ANNAPOLIS, Md.--(BUSINESS WIRE)--$HASI #earnings--Hannon Armstrong Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong," "we," "our" or the "Company") (NYSE: HASI), a leading investor in climate change solutions, today reported results for the first quarter of 2021.

Financial Highlights

• Delivered $0.61 GAAP EPS on a fully diluted basis for the first quarter of 2021, compared with $0.35 for the same period in 2020
• Delivered $0.43 Distributable EPS on a fully diluted basis for the first quarter of 2021, compared to $0.44 Distributable EPS for the same period in 2020
• Established $400 million sustainability-linked unsecured revolving credit facility with 10 relationship banks in April
• Grew Portfolio 38% YOY to $2.9 billion and Managed Assets 19% to $7.4 billion
• Increased Portfolio Yield QOQ to 7.7%
• Declared dividend of $0.35 per share

ESG Highlights

• Published 2020 Impact Report
• Hannon Armstrong Foundation announced Climate Solutions Scholarship Program with Morgan State University and Miami University
• Estimated that over 87,000 metric tons of carbon emissions will be avoided annually by our transactions closed this quarter, equating to a CarbonCount^® score of 0.46 metric tons per $1,000 invested

"With strong first quarter results, we remain on track to deliver on our three-year distributable EPS guidance," said Jeffrey W. Eckel, Hannon Armstrong Chairman and Chief Executive Officer.

"In addition, the Hannon Armstrong Foundation's announcement of its first grant to support sustainability-focused undergraduates from disadvantaged backgrounds serves as an important step forward in our journey to drive meaningful and sustained impact at the intersection of climate action and social justice."

A summary of our results is shown in the table below:

Financial Results

"In the first quarter, we maintained our portfolio size and yield as we funded several investments while also utilizing our securitization platform," said Jeffrey A. Lipson, Chief Financial Officer and Chief Operating Officer. “In addition, our new $400 million sustainability-linked unsecured revolving credit facility further enhances our liquidity and the flexibility of our funding platform to support growth while also providing market validation of our CarbonCount® scoring tool.”

Comparison of the quarter ended March 31, 2021 to the quarter ended March 31, 2020

Total revenue increased by $11 million, or 27%. Gain on sale and fee income increased by $10 million and interest income increased by $1 million. These increases were primarily driven by a larger portfolio as well as a change in the volume and mix of assets being securitized, partially offset by fewer fee generating opportunities.

Interest expense increased $9 million, or 52%, primarily as a result of a higher outstanding debt balance. We recorded a $1 million provision for loss on receivables based on loans and loan commitments, commensurate with the provision for the same period in 2020. Other expenses (compensation and benefits and general and administrative expenses) increased by approximately $8 million primarily due to an increase in our employee headcount, compensation, and one-time employee-related expenses.

We recognized $54 million in income using the hypothetical liquidation at book value method (HLBV) for our equity method investments in the first quarter of 2021, compared to approximately $17 million of HLBV income for the same period in 2020, due to a larger portfolio of equity method investments and tax attributes recognized by our co-investors which increases our allocation of earnings.

Income tax expense increased by approximately $5 million in the first quarter of 2021 compared to the same period in 2020, primarily due to the increased HLBV income described above.

GAAP net income in the first quarter of 2021 was $51 million, compared to $24 million in the same period in 2020. Distributable earnings in the first quarter of 2021 was approximately $36 million, or an increase of approximately $5 million from the same period in 2020 due primarily to an increase in distributable earnings from equity method investments.

Leverage

The calculation of our fixed-rate debt and leverage ratios as of March 31, 2021 and December 31, 2020 are shown in the table below:

Portfolio

Our balance sheet portfolio totaled approximately $2.9 billion as of March 31, 2021, which included approximately $1.4 billion of behind-the-meter assets and approximately $1.5 billion of grid-connected assets. The following is an analysis of the performance our portfolio as of March 31, 2021:

Guidance

The Company expects that annual distributable earnings per share will grow at a compounded annual rate of 7% to 10% from 2021 to 2023, relative to the 2020 baseline of $1.55 per share, which is equivalent to a 2023 midpoint of $1.98 per share. The Company also expects that annual dividends per share will grow at a compound annual rate of 3% to 5% from 2021 to 2023, relative to the 2020 baseline of $1.36 per share, which is equivalent to a 2023 midpoint of $1.53 per share. 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, (vi) the ongoing impact of COVID-19 and the speed and efficacy of vaccine distribution on economic conditions and (vii) 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. 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 approved a quarterly cash dividend of $0.35 per share of common stock. This dividend will be paid on July 9, 2021, to stockholders of record as of July 2, 2021.

