Q4 2023 Sunnova Energy International Inc Earnings Call
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Operator: and the Sunnova 4th Quarter. ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? Good morning and welcome to Sunnova's fourth quarter and full year 2023 earnings conference call. Today's call is being recorded and we have allocated an hour for prepared remarks and question and answers. At this time, I would like to turn the conference over to Rodney McMahon, Vice President, Investor Relations at, Thank you, please go ahead. Thank you, operator.
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Speaker Change: Good morning, and welcome to the neighbors at fourth quarter and full year 2023 earnings conference call. Today's call is being recorded and we have allocated an hour for prepared remarks and question and answer.
McMahon: At this time I would like to turn the conference I vote. Your protein Mcmahon Vice President of Investor Relations at Tonight. Thank you. Please go ahead.
McMahon: Thank you operator before we begin please note during today's call. We will make forward looking statements that are subject to various risks and uncertainties as described in our slide presentation earnings press release, and our 2023 Form 10-K. Please see those documents for additional information regarding those factors that may affect these forward looking statements.
Rodney McMahon: Before we begin, please note that during today's call, we will make forward-looking statements that are subject to various risks and uncertainties, as described in our slide presentation, earnings press release, and our 2023 Form 10-K. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. Also, we will reference certain non-GAAP measures during today's call. Please refer to the appendix of our presentation, as well as the earnings press release for the appropriate GAAP, for non-GAAP reconciliations and cautionary disclosures. On the call today are John Berger, Sunnova's Chairman and Chief Executive Officer, and Robert Ling, Executive Vice President and Chief Financial Officer. I will now turn the call over to John. Good morning, and thank you for joining us.
Speaker Change: Also we will reference certain non-GAAP measures during today's call. Please refer to the appendix of our presentation as well as the earnings press release for the appropriate GAAP to non-GAAP reconciliations and cautionary disclosures on the call today are John Berger, <unk>, Chairman and Chief Executive Officer, and Robert Lane, Executive Vice President and Chief Financial Officer, I will now turn the call.
Robert Lane: Over to John.
John Berger: Good morning, and thank you for joining us.
John Berger: 2023 proved to be a formidable test for the residential solar industry. Macroeconomic challenges in a rapidly evolving landscape meant that companies who were unable to adapt and tackle these challenges head-on have struggled or exited the market. While this unfortunate reality for some may have caused apprehension and generated negative headlines, it also presents a silver lining of reduced competition for adaptable companies like Sunnova. We stand apart in this regard.
John Berger: 2023 proved to be a formidable test for the residential solar industry.
John Berger: So economic challenges in a rapidly evolving landscape met that companies, who are unable to adapt and tackle these challenges head on and have struggled or exited the market.
John Berger: While this unfortunate reality for some may have caused apprehension and generated negative headlines.
John Berger: It also presents a silver lining of reduced competition for adaptable companies like Sonoma.
John Berger: We stand apart in this regard fortified by our scale robust balance sheet agility and forward thinking approach, enabling us to not only weather the storm, but pick up market share and expand margins in the process.
John Berger: Fortified by our scale, robust balance sheet, agility, and forward-thinking approach, enabling us to not only weather the storm but pick up market share and expand margins in the process. In the past few weeks, we have seen encouraging signs of improved market dynamics beginning to emerge; tighter risk premiums reflected in our recent securitization, coupled with an uptick in overall market demand as we transition beyond the seasonally softer period for customer originations paints a more optimistic picture than many perceive, better positioning Sunnova for the rest of 2024 and beyond. We have continued to increase our focus on cash generation by pursuing additional margin expansion. Exploring Potential Asset Sales and rapidly implementing cost-cutting measures to achieve cost savings. We are continuing to implement a range of initiatives, primarily focused on automation-driven efficiency.
John Berger: The past few weeks, we have seen encouraging signs of improved market dynamics beginning to emerge.
John Berger: Tighter risk premiums reflected in our recent securitizations, coupled with an uptick in overall market demand as we transition beyond the seasonally softer period for customer originations paints a more optimistic picture than many perceive.
John Berger: To better position <unk> for the rest of 2024 and beyond we are continuing to increase our focus on cash generation by pursuing additional margin expansion exploring potential asset sales and rapidly implementing cost cutting measures.
John Berger: To achieve cost savings, we are continuing to implement a range of initiatives primarily focused on automation driven efficiencies.
John Berger: This strategic approach will enable Sunnova to sustain growth without expanding its headcount. Additionally, we have initiated an immediate pause in spending related to select growth initiatives, such as international expansion. While these initiatives are temporarily on hold, we will remain committed to revisiting them in the future, contingent upon improved market conditions and an improved valuation of Sunnova's equity. Factoring in these cost reductions, we now anticipate a revised cost structure will result in a decrease of at least 20% in total adjusted operating expense per customer in 2020. Slide three highlights our growth in customer accounts, power generation, and energy storage under management, battery penetration, and expected contracted cash inflows for both 2024 and the remaining life of our customer contract. During the fourth quarter, we placed over 34,000 customers into service, which brought our total customer count at the end of 2023 to just over 419,000, and our megawatt hours and solar power generation under management to 1090 megawatt hours and 2.5 gigawatts, respectively.
John Berger: This strategic approach will enable sunoco to sustained growth without expanding its head count.
John Berger: Additionally, we have initiated an immediate pause in spending related to select growth initiatives such as international expansion.
John Berger: While these initiatives are temporarily on hold we will remain committed to revisiting them in the future contingent upon improved market conditions, and an improved valuation of snow as equity.
John Berger: Factoring in these cost reductions we now anticipate our revised cost structure will result in a decrease of at least 20% in total adjusted operating expense per customer in 2024.
John Berger: Slide three highlights our growth in customer count power generation and energy storage under management battery penetration and expected contracted cash inflows for both 2024 and the remaining life of our customer contracts.
John Berger: During the fourth quarter, we placed over 34000 customers into service, which brought our total customer count at the end of 2023 to just over 419000, and our megawatt hours and solar power generation under management to 1090 megawatt hours in two five gigawatts respectively.
