Q3 2019 Earnings Call
Follow at that time, if anyone should require assistance during the conference. Please press Star then zero on your attach tone telephone.
As a reminder, this conference is being recorded.
I would now I turn the conference over to your host Mr., Patrick Jobin with Investor Relations. Please go ahead.
Thank you operator, and thank you to those on the call for joining us today.
Before we begin please note that certain remarks, we will make on this conference call constitute forward looking statements. Although we believe these statements reflect our best judgment based on factors currently known to US actual results may differ materially and adversely please refer to the company's filings with the FCC for a more inclusive discussion of risks and other factors that may cause our actual.
Results to differ from projections made in any forward looking statements.
Please also note. These statements are being made as of today and we disclaim any obligation to update or revise them on the call today or when George Sutton runs co founder and CEO , Bob common Sunrun, CFO and add Fenster Sunrise co founder and executive Chairman the presentation today, we'll use slides, which are a bit.
Bolt on our website investors dot Sunrun dot com and now let me turn the call everyone thinks Patrick we're pleased to share Sunrun third quarter results in progress against our strategic priorities.
We're on track to deliver cast generation, a $100 million this year, which represents about 60% year over year growth.
We expect to lead the industry again by adding well over 50000 customers in 2019 and growing our customer base over 20% now approaching 300000.
The near term customer growth is lower than we were expecting due to labor shortages in both installation and our sales force. However, the strength of orders and the increasing value proposition from batteries enforced blackouts makes us confident and it 15% to 20% long term growth rate a new customers with continued strong cash generation.
In the quarter, we added 14200 customers, representing just over 107 megawatts of deployment.
10% year over year increase and within our guidance range.
We generated $22 million in cash and have achieved record low capital cost.
Consumer interest remains strong and we are actively working to increase our capacity to meet this demand.
We expect to grow 9% quarter over quarter in Q4.
[noise] household across the country are facing unreliable and increasingly expensive electricity service.
Forced blackouts in California are the new normal with P.G. me, saying they will last decade.
Investing and inefficient centralized infrastructure unforeseen blackout to lower the rest that transmission lines and equipment start fires is not sustainable.
Sunrun offers one of them or homeowners the ability to generate in store their own energy with our Brightbox service and we are not working those together to provide services to the entire system through regret services efforts.
The decentralized system, we're helping build is the best way to achieve affordable resilient power in a warming world.
Hundreds of Sunrun customers in California, we're able to keep the lights on during multiple recent outages.
The average customer affected lost power for 35 hours.
Family facing these outages are eager for resiliency.
In the Bay area, the attachment rate of Brightbox nearly doubled to approximately 60% for new orders in October .
The stories, we heard are moving one family walk power for 142 straight hours nearly six straight days.
With Brightbox, they were able to run critical load like the refrigerator in lighting without interruption.
Well some think backup generators are the only solution. They are far inferior they're expensive collude require constant refueling, which may not be possible fuel stations also down and our noisy and need maintenance.
Brightbox can power homes critical needs for about 12 hours through the night and can recharge when the Sun shining providing power through multi day outages.
Nationally, we have now installed more than 8000 Brightbox systems.
Attachment rate for Brightbox sales in our direct business was approximately 30% in California throughout Q3, and while we have only launched the service in nine states. That's far we're approaching 15% attachment across all geographies.
Overall demand continues to be strong, we're seeing approximately 15% to 20% growth in orders in Q3 and into Q4, which is consistent with our views on long term industry growth rate.
Well demand is trending in line with our expectations, we are facing constraints and our ability to install and meet sales demand exacerbated by a tight labor market.
For example, in California, our largest market, which is seeing some of the strongest growth tends.
Trends unemployment rates are at record lows and construction labor is especially tight with all the rebuilding following the fires.
We are actively working to fill over 600 positions and our installation sales organization.
