Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Vivint Solar fourth quarter 2019 results conference call.
This time, all participants are in listen only mode. After the.
His presentation there will be a question answer session. That's good question during the session you'll need to press star one on your telephone.
If you require any further assistance. Please press star zero I'd now like to hand, the conference over to your Speaker today, Rob Kane Vice President of Investor Relations. Thank you. Please go ahead.
Thank you operator.
Operator, good afternoon, everyone and welcome that doesn't Solars fourth quarter 2019 financial results conference call joining.
Joining me today to talk about our financial results or Dave a by Wattenberg, Chief Executive Officer, and Dana Russell, Our Chief Financial Officer. This call is being webcast a supplemental investor deck is available on the Investor section of Evans.
Solar website at investors Dot doesn't solar dot com.
In addition, we will be discussing both GAAP and non-GAAP financial measures during today's call.
To provide a non-GAAP the GAAP reconciliations in our earnings press release, So it was issued earlier today.
This press release is also available on the Investor section of our web.
Right.
Please note that a replay of this call will be available within a few hours of the call.
After management's remarks, we will host a <unk> session.
During today's call some of the statement will be making constitute forward looking statements within the meaning of the federal securities laws, including statements regarding our guidance and our expectations for our business.
That's finances operations in markets.
Accordingly, we wish to caution you that such statements are just estimates based on current expectations and assumptions regarding future events and business performance.
<unk> risk and uncertainties that could cause actual results to differ materially.
We refer you to the registration statements a periodic.
Ports that Wi Fi what the U.S. Securities Exchange Commission from time to time, which are available on site and identify important factors that could cause the actual results to differ materially from those contained in our projections and other forward looking statement.
We undertake no obligation and expressly disclaim any obligation to update or revise any forward looking.
But whether as a result of new information future developments or otherwise.
Let me turn the call over the David.
Thanks, Rob Good afternoon, and thank you for joining us on our call today.
We are pleased to share with you different sorts fourth quarter and full year 2019 financial and operating results.
Along with our progress against our strategic priorities.
We have continued to execute well and finished the year strong we installed 66 megawatts for 9500 customers in the fourth quarter. This represents 22% growth of installed megawatts over the fourth quarter of 2018.
For the full year or growth was 19% as we installed 233 megawatts for almost 34000 customers. This is a new record for annual volume for the company was the proud milestone for us.
However, we're most proud of is how we're delivering this growth it has not been a growth at all.
Yes mentality that its heartless industry in the past rather it is intentional and intelligent growth that focuses on the customer or employees at our investors. We're growing the best markets with a maniacal focus on installation quality employee safety and the customer experience. It is this holistic approach coupled with strong growth that under.
Right surprised we haven't been part for Vivint solar.
We remain differentially focused on the most economically attractive markets, which we believe are also the most competitive.
To provide you some perspective on our growth in the fourth quarter, our growth in California was up 27% versus the prior year in Massachusetts, our growth was.
25% and in Jersey, It was up 57%, we believe our integrated model is succeeding especially in the most contested markets.
One of our major strategic advantages and why we continue to increase our market share and these highly competitive markets is a different sorts powerful direct to home sales force. We believe we have.
The most professional skilled and motivated sales force in the industry since the company's inception, we've invested heavily in building the best cells management teams, creating comprehensive training materials, developing very robust sales tools and streamlining our selves processes.
Our investment and focus on the Vivint solar.
Sales team has resulted in our having what we believed to be the most effective sales team and the residential solar industry.
Our results in the most competitive markets speak for themselves.
Coming back to a fourth quarter results our growth is coming across all of our channels, but remains strongest in our inside sales retail and homebuilder channels.
In the fourth quarter these channel trips and a 30% of our total volume up 21% sequentially and 146% year over year. Our inside sales team has performed especially well with volume growth of 40% year over year for 2020, we expect those channels to continuing to grow faster than our direct to home and dealer channels.
Represented a larger portion of our volume and allowing us to reach additional customers at lower overall costs.
Another strategic advantage for Vivint solar is our installation and operations teams. The vast majority of different sorts installations are performed by didn't sort employees our employees take pride in the quality over installations.
