Q2 2022 Sunnova Energy International Inc Earnings Call
We saw both our adjusted operating expense on a per customer basis, and our customer default and delinquency rates decline.
However, we did fall short of our expectations and customer additions, primarily due to delays in receiving permission to operate or PTO from some utilities that we believe were stressed due to high industry growth. We also collected less than expected unscheduled principal payments on our solar loans as the economic recession and the Sun.
And spike in mortgage rates led to a significant decline in mortgage and mortgage refinancing activities.
While missing these targets was frustrating investors should consider the shortfall to be timing driven as we still expect to hit our 2022 customer additions target with a more backend waiting and we will ultimately still collect the principal owed to us over the terms of the solar loans.
More importantly, we are able to reaffirm our 2022 guidance as well as our intermediate term major metric growth plan, the triple double Triple plan due to the following reasons.
The large backlog of customers, we have under contract, but not yet placed in service. So never had its best quarter for sales in company history in the second quarter, creating a significant backlog of customers, which we expect to be placed in service by the end of the year.
The increasing traction with up selling energy services to existing customers.
The earnings stability or long term contracted cash flows generate that allow us to meet and in some cases exceed expectations for adjusted EBITDA and the interest payments, we collect on solar loans, even when customer additions fall below expectations and the robust demand, we're seeing for our essential energy services, even in the face of waning consumer.
Confidence as homeowners seek an offset to rapidly rising energy costs.
Slide four summarizes the growth in some of those customers battery attachment rate on origination battery penetration and dealer network.
In the second quarter of 2022, we added approximately 17300 customers, bringing our total customer count to 225000 customers as of June 32022, a 40% increase in cumulative customers from June 32021.
As I just noted the delay in customer additions was primarily driven by slower than expected interconnection times in select utility areas, but was also impacted by battery deliveries scheduled to occur late in the second quarter moving into earlier in the third quarter and accessory and service only sales ramping later in the second quarter than initially anticipated.
While these factors impacted the number of customers who placed in service in Q2, we still expect to fall within our guidance range of 85000 to 89000 customer additions for full year 2022.
As anticipated our battery attachment rate on origination increased in the second quarter of 2022% to 31%.
More importantly, our battery penetration rate continues to grow and reached 14, 2% as of June 32022 inclusive of over 2000 battery Retrofits, we had performed life to date.
Our backlog of battery retrofit sales also grew materially in the second quarter. Our growth continues to be driven by our dealer network, which as of June 32022 stood at 986 dealers sub dealers and new homes installers only a few dealer shy of our year end target of 1000 and we.
Our dealer growth to accelerate further as we move out of the current peak selling season.
Finally on slide four we have updated our information on customer contract life and expected cash inflows.
As of June 32022, the weighted average contract life remaining on our customer contracts equaled 22, three years and expected cash inflows from those customers over the next 12 months increased to $432 million.
An increase of 45% versus June 32021.
On slide five we provide a summary of the broad and rapidly growing energy services, we offer centered around our vision of the Sonoma adaptive home, which is increasingly being demanded by both current and new customers.
When we discuss our goal of increasing the number of services sold on a per customer basis to seven by the end of 2025. These service offerings positions to another to achieve that goal. We derived a number of services per customer by dividing the total number of unique service transactions by our cumulative customer base, which as of the end of Q.
Two stood at 225000.
As you can see on slide five we sold an average of 384 services per customer as of June 32022, compared to $3 five too when we established this goal last year.
In addition to growing our services per customer. We are also seeing an increase in non unique transactions. These non unique transactions consist of up sales to our existing customer base and while they do not increase our cumulative customer count they will assist us in our ability to achieve our <unk> per share and services sold per car.
Customer targets included in the Triple double Triple plan. We currently offer 29 distinct services categorize here to both current and new customers.
As technological advancements in our industry continue to accelerate.
Allowing us to create a margin rich integrated and comprehensive energy service for our customers. We are increasingly called upon to expand the number of services, we sell to meet our customers' demand as we've moved beyond just the solar panel I will now hand, the call over to Rob. Thank.
Thank you John starting on slide seven you will see the year over year improvements in our second quarter results. This includes a 121% increase in revenues significant increases to both adjusted operating cash flow in recurring operating cash flow and a 44% year over year increase in the adjusted EBITDA.
Together with the principal and interest we collect on solar loans.
Our increase in revenue includes a change in how we have been sourcing some equipment for our dealers that resulted in $54 $2 million in inventory sales revenue in the second quarter of 2022, excluding that number our revenue increase was 39%.
While collections on solar loans increase from the same period last year. We had initially expected this increase to be even greater.
As John noted earlier, we were anticipating a much higher level of principal payments from our customers during the quarter.
This slide and payments was due to customers delaying unscheduled principal payments given rising interest rates materially lower refinancings of mortgages and overall concerns about the economy.
Scheduled payments, however were better than expected and so we consider the unscheduled payments merely delayed and thus there is no loss of cash value to Sonoma. Furthermore, our second quarter 2022, adjusted operating expense per customer on a trailing 12 month basis declined by 7% compared to the first.
Quarter of 2022, despite our continued strong investment in growth and inflationary environment and spending on the recently completed <unk> meter replacement cycle.
This was driven by our business continuing to scale and our focus on managing spending.
Slide eight summarizes our recent financing activity and liquidity position.
The 2022 financing transactions completed to date include $167 million in tax equity funds and $653 million in asset backed securitizations, while our June securitization priced at a yield above previous issuances, even with that most recent print our weighted average cost of <unk>.
Ed issuance remains well within the 400 basis points range at four 5%.
Our total liquidity as of June 32022 was $482 million down from $703 million as of March 31, 2022.
This planned utilization of liquidity was partially driven by an acceleration of work in progress as we entered the strong sales portion of the calendar.
Additionally, as investors recall in August of last year, we issued the residential solar industry's first ever Green bond.
This issuance effectively pre funded our balance sheet, allowing us to forgo issuing any non investment grade tranches in our next several securitizations to better match the earnings profile of our assets to our debt maturities as.
As such our liquidity glide path is on target as we work through the pre funding from the Green bond.
Included in these numbers, our both our restricted and unrestricted cash as well as the available collateralized liquidity, we could draw upon from our tax equity and warehouse credit facilities, given the available unencumbered assets as of June 32022, this available collateralized liquidity equaled 180.
Million.
Beyond that subject to available collateral, we had $470 million of additional capacity in our warehouses and open tax equity funds that represents just over $950 million of liquidity available exclusive of any additional tax equity funds securitization closures the cash value of R. D.