Robert Ling: Turning to slide four, you will see that as of December 31st, 2023, the expected cumulative nominal contracted cash inflows associated with our customer contracts over a weighted average remaining life of 22 years is $16 billion. In 2024, these same contracts are expected to generate $789 million in contracted cash inflows. These inflows are the sum of all expected cash generated from customer release, PPA, and loan contracts, including those from SRECs and grid services, in service as of December 31, 2020. Also on this slide, we provide our expectations of levered cash flows, which, based only on what was securitized as of December 31, 2023, are expected to be $136 million in 2024 and $4.9 billion on a cumulative nominal basis. Cumulative levered cash flows will continue to grow as new assets are added and will grow on a per annum basis as tax equity flips occur and debt is paid down. I will now hand the call over to Rob, who will walk you through our financial highlights.
John Berger: Turning to slide four you will see as of December 31, 2023 expected cumulative nominal contracted cash inflows associated with our customer contracts over a weighted average remaining life of 22 years with $16 billion.
John Berger: In 2020 for these same contracts are expected to generate $789 million in contracted cash inflows.
John Berger: These inflows are the sum of all expected cash generated from customer lease PPA and loan contracts, including those from <unk> and grid services in service as of December 31, 2023.
John Berger: Also on this slide we provide our expectations of Levered cash flows, which based only on what was securitized as of December 31, 2023 is expected to be $136 million in 2024, and $4 $9 billion on a cumulative nominal basis.
John Berger: Cumulative levered cash flows will continue to grow as new assets are at it it will grow on a per annum basis as tax equity flips occur and debt is paid down.
John Berger: I will now hand, the call over to Rob who will walk you through our financial highlights.
Robert Ling: Thank you, starting on slide 1, and Dr. David Dott, together with Interest Income and Principal Proceeds, equaled $549 million for the year-ended 2020 budget, which included a $207 million contribution from investment tax credit for ITC sales. Excluding ITC sales, 2023 Adjusted EBITDA, together with interest, income, and principal process, increased by $58.5 million versus the prior year in the US, as a more While 2023 ITC sales were heavily back-end-weighted due to delayed Treasury guidance, we expect a more even contribution of this activity in 2024, as we plan to continue utilizing ITC transferability, primarily from new tax equity partners, to diversify our funding. Slide 7 highlights Sunnova's continued ability to efficiently access the capital market. In 2023, we added $957 million in additional tax equity funds, entered into over $1 billion in asset-backed securitization, closed a $50 million secured revolving credit facility to support procuring and selling inventory to dealers, closed a $65 million accessory loan to, and issued a second green bond which, together with a modest equity offering, brought in $466 million in additional capital after fees and expenses. We also expanded our warehouse capacity while securing amendments to keep pace with our origination.
Rob: Thank you John starting on slide six you will see our adjusted EBITDA together with interest income and principal proceeds equaled $549 million for the year ended 2023, which included a $207 million contribution from investment tax credit or ITC sales.
Rob: Excluding ITC sales 23, adjusted EBITDA together with interest income and principal proceeds increased by $58 $5 million versus the prior year.
Rob: Since most expenses flow through adjusted EBITDA, including those who support our loan business. We view adjusted EBITDA together with interest income and principal proceeds as a more complete picture of our financial performance.
Rob: While 2023 ITC sales were heavily back end weighted due to delayed treasury guidance, we expect a more even contribution of this activity in 'twenty 'twenty four as we plan to continue utilizing ITC transferability, primarily from new tax equity partnerships to diversify our funding sources.
Rob: Slide seven highlights <unk> continued ability to efficiently access the capital markets.
Rob: In 2023, we added $957 million in additional tax equity funds entered into over $1 billion in asset backed securitizations close to $50 million secured revolving credit facility to support procuring and selling inventory to dealers close to $65 million accessory loan pistol.
Rob: <unk> and issued a second green bond, which together with a modest equity offering brought in $466 million in additional capital after fees and expenses.
Rob: We also expanded our warehouse capacity, while securing amendments to keep pace with our origination.
Robert Ling: Through February 21st of this year, we have added another $195 million in tax equity and priced two asset securitizations at the tightest spreads we have seen in the past 12-18 months. In our $537 million of liquidity as of December 31, 2023, we have both our restricted and unrestricted cash and the available collateralized liquidity we could draw upon from our tax equity and warehouse credit facilities. Subject to available collateral, we had $835 million of additional capacity in our warehouses and open tax equity.
In February 21 of this year, we have added another $195 million in tax equity and price to asset securitization at the tightest spreads we have seen in the past 12 months to 18 months.
In our $537 million of liquidity as of December 31, 2023 are both our restricted and unrestricted cash and the available collateralized liquidity, we could draw upon from our tax equity and warehouse credit facilities.
Rob: Subject to available collateral, we had $835 million of additional capacity in our warehouses and open tax equity funds.
Rob: Bind these amounts represent nearly one $4 billion of liquidity available exclusive of any additional tax equity funds securitization closures asset sales in the money interest rate hedges further warehouse expansions or other sources of liquidity during the year.
Robert Ling: These amounts represent nearly 1.4 billion dollars of liquidity available. Excluding any additional tax equity funds securitization closures asset sales in the money interest-rate hedges further warehouse expansions or other sources of liquidity during. On slide eight, you will find a summary of our unit economics. As of December 31st, 2023, on a trailing 12-month basis, our fully burdened unlevered return on new origination increased to 12%, while our weighted average cost of debt decreased to 6.4%, respectively. This resulted in a 5.6% implied spread over the same period, the highest implied spread since early 2022.
Rob: On slide eight you will find the summary of our unit economics as of December 31, 2023 on a trailing 12 months basis, our fully burdened unlevered return on new origination increased to 12%, while our weighted average cost of debt decreased to six 4% respectively. This resulted in a five six.
Rob: <unk> implied spread over the same period the highest since early 2022.
Rob: Slide nine provides additional information on our unit economics, which are improved and continue to improve into 2024, we now estimated implied spread on near term origination of 600 basis points overall, our margins have remained stickier than expected considering the declines we have seen in the weighted average cost of debt. However.
Rob: We maintain that the long term expected spread is 500 basis points.
Rob: Our weighted average cost of debt life to date remains just over 5% as of December 31 2023.
Robert Ling: Slide nine provides additional information on our unit economics, which have improved and will continue to improve into 2024. We now estimate an implied spread on near-term origination of 600 basis points. Overall, our margins have remained stickier than expected considering the declines we have seen in the weighted average cost of debt. However, we maintain that the long-term expected spread is 500 basis points.