And the construction services, we provide we believe our operational processes comedy with installation service maintenance or the most effective in the industry our focus on customer satisfaction and quality are paramount in our thinking and got our actions.
Efficient operations alone harness satisfactory.
If the quality of installations.
Standard the two must go hand in hand, we believe our 86 point checklist start dedicated quality inspection teams and our compensation policies tied to the quality of installations means customers and investors can rest assured that have been solar system will perform as designed in addition, when installations are done correctly.
The first time, we're able to dedicate fewer resources to fixing issues down the road, which allows us to apply more resources to installation.
We are relentless in our effort stupid leader in residential solar operational excellence, we continue to refine our processes audit and verify performance and add dedicated resources.
As to assure quality.
Our operational efficiencies a competitive advantage and we believe these capabilities will increasingly differentiate us in the future.
Our integrated model allows us to ensure control Dan consistency and push best practices out across the company in a rapid and predictable manner several noteworthy.
Wins in 2019 include a 70% reduction in our time from installation to PTCL.
A record low in service reporters on new accounts within 12 months of installation and the overall performance of our fleet at record high levels with regards to system availability and power generation These achievements, resulting.
Happier customers, which is evidenced by what we see in high and improving customer satisfaction metrics that we closely track across the customer experience.
Despite these improvements we continue to continue we know we continue to improve continual improvement as the poor DNA of our company and we are excited about what our people achieve.
2020.
Looking forward to the coming year demand continues to be very robust for residential solar and we believe we are well positioned for another strong year end 2020, we will continue to leverage the advantage of our business model and continue to target. The most economically profitable markets given recent concerns with the current.
One of virus, we are monitoring and putting the redundancy plans in place where feasible to protect and prepare against potential shocks to our business continuity. Despite these concerns we believe will still grow installed megawatts by 15% to 20% given the strength of our current pipeline. We believe this growth keeps us at or above the.
But the 2020 market growth rate.
There is the potential to grow faster by more aggressively serving less economically attractive markets. However, chasing this additional growth would require us to lower our margin targets or possibly install systems at a loss. This is something some in the industry UBS done in the past growing for gross sake and has led to a.
Negative consequence for many companies as they have had the resort to equity raises and corporate level debt to fund. These less profitable growth. This is something we're not wanting to do instead, we remain steadfast in our commitment to to be disciplined.
Pursue profitable growth.
Finally, we continue to gain traction with our storage.
Offerings, primarily in Hawaii in California, we offer new customers the ability to add storage to their source system, whether it is a system purchase or routine ownership.
Although the customer.
Also all the number of customers requesting storage is still relatively low to our overall volume we are seen a significant increase in customer awareness and.
Have doubled our storage installation sequentially from the third quarter storage has become an increasing portion of our business and we believe will be a material part of our business. This year with double digit attach rates in markets, where we offer a storage option.
Our growth is at a level we expected.
And a planned for and we are executing in a way the confused.
To build an organization that will provide the benefits of residential Florida homeowners and lead the revolution, a clean power to greater Heights, we do not expect the momentum to slow down we will continue to be prudent and deliberate and how we grow and operate the business. We will continue to invest in and improve our systems processes and technology to reduce cycle.
Times, improving customer experience and reduce operating costs I believe it has never been a better time to be part of business or.
Overall, I'm very pleased with our company's progress on the exciting results were experiencing with that let me turn the time were to Dana to provide additional details on our metrics with quarter.
As David discussed we came in at the upper end of.
Our installation guidance was 66 megawatts in the quarter.
Compared to recent quarters, we saw strong uptick in system sales as customers locked in the value of the 30% ITC by having their system installed in 2019.
For the fourth quarter, a system sales were 13 megawatts or about 20%.
Of our volume going forward, we believe system sales as a percent of our quarterly installation volume will fall back the low to mid double digit range.
With our focus on our best markets. We've continued to see strong project values for our PDP is leases for the fourth quarter. Our project value was $4 in 71 cents per.
What a 7% increase over the same period a year ago.
On an adjusted basis, our net present value created or estimated margin was 62 million.
On a unit basis, our adjusted net present value per watt was 94 cents. Since typically there is a material lag of approximately a quarter between the time we.
Solace system for sale and recognize the revenue from that system, we're reporting an adjusted number to better align the value created with the associated costs.