Keep in the money interest rate swaps, our warehouse expansion plan later this year, including an expansion of our loan warehouse just last week.
On slide nine you will see our fully burdened unlevered returns on new origination was nine 2% as of June 32022 based on a trailing 12 months, while our returns remained flat from last quarter on a trailing 12 months basis due to lower returns in the second half of 2021, the fully burdened Unlevered <unk>.
<unk> for the three months ended June 32022 increased to nine 7% an increase of 50 basis points compared to the three months ended March 31 2022.
Since the beginning of the year, we have raised our returns by 100 basis points and we expect a further increase of 30% to 50 basis points in the third quarter.
As we discussed on our last earnings call high and rising utility rates have enabled us to raise our pricing on newly originated customers and thus allow us to offset our own increases in costs, specifically the higher cost of debt. Additionally.
Additionally, higher utility rates are driving even greater value to sunoco on a per share basis by improving our customer payment performance.
Currently we are seeing just under 30 basis points and value loss from net defaults a number that continues to decline while the market assumes this loss rate to be closer to 120 basis points.
The spread between these two assumptions equals approximately $69 million or <unk> <unk> per share every year and growing as we grow our contracted cash base and keep our value loss rate low.
These price increases together with the high growth of our industry, our increasing operating leverage and our continued growth and additional energy services should keep margins wider in the near term and position the company to push our implied spread on a trailing 12 months back towards the 600 basis point range later this year. However.
As we have noted before we model a long term average for our implied spread in the 500 basis point range to estimate our guidance targets.
Slide 10 reflects the strong growth we have seen in both our gross contracted customer value or <unk> and in <unk>.
As of June 32022, <unk> was $2 $4 billion discounted at 4% an increase of 41% compared to June 32021.
Our June 32022 in CCD at this.
Discount rate equates to approximately $10800 per customer and $21 16 per share.
Had a 6% discount rate our June 32022, <unk> was $1 9 billion.
Were $16 64 per share.
An increase of 48% since June 32021, and our June 32022, <unk> and a 5% discount rate was $2 1 billion or $18 74 per share.
These current per share values demonstrates that even at a higher discount rate. So nova is receiving little to no credit for either its platform customer optionality or expected growth.
Looking back further our net contracted customer value on a per share basis is up approximately 60% since our IPO three years ago. This week.
Over these three years this growth on a per share basis, regardless of discount rate used has been accelerating and we expect that trend to continue.
Beginning on slide 12 through Slide 14, you will find our detailed 2022 guidance liquidity forecast and our major metric growth plan. The triple double Triple plan. There are no changes to these estimates as we remain on target as it relates to both our liquidity forecast and our overall guidance.
<unk> the uncertainty around the potential investment tax credit extension, neither should others 2022 guidance, nor the triple double Triple plan are dependent on any extension as one was never included in our assumptions.
As of June 32020 to over 95% and approximately 75% of the midpoint of our 2022 and 2023 targeted customer revenue and principal and interest we expect to collect on solar loans was locked in through existing customers as of that same day, respectively.
As John mentioned, our second quarter origination created a significant backlog of customers, who have signed up for our services, but are not included in our customer count as we do not count on originated customer and our cumulative customer count until they had been placed into service while receiving permission to operate was slower than we would have preferred.
Q2, we have seen PTO start to free up in July adding to our confidence that these originated customers will be interconnected in the coming months and thus added to our customer count before the end of the year.
Finally, despite concerns about the housing market, our new homes business continues to generate new customers and take market share in key territories.
I'll now turn the call back over to John .
Thanks, Rob.
As customer payment performance becomes more of a concern and less essential in more mature industries Synovus performance has improved as our customer delinquency default and value loss rates are at an all time company lows and continue to improve.
We believe we are seeing this improvement because our customers are experiencing a level of energy savings greater than ever due to utility rates being significantly higher today than they were when their contracts were originated.
This utility rate escalation not only further incentivize our customers to prioritize paying their similar bill but also on types as other homeowners to make the switch to solar and the many other energy services we offer.
While regulatory debates supply chain gridlock, and geopolitical tensions have created a steady stream of negative headlines that have weighed heavily on our equity valuation. These headlines have had little to no impact on <unk> operations growth or financial performance.
Since we have had a more pessimistic view of the global economy for some time, including predicting a recession two earnings calls ago, we've taken certain steps over the past several quarters to prepare sunoco for the many challenges seen today.
This includes raising significant liquidity in 2021, well before the recent interest rate hikes locking in matching that for historical growth keeping inventory on our balance sheet to provide a safety net for our dealers to meet unwavering demand.
Adding and adding new equipment manufacturers to our approved vendor list to further insulate ourselves from an equipment constraints as they arise and finally prioritizing service to ensure our customers remain happy paying customers, who will engage us when ready to add new energy services.
While some of the investment community have begun to question the outlook of our industry in both the near and mid term we remain bullish due to the following reasons.
We have a sizeable backlog as of today, we have originated all the customers needed to meet our 2022 customer additions guidance and have begun to originate for 2023.
We expect hydrocarbon prices to stay relatively high despite a recession, which will therefore drive strong consumer demand for our energy services.
We have demonstrated our pricing power in a material way and expect that ability to continue.
We expect our cost of capital to slowest growth relative to rising utility rates or even decline in the near term as the recession impacts the global economy.
We expect our service offerings global software platform service capabilities and capacity and geographic growth to be more mature in 2023, providing us even greater earnings and cash flow growth and we expect to continue the trend of decreasing our costs on a per customer basis.
Trend that will escalate now with the completion of the <unk> meter replacement cycle.
Finally, it is difficult to ignore the recent wildfires heat rates and flooding around the world, including record summer temperatures in our home state of Texas to combat. These challenges the world is in desperate need of clean resilient and reliable energy more than ever.
At Sonoma, we are working diligently to bring solutions to the global energy crisis, Trifecta energy affordability energy security and climate change by providing an unparalleled energy service to help homeowners gain true energy independence in the face of growing economic hardship and climate change realities with that opera.
Later, please open the line for questions.
Thank you we will now start today's Q&A session, if you'd like to ask a question. Please press star followed by one on your telephone.
Pat now if you change your mind. Please press star followed by chain on preparing to ask your question. Please ensure your line is on mute you'd likely your first question comes from Mark Strouse from JP Morgan. Your line is now open market.
Yes, good morning, everybody, thanks, very much for taking our questions.
