.hannonarmstrong.com/. An online replay will be
available for a limited time beginning immediately following the
call.
About Hannon Armstrong
Hannon Armstrong (NYSE: HASI) is the first U.S. public company
solely dedicated to investments in climate solutions, providing
capital to leading companies in energy efficiency, renewable
energy, and other sustainable infrastructure markets. With more
than $8 billion in managed assets, Hannon Armstrong’s core purpose
is to make climate-positive investments with superior risk-adjusted
returns. For more information, please visit
www.hannonarmstrong.com. Follow Hannon Armstrong on LinkedIn and
Twitter @HannonArmstrong.
Forward-Looking Statements:
Some of the information contained in this press release is
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) that are subject to risks and uncertainties. For
these statements, we claim the protections of the safe harbor for
forward-looking statements contained in such Sections. These
forward-looking statements include information about possible or
assumed future results of our business, financial condition,
liquidity, results of operations, plans and objectives, and include
the ongoing impact of the current outbreak of the novel coronavirus
(“COVID-19”). When we use the words “believe,” “expect,”
“anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,”
“may” or similar expressions, we intend to identify forward-looking
statements. However, the absence of these words or similar
expressions does not mean that a statement is not forward-looking.
All statements that address operating performance, events or
developments that we expect or anticipate will occur in the future
are forward-looking statements.
Forward-looking statements are subject to significant risks and
uncertainties. Investors are cautioned against placing undue
reliance on such statements. Actual results may differ materially
from those set forth in the forward-looking statements. Factors
that could cause actual results to differ materially from those
described in the forward-looking statements include those discussed
under the caption “Risk Factors” included in our most recent Annual
Report on Form 10-K as well as in other periodic reports that we
file with the U.S. Securities and Exchange Commission (the
"SEC").
Any forward-looking statement speaks only as of the date on
which such statement is made, and we undertake no obligation to
update any forward-looking statement to reflect events or
circumstances, including, but not limited to, unanticipated events,
after the date on which such statement is made, unless otherwise
required by law. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it
assess the impact of each such factor on the business or the extent
to which any factor, or combination of factors, may cause actual
results to differ materially from those contained or implied in any
forward-looking statement.
The Company has not provided GAAP guidance as forecasting a
comparable GAAP financial measure, such as net income, would
require that the Company apply the HLBV method to these
investments. In order to forecast under the HLBV method, the
Company would be required to make various assumptions related to
expected changes in the net asset value of the various entities and
how such changes would be allocated under HLBV. GAAP HLBV earnings
over a period of time are very sensitive to these assumptions
especially in regard to when a partnership transaction flips and
thus the liquidation scenarios change materially. The Company
believes that these assumptions would require unreasonable efforts
to complete and if completed, the wide variation in projected GAAP
earnings based upon a range of scenarios would not be meaningful to
investors. Accordingly, the Company has not included a GAAP
reconciliation table related to any distributable earnings
guidance.
Estimated carbon savings are calculated using the estimated
kilowatt hours, gallons of fuel oil, million British thermal units
of natural gas and gallons of water saved as appropriate, for each
project. The energy savings are converted into an estimate of
metric tons of CO2 equivalent emissions based upon the project’s
location and the corresponding emissions factor data from the U.S.
Government and International Energy Agency. Portfolios of projects
are represented on an aggregate basis.