Rob: As a reminder, we measure our cost of capital on a yield at issue basis, rather than an interest rate basis. As this more fairly captures the effects of any discounts these and capped call purchases.
Rob: Slide 10 reflects the strong growth, we have seen our net contracted customer value or in CCD at a 6% discount rate in <unk> was $3 1 billion, an increase of 35% compared to December 31 2022.
Rob: Our December 31, 2023, and <unk> at the discount rate was $25.26 per share. This represents a greater than two fold increase since we announced our triple double Triple plan.
Robert Ling: Our weighted average cost of debt, life to date, remains just over 5% as of December 31st, 2021. As a reminder, we measure our cost of capital on a yield-at-issue basis rather than an interest rate basis as this more fairly captures the effects of any discounts, fees, and capped call prices. Slide 10 reflects the strong growth we have seen in our net contracted customer value, or NCCV. At a 6% discount rate, NCCV was $3.1 billion, an increase of 35% compared to December 31, 2022. Our December 31st, 2023 NCCV at the discount rate was $25.26 per share.
Rob: Even with this significant increase or <unk> <unk> per share ended the year lower than expected primarily due to the timing of tax equity closures and fourth quarter customer additions coming in slightly below our expectations.
Rob: At this time, we have elected to reaffirm our 2020 for full year guidance found on slide 12.
Rob: We will reassess our guidance next quarter once our lower cost structure has had more time to operate.
Rob: We expect to capture approximately 15% of our 2024 adjusted EBITDA together with interest income and principal proceeds in the first quarter, increasing to approximately 20% in the second quarter, 30% in the third quarter and 35% in the fourth.
Rob: Customer additions are expected to be more back end weighted with 15% in the first quarter, 25% in the second quarter and the balance evenly distributed over the second half of the year. This is mainly due to our new channels as well as growth in accessories and service only sales.
Robert Ling: This represents a greater than two-fold increase since we announced our triple-double-triple plan. Even with this significant increase, our NGCV per share ended the year lower than expected, primarily due to the timing of tax equity closures and fourth quarter customer additions coming in slightly below our expectations. At this time, we have elected to reaffirm our 2024 full-year guidance, found on slide 12. We will reassess our guidance next quarter once our lower cost structure has had more time to operate. We expect to capture approximately 15% of our 2024 adjusted EBITDA together with interest income and principal proceeds in the first quarter, increasing to approximately 20% in the second quarter, 30% in the third quarter, and 35% in the fourth. Customer additions are expected to be more back-end weighted, with 15% in the first quarter, 25% in the second quarter, and the balance evenly distributed over the second half of the year. This is mainly due to our new channels, as well as growth in accessory and service only services. Thus, the back-end weighting will be more driven by accessory loan and service only customers.
Rob: Thus the backend weighting will be more driven by accessory loan and service only customers.
Rob: As of December 31, 2023, 90% at the midpoint of our total 2024 targeted customer revenue interest income and principal proceeds was locked in through existing customers as of that same day, respectively.
Rob: We have updated our liquidity forecast for 2024 and are introducing guidance for 2025, and 2026, which can be found on slide 13.
Rob: We now expect to generate enough cash in 2024 to provide the working capital needed to hit our growth target for the year, while keeping our cash position relatively flat. This will be accomplished through a combination of securitization in sales net of operating costs as we exit 2024, and we expect to achieve an annual run rate of cash generation between.
Rob: $200 million and $500 million.
Rob: This significant increase in cash generation beyond 2024 is a reflection of our pricing changes and can be further enhanced towards the top end of the range through improvements in treasury rates ever tightening risk premiums and final domestic content guidance.
Rob: We are electing to sunset, our recurring operating cash flow metric in favor of Levered cash flows in response to investor inquiries around not just the cash flows from in service and securitized assets, but the desire to see the value and cost of our superior customer service model.
Rob: Levered cash flows as a sum of expected residuals from all securitized lease tpa alone contracts, plus all MSA fees, plus expected cash inflows from Unpledged extracts and grid services.
Rob: As John noted earlier, we have continued to focus on cost reductions. However, one area that we'll continue to retain its investment as our collections department to ensure we are maintaining our LOE per annum capital loss rate, which is unchanged at approximately 25 basis points.
Robert Ling: As of December 31, 2023, 90% of the midpoint of our total 2024 targeted customer revenue, interest income, and principal proceeds was locked in to existing customers as of that same day, respectively. We have updated our liquidity forecast for 2024 and are introducing guidance for 2025 and 2026, which can be found on slide 13. We now expect to generate enough cash in 2024 to provide the working capital needed to hit our growth target for the year while keeping our cash position relatively flat. This will be accomplished through a combination of securitizations and sales, net of operating costs.
Rob: Finally, while we forecast no need for corporate capital through 2026 for good housekeeping purposes, we will be putting in place a modest ATM in the coming weeks and we'll update the market every quarter of any anticipated usage. We have discussed this ATM before and to be clear, we do not intend to utilize the ATM between now and our next earnings.
Rob: Call the.
Rob: The best time to put tools like an ATM in place is when they are in fact, a luxury and not a necessity.
Rob: I will now turn the call back over to John.
John Berger: Thanks, Rob.
John Berger: <unk> is committed to delivering a comprehensive sustainable and streamlined approach to energy financing servicing and management for our customers.
John Berger: We are in an adaptive energy services company that has an unwavering focus on innovative technologies integrated energy solutions and quality control as evidenced by our investments in our Global Command Center and our adaptive Technology Center, both designed to optimize our operations and provide our customers with the <unk>.
John Berger: Strong customer experience.
Robert Ling: As we exit 2024, we expect to achieve an annual run rate of cash generation between $200 million and $500 million. This significant increase in cash generation beyond 2024 is a reflection of our pricing changes and can be further enhanced towards the top end of the range through improvements in treasury rates, an ever-tightening risk..., and the Final Domestic Content Guide. We are electing to sunset a recurring operating cash flow metric in favor of levered cash flows in response to investor inquiries around not just the cash flows from in-service and securitized assets but a desire to see the value and cost of our superior customer service model. Leveraged cash flows is the sum of expected residuals from all securitized lease, TPA, and loan contracts, plus all MSA fees, plus expected cash inflows from unpledged SRECs and grid services.