Moving on we continue to create significant value with each system, we install as we prioritize for overall return rather than a strict focus on cost.
Cost we believe our estimated margin shows that we're achieving this even as we're investing for growth faster than the overall market.
Although our unit margin can fluctuate from quarter to quarter. We believe we will maintain a margin at approximately a dollar per watt on an annual basis.
Our net retained value was 1.2 billion at the end of.
The fourth quarter on a per share basis. This represents approximately $10.
Net retained value decreased from the prior quarter as a result of using 50 million in cash from our balance sheet to prepay for Safe Harbor inventory as a reminder, we believe net retained value as we calculated is a good proxy.
For the asset value the company.
Our commitment to growing in a sustainable controlled manner can be seen as the asset value the company increased steadily quarter over quarter.
Our unit cost for the fourth quarter was $3 and 54 says the increase in our unit costs were due primarily to higher panel.
As seen in the fourth quarter as supply was constrained due to safe Harbor purchases.
The addition of new installation crews and investments in new sales channels and corporate infrastructure as we continue to grow.
We believe this will benefit our overall cost structure in future periods.
Total revenue for the quarter was 77 million.
Ian up 21% over the fourth quarter of 2018.
Revenue from systems, where retain ownership was approximately 44 million up 25% from the year ago period.
Revenue from system and product sales in the fourth quarter was approximately 34 million up 17% from the year ago period.
Our liquidity and financial position, we remain quite strong we finished the quarter with 256 million in cash unrestricted cash.
There are several factors at play in the decrease in our cash balances in the quarter relative to the prior quarter first was the 50 million, we used for purchasing safe Harbor equipment second with.
Our new asset financing facility, replacing our work working cap facility, we chose to reduce our corporate level debt by a net of 32 million.
At the end of the year, we had approximately 224 million an undrawn capacity in the various debt facilities and approximately 67 megawatts in.
The tax equity capacity.
In addition to having sufficient liquidity reserves, we continue to see a great deal of interest from tax equity and debt investors for residential solar assets.
Subsequent to quarter end, we entered into a new tax equity partnership that is expected to provide another 28 megawatts of.
Tax equity capacity.
We feel positive about the capital structure of our business and we believe will remain cash flow neutral to positive.
Given our current business practices and growth rates.
Turning to our first quarter guidance, we expect to install volume to be somewhere between 57 to 60.
Megawatts, we expect our cost per watt to be between $3 and 68 and $3.75.
Our unit costs are typically higher in the first quarter as volume is at its seasonally low point for the year.
We believe our cost structure will decline through the year as volumes increase and we realize more benefit of the.
Estimates were making to enhance growth in our emerging routes to market.
For the full year, we expect to grow at 15% to 20% and we'll continue to update this as the year progresses, we recognize the turmoil and concern with some industries and geographies relating to the upheaval associated with the Corona virus.
We are hopeful the residential solar business in the us avoid significant disruption, but are mindful of the potential impact associated with this issue we have not seen meaningful impacts of the business at this time.
We're excited about the progress we've made and continue to believe that the company is in a very strong position to take.
Take advantage of the significant customer demand for residential solar we believe our current growth trend will continue into 2020, and we expect that will grow at or above market growth rates.
With that I'll turn the call back to the operator for questions.
As a reminder to ask a question.
Press Star one on your telephone to withdraw your question press the pound or Husky. Please standby Billy compiled the Q and a roster.
Your first question comes from Brian Lee with Goldman Sachs. Your line is open.
Okay.
Your next question comes from Philip Shen with Roth.
Capital Your line is open.
Hey, guys. Thanks for the questions.
Hi.
As expected I think you guys called out the current a virus as it risking your 10-K.
And I know you Dan are you just mentioned that you haven't seen anything meaningful.
In our checks this week, we're starting to hear of.
Relations and lower sales volumes.
In both the northeast and in California.
From separate installers and this is just the beginning.
Potentially what could happen just curious if you guys can elaborate on what you guys are seeing and hearing and and how do you expect this to play out.
Hey, Philip as David.
We've looked at our leading indicators and they're very very strong we actually havent seen anything impacts.
Point, So we look at our account generation, we look at our welcome calls and.