I do want to come back to the Senate Bill here in a minute, but just real quick any color that you can provide on your your inventory sales to dealers.
It looks like there was some benefit that you had an EBITDA in <unk>, how should we think about that going forward and was that the EBITDA guidance that you had previously provided.
Earlier, this year, where those sales already baked into that outlook.
Yes that accounting treatment, sorry, Hey, Mark this is rob that accounting treatment.
It was already baked into some of our assumptions.
The bottom line is that we've been really focused on inventory on supply chain on making sure that our dealers get.
The absolute best pricing and making sure that they get the inventory they need in order to do their insoles. So.
We had previously when we were in safe Harbor been contributing directly it was actually more costly for us to do that both to our investors.
<unk> sorry to our.
Dealers and <unk>.
To us by.
By the changes that we made it was more efficient for us to get the equipment to.
To the dealers and although too although we do pick up some margin in the process and certainly that is beneficial and that is cash margin that we do in fact pick up.
Really this was always within the plan that we had for <unk>.
For ourselves and it was in our projections.
And you've seen that there is.
There's other aspects and benefits to this but the biggest one for US is that our dealers have inventory in supply at very good pricing that they are able to deploy quickly and get their systems installed.
Okay. Thanks, Ron and then John just coming back to the Bill in the Senate I know, it's still a bit early but assuming that does pass just kind of your your initial thoughts.
<unk> seen so far how this might be better or worse than some of the puts and takes that we've seen over the last year or so from build back better.
Yes, Mark this is John .
Yes, it was a pretty nice surprise wasn't it.
Certainly we thought that there is as I've said publicly.
Optimistic cautiously optimistic that something would happen here, maybe an extension.
Anders at the end of the year kind of a worst case scenario and then this.
This came about.
Obviously this is a big bang for our industry in a material way and what.
What I would say is is that.
As it's written now and heavily qualify this.
<unk> had my government affairs experts lawyers et cetera, coming through this obviously overnight.
Sure that I'm wrong in some of the things that I'll say, but.
What I would say is is that.
If you had to write a bill that was perfect for a company as a residential energy service provider like us.
This bill would be the perfect Bill.
And let.
Let me tell you why.
First the ITC extension, most importantly, and that was what 90% of what we wanted.
Is now done on a 10 year basis, it moves to a clean technology agnostic, which fits very well with the snowbird adaptive home on not just solar and that gives our investors a high degree of visibility that we frankly have locked in my entire career.
The other is is that the manufacturing credits are something that we obviously never manufacture anything we have partners that do that but the tariffs the wranglings of all of the issues that we've had with regards to.
Forced labor.
Seizures of cargoes of panels et cetera, all of that.
It's only going to be addressed on a long term basis by bringing manufacturing back.
Back to the U S and those jobs.
Does that.
And then we have bonus investment tax credits on top of this it looks like the top end for us on some of the things that we do and many more things that we have in the pipeline and we haven't disclosed publicly yet.
It could be as much as a 50% ITC. There there are some other things there were obviously a little bit involved in fuel cells and so that was very helpful.
And like I said Theres a lot of other growth initiatives have haven't been public yet that will come out in the next few weeks and months that.
Will that are being addressed in this bill as well so.
Gosh I.
I hope it happens I think it will and this is beyond great for the industry.
Excellent. Thank you very much.
Thank you. Our next question comes from Philip Shen from Roth Capital. Your line is now open.
Hey, guys. Thanks for taking my questions.
It's good news in terms of the one bill here as it relates to <unk>.
Looking ahead to liquidity.
And you have your forecast through 2023 I was wondering if you could give us a little more color on how youre thinking about.
The 300 million for next year.
Historically, John I think you've talked about the green bond.
And just was wondering if youre still thinking about the $3 million terms of green bonds or if there might be some other sources that might be more likely to be tapped.
Hey, Phil this is rob. Thanks, so much for asking the question I mean, obviously, we've been talking about this for quite some time, we've clearly signaled to the market by the first part of 2023 would be.
Looking to enhance our liquidity position.
We really haven't made a decision as far as how we're going to end up doing that.
We still have a number of options available I know probably doesn't help too much with your modeling, but certainly.
The debt markets are.
Still very attractive to us.
What we wanted to do is make sure that whatever we do in whatever the timing is it's the one that's going to be.
Most beneficial to our shareholders. So we're going to continue to follow that path.
Sorry, not to give you too much more on there, but its still the target as you can see from the reiterated on our guidance it's still there.
That's still what we perceived that needs to be.
On a go forward basis.
Continuing along the trajectory and our anticipated growth path, we think that thats.
That's still the right number.
Great. Thanks, Ron and then as a follow up there when you think about 2024.
No you haven't provided.
Guidance or an outlook or even commentary yet, but as we get closer and you guys have a long.
Term and ability to view.
How does you pretty far out was wondering if you could talk about whether or not after the $300 million. If you still think you will have exit velocity and not require any.
Any more corporate capital because the core business itself can generate enough of the capital needed for the incremental annual installations and so do you think your.
<unk>, Ken can get you guys there.
So just wanted to see if that view is still that thanks.
Yes, I appreciate the question and it really is the right question. If you take a look at our business.
There is two aspects of it one is the recurring operating cash flow and we are really hitting that exit velocity.
And frankly, if we were to stop growing today, there would never be any need at all for anything else whatsoever.
But at our current growth trajectory and where we see the growth for ourselves and the industry. We would assume that would be the case now the only thing that would change that would be a very.
Strong increase in growth because the only thing that this is funding is working capital. It's not funding operations. It's really just funding. The fact that we continue to grow at a very high pace.
And if we were to ever reach a sort of steady state.
Call it the same number or a.
Good modest.
Increase in that 'twenty, 2025% growth.
Or less we don't think that we would ever need anything more but if we start getting into some of this hybrid growth, we've been growing 100% or 85%.
Second derivative growth year over year.
That obviously creates working capital needs and the timing there and Thats, where the only reason why we have been out there in the market.
In the past for any sort of corporate capital otherwise.
If you take a look at our business and our decision really in founding from over 10 years ago. The decision has been to hold on to our cash flows by a margin because of doing that we've been able to build up this big bank of cash flows and as the tax equity reaches its.
It's flips and as we hit.
<unk> in our.
In our securitization that's when we expect the cash to really flow and to see even more realization of all of that in PCB that we've that we've spent time banking.
Great. Thank you Rob for that color and just one last question if I may in terms of those.