Conference Call and Webcast Information

Hannon Armstrong will host an investor conference call today, Tuesday, May 4, 2021, at 5:00 p.m. eastern time. The conference call can be accessed live over the phone by dialing 1-866-652-5200 or for international callers, 1-412-317-6060. Please ask to be connected to the Hannon Armstrong call. A replay will be available two hours after the call and can be accessed by dialing 1-877-344-7529, or for international callers, 1-412-317-0088. The passcode for the replay is 10154938. The replay will be available until May 11, 2021.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company's website at www.hannonarmstrong.com. The online replay will be available for a limited time 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 $7 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, and Section 21E of the Securities Exchange Act of 1934, as amended 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. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, we intend to identify 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").

Other important factors that we think could cause our actual results to differ materially from expected results are summarized below, including the ongoing impact of the current outbreak of the novel coronavirus (COVID-19), on the U.S., regional and global economies, the U.S. sustainable infrastructure market and the broader financial markets. The current outbreak of COVID-19 has also impacted, and is likely to continue to impact, directly or indirectly, many of the other important factors below and the risks described in the Form 10-K and in our subsequent filings under the Securities Exchange Act of 1934, as amended. Other factors besides those listed could also adversely affect us. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In particular, it is difficult to fully assess the impact of COVID-19 at this time due to, among other factors, uncertainty regarding the severity and duration of the outbreak domestically and internationally, uncertainty regarding the effectiveness of federal, state and local governments’ efforts to contain the spread of COVID-19 and respond to its direct and indirect impact on the U.S. economy and economic activity including the timing of the successful distribution of effective vaccines.

Statements regarding the following subjects, among others, may be forward-looking:

• negative impacts from continued spread of COVID-19, including on the U.S. or global economy or on our business, financial position or results of operations;
• our expected returns and performance of our investments;
• the state of government legislation, regulation and policies that support or enhance the economic feasibility of projects that reduce carbon emissions or increase resilience to climate change, which we refer to as climate change solutions, including energy efficiency and renewable energy projects and the general market demands for such projects;
• market trends in our industry, energy markets, commodity prices, interest rates, the debt and lending markets or the general economy;
• our business and investment strategy;
• availability of opportunities to invest in climate change solutions including energy efficiency and renewable energy projects and our ability to complete potential new opportunities in our pipeline;
• our relationships with originators, investors, market intermediaries and professional advisers;
• competition from other providers of capital;
• our or any other company’s projected operating results;
• actions and initiatives of the federal, state and local governments and changes to federal, state and local government policies, regulations, tax laws and rates and the execution and impact of these actions, initiatives and policies;
• the state of the U.S. economy generally or in specific geographic regions, states or municipalities and economic trends;
• our ability to obtain and maintain financing arrangements on favorable terms, including securitizations;
• general volatility of the securities markets in which we participate;
• the credit quality of our assets;
• changes in the value of our assets, our portfolio of assets and our investment and underwriting process;
• the impact of weather conditions, natural disasters, accidents or equipment failures or other events that disrupt the operation of our investments or negatively impact the value of our assets;
• rates of default or decreased recovery rates on our assets;
• interest rate and maturity mismatches between our assets and any borrowings used to fund such assets;
• changes in interest rates and the market value of our assets and target assets;
• changes in commodity prices, including continued low natural gas prices;
• effects of hedging instruments on our assets or liabilities;
• the degree to which our hedging strategies may or may not protect us from risks, such as interest rate volatility;
• impact of and changes in accounting guidance;
• our ability to maintain our qualification as a real estate investment trust for U.S. federal income tax purposes;
• our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended;
• availability of and our ability to attract and retain qualified personnel;
• estimates relating to our ability to generate sufficient cash in the future to operate our business and to make distributions to our stockholders; and
• our understanding of our competition.

The risks included here are not exhaustive. Forward-looking statements are based on beliefs, assumptions and expectations as of the date of this press release. Any forward- looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements after the date of this earnings release, whether as a result of new information, future events or otherwise.

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.

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, gains or (losses) 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 our Operating Partnership. We also make an adjustment to our equity method investments in the renewable energy projects as described below. Judgment will be utilized in determining when we will reflect the losses on receivables in our distributable earnings. In making this determination, we 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 and 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.

Investor Relations:
Chad Reed
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410-571-6189

Media:
Gil Jenkins
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443-321-5753