We haven't seen a dip, but it's actually been accelerating so.
We're encouraged by that but we're also measured and.
And that as well so.
I think that have an impact I do.
It is how big.
We're on shore, but right now is still looks very very strong we've been working on contingency plans on making sure that we can still.
So do everything we've done in the past due in the very best we can a plan around it.
But right now the demand has actually been.
Holding up quite nicely.
Great.
Thanks, David you mentioned, the redundancy plans and contingency plans.
Is that primarily for.
Senior managers or if you can elaborate on that that would be great.
Sure we look at both in the field.
On operations, we look at the field on sales and then we look at corporate so here at corporate build a day, we had our entire team all work from home no blips we've got.
We've got redundancy in our sites, where we actually do all the processing. So nothing nothing in one site. So we we've worked on that in the diversification that we've been doing that for the past year perfecting that process.
We've been working through.
Just remote.
Support of systems and of work.
Flows both in the field and externally and and feeling good about the progress made there you on the sales front.
These folks or dispersed throughout the communities and so.
[music].
Obviously, the current biased towards hitting in words concentrated you probably a much more adverse reaction versus elsewhere and.
We're pretty diversified across the markets RIN so.
We are doing the best we can.
And feel good about what we can control and we'll continue to monitor and be optimistic, but also responsible we need to be responsive.
Okay that sounds pretty robust.
No as it relates to liquidity, Dan I think you spoke to this a lot in terms of the amount of capacity have.
I was wondering.
If I missed it but can you comment on how much capacity have left on the forward flow I think you guys.
I have 208 million 200 and.
8 million used up now.
And then what are you guys hearing in terms of and this might be too early but have you had any initial discussions with financing partners.
To re up facilities and is there any hesitation.
From.
Any of the banks or.
Any of those partners.
We sure have had good responses to inquiries about capital as we mentioned we're optimistic about it.
Tax equity appears to be in a good spot.
Everything that we've talked about I think continue to see robust markets for it.
People are very.
Comfortable and seeking value here and so I think the assets are performing well. So we just don't really see any barriers at this point.
To renewing or doing things that we've done in the past we know there's some upheaval in the markets right now, but we really believe.
Now that we're in a good spot and continued to.
Be optimistic about that as well.
So I don't see I don't see much in a way of concerns and now and we've reflected that in our prepared remarks.
Great. Thank you both.
Appreciate it I'll pass it on.
Your next question comes from Brian Lee with Goldman Sachs. Your line is open.
Hey, guys.
And.
Pretty short question on that first the first introduction there.
Yes, apologies technical difficulties.
Well, we'll get that sorted out.
And maybe just a follow up on Elds question.
Financing sounds like you're you're in a good spot right now but.
Just like to doing with.
Operational folks in the midst as you know what is a tough situation right now with all the virus.
Challenges facing do you have.
He plans.
From a financing standpoint, it kind of marts credit markets Titan spreads widened further let's say you do need to go outside of the normal wheelhouse for financing what options would you consider and having plates.
Well, Brian I think.
As far as contingency plans, we have a variety of vehicles that we have employed in the past and we continue employed we have a lot of undrawn capacity on the curve vehicles debt facilities that are in place. So.
So as far as constraints in the near term.
Just.
Still see a lot of constraints there and we've we've signed up additional tax equity we have others in the pipeline I think we feel pretty good about it so.
So we're not just centered in one vehicle or one route in terms of per flight providing capital for us.
And I think the markets remain remain open in pretty strong.
We'll see how things go here and if if there are other issues that arise but right now.
We feel pretty good about the capital structure of the company and the potential for new.
Restaurants in new new offerings. So.
I hope that answers your question.
Yes, no that I appreciate the color.
I might have missed it but a couple of maybe movado related question.
First on the net retained value there was a decline quarter to quarter.
If you could maybe walk us through the drivers of that and then secondarily the.
The revenue dollars were weaker on higher volumes for the the system and product sales segments wondering what what might have driven that dynamic as well.
Well on the net retained value Theres a cash component.
I wanted in that.
And we used cash as we talked about.
With Safe Harbor, and also paying down our.
Working capital facility. So we use some of our cash to pay down some corporate level debt.