Sunrun can be a preferred employer given the benefits and career mobility, our national scale and grow provides we believe our benefit packages along with the opportunities for career progression are among the bass and can differentiate us from smaller localized solar companies.
I'm confident we can address the labor challenges over the next couple of quarters.
We are focused on delivering strong financial returns.
We're on track to generate 100 million of cash flow this year, which generates growth 60%.
Excuse me, which represents about 60%.
This is repeatable through continued growth in our customer base resiliency offerings in California, further cost reduction and advance grid service offerings combined with a strong financing environment.
We're excited about 2020, unless you're official guidance on our Q4 call early next year.
I'll now turn the call over to Bob to review Q3 performance entered discuss next quarter's gotten some more detail.
Thanks Len.
NPV in the third quarter was approximately $7000 per customer or 90 cents per watt.
Year to date NPV is about one dollar and two cents an unchanged from last year.
NPV would've been higher and above a dollar in the quarter had not been for installed flagging sales growth, particularly in high value markets like California.
We expect net NPV to be above a dollar in Q4.
Project value was approximately $32400 per customer or $4.18 per watt in Q3.
As a reminder project value is very sensitive to modest changes in geographic channel and tech sector tax equity funding mix.
Turning now to creation costs on slide eight.
In Q3 total creation costs were approximately $25400 per customer for $3.28 per watt, an improvement of six cents or 2.2% from last quarter.
As with project value creation cost can fluctuate quarter to quarter.
As a reminder, our cost stuck is not directly comparable to those appears because of our channel partner business blended installation cost per watt, which includes the cost of solar project deployed by our channel partners as well as installation costs incurred for Sunrun built systems was $2.48 per watt.
4%, a four cents improvement from last quarter.
[noise] install cost for systems built by Sunrun improve by 16 cents.
Or 8% year over here.
To $1.90 cents per watt.
In Q3.
Our sales and marketing costs were 81 cents per watt up one cents from Q2.
Our total sales and marketing unit costs are calculated by dividing cost in the period by total megawatts deployed.
Higher mix of direct business results in higher reported sales and marketing cost per watt, but it also means there will be lower blended installation costs per watt overtime due to the higher mix of Sunrun built systems at a lower cost per watt.
In Q3.
DNA costs were 25 cents per watt an improvement of three cents from Q2.
Finally, when we calculate creation costs, we subtract the GAAP gross margin contribution realized from our platform services.
This concludes our distribution racking and lead generation businesses as well as solar systems, we sell for cash or with third party loan.
Our platform services gross margin was 26 cents per watt in Q3, once that's higher than last quarter.
In the third quarter, we deployed 107 megawatts.
Our cash and third party loan mix was 18% in Q3 in line with recent levels.
We expect this mix to continue in the high teens.
Turning now to our balance sheet.
We ended the third quarter with 373 million and total cash.
Quarterly cash generation was 22 million.
We continue to expect cash generation of 100 million in 2019.
We define cash generation has that changed our total cash less the change in recourse debt.
Cast generation can fluctuate significantly due to the timing of project finance activities.
As a reminder, our cash generation excludes strategic opportunities and ITC safe Harbor related activities, which we will undertake.
That will discuss our safe harbor in plans in more detail later in the call.
We also want to share to corporate finance updates.
First we amended our working capital facility are only recourse credit facility to extend its maturity to April 2022, and two enhanced flexibility.
Right and size were unchanged.
Second our board has authorized a three year up to $50 million share repurchase program.
As we continue to generate cash now have an equity white safe Harbor strategy in place. We view. This program is another tool to create shareholder value.
Moving onto guidance on slide nine.
We expect to deploy between 115 and 118 megawatts in Q4.
As our direct business represents a larger portion of our mix more expenses are front loaded for increasing sales and deployment capacity.
But I am dynamics of a tight labor market and these more frontloaded expenses put pressure on in PV and cash generation.
Despite this given the strong financing environment, we still expect to generate 100 million net of cash in 2019.