HANNON ARMSTRONG SUSTAINABLE
INFRASTRUCTURE CAPITAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
For the Three Months Ended
December 31,
For the Year Ended December
31,
2021
2020
2021
2020
Revenue
Interest income
$
30,536
$
24,512
$
106,889
$
95,559
Rental income
6,544
6,470
25,905
25,878
Gain on sale of receivables and
investments
13,345
15,439
68,333
49,887
Fee income
3,270
2,468
12,039
15,583
Total revenue
53,695
48,889
213,166
186,907
Expenses
Interest expense
26,311
26,299
121,705
92,182
Provision for loss on receivables
(2,399
)
4,467
496
10,096
Compensation and benefits
13,124
10,543
52,975
37,766
General and administrative
5,093
3,664
19,907
14,846
Total expenses
42,129
44,973
195,083
154,890
Income before equity method
investments
11,566
3,916
18,083
32,017
Income (loss) from equity method
investments
56,903
15,457
126,421
47,963
Income (loss) before income
taxes
68,469
19,373
144,504
79,980
Income tax (expense) benefit
(5,648
)
5,640
(17,158
)
2,779
Net income (loss)
$
62,821
$
25,013
$
127,346
$
82,759
Net income (loss) attributable to
non-controlling interest holders
401
88
767
343
Net income (loss) attributable to
controlling stockholders
$
62,420
$
24,925
$
126,579
$
82,416
Basic earnings (loss) per common share
$
0.73
$
0.33
$
1.57
$
1.13
Diluted earnings (loss) per common
share
$
0.71
$
0.32
$
1.51
$
1.10
Weighted average common shares
outstanding—basic
84,698,890
75,400,321
79,992,922
72,387,581
Weighted average common shares
outstanding—diluted
88,609,807
84,843,939
87,671,641
74,373,169
HANNON ARMSTRONG SUSTAINABLE
INFRASTRUCTURE CAPITAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
December 31, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
226,204
$
286,250
Equity method investments
1,759,651
1,279,651
Commercial receivables, net of allowance
of $36 million and $36 million, respectively
1,298,529
965,452
Government receivables
125,409
248,455
Receivables held-for-sale
22,214
—
Real estate
356,088
359,176
Investments
17,697
55,377
Securitization assets
210,354
164,342
Other assets
132,165
100,364
Total Assets
$
4,148,311
$
3,459,067
Liabilities and Stockholders’
Equity
Liabilities:
Accounts payable, accrued expenses and
other
$
88,866
$
59,944
Credit facilities
100,473
22,591
Commercial paper notes
50,094
—
Non-recourse debt (secured by assets of
$573 million and $723 million, respectively)
429,869
592,547
Senior unsecured notes
1,762,763
1,283,335
Convertible notes
149,731
290,501
Total Liabilities
2,581,796
2,248,918
Stockholders’ Equity:
Preferred stock, par value $0.01 per
share, 50,000,000 shares authorized, no shares issued and
outstanding
—
—
Common stock, par value $0.01 per share,
450,000,000 shares authorized, 85,326,781 and 76,457,415 shares
issued and outstanding, respectively
853
765
Additional paid in capital
1,727,667
1,394,009
Accumulated deficit
(193,706
)
(204,112
)
Accumulated other comprehensive income
(loss)
9,904
12,634
Non-controlling interest
21,797
6,853
Total Stockholders’ Equity
1,566,515
1,210,149
Total Liabilities and Stockholders’
Equity
$
4,148,311
$
3,459,067
EXPLANATORY NOTES Non-GAAP Financial Measures
Distributable Earnings
We calculate distributable earnings as GAAP net income (loss)
excluding non-cash equity compensation expense, provisions for loss
on receivables, amortization of intangibles, non-cash provision
(benefit) for taxes, losses or (gains) from modification or
extinguishment of debt facilities, any one-time acquisition related
costs or non-cash tax charges and the earnings attributable to our
non-controlling interest of Hannon Armstrong Sustainable
Infrastructure, L.P., a Delaware limited partnership (our
"operating partnership"). We also make an adjustment to our equity
method investments in the renewable energy projects as described
below. We will use judgment in determining when we will reflect the
losses on receivables in our distributable earnings, and will
consider certain circumstances such as the time period in default,
sufficiency of collateral as well as the outcomes of any related
litigation. In the future, distributable earnings may also exclude
one-time events pursuant to changes in GAAP and certain other
adjustments as approved by a majority of our independent
directors.
We believe a non-GAAP measure, such as distributable earnings,
that adjusts for the items discussed above is and has been a
meaningful indicator of our economic performance and is useful to
our investors as well as management in evaluating our performance
as it relates to expected dividend payments over time. As a REIT,
we are required to distribute substantially all of our taxable
income to investors in the form of dividends, which is a principal
focus of our investors. Additionally, we believe that our investors
also use distributable earnings, or a comparable supplemental
performance measure, to evaluate and compare our performance to
that of our peers, and as such, we believe that the disclosure of
distributable earnings is useful to our investors.