John Berger: In a world where our perceptions are manipulated we know there are people selectively crafting narratives that paint a picture that is far from the truth, but we stand firm in our commitment to focus on transparency and integrity choosing to focus on the facts. For example on slide 15, you will see.
John Berger: As of December 31, 2023, only 0.6% of our customers had an escalated concern and improvement from one 1% at the end of 2022.
John Berger: Moreover, in 2023, we saw an 80% improvement in our service response time as the average age of a closed work order went from 96 days as of December 31, 2022 to 19 days as of December 31 2023.
John Berger: This marked improvement was driven by our investments in our customer service infrastructure, which enhanced and strengthened our customer service levels and capabilities.
John Berger: 2024 will be a year of continued growth and transformation for synovus.
John Berger: With a continued emphasis on cash generation as a top priority to accomplish this in addition to expanding margins and the more aggressive cost reductions. We mentioned, we will look to leverage asset sales as a more meaningful source of cash generation, coupled with increasing our long term levered cash flows are.
John Berger: As John noted earlier, we have continued to focus on cost reduction. However, one area that will continue to retain its investment is our collections department to ensure we are maintaining our low per annum capital loss rate, which is unchanged at approximately 25 basis points. Finally, while we forecast no need for corporate capital through 2026, for good housekeeping purposes, we will be putting in place a modest ATM in the coming weeks, and we'll update the market every quarter on any anticipated use. We have discussed this ATM before, and to be clear, we do not intend to utilize the ATM between now and our next earnings call. The best time to put tools like an ATM in place is when they are, in fact, a luxury and not a necessity.
John Berger: <unk> to prudent capital management and shareholder value creation remains unchanged, we remain dedicated to evaluating ways to deploy our capital with an emphasis on both maximizing returns on capital and exploring opportunities to make returns of capital over time.
John Berger: We will continue to evaluate the optimal allocation of our capital resources and will not hesitate to take advantage of attractive opportunities in the capital markets and in our rapidly changing industry.
John Berger: As we look to the remainder of 2024.
John Berger: We are excited about what we are seeing while there is no denying that what we are doing is difficult at the end of the day, we are transforming the energy landscape challenging the status quo and offering customers greater choice to help meet society's ever increasing energy demands.
Speaker Change: With that operator, please open the line for questions.
Speaker Change: 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 keypad. If you change your mind. Please press star followed by <unk>.
Speaker Change: First question today comes from Phillip.
Phillip: Chen from Ralph and Kelly Ann Your line is now open. Please go ahead.
Phillip Chen: Hi, everyone. Thanks for taking my questions.
Phillip Chen: Hey, John just now you highlighted asset sales a number of times can you give some more color on what this means I know you have a lot of securitized loan assets on balance sheets. My guess is you would not touch any of that can you talk through your view of what you would do ahead are there any current assets available for sale. In addition.
John Berger: I will now turn the call back over to you... Thanks, Rob. Sunnova is committed to delivering a comprehensive, sustainable, and streamlined approach to energy financing, servicing, and management for our customers. We are an adaptive energy services company that has an unwavering focus on innovative technologies, integrated energy solutions, and quality control, as evidenced by our investments in our Global Command Center and our adaptive technologies, both designed to optimize our operations and provide our customers with a strong customer experience. In a world where perceptions are manipulated, we know there are people selectively crafting narratives that paint a picture that is far from the truth.
Phillip Chen: What is the magnitude of asset sales in 'twenty, four and 'twenty five that is contemplated in your guidance and outlook. Thanks.
Speaker Change: Yes, Phil Thanks.
Speaker Change: No I don't we could possibly look at.
Speaker Change: <unk> securitizations that probably will be more on the GPO side of things that would be my guess, but and we are exploring some some of those but I think primarily in.
Speaker Change: Our plan, it's really the loans both.
Speaker Change: The solar plus loans in the accessory loans that we've looked to see if we could sell those assets I think that's pretty clear that we can.
Speaker Change: I would expect to see some of those asset sales in the course of this year.
Speaker Change: Not.
Speaker Change: Even close to the majority of the cash generation that we've laid out that is primarily <unk>.
John Berger: But we stand firm in our commitment to focus on transparency and integrity, choosing to focus on the latter. For example, on slide 15, you will see that as of December 31st, 2023, only 0.6% of our customers had an escalated concern, an improvement from 1.1% at the end of 2022. Moreover, in 2023, we saw an 80% improvement in our service response time as the average age of a closed work order went from 96 days as of December 31st, 2022 to 19 days as of December 31st, 2023. This marked improvement was driven by our investments in our customer service infrastructure, which enhanced and strengthened our customer service levels and capabilities.
Speaker Change: Through our GPO and securitizing through our asset cost just given the spread that we're realizing and had been realizing for the last few quarters starting to come to into play so to speak.
Speaker Change: We moved towards being able to securitize. These assets primarily in the back half of this year, just given the timing, but it's possible to have that.
Speaker Change: Latter part of the second quarter and third quarter. So is it primarily on the cash generation side securitization proceeds assumed obviously ITC adders are a part of that once we get domestic content guidance those.
Speaker Change: Why there is a range there those cash generation.
Speaker Change: For each securitization could go up meaningfully.
Speaker Change: They have a very conservative tax equity, our ITC percentage compared to peers is assumed in this so it could be quite a bit meaningfully higher than the bottom end of that range and then that can be supplemented with loan and accessory loan sales.
Rob: Rob anything to add.
Rob: That pretty much covers it.
Rob: Like you said, so we've got some phenomenal.
Long term securitizations with really good pricing locked in at rates.
Rob: Can't get today and with advanced rates that you can't get today, so it wouldn't make sense to really touch.
John Berger: 2024 will be a year of continued growth and transformation for Sunnova, with a continued emphasis on cash generation as a top priority. To accomplish this, in addition to expanding margins and the more aggressive cost reductions we mentioned, we will look to leverage asset sales as a more meaningful source of cash generation, coupled with increasing our long-term leveraged cash. Our commitment to prudent capital management and shareholder value creation remains unchanged.
Rob: Most of what we have in our securitization is already.
Speaker Change: Great. Thanks, guys.
Speaker Change: Shifting over to Opex. So it looks like the adjusted Opex went up meaningfully in Q4, clearly you are seeing the benefit of that in your customer service quality metrics.