We expect NPV per watt in Q4 to be above a dollar and for 2019 to be near prior year levels.
Now, let me turn it over to Ed.
Thanks, Bob Oh, we have lots of good news to share across all of our capital raising activity.
I'd say I plan to focus on our recent capital market activities implied capital costs, and our investment tax credits Safe Harbor strategy.
Oh also review cash generation, net earning assets and capital runway.
Low interest rates and strong finance execution continued to provide a strong tailwind for the company.
In October we once again set new records for capital costs in advance rate with our 312 million securitization of solar assets, we price the senior notes at 3.63% with an 80% advance rate demonstrating that the market and ratings agencies increasingly recognized both the high quality of residential solar.
Assets as well as our industry leading performance.
The depth of investors for senior and subordinated debt continues to increase cigna significantly as well.
October's transaction was similar in structure to the one we closed in December 2018.
Comparing the two securitizations. However, this year, we achieved the yield that was 191 basis points lower.
In advance rate that was eight percentage points higher and a single a rather than a minus credit rating.
In addition, we achieved a double beat credit rating on an additional tranche or debt with a 95% cumulative advance rate at a 6% discount rate.
Setting the stage for us to raise more than 100% of contracted asset value from subordinated debt outside the ABS market in a transaction, we expect to close during Q4.
In addition, these factually bear that a 6% unlevered discount rate for our assets is now too high.
To put our current labor constraints and growth trajectory in our development business in context.
If we measure customer value is using a 5% discount rate rather than a 6% one.
Our net present value year to date would be approximately 25 cents a lot higher marked to market.
Next I would like to preview our investment tax credits Safe Harbor strategy.
While we're planning for our business to thrive in a lower ITC environment.
We're also availing ourselves the safe Harbor provisions the IRS codify to extend access to higher tax credit levels.
We expect to extend access to the 30% tax credit for about 500 megawatts of projects by incurring more than 5% of the cost of these projects in 2019.
Because we expect to debt finance on a non recourse basis. The vast majority of these costs.
We initially expect to carry about 25 million in equity capital against the strategy.
No the actual cash amount of equity capital deployed it exactly Decemberthirty. One 2019 may vary based on the exact timing of payments and capital drive.
The credit facility, we anticipate closing as a multiyear revolving facility as such we can elect to add equipment to it during future years to further safe harbor at 26% or 22% ITC levels.
We expect to benefit from at least a 22% investment tax credit through December 2023 on our lease projects with the 10% permanent tax credit becoming relevant in 2020 for.
This ability to extend to access to higher tax credit levels exists only for residential solar systems that are subject to a PPA or lease or what we call solar as a service.
Phil or as a service represents approximately 80% of our run rate business.
Absent a change in law next year and for all future years solar as a service will therefore enjoy substantial competitive advantage versus systems purchased with cash or alone.
This structural advantage in favor of solar as a service will begin at 4% of cost next year.
Climbed to about 26% of cost in 2022.
And settle at 10% of cost in 2024 and for all subsequent years.
The perpetual 10% advantage for solar as a service is because it benefits from a 10% tax credit under permanent law, while homeowner purchase systems do not.
We're also monitoring the environment in Washington are pleased to report there is a growing coalition and supportive extending renewable energy tax credits as the single highest impact actionable policy opportunity to combat climate change.
However, especially with the wildcard of impeachment handicapping the chance of pathogen any specific moment in time is difficult.
We are nevertheless, increasingly optimistic for its eventual extension.
Moving to slide 10, net earning assets increased both year over year and quarter over quarter to $1.4 billion net earning assets measured at a 6% unlevered discount rate is our way to describe the value of cash flows to sunrun shareholders after payments to finance counterparties.
Cash was 373 million total cash less recourse debt increased 106 million year over year.
Turning finally to our pipeline our project debt and tax equity runway each extend into the fourth quarter of 2020.
With that I'll turn the call back over to one.