Certain of our equity method investments in renewable energy and
energy efficiency projects are structured using typical partnership
“flip” structures where the investors with cash distribution
preferences receive a pre-negotiated return consisting of priority
distributions from the project cash flows, in many cases, along
with tax attributes. Once this preferred return is achieved, the
partnership “flips” and the common equity investor, often the
operator or sponsor of the project, receives more of the cash flows
through its equity interests while the previously preferred
investors retain an ongoing residual interest. We have made
investments in both the preferred and common equity of these
structures. Regardless of the nature of our equity interest, we
typically negotiate the purchase prices of our equity investments,
which have a finite expected life, based on our assessment of the
expected cash flows we will receive from these projects discounted
back to the net present value, based on a target investment rate,
with the expected cash flows to be received in the future
reflecting both a return on the capital (at the investment rate)
and a return of the capital we have committed to the project. We
use a similar approach in the underwriting of our receivables.
Under GAAP, we account for these equity method investments
utilizing the HLBV method. Under this method, we recognize income
or loss based on the change in the amount each partner would
receive, typically based on the negotiated profit and loss
allocation, if the assets were liquidated at book value, after
adjusting for any distributions or contributions made during such
quarter. The HLBV allocations of income or loss may be impacted by
the receipt of tax attributes, as tax equity investors are
allocated losses in proportion to the tax benefits received, while
the sponsors of the project are allocated gains of a similar
amount. In addition, the agreed upon allocations of the project’s
cash flows may differ materially from the profit and loss
allocation used for the HLBV calculations.
The cash distributions for those equity method investments where
we apply HLBV are segregated into a return on and return of capital
on our cash flow statement based on the cumulative income (loss)
that has been allocated using the HLBV method. However, as a result
of the application of the HLBV method, including the impact of tax
allocations, the high levels of depreciation and other non-cash
expenses that are common to renewable energy projects and the
differences between the agreed upon profit and loss and the cash
flow allocations, the distributions and thus the economic returns
(i.e. return on capital) achieved from the investment are often
significantly different from the income or loss that is allocated
to us under the HLBV method. Thus, in calculating distributable
earnings, for certain of these investments where there are
characteristics as described above, we further adjust GAAP net
income (loss) to take into account our calculation of the return on
capital (based upon the underwritten investment rate) from our
renewable energy equity method investments, as adjusted to reflect
the performance of the project and the cash distributed. We believe
this equity method investment adjustment to our GAAP net income
(loss) in calculating our distributable earnings measure is an
important supplement to the HLBV income allocations determined
under GAAP for an investor to understand the economic performance
of these investments where HLBV income can differ substantially
from the economic returns.
In 2021, we acquired equity investments in portfolios of
renewable energy projects which have the majority of the
distributions payable to more senior investors in the first few
years of the project.The following table provides our results
related to our equity method investments for the three months and
year ended December 31, 2021 and 2020,
Three Months Ended December
31,
Year Ended December
31,
2021
2020
2021
2020
(in millions)
Income (loss) under GAAP
$
57
$
15
$
126
$
48
Distributable earnings
$
27
$
15
$
104
$
55
Return of capital/(deferred cash
collections)
(9
)
7
(51
)
102
Cash collected
$
18
$
22
$
53
$
157
Distributable earnings does not represent cash generated from
operating activities in accordance with GAAP and should not be
considered as an alternative to net income (determined in
accordance with GAAP), or an indication of our cash flow from
operating activities (determined in accordance with GAAP), or a
measure of our liquidity, or an indication of funds available to
fund our cash needs, including our ability to make cash
distributions. In addition, our methodology for calculating
distributable earnings may differ from the methodologies employed
by other companies to calculate the same or similar supplemental
performance measures, and accordingly, our reported distributable
earnings may not be comparable to similar metrics reported by other
companies.