That was a long term view, if we bring it more near term and look at the next.
Two quarters.
Have your first two quarter customer additions.
John highlighted that.
PTO.
Connections were taken a little bit of time.
Things appear to have accelerated but that said you have a bigger number for customer additions in Q3 and four.
What gives you the confidence that those interconnections will not <unk>.
Slow down again.
What's the risk around.
The customer additions in the back half and how you think about that thanks.
Hey, Phil This is John yes. It is.
I would say that July has been pretty good as far as the permission operates picking up.
<unk>.
Some of the utility areas.
Still have some issues with the overwhelming demand quite candidly the utilities need to hire some more people and process and automate.
Which they are very slow to do being typical utility so.
Some of our dealers have moved service territory several months ago because of some of those constraints and so some of our composition of our work in progress of our backlog has changed up.
A bit over the last quarter or so and so we feel that if you look at the sheer number.
And then the different services that are being offered.
Those are really taking off at this point in time. Unfortunately, it was just at the tail end of the second quarter of last month, we've seen continued high.
Growth in July and we expect that all the way through and those typically have very short durations and.
As well on the supply side of things the batteries didn't quite come in like we wanted to in the last two weeks of June came in really the first three weeks of this month.
So we already have those batteries and they are being deployed as we speak so.
That was another mover there as well so there's a lot here in terms of growth in <unk>.
<unk>.
And the backlog the composition of that growth with regards to the utilities. The the additional services that growth and then just the supply chain continues to improve particularly given what we've done in the past as evidenced by that.
One and.
Inventory position that we talked about last quarter all of those are coming together to give us a pretty good degree of confidence that we will hit this year, one thing that I know there's been chatter about a.
New homes, so the new homes market I think it won't be surprised anybody that we were quite bearish on the new homes market a year ago.
Don't think that you can go into a recession with a white hot housing market and expect that the housing market to stay white Hot and we've been very conservative yet again.
I know some competitors count when you win a community that that is their work in progress we do not do that we only count a work in progress when the home breaks ground and so that should give you further confidence that we not only have the new homes, we think in a pretty decent shape, regardless of the new homes market housing market for this year.
We have already booked several thousand.
Groundbreakings in for 2023.
As of today as well so we're we're looking forward to 2023 and quite candidly.
I see a pretty big boom, regardless of this bill in 'twenty three.
Even toyed with how do we think about maybe higher growth than we've laid out.
But certainly with this bill.
Any growth forecast for 2023, certainly for us I can speak for that but I would think of the industry are absolutely going to be shredded.
This is going to be.
A big boom time in our industry.
Great. Thanks, Sean I'll pass it on.
Our next question comes from Julien Dumoulin Smith from Bank of America. Your line is now open.
Hey, Thank you.
Congratulations on.
All those successes here hopefully it comes together, maybe just coming back to the spread and what's implied for you talked about.
Levered versus the cost of debt can you talk about your pricing power, how you see that maintaining or improving unlevered returns as to maintain your spread rate. So can you talk about sort of a forecast that view of that spread and what that pricing power is doing to it just want to think.
Think about that 4% trailing year weighted average cost of debt, where do you see that trending to obviously, that's going to be higher here and how do you maintain that spread or how do you think about that just if you can break apart produces obviously is the cost reduction element of this as well.
Yeah Julian this is Jon.
So we've had a lot of what we moved early.
Move to quite a bit more than everybody else has on pricing I think that's pretty well known in the marketplace.
<unk>.
I think that that's the responsible thing to do and so giving back a little bit of growth. When we already had a very blistering record smashing Q2 as far as sales go and building a backlog.
So it certainly didn't hurt us and we built quite a bit of margin in those in those transactions and then on a forward basis. So I would tell you that.
As we sit today, our fully burdened unlevered returns are higher than that 97 that we printed for Q2 already and so pretty much.
Everything that we had planned for is already baked in now that doesn't mean that as.
The cost of capital were to increase from its recent over the last month decline since that asset backed.
Securitization, we did back in June .
We would we would take a look at that and continue to increase price and we feel quite confident we have that pricing power.
We are confident that competitors are going to have to move in the next few days.
On <unk>.
Pricing and that will further bolster the pricing power that we have in the marketplace.
Now on the cost of capital side. There is a couple of things one we had some transactions that will be excited to announce.
And not too distant future on lowering cost of capital that I think would be pretty interesting too to investors. The second thing is if this bill does pass.
If you look at the transferability of the credit, which I failed to mention earlier.
<unk> question that can't be do anything, but reduce the cost of tax equity right and so when you look at a lot of these different things.
The likelihood that the cost of capital for us is going to at least marginally go down.
And then when you look at where we sit on the asset backed securitization market or even doing commercial bank debt I would say that right now we're at least 50% 60 basis points wide or narrowed sorry tightened on the risk free from when we had done our securitization. So when you look at a weighted average between loans that was Lee.
PPA securitization, we did which trades wide of loan Securitizations.
Pretty clear that we're already back into the high fours. If you will of cost of capital here. So we'll see where this goes I don't know where the bond market is going to go.
I will say that it looks like we are now technically could be deemed into recession, which very few people predicted. We obviously, we're a little bit ahead of that and so we feel pretty strongly that.
Our pricing power is going to continue to be high because energy prices are going to continue to be high relative to the economy and the cost of capital is related in our prepared remarks, we think is probably going to marginally drop even from here. So all of that together is is that we feel pretty good about where we are trying to get back to our 600 basis points spread.
And we feel we feel pretty confident we can get there one way or the other either drop in cost of capital or some further increases in pricing or a combination of both.
Hey, John just to clarify that Super quick.
Think about the next couple of quarters here in particular, given sort of the delay in the dynamic of the timeline when price of though when you install et cetera.
You can get back that 6% over the next couple of quarters or how do you think about that timeline.
Given the backlog and the higher cost versus the timeline to implement that pricing higher pricing.
Yeah much of our backlog if not all of it has already gotten much higher pricing in it and so youll see that come out as far as in a 12 month trailing basis, it'll be just math right Julien so.
Some of the obviously all of the origination that we do from now to the end of the year wont be securitized on next year.
So its something to take it that's why we've always looked at this on a trailing 12 month basis I know.
I would to look at the front end of an ABS and see what that implied.
The trajectory of the cost of capital is but at the same time, there is a timing lag between when we originate and when we would securitize.