Thanks, Ed without let's open the line for questions. Please.
Ladies and gentlemen, if you have a question at this time. Please press the star and is our number one key on your Touchtone telephone. If your question has been answered are you with your move yourself from the Q. Please press the pound key.
Our first question is from the line of Brian Lee with Goldman Sachs. Please go ahead Sir.
Hey, everyone. Thanks for taking the questions.
I guess first off maybe.
Little bit of context around the labor issue and the sales funnel I think last quarter. You mentioned you were.
Seeing above 20% bookings growth can you give us a sense of how much bookings growth you saw in the quarter. This time around and then can you also comment on cycle times today, if Dave sort of moved outside of that 60 to 90 day target window and then follow.
Sure. So so yeah, Brian I'm.
The orders are at 15% to 20% for Q3, and we expect that to presents for Q4.
So you know again, if you look over any multi quarter time horizon, where sustaining both types of growth rates and as we described last quarter, we fell behind after focusing on install efficiency and it's proven to be difficult to catch up quickly in a market this tight and especially at our scale.
So we have 600 open position today. So you know I think if you adjust again look at the the cycle times on that they are they are being pushed out and the key there as you really want to communicate with your customers upfront with the right expectations and that really helps you mitigate any.
Sort of concerns with that and that you know that's how we're approaching them.
Okay, well just Lin maybe to clarify on that on comment about pushing out is it pushing out within that 60 to 90 day window are you are you inferring that you're actually sort of in some instances moving outside the 90 day window.
We saw some or some backlog will be belt and pushed into Q1. So if you look at Q4 the growth rate from Q3 to Q4 is 9% quarter over quarter, So still strong growth, but you're going to see I'm still some backlog being being able to be realized in Q.
Okay. That's helpful. And then I guess, that's kind of a segue into my second question and then ill pass it on so the labor issues I think most people appreciate their keeping you from hitting the deployment targets.
For the year, but if we do look ahead into Q1.
Obviously, whether something you can't control, but volumes are seasonally weaker.
But you do have deployment capacity just based on the fourth quarter guidance here that would imply you can do I guess over 150 megawatts a quarter.
I would doubt most people are expecting it to be that strong into Q1, but if your question is just trying to get a sense of you know how much of the labor issues are impacting you now because you're in a seasonally strong period of the year and then maybe does that just naturally lesson into the early part of next year as things slow down seasonally and then youve.
Ramped up some of this capacity the sales funnel is strong and so maybe the sales to install lag you really do start to see it.
Got it naturally helped by some seasonal.
Slowness.
Yes, you characterized that while we do expect a catch up within a couple of quarters and that's a combination of actions. We're taking a lot of that actions. You may you know suspect, we're taking which are around hiring recruiters inside and outside and making sure our compensation and retention and you know packages are tight making sure.
Really marketing the employment brand and the career opportunities that we have and you know so again. This this issue came up last quarter and that you know at our scouts, it's hard to do it in a quarter, but you know and with any reasonable period of time, we feel confident we can catch up on the other you know.
There the other thing that we are leveraging and we're also seeing a little tightness is just leveraging third party labor as well, yes, one of the advantages to our business models. We do have this multichannel model. So we can flex relationships that we have with our existing network and third party. You know. They also are you know constraint and this is mark.
And as you can imagine, but it gives us a little bit more flax. So I think you characterized that well on and we thank you know getting into Q1 will be in good shape.
Okay. Thanks, a lot I appreciate it thanks.
And your next question is from the lot of Michael Weinstein with Credit Suisse. Please go ahead.
Hi, guys.
Good afternoon either.
Yes.
So Ed you mentioned, 5% as a possible no new legitimate discount rate based on the outcome of the CBS refinancings I'm just wondering if you plan to actually deploy that many future presentations at this point.
That's a great question. Michael we are currently if the mine that we are less likely to actually mark to market, the 6% discount rate certainly.