And so that's the main impact with net retained.
Are you having a deep.
So not a significant decrease and we feel like we're in a previous position there as well from a cash standpoint.
But that's the answer to that question. The second question was.
Remind me again, Brian what your second part of your question was.
Yes, it looked like revenue dollars where week there.
On a higher volume third system product Oh, I looked at system product sales in the 30 megawatts. So they denied the past few quarters like your revenue was about Saybrook Pointe weaker.
Yeah the.
The.
The the delay or the timeframe in between the sale of that system.
The installation that collecting those revenues and recording those revenues through the quarters, what's really impacted that and that's that's also why we talked about a bit of an adjustment in terms of the net present.
We have as well so.
We'll see the benefit of that in the first quarter and first quarter results, where we'll see.
The revenue associated with those systems sales. So it's more of a timing issue than anything Brian.
Weve, Brian we really we prioritized.
Late in the quarter our system installed so kind of across the market is trying to really make sure. We got as many of those installed as possible that really was the lions share of what we focused on throughout December. So thats why we saw such a high spike in and that was kind of late in the quarter.
It was the right thing to do for customers.
I appreciate it thanks, guys I'll take the rest offline.
Thanks, Brian.
Your next question comes from Colin Rusch with Oppenheimer. Your line is open.
Does that.
I'm more curious about what you're doing on the grow side too.
As you look at new geographies, what do you need to see to start moving into some new geographies and how long do you think it's going to be before you need to do that support growth.
Well first off I think thanks I appreciate the question call on I think our growth overall has been quite robust we're really pleased with that.
Back last.
Six seven quarters, we've been posting growth and.
Hi teams low twentys and so we've had really strong growth.
What I call, our core markets known in our core markets, but our most competitive markets.
When we think about new geographies, we always do a trade off right we're like.
Those are usually marginal economics marginal savings for your customers and.
We've always felt like we wanted to dominate the best markets and we've done a really good job there.
I look back this last year and we look at some of the interconnection data out there for the industry.
And we think we're growing.
Three times or more in some of the key markets like California, Massachusetts, New Jersey, and others. When you look at just the growth rates versus industry. So.
Our growth has not been constrained and we've been growing quite well in the best markets.
Now at the same time as Dennis said, we've been.
Investing heavily into new channels, we've invested heavily into retail we've invested heavily into our capabilities around inside sales. Obviously, we invested heavily into homebuilders and are very pleased with those efforts and we'll see that volume coming this year.
Many of those new.
Models that were looking at.
And also even the models with our direct to home. We're we're pushing towards a lower cost per watt that allows us to expand into new markets, but our plate at this point has been.
Dominate in the most competitive animals viable markets.
Make the investments into new.
Channels that we see gas your lower cost of acquisition benefit from those channels in our existing markets and then apply them to margin markets, where you have a cost model that allows you to expand and expand with healthy unit economics. So the work we're doing right now around E Commerce will.
Allow us to go into new markets and do so boldly and aggressively as we perfect that process Sandy with our inside sales and our other channels. So.
There is a there is a very thought out plan. There is a very intentional approach here on how we're approaching growth.
And once again.
Our overall growth in the best markets I think is better than growth in our marginal markets and we've always said people will save all your drone.
We grew 19% last year, it's phenomenal where we grew.
People say well can you grow more yes, we can grow more we've always said we'd grow more.
But we choose to.
Grow in a sustainable and a deliberate and intelligent manner on on how we grow did you want to add anything to that or is that kind of cover no I think.
Everything David said I would add the the we touched on this but the investments that we're making now are.
Being.
Got it in our cost per watt and we're realizing accelerating growth of those emerging markets, but but we're making an investment. So it is impacting cost per watt and causing cost per watt to be a bit higher in the near term and we think it's going to pay off a lot down the road for the very reasons call that you're talking about.
New markets have been able to grow offer solar at a very affordable price.
To customers in emerging markets in a way that makes sense and is economically viable.
Great and then a follow up is really about cost of capital and your ability to borrow at lower.
Right.
As you guys kind of other business and think about your your cost of capital and speaking with your lenders and other finance partners.
You start to think about the business added at a different discount rate.
So capturing some are spread.
Can you do some things on your balance sheet.