Rob do you have any more comments on that yes, I would also point out that so much of our competition. That's out there who just origination and sells almost immediately there are a lot more impacted by this than we are so if you see the sharp increases in.
That we had in the 10 year is it really sort of peaked about a month or so ago that impacted them a lot more we believe in it and it impacted us for those that look at the ABS market Youre able to take a more long term view and Youre also able to.
The time to actually change some of the pricing but.
The required returns a lot of the buyers out there in the in the loan purchase in the whole loan market have those have gone up significantly and what it means is that for anyone who did originate alone with the purpose of actually selling it.
And by the time that loan ends up getting into service they can find themselves under water on that.
Given where we are in the market given the fact that we failed on those cash flows we are in a much better position.
We're not alone there are others within the industry that have chosen to go with the ABS path as well instead of just selling everything off.
But I think that you're really going to see the benefits of the long term discipline, staying and holding onto those cash flows really be reflected.
In those of US who have chosen to keep them.
Alright fair enough. Thank you guys. Good luck.
Thanks Julie.
Our next question comes from Mohit <unk> from Credit Suisse. Your line is now open.
Hey.
Good morning.
Congratulations on the.
A lot of good work from you guys over there.
Just quickly on.
The leases versus Luna ppas or leases versus loans, how should we think of that mix going forward.
So the multiple construct typically kind of pushing higher prices.
Pushed dealers to go more towards loans versus leases.
How does this mix change if there is no.
Sure.
<unk> expanded the <unk> proposal.
It May Heath this is John .
We've actually seen a swing back towards PPO leases ppas over the last few months, that's been stronger than I anticipated.
<unk>.
To be clear about it we're agnostic so.
It's something that.
For us as <unk>.
Fine.
We'll take it either way.
I will say as interest rates continue to move.
Believed to be a long term secular inflationary problem, mainly caused by the structural issues with regards to energy and food.
Exacerbated by the war in Europe .
I would say that you look at this and.
It is highly likely.
Even away from this bill, which I think does favor lease and PPA on a slight basis right.
Laid out earlier, I think that youre going to see more and more leases and ppas being sold versus loans. So I think.
We've definitely seen the loan in my opinion, the top of the market share as far as that regard.
In terms of the split I think maybe it topped out at 75% of the market are 80% of the market.
Never thought it would go beyond that.
That's just math and.
We're certainly seeing a trajectory on the way down, but again, we're agnostic to it.
But I would say that if.
If you look ahead, given everything the environment macro environment interest rate is.
Proposed.
But senator Manchin Senator Schumer, I think <unk> got to come to be a lot more constructive on the growth of elite ppas versus loans.
Okay I appreciate that color.
<unk>.
Not sure. If this was touched upon but just on your expectations on the gwich'in supply beat.
<unk> modules of batteries for later this year next year.
Given logistics and <unk>.
Yes, we're continuing to see the battery supply loosening up materially.
And a lot more choices out there in the marketplace, We've got fantastic partners and Tesla Gen rack and solar edge and Enphase and.
We continue to see.
An improvement in the product itself the ease of installation.
Badri of Enphase yesterday made it made that clear he was very focused on that I can I can second Daddy.
Definitely as well as the.
The other gentlemen run the key.
A key supplier partnerships with us so.
I would say that.
Supply is only going to get better from here now that.
Also as relative to demand right. So let's be clear about that as demand really continues to outstrip even my expectations.
There will always be a little bit of tightness in the marketplace, if not quite a bit all the way through all different types of equipment.
On the panel side, we've taken step.
Steps to procure panels.
We do have some equipment directly.
And we've been facilitating making sure our dealers are taken care of and I feel very comfortable about the panel supply given the information I have right now as well so we're in.
Pretty good shape across the board as far as equipment goes.
Maybe a little bit a few months or a couple of quarters longer in terms of how it took to get through the supply chain.
Hell, but.
We are here now and we're in pretty good shape.
Got you thanks for that.
Our next question comes from Ben <unk> from Baird. Your line is now open.
Hey, good morning, Thanks for taking my question guys.
First just some housekeeping the 90.
90, 565% did that just have got to.
EBITDA, where those percentages correct for the coverage for 'twenty, two and 'twenty three.
95% and 75% of its EBITDA and P&I.
So it is revenue and P&I is what we're looking at but it does exclude.
Revenue impacts from things like the inventory sales. So it's really the coverage of the recurring revenue from customers.
So revenue got it.
Okay.
John could you just talk maybe because you closed on the 1000, plus thousands dealership number or we.
Could you talk about maybe the.
Progress there and then also just deal with the current economic environment.
The health of the dealers because I know they vary in size and then probably just on that.
So on that front.
Could you talk about yield.
Just on the level of this exclusivity with the dealers.
Thank you guys.
Yes, Ben.
So first and foremost on the exclusivity.
It's something that we continue to see a lot of dealers interested in and we continue to sign more of those relationships up I would say.
It could be a little off on this but somewhere around 75%, 80% of our origination flows under exclusivity. So that's continued to be about where it has been over the last few years.
We don't expect that to change.
The in terms of growth of dealers that continues to be strong we continue to add additional services.
Namely.
Generators.
Load management, EV charging and so those bring additional contractors into the fold into the family so to speak and.
Then we can help them be able to sell other things like solar and storage and so forth. So there's a lot of the different channels.
Big key piece part the company's growth plan to bring these different dealers too.
To the <unk>.
Platform that is Sonoma and serve them the way that they want to be served and so we see that the trajectory of dealer growth is going to continue to be strong we will obviously blow past 1000.
At the end of the year are set goal that we.
Gabe out last year.
In terms of the health of the dealers.
It's a tricky time, you've got to be careful you got to know what youre doing.
Obviously, almost 10 years into this just with this company we know what we're doing and we know how to be good partners. We know that you need to have the inventory there to take care of them because they've got payroll that's going out the door, sometimes daily certainly weekly and if they don't have the equipment that can chew up capital pretty quickly got to stay on top of them you can't just sit there and wire money.
And hope for the best it's something that this is a partnership and we got we got to make sure that we understand what their needs are and.
What the customers are looking for and make sure that they are in good financial state and.
Across the board.
We're pretty pleased with the health of our dealers again, we're going to stay vigilant on that but at this point, we're quite confident in their financial health and we're confident we're confident in continuing to see small dealers become very large dealers. That's another continuing trend.
These warrants my heart being the entrepreneur to see somebody come in and have nothing and really build a multimillion dollar business and they can take that money back to their families and so forth then it's the American Dream and we're a big proud sponsor of the American Dream.