Conditions change very materially we may.
We may always revisit that.
However, certainly the experienced capital cost in the market are significantly below 6%.
I think were also focused principally on generating cash and meeting those sorts of targets and hoping to focus investors there as well.
No I'm also on the.
Can you comment a little bit on cash generation, especially considering that you have a safe harbor goal now might require.
Somewhere around 109, a cash it I think I calculate.
Hi, Michael So its Edward again so.
In my section, we described described as a little bit.
We expect equity capital deployed against the Safe Harbor strategy to be about $25 million.
It's possible that could be more or less at exactly December 31st.
Based on the exact inflows and outflows of payments in and out of the facility. It because that will be a busy time of year for us.
We do have.
Would you expect to close here in the quarter.
A significantly high LTV facility to.
Finance the equipment that we are purchasing in support of that Safe Harbor program.
So maybe too.
No.
I might add to that are just that.
The cash generation target of 100 million on what exclude that 25 million that 25 million investment and so we would show you that specific I backed line I'm and then in terms of just as we've described it historically, we believe that that's a repeatable you know this is a repeatable target for us annually.
Well, that's great and one last question about the Comcast deal I'm just wondering if you hit the Q3 targets 6000 customers I believe it was and is this change the targets for December and going forward.
We didn't not expect Comcast to reach their you know that the equity warrant piece of the contract.
As we've been discussing in previous quarters I'm, you know they they for their own competitive reasons haven't really push this into their core business. So it's really been operating as a sort of silo business development program and we've really de emphasized and I'm. We just think that there are we're seeing lots of demand in.
And attractive acquisition channel. So you will not see that as if it doesn't represent any material amount of installations and I wouldn't expect to see that going forward.
So just given a lot just unclear we wouldn't expect any dilution from Ah that agreement.
Got you.
And your next question comes in a lot as Joe I'll share with JMP Securities. Please go ahead.
Hello, There're a couple of questions first not to beat the safe Harbor horse too much could I hear the equity capital number can you can you give us a sense as to what the gross capital deployment is gonna be to cover that that 500 megawatts.
Hi, Joe It's Ed.
Fair question.
We are going to be a satisfying the safe harbor requirement for all projects using the 5% prong.
We will be doing that.
In a variety of different methods and expect to be describing the details around that including the financing facility on our next call.
Okay, and Jack we're down.
But 500 megawatts you get back at me out what will allow that you know what the aftermath and might might you guys be using the physical work standards as part of that.
We do not anticipate using any physical work standard.
Okay.
Second question Kinda seems like you guys are settling into.
You know a pre flip plus a subordinated debt follow up you go into fourth quarter, and then a post split in the second quarter or sort of cadence is that what I think about 2020 can I sort of expect the same profile of transactions over the course of the year.
Great question, Joe So absolutely.
We have been active with both pre flip and post slip.
Transactions this year and over a multiyear period I would expect that to be the case and next year, we would probably do approximately two such transactions.
Whether or not we do another refinancing next year or 2021 is undecided. So I wouldn't want to guarantee that at this point and again, we can talk more about that on the 2020 call.
All right Cool and then last last question you saw oxen Bear Bay area.
He is talking about going out to some some behind the meter storage I guess, Birmingham vendors. This big.
Do you see all sources solicitation, which I suspect as utility scale, but that debt.
Sort of flow through to come with you guys as well so I'm just wondering.
How you guys are thinking about are the opportunity for grid services revenue in the context of all of this all this chaos here in the state.
Yes, Joe that's a great question I think actually the ccas are potentially stepping into a leadership role in thinking both about the delivery of renewables and resiliency.
And.
And I think part of that is just you know thats sort of in their mission to due in part of it is obviously, they're not distracted by a bankruptcy.
And headlines and the political situation.
That PG any of them.
And so we do think there will be increasing opportunities to work with ccas on solar and solar plus storage.
Both.