To reduce some of the carrying costs on the on the existing projects.
Well.
Our facilities that we have in place now are.
Our hedged so we've we've kind of locked in interest rates on a lot of the.
The that's currently in place.
We think.
About doing other app capital raising activities here as we go forward and we'll see what the impacts our with that we think that it's likely that we could see some lower interest rates associated with that.
For the most part we plan on a being relatively.
Simply stable so.
We think we're in a fairly favorable a fairly favorable situation from a cost of capital.
That may improve slightly but we don't we don't see that.
Increasing.
Or at least.
That's not to the way we look at it right now.
Well.
So we think we're in a in a pretty good situation in terms of the capital structure of the company and think it will be relatively stable as we go forward.
Alright, thanks, so much guys.
Thanks.
Your next question comes from Julien.
Colin Smith with Bank of America Merrill Lynch. Your line is open.
Hi, good afternoon team. Thank you so much for the time.
Perhaps firstly can we talk strategic little bit on any price on any efforts and how you think about the business I mean, I know this media articles out there so would love to hear your thinking.
In any.
The direction right I suppose we haven't seen too many.
Strategic thoughts of late in the sector.
Curious if this is more asset oriented broadly or if there's any commentary you cannot and then I got a quick follow up.
From a strategy standpoint, Julian you want to point us in any direction there I mean the.
Is there something that you're listening.
I was just if there was any reactions to meet your article in there.
As far as Frank.
Well our strategy as David mentioned is to continue to do what we've been doing focused on quality focus on.
Great markets focus on continuing to build our sales teams in our sales processes focusing on the new initiatives in the emerging markets I mean really that's our strategy. So there.
There hasn't been a change in the way that we think about the business other than what Weve.
Indicated we continue to be excited about it and at our strategy is go forward as.
As purposefully as we can under the conditions, the David talked about where we're being responsible and mindful of the economics of the company and build sustainable.
In addition, so we're extremely happy with our employees with the way the businesses running with the improvements that we've made in the efficiency gains that we have the productivity of the system. So.
That continues to be the strategy and I don't think that will have really other.
Other comments.
And that David you want to yes, no I agree completely I mean, I actually have probably been I don't even more bullish about the company than I am right now.
When you think about everything that the Dana said, it's all true I mean operationally, we're performing now at a better level than we've ever performance I mean hands down and our strength there to flex forward is.
Is remarkable.
From the sell side the generation.
In our direct to home team is absolutely question, we have more active head count now than we've ever had in the history. This company.
And I think they are happier than they've ever been and we're working hard to continue to delight them.
And then at the same time, we've opened at least.
Channels that we think are very customer centric and giving them the products they've won in the channels. They want and we're very encouraged by the cost position that puts us into expand into new geographies.
On the expansion front, we're in new markets, you think about Chicago, Illinois.
I know in general and and we reentered Hawaii phenomenal growth rates for us, we're absolutely crushing and right now in Illinois. So we're really pleased with that and we're just starting on the platform play and so now with the attach rates as we now ship shifted pivot toward bringing additional products. These customers that are.
If you than they've ever been and we're servicing Ben we rubber service them you know.
We were on their trust and you see our growth rates.
So we actually feel like we're kind of coming into our own right now and are leaning leaning forward to accelerate and we're super encouraged by that so we and we.
All of our integrated model, we think going forward. The control is something that you guys you put an emphasis on.
If you can't prove that you're controlling the sales process and the installation process I would be I would rethink that because we actually see that control as a key differentiator going forward.
And the parties that associate with this industry.
Our putting a premium on it so we like we like the cards that we have we like the cars that weve.
Created and we're very very bullish about about our strategy in our ability to lean in and execute and create a lot of value.
So do I don't know that actually question not go up on the.
It's it's fine.
If I could move on.
With respect to supply contingencies, and you guys talked about addressing all sorts of things on the virus.
So you addressed some of the more corporate angle, how do you think about ensuring the adequacy infants.
And then separately as extends which can be the dig into the inventory given supply chain concerns.
Since you using somebody I could say corporate equipment or how do you think about that side integration rather than focusing on the sales side.
In the context of diversification.
Yeah. That's a good question Julien I think we do.
Do have as you move.