Reconciliation of our GAAP Net Income to Distributable
Earnings
We have calculated our distributable earnings and provided a
reconciliation of our GAAP net income to distributable earnings for
the three months and year ended December 31, 2021 and 2020 in the
tables below.
For the three months ended
December 31, 2021
For the three months ended
December 31, 2020
(dollars in thousands, except per
share amounts)
$
per share
$
per share
Net income attributable to controlling
stockholders (1)
$
62,420
$
0.71
$
24,925
$
0.32
Distributable earnings adjustments:
Reverse GAAP (income) loss from equity
method investments
(56,903
)
(15,458
)
Add equity method investments earnings
27,135
14,943
Equity-based compensation charges
3,544
5,176
Provision for loss on receivables
(2,399
)
4,467
Other adjustments (2)
6,890
(4,728
)
Distributable earnings (3)
$
40,687
$
0.47
$
29,325
$
0.37
(1)
The per share amounts represent GAAP diluted earnings per
share and is the most comparable GAAP measure to our distributable
earnings per share.
(2)
See Other adjustments table below.
(3)
Distributable earnings per share for the three months ended
December, 2021 and 2020, are based on 87,143,351 shares and
79,820,082 shares outstanding, respectively, which represents the
weighted average number of fully-diluted shares outstanding
including our restricted stock awards, restricted stock units,
long-term incentive plan units, and the non-controlling interest in
our operating partnership. We include any potential common stock
issuance in our distributable earnings per share calculation
related to our convertible notes using the treasury stock method
and any potential common stock issuances related to share based
compensation units in the amount we believe is reasonably certain
to vest. To the extent a convertible note is converted during the
period, we include its dilution using the treasury stock method
until the date of conversion, after which we include the shares
issued upon conversion. We believe the use of the treasury stock
method is an appropriate representation of the potential dilution
when considering the economic behaviors of the holders of the
instrument.
For the year ended December
31, 2021
For the year ended December
31, 2020
(dollars in thousands, except per
share amounts)
$
per share
$
per share
Net income attributable to controlling
stockholders (1)
$
126,579
$
1.51
$
82,416
$
1.10
Distributable earnings adjustments:
Reverse GAAP (income) loss from equity
method investments
(126,421
)
(47,963
)
Add equity method investments earnings
103,707
55,305
Equity-based compensation charges
17,047
16,791
Provision for loss on receivables
496
10,096
(Gain) loss on debt modification or
extinguishment
16,083
—
Other adjustments (2)
21,232
855
Distributable earnings (3)
$
158,723
$
1.88
$
117,500
$
1.55
The per share amounts represent GAAP diluted earnings per share
and is the most comparable GAAP measure to our distributable
earnings per share.
See Other adjustments table below.
Distributable earnings per share for the years ended December
31, 2021 and 2020, are based on 84,268,341 shares and 75,588,286
shares outstanding, respectively, which represents the weighted
average number of fully-diluted shares outstanding including our
restricted stock awards, restricted stock units, long-term
incentive plan units, and the non-controlling interest in our
operating partnership. We include any potential common stock
issuance in our distributable earnings per share calculation
related to our convertible notes using the treasury stock method
and any potential common stock issuances related to share based
compensation units in the amount we believe is reasonably certain
to vest. To the extent a convertible note is converted during the
period, we include its dilution using the treasury stock method
until the date of conversion, after which we include the shares
issued upon conversion. We believe the use of the treasury stock
method is an appropriate representation of the potential dilution
when considering the economic behaviors of the holders of the
instrument.
The table below provides a reconciliation of the Other
adjustments:
For the Three Months Ended
December 31,
For the Year Ended December
31,
2021
2020
2021
2020
(in thousands)
(in thousands)
Other adjustments
Amortization of intangibles (1)
$
841
$
824
$
3,307
$
3,291
Non-cash provision (benefit) for income
taxes
5,648
(5,640
)
17,158
(2,779
)
Net income attributable to non-controlling
interest
401
88
767
343
Other adjustments
$
6,890
$
(4,728
)
$
21,232
$
855
(1)
Adds back non-cash amortization
of lease and pre-IPO intangibles.