For resiliency purposes, but also just for regular capacity, which obviously is related.
And so we havent made any announcements on that of late but there are discussions underway and.
I would expect over the coming year that both potentially more to talk about their <unk> I would say and we of course announced the Oakland.
And with Oakland, which we talked about last quarter and I think we're you know we're pursuing at too.
Pronged approach here as one adds just let's just go direct to consumers and deliver a superior service with Brightbox product and you know and then at the same time work the regulatory and you know the partnerships to make sure that we're leveraging those assets for the benefit of everybody and valuing all the services and setting up the right.
Access to actually contribute all the services. They can so you know we expect that the direct to consumer route as you know probably the least friction and you get that going fast and then in parallel as we get our our our footprint increased.
You can't ignore us anymore, we can provide a lot of services.
To the PC and too.
The Io use that are more cost effective and the traditional centralized way of doing things.
Great. Thank you very much.
And your next question comes in a lot of Eric Lee with Bank of America. Please go ahead.
Hey, good afternoon, Thanks for taking my question.
Hi can you hear me.
Okay. So just a quick question around expectations for growth MPV into 2020 and beyond.
Could you just talk a bit about efforts to mitigate does for your 19 specific headwinds.
Impacting guidance and how should we think about I know you talked about 15% to 20% growth into 20 pause and I mean could you clarify around MPP as well should we expect normalization maybe towards the color 15 again. Thanks.
Great question, we you know as as we described the growth rate and the orders as you know the 15% to 20% in Q3 in Q4, we don't see any reason why that would subside we're not in position to give any formal 2020 guidance at this stage that will be next call.
And so piggybacking on my answer for Brian's question, you know, we're putting into place all of the blocking and tackling to.
Make sure that we have the capacity and so we think that's you know that that it wasn't the overnight I'm improvement, but we expect in a couple of course will be caught up so.
We'll see some backlog into Q1, but we should be caught up.
You know directionally by then.
And could you talk about the NPV expectations, Oh, Yeah in terms of sure sure Yes, sure all right.
Ah yes, so the MPV is depressed this quarter because about mismatch. So as we start to deliver the growth in Q4, you're going to see it above the dollar and so we would expect that it would normalize above a dollar until those historical rates.
And just clarify John on for your 19, MPV guidance I know you guys put out.
A dollar per watt, plus but I believe.
Paul but if you could clarify you made a comment about towards full year eighteens NPV.
Yes, So I think we've said above one dollar is for the for the full year is.
The official guidance and my comment was that I thought it we would approach near last years overall NPV for the full year. Okay. That's helpful.
One last question for me before I pass it on could you just briefly talk about drivers of that backlog.
Growth from retail homebuilder partnerships et cetera. Thank you.
Sure it's been really across all of our acquisition channels. So I'm. So as we're we're a multichannel business. It's one of our competitive advantages. So it's across our customer for all of our digital marketing our retail presence our channel partners and as I've said on multiple calls the new.
Home on the new homebuilders as a slower build its a meaningful policy because it normalizes solar and makes it more exposed to people, but it's not a meaningful size of our.
Of our installed megawatts are installed sale or or even bookings at this stage. So nothing nothing meaningful moved around this quarter be versus previous one.
Your next question.
And your next question comes on line of Sophie Karp with Keybanc. Please go ahead.
Hey, guys. How are you hear me.
Yes, Hi, Sophie.
Great terrific.
Just a question on the.
Share buybacks from them.
So that's something that you see you and.
Thank you.
Your comp USA right way.
To start something like that where you asked the company.
Hi, Sophie so it's Ed So I think we've.
Been talking about share buyback program for some time, it's been a board topic for a while it's come up on calls.
And I think that.
The consideration that we've had in the past have included.
Uncertainty around the safe Harbor side the program in the equity capital.
Sorry to execute it.
And.
With that in the rear view mirror.
With this sustained growth that the business and cash generation.