Yeah.
Thank you. Our next question comes from safety Cop from Keybanc. Your line is now license IC.
Yeah.
Hi, Good morning, Thank you for taking my question.
Congrats on a solid quarter and the good news from Washington.
Just a couple of questions for me.
You guys are talking about the backlog of interconnections with a utility right is it possible to.
Quantify.
If not for.
Utilities inability to interconnect as fast as you want them to what the customer additions, but it looked like this quarter.
We've taken into account the elongated duration, Sophie and I would tell you just under.
Roughly around 27% to 8% of our backlog is already installed in some cases has been installed for weeks on end so.
We've got a we've got a pretty good idea about where things are.
I'd say that things would have to materially worsen from here to be in bad shape.
On the number on the guidance range and we don't see that we see a slight improvement as we move forward in time so.
The confidence there is that the width as frankly, as we would say aged quite a bit and so we're starting to get to the point where <unk>.
Months, and it's difficult to see that that would actually worsen materially from where we sit today.
Got it and then just.
Kind of curious one of the points that the industry has made in them.
And in debates about net metering et cetera is that ultimately.
I have to interact with the utility right if you have storage.
Is that something that.
You might use I guess, just a strategy to maybe in the future but rounded.
Even where I don't know.
That may not be.
Tariff driven I guess by Tomorrow.
Speed to.
Connect to make this is to go make the system operational.
That makes sense, yes, yes, it does make sense, we have used that in the past.
Quite a bit and continue to do so love to expand it.
Love to have a open market and capitalistic market, where utilities have to provide great service.
And I think that regulators should look a very intently at that.
Not providing speedy interconnection to consumers harms consumers in a period of rising energy and.
And what is now.
Obviously, a recession and so it harms the consumers that they are supposed to serve and it's something that I think that the regulators ought to take a look at as far as anti competitive behavior as well and so anything we can do as far as changing technology. If the regulators won't act or slow to act as they clearly are in many.
As states and territories.
We will certainly do that.
Technological shifts here Thats pretty.
Big.
<unk> is getting bigger and bigger as the technology improves and I would hope that the utilities can start to think about us as being more of a facilitating consumers.
Customers.
But if they don't then technology will fill that gap and we will need less and less of their services.
Thank you and then one last one if I may.
I guess, just maybe too early to answer definitively, but coming through this bill assuming that goes so unchanged. It sounds like there's a little bit of everything in there.
And then just rebates for heat pumps for example for this.
Ventas for Evs et cetera.
Is the low hanging fruit for you guys. If this goes through I guess to add services would you be interested in coupons and kind of integrating that into the hole.
<unk> management system or EV Chargers.
What's the most obvious next edition I guess im sorry.
Sure.
Yeah.
Yes, we already have EV Chargers and we've got.
Some things going on in the fuel cell area, obviously, that's a nascent but.
The other thing is we do a lot of other assess res roofing, obviously, the necessity of having a new roof and a good idea there before you put solar.
It's something that we've been promoting out there it's better for consumers.
And then when you look at something on the demand side of things load management, we're already involved in that and selling that to consumers need to ramp that up a lot more.
And then when you start adding EV then you sell a lot more solar right and we're seeing again, we talked about last quarter surprise me and we continue to see this.
As additional contracts, we called powering <unk> when people want more solar more inverters more serve solar service.
<unk>.
Fill that up if you will and the batteries will we get more in the heat pump side and demand side, most likely yes.
That's something as we're looking at wanting to not only manage the supply with the demand side of the of the customer and making sure everything is working and working well, particularly when they are off grid for whatever reason because they don't have a choice because of the lack of reliability of the grid that is increasing due to climate change issues wildfires flooding.
Et cetera Hurricanes.
But whatever the case may be those big loads are something that we've definitely been keeping our eye on and targeting so don't be surprised if we get involved in that and to help our customers as well.
Rob do you have any yes, I would just say that this really dovetails into the Sonoma adaptive home in the whole vision, we've had as not just being merely a solar company, but our mission powering energy independence. It's all about how do we take everything that we can offer out there and really use.
Is it to benefit the consumer.
Thank you.
Thank you.
Our next question comes from Pavel <unk> from Raymond James Your line is now.
Thanks for taking the question you highlighted the ability to push through higher.
Lease and PPA pricing, if we go back maybe.
18 months before the inflationary spiral began there was a comment.
That <unk>.
A kilowatt hour at the utility rate is kind of the threshold for when a rooftop solar makes economic sense with everything that's happened. Since then what is that new threshold. If there is one.
<unk> John .
Look I've always thought it.
My number was roughly about $13 $13 five but.
I don't think that we really quibble I'm looking across the country and so a place like Texas Houston, Texas for instance.
We've gone from a market that was roughly around 10 to 12 range Dallas is a little bit higher as you are aware of and now we are minimum.
16.
And these natural gas pricing closer I think this week to 18 20.
We see Houston as a fantastic market one of the largest metropolitan areas very very low penetration, we're very very bullish on these markets because of the material kilowatt or a rate movement, driven by natural gas and coal pricing primarily.
What I would say is is that at this point you are probably looking at something closer to 16.
<unk> 16 from my $30 75.
And so clearly we're there across the board even in places that were you.
Used to be very low cost like Houston.
So.
Again as a data point, we talked about last quarter, but we see a very rapidly expanding geography as far as market based across the United States and for the first time.
I think this really sticks, we're going to see every state is a place where we can offer our services very profitably.
Yes.
A lot of questions already on.
Headlines out of Washington, All asked about slightly different policy.
Dynamic which is California.
Presumably nothing happening before the mid terms with net metering.
But what's your expectation for California doing something after November .
I think that they will do something that will tilt towards the utilities.
Broken record on this this has been our position from day one.
With that said as the utility rates continue to skyrocket, particularly in California.
And more and more spending is massive spending is desired by the utilities, there that's going to push rates up even further.
Don't know how governor Newsome is going to do anything but at least pay attention to his consumers as voters and do the right thing just smart obviously, a smart Guy smart politician.
Clearly wants to run for President and I think we all know what is likely opponent or at least one of them is and we all know what governor the Santos did for the consumers and people of Florida. So I think there is.
Very strong.
Possibility here that things end up very very good for consumers and therefore us and the state of California.
One thing I'll just leave with his previous answer to your previous question is.
California will make up I predict in the next couple of years, a smaller and smaller portion of our overall sales.
Just by definition as the geographies greatly expand due to the global energy crisis.