You alluded to their inventory associated with safe Harbor, where weve stockpiled some inventory mainly panels.
And so we have we have that available to us we don't want to have to use those.
And.
Sale transactions that.
That doesn't benefit the reason why we had the safe harbor so.
So for retained ownership activity, where we have a PPA air lease that's where we're using that safe harbor equipment and right now.
The supply of other equipment looks to be pretty good. We just did a check on that the other day.
Today, It appears that the manufacturers are panels and other equipment.
Seem to be up and running and the market seem to be available.
You know if that if thats impacted or shuts down.
It may be that we'd have to use some safe harbor to equipment or do.
Something else there.
We don't anticipate that we did see a lag in a delay associated with some activity coming out of China.
And now we feel like we're seeing that activity give back up.
And some momentum beginning to build there.
We don't.
We don't know exactly what will happen here as time goes on.
We feel pretty good in the present.
But the clarify on that as you have not seen in the issue from the supply chain perspective, yes, right that that maybe the critical point.
Well, what we saw was lighter.
What we saw was early on the there was.
There was some delays and some activity that was not occurring in some of those factories were operating in a way that was allowed us to get the equipment. What we've seen over here. The last couple of weeks is that activity resume.
Facilities are back up and operating something 80% plus and we're seeing some increased activity from the fee people that we've been getting equipment from.
So we're seeing we're not seeing.
Problems, we're seeing we're seeing some momentum build there where we're seeing.
That activity increase not decrease that's the current state and and so thats, where we know today.
The way to put it as.
We cushion that we had and the resumption of activity, we don't anticipate any stock outs for the growth rates were talking about so I can always change, but we.
The supply chain and in constant communication with our vendors and that's not a that's not a huge concern for us we're feeling pretty good about where we are and the outlook from the flow and.
Yeah.
That was a concern, but we feel really good about where we are given their work we've done and the cushion that we had theres only so much.
Such that we can control their Julian as you know I mean, we don't we don't manufacturer that ourselves and we did that from third parties most all the equipment.
We've had relationships that are.
Long relationships with suppliers that we do a lot of business with and we are priority for those.
Suppliers.
But.
But we'll we'll see how this Athens and how how this virus affects the world and what other considerations are made.
And and I think as far as where we stand in line to other people.
I think we are probably in a very good position from a priority standpoint.
Thanks for clarifying guys.
Thanks Julien.
Your next question comes from Joseph Osha with JMP Securities. Your line is open.
Hello Hello.
Amplifying a little bit on on Juliens question, and also maybe being a little more specific job you're talking about storage alot.
I'm curious as to whether.
We might see you look to add some some skill sets there and on a related note unless I missed did I.
I don't think I heard a specific storage attach rate number is that something you'd be willing to speak too and then I've got a follow up.
Hey, Joe appreciate the question yes.
It's no secret we were behind on storage.
So we knew that it was intentional on our behalf.
We have shifted in the last quarter to you've heard from us that we've stepped up our game there.
And we're seeing that we've doubled our.
Weve doubled what we're doing in Q4 over Q3, but I put the prepared remarks, and we said that for this year coming forward, we expect to see double digit attach rates.
In the markets that we offer batteries.
So you specifically in Hawaii in California, and you'll see in the northeast.
This year so.
So that's great I think that we're in the game.
I think we're kind of catching up on the on the attach rates and you'll see a much bigger piece of our.
But.
Play going forward.
Okay. Thanks.
Second question. It's you are now sort of the second company, we've heard talk about.
Some unreasonable behavior in the market I'm wondering obviously without getting into names is this aggressiveness coming from other.
Larger companies or is this mom and pops thought taking the business to financing platforms, where where are you seeing this pressure coming from.
Yes, I mean, you look at the.
We know, it's very transparent market on what people pay and we pay competitively.
And our value proposition always been it's it's kind of for our sales folks. It's the commission times, what does the per Rep averages times, we always tell them about sustainability and then you wrap that around kind of the customer experience and then the additional referrals they get as you delight customers and so.
We feel like we're competitive on our pay there are there there are some players that we look at what they pay and we think its irrational.
And but we really focus to be competitive we really differentiate on our per rep averages will compare our per rep beverages with the large dealer network that we worked with.