And with the amount of capital that we have on the balance sheet today, all those things sort of came together I think in this board discussion to give everyone. The enthusiasm to launch such program.
And and begin building that muscle this company.
Thank you and one more from the site.
[laughter] believe that market shortages.
Sure.
Does it seems like something that will dissipate, so like sort of about seven or session right.
But I'm sure you can find pockets so.
<unk>.
Okay, great locally and maybe it's higher than women and option at all to sort of.
While workforce, if you will increase.
Again.
No.
Okay.
<unk>. So I'll just repeat the question I believe that the.
Your comment is that the labor labor market shred. It just made percent are their creative opportunities set pretty to mobile.
Workforce.
Were you know so one I would say, yes. They do we do believe though that we can be a preferred employer with our national scale with our training programs their career development and so while you know again, you're going to see 9% growth quarter over quarter. Thank you foresee CCEP progress against that.
And we were really based but that's just a quarter ago. So at our scale, it's hard to turn it around immediately but I would also say our scale is not that huge. So were you know we have 600 open positions so with the right blocking and tackling with our market position I'm you know we believe that's achievable.
Thank you.
Thank you.
Your next question comes in a lot of Philip Shen with Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for the questions I'd like to explore the labor topic, a little bit more.
No we touched on this a bunch and you've mentioned that you're confident in resolving this.
A couple of quarters I think last quarter, you were confident in resolving this as well before Q4.
And so you know our checks with the industry suggested is incredibly tight out there.
You do have 600 physicians more than 600 to sell.
So I know your long term goal is to grow 15 to 20 percents and with your guidance for Q4, I think you're going to grow maybe 11% year over year in 2019 versus.
Your prior guide of 16 is 18% year over year growth. What are your appears is growing 18% on all the other one growing 30%.
I know you're not going to provide official guidance for next quarter, but it's.
Can you comment Directionally on your 2020 outlooks.
Could we see something similar to 29 chain, where its subs, 15% growth because of this labor issue and then also as it relates to your confidence what would need to happen in order for this to be longer than a couple of quarters for example.
And.
What kind of probability might that peak.
<unk> think fell so so one I would just point you to a couple numbers to give more confidence. So one if you just look trailing 12 months the growth in our megawatts deployed was 20%. So it's a share taking number versus you know any of the peer company.
Secondly, I think I would point to the sequential growth from Q3 to Q4, where the sequential growth in the quarter is 9%. So you know if you just look at that as a as a indication of some of the momentum in the business that that would support you know the type of growth rates that you're talking about I'm. So that's what give.
That's some confidence there. We also you know the seasonality will help as well to Brian Lee's question and then we are also I'm you know not only do we have the levers of our direct hiring but we also have the third party and so theres more time for us to put in place programs with third parties for sustainable business.
For them. So it's a lot of blocking and tackling but again, we're you know we're operating at a scale that's bigger than our peers, but again, it's not at this scale about as hundreds not thousands of people I'm. So it's an executional challenge and we think that the Q3 Q4 growth rate.
Should provide some confidence that the momentum is going into right direction.
Okay. Thanks Lynn.
Shifting gears to your contracted value, it's down to 331 million this quarter.
I think it's down 25% year to date.
How do we how should we think about how do you think about this line trending ahead do you think the contract value to grow near term.
And over the past your deployed by this year to date nearly 300 megawatts and this is in contrast, with a contract value going down.
Suggests that you are selling assets and maybe even residual equity.
Are you selling the equity slices in these assets in and if you can comment on that overall outlook for that line item.
That would be great. Thanks sure sure Phil This is Ed so.
Great questions and is in a few things I would like to share on the topic. So the first we haven't made any asset sales.
And when we think about net earning assets, we really think about it in concert with cash as a first measure.
And our cash position is up 100 over $100 million.