Speaker Change: You talked about lowering this by 20% per customer.
Speaker Change: Can you share what the outlook is specifically for the customer service and sales and marketing line items, which were each quite high on an absolute dollar basis. In Q4 can you talk about how these line items may trend and scale ahead. Thanks.
Speaker Change: Yeah, Phil So some of this isn't we've attempted to give more visibility by breaking out direct sales and that is some of the good portion of the sales increase.
John Berger: We remain dedicated to evaluating ways to deploy our capital with an emphasis on both maximizing returns on capital and exploring opportunities to make returns on capital over time. We will continue to evaluate the optimal allocation of our capital resources and will not hesitate to take advantage of attractive opportunities in the capital markets and in our rapidly changing industry. As we look to the remainder of 2024, we are excited about what we are seeing. While there is no denying that what we are doing is difficult, at the end of the day, we are transforming the energy landscape, challenging the status quo, and offering customers greater choice to help meet society's ever-increasing energy demand. With that, Operator, please open the line for questions. Thank you. We will now start today's Q&A session. If you would like to ask a question, please press start, followed by 1 on your telephone keypad.
Phil: Still a small.
Phil: Small minority of our origination but it does.
Phil: Standout as far as the sales and marketing growth.
Phil: On the service side have talked over the last few quarters about catching up on the service.
Phil: Levels that we promised our customers we've done that now.
Phil: And then some and so we will be able to once we cleared that backlog, which we've done we'll be we're seeing a cost reduction on a per customer basis, that's pretty meaningful and so youll see that as I said peak in Q4.
Phil: Outside some bonus payments, we pay bonuses to employees in Q1.
Phil: We're already seeing some pretty meaningful cost reductions this quarter in the last few months.
That to continue to accelerate in Q2 and beyond.
Phil: But it's too high there's no question about it and we're bringing it down meaningfully and slowing the growth clearly you can see that in the capital budgets that we've laid out for 2025 and 26 that helps to meaningfully cut cost as well and then bring in the automation that's been something that we've invested in and it's part of.
John Berger: If you change your mind, please press start. Our first question today comes from... And from Ross NKM, your line is now open. Everyone, thanks for taking my questions. Hey, John, just now you highlighted asset sales a number of times. Can you give some more color on what this means? I know you have a lot of securitized loan assets on balance sheets. My guess is you would not touch any of that.
Phil: Spending a big part of the spending and I expect to start realizing some of those efficiencies are a lot of those efficiencies as soon as this quarter.
Speaker Change: Great. Thanks, John one last one here.
Speaker Change: Talked about the potential for a modest $100 million ATM on the one hand, you're saying you don't need corporate capital. But then you have this announcements can you share more on your thinking in terms of the rationale and timing and also how you plan to address the upcoming 26 convert maturity.
John Berger: Can you talk through your view of what you would do ahead? Are there any current assets available for sale? And additionally, what is the magnitude of asset sales in 24 and 25 that is contemplated in your guidance and, Yeah, Phil, thanks. No, I don't. We could possibly look at perhaps securitizations that would probably be more on the TPO side of things, would be my guess. But, and we are exploring some of those, but I think primarily in, in our plan, it's really the loans, both, you know, the Solar Plus loans and the accessory loans that we've looked to see if we could sell those as assets. I think it's pretty clear that we could, and I would expect to see some of those asset sales in the course of this year. It's not even close to the majority of the cash generation that we've laid out.
Speaker Change: Yes, so like we said in the prepared comments really this is just good housekeeping Phil we've been talking about this publicly since at least in the second quarter of last year.
We plan to update the street on our intended use but we're putting it in place now because we don't intend to use it now.
Speaker Change: And yes.
Speaker Change: Frankly, we wish we would have done in a long time ago. So it wouldn't be an issue, but it is so we're just making sure to get it done.
Speaker Change: The thing on the converts.
Speaker Change: Our plan on the converged is still to be able to refinance both have emerged in the high yield bond and then to use the excess cash generation that we're planning on giving over the next few years.
Speaker Change: To pay down so first is use cash to pay down and second is to refinance the second part of it. So between those two we expect to be able to refinance and lower our overall.
Speaker Change: Mount of debt that we have on the balance sheet pro forma for that.
Speaker Change: I think it was brought up with some of our peers as well the cost of capital that we have is still really really low in the timeframe that we have.
John Berger: That is primarily through our TPO and securitizing, well, through our asset costs, just given the spread that we're realizing and have been realizing for the last few quarters, starting to come into play, so to speak, as we move towards being able to securitize these assets, primarily in the back half of this year, just given the timing, but it's possible to have that in the latter part of the second quarter and So this is primarily on the cash generation side. Securitization proceeds are assumed.
Speaker Change: This is paper that is not due until 2026, the right time to be addressing it refinancing. It is in 2025 at the right time to start preparing for it is now and that's what we're doing with looking at the cash generation.
And with other things that we'll look to do along the way to try to decrease debt burden as we get closer to the maturity dates.
Speaker Change: So first John I, just wanted to highlight two things.
Speaker Change: We have the ability to generate levered cash flows off the existing assets, we did not lever all the way through the asset and so that's providing meaningful cash flow that frankly, no. One else has and then we're also generating through Securitizations and asset sales and my answer to your first question additional cash and so we.
John Berger: Obviously, ITC adders are a part of that, and once we get domestic content guidance, those, that's why there's a range there. That cash generation for each securitization could go up meaningfully. We have a very conservative tax equity or ITC percentage compared to peers assumed in this, so it could be quite a bit meaningfully higher than the bottom end of that range, and then that could be supplemented with loan and accessory loan sales. Rob, anything to add?
Speaker Change: Two ways to generate the cash to pay down the debt and that's what we're focused on is.
Speaker Change: Doing just that.
John Rob Thanks, very much for all the color I'll pass it on.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Our next question comes from Penny detached from Wells Fargo. Your line is now live. Please go ahead.
Penny: Thanks. Good morning, guys. Just wondering if you could maybe comment at a high level on competition that youre seeing in the financing space are you seeing any financing only companies offer aggressive or irrational pricing that's impacting your strategy in any way.
Penny: Yes, it does John.
Penny: We're seeing some of that.
Penny: It doesn't last very long I think there is maybe one player or two in particular that is doing that but the market.