The table below provides a reconciliation of GAAP SG&A
expenses to Distributable SG&A expenses:
For the Three Months Ended
December 31,
For the Year Ended December
31,
2021
2020
2021
2020
(in thousands)
(in thousands)
GAAP SG&A expenses
Compensation and benefits
$
13,124
$
10,542
$
52,975
$
37,766
General and administrative
5,093
3,665
19,907
14,846
Total SG&A expenses (GAAP)
$
18,217
$
14,207
$
72,882
$
52,612
Distributable SG&A expenses
adjustments:
Non-cash equity-based compensation charge
(1)
$
(3,544
)
$
(5,176
)
$
(17,047
)
$
(16,791
)
Amortization of intangibles (2)
(69
)
(52
)
(218
)
(202
)
Distributable SG&A expenses
adjustments
(3,613
)
(5,228
)
(17,265
)
(16,993
)
Distributable SG&A expenses
$
14,604
$
8,979
$
55,617
$
35,619
(1)
Reflects add back of non-cash amortization of equity-based
compensation. Outstanding grants related to equity-based
compensation are included in the distributable earnings per share
calculation.
(2)
Adds back non-cash amortization of pre-IPO intangibles.
Distributable Net Investment Income
We have a portfolio of debt and equity investments in climate
change solutions. We calculate distributable net investment income
by adjusting GAAP-based net investment income for those
distributable earnings adjustments described above which impact
investment income. We believe that this measure is useful to
investors as it shows the recurring income generated by our
portfolio after the associated interest cost of debt financing. Our
management also uses distributable net investment income in this
way. Our non-GAAP distributable net investment income measure may
not be comparable to similarly titled measures used by other
companies. The following is a reconciliation of our GAAP-based net
investment income to our distributable net investment income:
Three months ended December
31,
Year ended December
31,
2021
2020
2021
2020
(in thousands)
Interest income
$
30,536
$
24,512
$
106,889
$
95,559
Rental income
6,544
6,470
25,905
25,878
GAAP-based investment revenue
37,080
30,982
132,794
121,437
Interest expense
26,311
26,299
121,705
92,182
GAAP-based net investment income
10,769
4,683
11,089
29,255
Equity method earnings adjustment (1)
27,135
14,943
103,707
55,305
(Gain) loss on debt modification or
extinguishment (2)
—
—
16,083
—
Amortization of real estate intangibles
(3)
772
772
3,089
3,089
Distributable net investment
income
$
38,676
$
20,398
$
133,968
$
87,649
(1)
Reflects adjustment for equity method investments described
above.
(2)
Adds back losses related to debt prepayments included in
interest expense in our income statement.
(3)
Adds back non-cash amortization related to acquired real
estate leases.
Managed Assets
As we both consolidate assets on our balance sheet and
securitize assets, certain of our receivables and other assets are
not reflected on our balance sheet where we may have a residual
interest in the performance of the investment, such as servicing
rights or a retained interest in cash flows. Thus, we present our
investments on a non-GAAP “managed” basis, which assumes that
securitized receivables are not sold. We believe that our Managed
Asset information is useful to investors because it portrays the
amount of both on- and off-balance sheet receivables that we
manage, which enables investors to understand and evaluate the
credit performance associated with our portfolio of receivables,
investments, and residual assets in securitized receivables. Our
non-GAAP Managed Assets measure may not be comparable to similarly
titled measures used by other companies.
The following is a reconciliation of our GAAP-based Portfolio to
our Managed Assets as of December 31, 2021 and December 31,
2020:
As of
December 31, 2021
December 31, 2020
(dollars in millions)
Equity method investments
$
1,760
$
1,280
Commercial receivables, net of
allowance
1,299
248
Government receivables
125
965
Receivables held-for-sale
22
—
Real estate
356
359
Investments
18
55
GAAP-Based Portfolio
3,580
2,907
Assets held in securitization trusts
5,199
4,308
Managed assets
$
8,779
$
7,215
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220217005909/en/
Investors: Chad Reed investors@hannonarmstrong.com 410-571-6189
Media: Gil Jenkins media@hannonarmstrong.com 443-321-5753
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