Okay.
Thank you very much.
Thanks for the.
Our next question comes from David Peters from Wolfe Research.
Apologies ladies question has our next question comes from Sean Morgan from Evercore Your.
Your line is now open Shawn Hey, guys.
Hey, guys.
Short here.
Circling back to the inventory sales to dealers can we just think of that as well.
A one time accounting change so that we.
We had this pretty.
Pretty big Spike quarter over quarter in sales and also the Cogs, but.
This is really just sort of one time change that will not be sort of recurring.
It's a change, but we expect it to be recurring.
It's still a matter of how we're making sure that our dealers get their inventory but.
The other thing I think to point out as we always point to the <unk> CF in the Alcs metrics as being really the best proxy for our actual cash flow in these numbers that that margin is excluded from those so we back that margin out.
Because it's a lot more related to how we view our our returns on origination than it is on a recurring recurring cash flow basis. So it seemed much more as part of our sales rather than our service type of revenue.
So.
You should expect to continue to see it but it's.
When we really look at <unk>, it's not going to be an impact there.
Okay. Thanks, Rob.
Thats It from me.
Thanks, Sean.
Our next question comes from David <unk> from Wolfe Research. Your line is now like David.
Yeah, Hey, good morning.
Question, just on the Opex on a per customer basis, you guys noted the 7% improvement on a trailing 12, despite inflationary pressures the meter investments you've made and so forth. Just just wondering if you have a view where this settles out I guess the kind of the run rate if you will.
Yes, our long term view from.
Two or three years ago was that we were going to ultimately get to about 25% savings from where we had started.
From the end of <unk> 19 to the end of 'twenty two.
Yes.
We still feel very strongly.
That will get there what we've really seen thats been very encouraging is that.
We've continued to see that scaling.
The investment in service really pay off for us so that the densification of our service areas.
Our ability to deploy our people our investment in technology has all really.
<unk> been beneficial and continues to drive that down so it's been a long term mission and we still look at ourselves as being well on target for that.
And I would also add there.
Despite some some things that in terms of growth efforts that we haven't.
Disclosed yet and we've been public about.
That spending that goes along there as well so.
It's quite remarkable to robs point the amount of operating Leverages company is demonstrating and.
The company gets bigger and bigger.
And those growth initiatives are out there and they throw cash here next year or the year after.
Yours. After then that operating leverage is going to even increase more so.
We're in really good shape as far as our long term expectations of the company.
The reduction of costs, despite the inflationary environment.
Thanks for that color just one last one just to squeeze in.
I'm wondering if you could expand on the new homes market just a bit I think you said things are still strong there and even taking share in some key markets, but just curious if you could clarify within the triple double Triple plan like what percentage of new customers Youre expecting to come from the new home segment specifically.
About 15%.
Okay. Thank you.
Okay.
Our next question comes from apps App sheet since that from Nielsen. Your line is now open.
Yeah, Hey, good morning, guys.
Just wanted to.
Delve into the question that was asked left.
Last question on the Opex per customer.
I'll just provide a little more color like what exactly were the drivers I know you're talking about technology, but exactly sort of see what what are the main drivers in terms of.
What are you guys doing there.
This is Rob I mean, I think when you take a look at it where are we spending money and where are we really able to find what scales and what types of scale. So as we continue to deploy out into new markets and we continue to have new customers, we're making investments both on the technology side, and we're making investments.
On the.
On the side of customer service both.
Within the call centers and out in the field most of the rest of our business departments tend to scale with that so we don't need to add necessarily more.
As more assets on.
Personal assets or other assets onto that side of the business, where we have found things that don't scale has been really in the construction and construction management sales and sales management side of the business, which is why we have focused on the dealer model, primarily that scales very well for us as we continue to grow.
We don't have to add a bunch of additional layers of management, there, which is from our experience where a lot of the diseconomies of scale can happen. So we're focusing a lot more on the service side, where we do find economies of scale.
Even though we continue to have an open technology platform.
Our dealers, who do have not I'm, sorry, our service folks who do have specific knowledge are able to deploy that knowledge across our more geographically concentrated base.
And on other aspects of our business, we're able to add a lot more customers without necessarily adding a lot more expense, especially on the administrative side. One thing I will add is culture from the very beginning when I founded this company. We wanted to make sure that we had everybody understand particularly management that it is not.
Management's money, it's the shareholders' money don't spend it and I think that culture is clearly still with us today.
Got it.
I was wondering if I could.
Can you provide some color on the termination side. So we felt like 197 leases this florida spending see what's going on there.
I think so as we go.
Matt.
Yes, it's a good detailed a catch it caught my eye to quite frankly, and what I'd say is is that looking into it there's a little bit of catch up so, it's obviously immaterial, but by a long shot but.
Some some calculation.
Catch up if you will from the first quarter.
Secondly, there are some of the service only contracts that may have dropped off.
That's what it looks like to me after a little bit of digging anyways.
To do a better job I need to do a better job of going back to those customers and reconnecting signing them up again, because clearly they still value the service and so I think we are.
I dropped the ball on that one a little bit we'll pick that ball up and we'll fill that gap. If there is anything more than that we will certainly be upfront and talk about that but I think it's really just more of a calculation catch up in a little bit better job of need to do as far as some of these service only contracts we signed years ago.
I do but I will also say that it it goes to how strict we are in our definitions. We are counting a customer if they are someone with whom we have an ongoing service relationship and they're paying customer we're not just saying hey, we sold something five years ago. So therefore your customer this isn't Mcdonald's right, we're not saying that.
We've had billions and billions served if we are in the restaurant and we're serving you your customer.
Perfect got it thank goodness, so thats all I have.
Thank you.
Our next question comes from Brian Lee from Goldman Sachs. Your line is now it's Brian .
Hi, Thanks for taking our questions. This is Greg on for Brian .
I guess my first question going back to the inventory. So I just wonder why are you changing accounting and lesser inventory that you bought in the quarter and so in a quarter.
Or is this previously previously held inventory now being sold and did it help at some cash to the balance sheet this quarter and I have a follow up.
Sure. So this is.
It's not a change in the accounting accounting has basically been GAAP rules as long as it's been GAAP, it's been a change in how we've been moving the equipment to our dealers. So previously, especially with the safe Harbor inventory that we had what we were doing was putting it in.
And then contributing it directly down to the to the project.