John Berger: I mean, that pretty much covers it. You know, like you said, we've got some phenomenal long-term securitizations with really good pricing locked in at rates you can't get today and with advanced rates that you can't get today, so it wouldn't make sense to really touch most of what we have in our securitizations already. Great. Thanks, guys. Shifting over to OPEX, it looks like the adjusted OPEX went up meaningfully in Q4. Clearly, you're seeing the benefit of that in your customer service quality and metrics. You talked about lowering this by 20% per customer. Can you share what the outlook is specifically for the customer service and sales and marketing line items, which were each quite high on an absolute dollar basis in Q4?
Penny: I'm surprised has been around the market for a while a long time and I've got to say the stickiness on the price increases that we and our and.
Penny: Pierre has been able to put forth.
Speaker Change: It surprised me too in a positive way. So I think the market is clearly very healthy and we always have one or two folks that want to come into the market and then decided to buy market share. We certainly see that now that always ins and a trail of tears and then there is no reason why that that would be any.
Speaker Change: Different here, but on the margin clearly, we're taking share we continue to we're projecting that out although slowing growth really to generate the cash, but and so I don't really see it's impacting our operations much at all we continue to see a surprising amount of pricing power.
Speaker Change: Okay.
Speaker Change: Got it.
Speaker Change: I wanted to get your general view of how spreads could could trend over the course of 2024, you had a roughly 6% implied spread now, but you'll probably continue to enjoy Taylor.
John Berger: Can you talk about how these line items may trend and scale ahead? Phil, some of this is we've attempted to give more visibility by breaking out direct sales, and that is some of the good portion of the sales increase. That's still a small minority of our origination, but it does stand out as far as sales and marketing growth are concerned. On the service side, I've talked over the last few quarters about catching up on the service levels that we promised our customers. We've done that now and then some, and so we'll be able to, once we've cleared that backlog, which we have, we're seeing a cost reduction on a per-customer basis that's pretty meaningful. And so you'll see that, as I said, peak in Q4. Outside some bonus payments, we pay bonuses to employees in Q1.
Speaker Change: Tailwind from declining equipment costs and tax credits, so I guess, just holding interest rates constant.
Speaker Change: Would you expect the spread to widen over the next 12 months or are there other kind of puts and takes we should consider.
Speaker Change: No I think it's quite likely it will.
Speaker Change: And so if you hold the rate constant we're seeing some reduction in the risk premium I think that that does continue to come in from what has been what has been historically a really high spread.
Speaker Change: That materialized in 'twenty, two and 'twenty three.
Speaker Change: And even without that though I think hanging in in the 6% plus or minus and May go a little bit north word for a couple of quarters or so this year.
Speaker Change: But again the price pricing power has been pretty sticky and that.
Speaker Change: That to continue.
Speaker Change: Got it thank you.
Speaker Change: Our next question comes from Julien Dumoulin Smith from Bank of America. Your line is now open. Please go ahead.
Speaker Change: Hi, Good morning, this is <unk> on for Julian.
Speaker Change: Wanted to ask a quick question about the EBITDA guide is there an assumption for 2024 for gain on sale through loan portfolio monetization, whereas this pure upside.
Speaker Change: In terms of the stated guide.
Speaker Change: Do you expect this opportunity to be predictable in the sense that as we progressed through 2024, you could begin to provide a target for asset sales or.
John Berger: We are already seeing some pretty meaningful cost reductions this quarter and the last few months. I expect that to continue to accelerate in Q2 and beyond, but it's too high. There's no question about it, and we're bringing it down meaningfully and slowing the growth. Clearly, you can see that in the capital budgets we've laid out for 24, 25, and 26. That helps to meaningfully cut the cost as well. And then you bring in the automation.
Speaker Change: Monetization in the year over certain period, a certain period of time.
Speaker Change: Yes, that's really upside I think that as we get more visibility end of the market and market appetite will be able to get more information you could do it really in two ways you can do it lumpy or you can do it to programmatic forward flow type of programs and I think that as we enter into those programs that disclosure will help will help.
Speaker Change: Season that guide a little bit.
Speaker Change: Alright, Thank you very much.
Speaker Change: Our next question comes from Brian Lee from Goldman Sachs. Your line is now open. Please go ahead.
John Berger: That's been something that we've invested in as part of the spending, a big part of the spending, and I expect to start realizing some of those efficiencies or a lot of those efficiencies as soon as this quarter. Great, thanks, John. One last one here.
Brian K. Lee: Hey, guys. Good morning, Thanks for taking the questions.
Brian K. Lee: And then maybe just a follow up on the asset sales.
Brian K. Lee: If I look at slide when as this one.
Brian K. Lee: 13, you've got the 200 million and then $300 million of cash.
Robert Ling: You talked about the potential for a modest $100 million ATM. On the one hand, you're saying you don't need corporate capital, but then you have this announcement. Can you share more on your thinking in terms of the rationale and timing, and also how you plan to address the upcoming 26 convert maturity? Thanks.
Brian K. Lee: <unk> and 'twenty five 'twenty six.
Brian K. Lee: No asset sales that are being embedded in those forecasts correct.
Speaker Change: Correct very little.
Speaker Change: But on the margin if you look at some of the loans there could be something on the margin there, but very little that's primarily if not wholly securitize.
Speaker Change: As well as the lever so close.
Speaker Change: Okay great.
Speaker Change: So John if you.
Speaker Change: Our base casing.
Robert Ling: Yeah, like we said in the prepared comments, really, this is just good housekeeping. Phil, we've been talking about this publicly since at least the second quarter of last year. We plan to update the street on our intended use, but we're putting it in place now because we don't intend to use it. Thank you, and you know we frankly wish we'd have done it a long time ago so it wouldn't be an issue, but it is. We're just making sure to get it done. The second thing on the converts, our plan for the converts is still to be able to refinance both the converts and the high yield bond and then to use the excess cash generation that we're planning on getting over the next two years to pay down. So first, use cash to pay down, and second, refinance the second part of it.
John Berger: No asset sales and it sounds like it would be opportunistic.
John Berger: If you do start to kind of more programmatically sell down assets and monetize them would you.
John Berger: First I guess included in the cash generation metric and then two how how additive could it be Boe talking like hundreds of millions of dollars a year, what kind of upside to the.