We're very very very encouraged by how much more our folks sell up per rep per month, and others and so and then then their confidence around us delivering and the customer experience. So.
You put that together and we don't match.
With user.
Pricing, but our growth rate is very high and I think we've really delighted our salesforce.
And we're seeing very very positive things. So they really look to that and said what is the full value proposition for us and where do we want to play place our fly personally and where do you want to be and we think some more sustainable out there.
So we're encouraged by what we're seeing.
We're mindful of what we think is rational versus irrational and.
We are doing everything that we think is appropriate to be competitive, but also be respectful of the sustainability and unit economics.
Yes.
Just wanted to.
That cuts across the whole industry.
Joe I mean, when you think about it we've got we've got players across the industry much of the industry is smaller players.
And so there is a lot of that and I think in order we know what it takes to get a return in a market and we have been disciplined in making sure that we get a return.
When we see somewhat out to pain well in excess of what we pay in a market. We know they either have to cut costs in other areas.
Or they're not getting the return and so it's not establishing a long term sustainable model.
We need to be in a long term sustainable model and pass on savings to customers.
Because that is the ability for us to sustain ourselves and and if you're not saving customers money the ability to retain those customers is a bit problematic.
The cutting the cost we've invested in our installation and in our quality and we've increased that over the years not decreased so even.
Well, we become more efficient we see a lot of activity out there and we have requests all the time for people to say, hey, so and so installed less system. There are no longer in business. There out of business now can you guys help us and.
Would you service by system.
So thats part of the element that we.
We see that customers. Many times are not aware of what they are getting into when they signed a long term agreement.
With folks, who don't have or who don't have the wherewithal to sustain them over a long period of time, we don't like that behavior, because it's a battery flexion the industry, it's a bad reflection for customers we.
Certainly our a big player and so we are in contact with regulatory agencies and others, who are on protecting consumers and we want to be proactive and assuring that customers of the best experience possible.
So I think if any element in the processes.
Irrational or were cutting cost because were pain, so much in other areas and and we see that happening and we're not going to name names in terms of players who are out there, but we certainly do think that as the industry matures.
People are more responsible.
We hope that.
To evolve because it's better for everyone.
And we think that there are our parties out there who don't take the same concerns that we have and it's hard to control quality.
With hundreds and hundreds of installers out there so if you're not doing the same.
Is that we're doing you're going to have a tough time controlling that quality and if you're not checking on that and assuring that there's some audit process in place.
Then.
Then you're going have systems that are faulty and thats why we invest in those processes to make sure that that's part of our procedures.
So that we so that we give customers a better long term experience.
Thank you and I think that kind of leads to the final question then I'll jump off I think both of you've talked a lot about being very intentional about your growth and.
Staying focused on returns which is great.
And I look at your cash and.
The fact that it I think would've been up pretty nicely. If you hadn't safe Harbor, and then pay down recourse debt, which is great.
Then your comments for the upcoming year are still pretty kg and so I guess I'm wondering if your business model is so returns oriented and so intentional.
Is it not generating cash.
Well, we said that we would be neutral to positive and I guess, you're referring to the part where we say neutral and we do have timing differences from quarter to quarter, where there's quarters that there is more cash and and.
We will see we'll see some of that activity in the near term here as we get.
The benefit of system sales that Weve completed here.
At the end of the for the fourth quarter.
We feel good about the process, where we are making investments and we want to be clear about that so we are investing in routes in emerging markets.
In a meaningful way, we're investing in our technology and I T. So that we can do more from an E commerce standpoint.
And so we feel like that's important.
Maybe to sacrifice of some short term.
Cash.
Those but at the long term benefit of the company in sustainability of the company and the way. The organization is going to continue to evolve we really believes that the majority of Americans want access to residential solar it's beneficial to save some money and so it's our own us to say how can we best.
And.
Those interest by providing a means.
To to get that customer demand.
In a feasible meaningful way.
So we're about we're all about that so that's that's what we're trying to do and we're making those investments.
And we're proud of that and we'll continue to do that.
But we will do that in a way that continues to allow us to cash flow the business.
Thank you for so much time.
Michelle.
There are no further questions at this time. This concludes today's conference call you may now disconnect.
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