Over the trailing 12 month period and that's despite the fact, we've been making very significant working capital investments. So for instance to the earlier comments on the call all of the sales that we've incurred that have not yet become installed affect cash, but do not benefit net earning assets.
If you look on the balance sheet, you'll see construction and process is also up $45 million year to date. So thats further investments and so actually we think when you look at cash and net earning assets together, it's quite positive story I would also mention and this gets to the 6% discount rate.
That with actual interest rates being where they are.
And with the finance execution that we had been.
Achieving.
We can actually realize more than 100% of contracted net earning assets. So it would be possible to do you know refinancings.
Sell no assets.
Grow cash significantly it actually see contracted that earning assets decline.
'cause at a 6% discount rate, it's not really appropriately mark to market. If you used to 5% discount rate to examine net earning assets it would be $405 million higher about half of which is in the contracted period. So we think that that all together as a very attractive story for the company in for cash generation.
And.
You know absent, obviously remarketing everything in the materials.
You know it.
May not you may under sell the actual performance of the business.
Okay. Thanks.
One last one.
Can you provide us an update on your plans around the new homebuilding markets.
For example are you guys partnering with roofing contractors or do you feel like you can go direct to the builders nor checks suggest that you might be partnering with citadel grouping, which I was healthy market share in California as a pass because builders can you expand on this topic and just provide some color there. Thanks.
Thank you, yes, we are pursuing fall again, that's one of the advantages of our business model is how we have our direct efforts as well as our partnership platform. So we did last month announced a partnership for new homes, but citadel, which as one of California is largely through grouping company and we remain engaged with conversations or have been can.
Track and with half of the top 10 homebuilders in California. So again as I've said in the past the wave. These you know relationship typically work as you get awarded a community or two you prove yourself you get awarded more so it's a slow build but we like the progress that we've made to get in their improve ourselves that were high quality partner plus we welcome to.
I need to pursue these partnerships with with the Citadel and others.
I would also add that this safe harbor adds an interesting competitive advantage. This as well you know I believe with our scale, we're safe harboring that though the largest number of megawatts and so for the for the builders, who really prefer the solar as a service business model sense. It doesn't require any upfront capital.
Theres, a sustainable and terrible advantage for US you know that will persist for the next four years.
For years, plus with the 10% credit in that market.
Okay, great. Thanks, I'll pass it on.
Thank you.
And your final question cause or line of Colin Rouge with Oppenheimer. Please go ahead.
Thanks, So much for squeezing me in can you talk about the available capacity you have on the energy storage side to meet the needs of the demand in our you supply constrained at all at this point.
<unk> on in terms of the physical hardware, we're not supply constraint on the battery. So this again, though it overlaps with the markets, where we have installation constraints. So I'm. So I'd say, it's the same conversation we've been having in the previous conversations but in terms of the batteries themselves.
We are not constrained there.
Okay, and then just as you look at the technology landscape and moving towards a virtual power plants and other other services that you can provide.
Are you seeing meaningful evolution and technology, a you know and a shift in terms of what you wouldn't want to include and the portfolio. Obviously you guys have been pretty good about managing vendor us, but I'm wondering if there's a maybe a shift in terms of how you think about technology exposure and technology needs. So as you move into the next phase of a business.
I think we're excited about all the innovation that's happened in the batteries hasn't that's a tailwind we have not seen those price reductions happen, but when we look at the landscape out there, there's a <unk> with electric vehicles coming and the amount of innovation that's happening here there are.
Many suppliers working on the next generation of batteries, which will be easier to install cheaper to install higher capacity and so those are all you know omnicom. So I would say that we're excited about that the product that we have today works you know it's been tested through the power shut off as we said its financially attractive.
It's only getting better.
Okay. Thanks, guys.
Thank you.
And I'm showing no further questions at this time I would now like turn the conference back to land for closing remarks.
Thank you everybody hope you have a lovely evening.
And this concludes today's conference call. Thank you for your participation and have a wonderful day you may all disconnect.
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Yes.