In this case, what we're doing is we are as we're selling it to the dealer and then the dealers putting it in their project. So it's it's a technicality, but it's one that the accountants insisted that we go ahead and make so we went ahead and did that with the change in how we're deploying it as far as the amount of inventory that we're bringing on.
If you can look at the inventory levels, we basically started the quarter with $150 million of inventory at cost we ended the quarter with $150 million of inventory at cost. So we're keeping fairly consistent inventory levels, which is a matter of.
Of how we're moving.
While it did certainly add on our cash.
Net.
As we've been moving that inventory.
Again, we bring on two pieces on the balance sheet. One is accounts receivable and the other is inventory so.
As we see the accounts receivable move Thats, obviously, something thats going to have a lag.
In fact, there while we do some of the collections.
But it really is as far as we're concerned so within that.
Ed.
From an AR standpoint, probably that's the only thing Thats. One time really is sort of a boost and we would expect that to be fairly consistent there and then for the for the inventory.
As we buy the inventory and this year. It gets paid off we'd expect that to be matching up fairly well.
Okay got it understood.
My second question.
On your guidance you talked about like all these macro factors impacting your kick you principal payments.
Why are your principal payments softening TQ, but not changing the guide for 2022.
Is there a rescue principal payments slowing down in the current environment.
We would look at the principal payments as being something that certainly can flex and we've seen it go up and down.
What were the big pieces that we saw the unscheduled principal payments start to slow down.
And but we also have a big chunk of our unscheduled principal payments really weighted much more towards the second quarter than any other quarter, because thats when folks tend to get their income tax refunds and thats what drives a lot of the unscheduled principal payment. The scheduled principal payments as we said were actually stronger than we had expected and that's really a reflection.
Of how.
How much lower our default and delinquency rates have been.
No look we keep talking about how this is an essential service this is not something.
Then that consumers are looking.
As an option, it's something they need and it's more reliable and it's cheaper than what the utility is providing them. So this is the build theyre going to pay they're going to pay this before they pay the card the cell phone to rent. This is it's the most.
It means that when we do end up in an environment that is potentially.
Pardon me, a recessionary environment in an inflationary environment.
We do well.
We're built for this type of environment and so we would expect that the scheduled principle payments will remain strong and we still expect to be able to come in.
Within that guidance range as of right now.
Okay got it thank you I'll pass it on.
Our next question comes from Seth.
South Asia from Wells Fargo. Your line is now open.
Thanks, Good morning, so it looks like the battery attach rate moved up quite a bit in Q2 and I. Just wanted to clarify are you still supply constrained at all on batteries or has supply caught up to demand and then.
Maybe as a follow up any comments in terms of where the attach rate could trend in 2023 under Nam or.
This new climate package I mean, it's been kind of hovering in this 20% to 30% range over the last few quarters, but is there a point where the attach rate is just really kind of step change higher.
This is John .
As I answered earlier, the supply situation of batteries continues to improve and so.
We find ourselves in pretty good shape as we sit here today relative to the demand that we see out there in terms of demand changing in inflicting out of that 20% 30% range.
I do feel like that's still going to happen, we obviously need more options out there that is happening.
For the marketplace in general and more manufacturers producing more gear.
We need a little more price relative to the kilowatt hour rates. So the kilowatt hour rate moves up more and more people are.
Are willing to go ahead and spend on the battery side because of the frankly the powers more valuable they don't want to give it back to the utility for free even under net metering and they have more and more concerns on reliability right. So as climate change bites down on the current antiquated infrastructure. So you.
You look at Europe , you've got many countries over there 80 plus percent attachment rates I don't know why that wouldn't be the case here in the United States pretty soon so we see very very strong signs and looking at the economics that consumers are going to continue to gravitate to more and more batteries.
Okay I'll leave it there thank you.
Our next question comes from Ashwin <unk> from Bank of America. Your line is now open.
Hey, guys. Good morning. Thanks.
Thanks for taking my question and congratulation on the very good.
<unk>.
I just had a question on the credit side.
So as you reaffirm your triple double Triple our growth plan.
If you can talk about sort of the credit trajectory.
Once the once you reach that goal.
And any sort of like near term and longer term.
Credit or duration that you may have.
Yes. This is Rob I mean, what I would say is that as we continue to grow the company, we've and we've held onto a lot of the cash flows that.
That the credit quality certainly as you seen it will continue has continued to improve and we will continue to improve.
There are a number of things that we've done that have actually been very credit accretive, but as we continue to pay down our existing securitization that ends up being credit accretive.
We expect as we've shown to see the continued growth in the our ocs.
And.
That is a big piece of where a lot of the credit metrics really begin.
And.
I would say that when we've talked to the rating agencies. The feedback has generally been <unk>.
Positive so we're continuing to stay very close to them.
No sort of.
Our plans are.
But generally speaking I.
I think youre seeing improving credit metrics certainly that's a lot of where my focus is and where John's focuses.
It has to be good credit metrics.
We think that accrues to our shareholders as well.
But we're very conscious of.
Making sure that we satisfy the debtholders.
Very well thank you so much guys.
Yes.
Okay.
That concludes the Q&A session on today's call I will now refer you back to John Brad Joseph further remarks.
Thank you and thanks to everybody for joining us. This morning, obviously very exciting morning, given the news out of Washington.
When we look ahead for the business the away from any action in Washington, We're very comfortable for three reasons and vary.
In terms of interested as to where.
This whole thing will take us with regards to the strong planning strong strategy strong balance sheet that we built.
First and foremost is our match funding of that we've locked in spreads that I think are really not appreciated for years and years to come with your asset backed securitization market are built over several years and that spread is locked in the second thing is the value of losses.
The terminations of the contracts and so forth that were expected previously and is still expected in the marketplace are far far in a way way too conservative and we are actually generating.
A faster pay down of debt faster pay down of tax equity and faster cash flow to shareholders than expected and lastly energy prices are rising faster than your overall economic growth and we do see that Kieran. Unfortunately.
Continuing we see a global crisis and energy the energy crisis Trifecta, if you will and we continue to see that this business will continue to boom and then lastly, finishing on the news out of Washington yesterday afternoon.
Step in the right direction, great policy for not only the United States, but the world, we applauded and we look forward to having a just really big Bang in the industry and looking ahead to growth that would be substantially stripped of any expectations. We've had previously so we're very bullish on.
And even more so after yesterday afternoon look forward to joining you on the next quarter call. Hopefully after that Bill is passed and looking forward to giving you more updates on the future of synovus. Thank you for joining us.
Yeah.
That concludes today's call you may now disconnect your line.