John Berger: $2 million to $300 million figures on this slide could could we be talking about it.
John Berger: If those asset sales started to show up.
Speaker Change: Yes. So if you look at the cash flows that we've laid out and I think for the first time for the first time on slide four.
Speaker Change: It's pretty meaningful as you move forward in time as we've been talking about the last several earnings calls cash generation after paying off all the debt service off right and tax equity. So there is a meaningful amount I mean, the cumulative nominal levered cash flows almost $5 billion, so theres quite a bit there that we can.
Robert Ling: So between those two, we expect to be able to refinance and lower our overall amount of debt that we have on the balance sheet pro forma for that. You know, I think it was brought up with some of our peers as well. The cost of capital that we have is still really, really low. And the timeframe that we have, this is paper that's not due until 2026.
Speaker Change: Could do and Thats another Avenue.
Speaker Change: If we wanted to do it it made sense to essentially.
Speaker Change: Pay down the corporate debt, whether that's the converts are the or the bonds.
Speaker Change: Down the road so it gives us and again, having these contracted cash flows gives us an enormous amount of Optionality I think there was anything meaningful.
Speaker Change: Rob you can correct me I think we would break it out for you all to show that but.
Speaker Change: Yes.
Rob: And that would be.
John Berger: The right time to be addressing it and refinancing it is in 2025, but the right time to start preparing for it is now. And that's what we're doing with looking at cash generation and with other things that we'll look to do along the way to try to decrease that burden as we get closer to maturity. Phil, this is John.
Rob: If we did see something it was a material amount we'd want to go ahead and call that out for you.
Speaker Change: Alright fair enough, we'll stay tuned.
Speaker Change: Second question I had was again on this slide you have got.
Speaker Change: The investment in systems, it's growing kind of like 10% to 15% in 2025 based on these numbers.
Speaker Change: What sort of growth are you embedding in that forecast for investment. It just seems like there's a lot of cost deflation that we know about happening right now so the growth in investments seems fairly meaningful unless you are implying.
John Berger: I just wanted to highlight two things. We have the ability to generate levered cash flows off existing assets. We did not lever all the way through the asset, and so that's providing meaningful cash flow that, frankly, no one else has. And then we're also generating, through securitizations and asset sales, in my answer to your first question, additional cash. And so we have two ways to generate the cash to pay down the debt, and that's what we're focused on doing just that. Don, Rob, thanks very much for all the comments. Our next question comes from... from Wells Fargo. Your line is now open, please.
Speaker Change: Either significant growth into 'twenty five next.
Speaker Change: Or maybe there is a mix element in there can you just any color there would be helpful. On what assumptions are baked into that thanks guys.
Speaker Change: Yes.
Speaker Change: Look at it the Capex, which includes all of our spending.
Speaker Change: Anything that we spend on Capex.
Speaker Change: <unk> deliver a service or service costs or overhead.
Speaker Change: G&A and sales.
John Berger: Thanks. Good morning, guys. Just wondering if you could maybe comment at a high level on competition that you're seeing in the financing space? Are you seeing any financing only companies offering aggressive or irrational pricing that's impacting your strategy in any way? Yeah, it does, John. We are seeing some of that. It doesn't last very long. I think there's maybe one player or two in particular that is doing that.
Speaker Change: Cost that's all in those numbers and so when you look at it's roughly about $4 to $1 billion for April eight so youre looking at.
Speaker Change: Very little.
Speaker Change: To your point, 10% to 15% growth from 24 to 25. So we are and then flat from 'twenty five 'twenty six.
Speaker Change: We are.
Speaker Change: Intentionally slowing.
Speaker Change: Capex growth I've said before in the last earnings call. Unlike where we were in that $4 billion to $5 billion Capex range.
John Berger: But the market, I'm surprised, has been around for a while, a long time. And I got to say, the stickiness of the price increases that we and our peers have been able to put forth has surprised me in a positive way. So I think that the market is clearly very healthy, and we always have one or two folks that want to come into the market and then decide to buy market share. We certainly see that now. That always ends in a trail of tears.
Speaker Change: And I just want to sit here and generate some cash at this point, particularly given where our debt is trading corporate debt is trading and where the equity is trading so.
Speaker Change: I like where we are and we're just going to focus on how do we cut costs expand margins and generate the cash.
Speaker Change: Yes, John I guess I.
John Berger: I was talking more on like the customer growth side. So you're doing 185 to 195000, new customer adds this year on that.
John Berger: Four <unk> to $4 3 billion base of investment.
John Berger: And there's no reason why that would be any different here. But on the margin, clearly, we're taking share. We continue to. We're projecting that out, although slowing growth really to generate the cash. And so I don't really see it impacting our operations much at all. We continue to see a surprising amount of pricing power.
Presumably for eight next year would go a lot further given some of the cost reductions, you're making as well as cost deflation youre seeing on the hardware side, so I'm trying to get a sense.
John Berger: 10% to 15% growth.
John Berger: Modest in investment what does that translate to in your growth assumptions for.
John Berger: And then I wanted to get your general view of how spreads could trend over the course of 2024. You have a roughly six percent implied spread now, but you'll probably continue to enjoy tailwinds from declining equipment costs and tax credits. So I guess just holding interest rates constant, would you expect the spread to widen over the next 12 months, or are there other kinds of puts and takes we should consider? No, I think it's quite likely it will.
New customers or however, you're quantifying it.
Speaker Change: Yes, okay. So we haven't given out obviously customer growth guidance that far out just for this year. So roughly about 190 came in roughly at about one 142, just a little north of that for last year.
Speaker Change: And so you can obviously simple math, there roughly about 31% customer growth. The capex is roughly about <unk>.
Speaker Change: 20% customer growth and so I do feel like because of our different channels.
Speaker Change: Strong uptake in battery.
John Berger: And so if you hold the rate constant, we're seeing some reduction in the risk premium. I think that does continue to come in from what has been historically a really high spread that materialized in 22 and 23. And even without that, though, I think the price power has been pretty sticky. And I'd expect that to continue. Got it, thank you. Our next question comes from... Hi, good morning. This is Tanner. I'm for Julian.
Speaker Change: <unk> sales upsells and load manager sales EV charger et cetera, and these different channels that we now have.
Speaker Change: That will continue to have our customer count grow a little faster than our capex growth.
Speaker Change: And the other side of that or the reason for that is what you are pointing out is declining equipment costs declining EPC you basically get more for your Buck.
Speaker Change: Per customer, that's also going to contribute to having a little bit higher customer growth and capex growth.
Speaker Change: Okay Fair enough makes sense I'll pass it on thanks, guys.
Speaker Change: Thanks.
Speaker Change: Our next question today comes from Ben <unk> from Baird. Your line is now open. Please go ahead.
Ben: Hey, good morning, guys.
Real quickly on the asset sales.
Ben: Just what are you seeing John.
Ben: In the private market.
Ben: Yes.
John Berger: I just wanted to ask you a quick question about the EBITDA guide. Is there an assumption for 2024 for gain on sale through loan portfolio monetization, or is this pure upside in terms of the stated guide? And do you expect this opportunity to be predictable in the sense that as we progress through 2024, you could begin to provide a target for asset sales or monetization in the year over a certain period of time? Yeah, that's really the upside. I think that as we get more visibility into the market and market appetite, we'll be able to get more information. You could do it really in two ways; you can do it lumpy, or you can do it the programmatic forward flow type of programs.
John Berger: How does that impact your decision on sales just valuations, maybe you could talk a little bit above that.
Ben: Okay.
John Berger: Yes, so we look at the private market pricing when you look at it.
Third party buyers and we look at the securitization market, we put them next to the other.
John Berger: What we see is that they are they have different expectations.
John Berger: It can make.
John Berger: Reising certain loans more attractive for securitization and others more attractive for sale.
John Berger: So really it's an optimization game for US and then the other thing that has an impact for US is the FCA channel that allows us to be able to securitize certain loans.
John Berger: That might be flat.
John Berger: If we were to sell them.
John Berger: And can bring.
John Berger: Cash if.
John Berger: If we elect to securitize them instead, so it really is an optimization game and we spend a lot of time.
John Berger: My finance team the pricing team.
John Berger: The marketing team has spent a lot of time together to try to make sure that we're pricing optimally.
John Berger: And then we're truncheon optimally for the right for the right outcome.
John Berger: And I think that, you know, as we enter into those programs, that disclosure will help season that guideline. All right, thank you very much. Our next question comes from Brian Lee from Goldman Sachs. Your line is now open. Hey, guys. Good morning.
Speaker Change: Thank you.
Speaker Change: John You mentioned in your prepared remarks.
Speaker Change: The carnage in the marketplace.
Speaker Change: That's the right word.
Speaker Change: But.
Speaker Change: How does affect you positively or negatively.
Speaker Change: The negative impact to our budget, but could you just talk about.
Speaker Change: The health of the industry.
Thanks you.
Speaker Change: Yeah, Yeah, I don't think I use that term but.
John Berger: Thanks for taking the questions. Maybe just a follow-up on the asset sales. You know, if I look at the slide, what is this one about?
Speaker Change: Yes, it's been a challenging year.
Speaker Change: Look obviously, we executed everybody last year.
John Berger: 13, you know, you've got the $200 million and then $300 million of cash generation in 2025 and 2026. No asset sales are being embedded in those forecasts, correct? Correct. Very little.
Speaker Change: Across the value chain and delivered the numbers and.
Speaker Change: I think that.
Speaker Change: Kudos goes to all the folks at <unk> and our dealers for really just a great year.
Speaker Change: Now we want to focus even more about how do you get a lot more efficient stay in this range of capex of $4 billion to $5 billion and generate the cash just given where again were corporate debt securities and equity is trading and that gets into that there is an overall clearly negative.
John Berger: But on the margin, if you look at some of the loans, there could be something on the margin there, but very little. That's primarily, if not wholly, securitized, as well as the leverage flows. Okay, great.
Speaker Change: Cloud over over the industry, whether it's from the debt markets credit markets or the equity markets or.
Speaker Change: Sometimes in the media we've seen that.
Speaker Change: I think thats overall, just a unfortunate.
John Berger: So, John, if you, you know, our base casing, You know, no asset sales, it sounds, you know, like it'd be opportunistic if you did start to kind of more programmatically sell down assets and monetize them. Would you, first, I guess, include it in the cash generation metric, and then two, how additive could it be? Are we talking about hundreds of millions of dollars a year?
Speaker Change: Cloud that at some point, we will blow away.
Speaker Change: Because the reality, even when you look at California, which were not big in California made that point over and over.
Speaker Change: Just looking at California, I think theres surprising strength, there I know.
Speaker Change: There is the numbers when you run the numbers make a lot of sense why because the utilities jackup rates like crazy in the law.
Speaker Change: Last 12 months and we're continuing to see that across the country. So you are selling into a industry that is increasing rates. Despite natural gas prices plummeting to historic lows.
John Berger: What kind of upside to the $200 to $300 million figures on this slide could we be talking about if, you know, those asset sales started to show up? Yeah, so if you look at the cash flow that we've laid out, I think for the first time, for the first time on slide four, that's pretty meaningful as you move forward in time, as we've been talking about on the last several earnings calls, cash generation after paying all the debt service off, right, and tax equity. So there's a meaningful amount.
Speaker Change: Add in orders of 50%, 19% just in the last week alone three major utilities announced rate increases, 15% and greater.
Speaker Change: So selling into that kind of market, where you have got despite fuel prices dropping or at least going sideways in the case of oil.
Speaker Change: It is pretty interesting to do and the other side of this you've got stabilization of cost of capital kind of in the worst side of things. If you will maybe improvement and you have equipment pricing Thats clearly.
Speaker Change: Declining and then you've got additional incentives through the iras that are yet to be employed specifically the domestic content ITC adder. So all of this is if you look at the numbers you can look at what's going on yes, it's difficult to move.
John Berger: I mean, the cumulative nominal levered cash flows are almost $5 billion. So there's quite a bit there that we could do. And that's another avenue of, if we wanted to do it, it would make sense to essentially pay down the corporate debt, whether that's the converts or the bonds, you know, down the road. So it gives us, again, having these contracted cash flows gives us an enormous amount of optionality. I think if there was anything meaningful, Rob, you can correct me. I think we'd break it out for y'all to show that. But yeah, and that would be if we did see something that was a material amount. We want to go ahead and call that, All right, yep, fair enough. We'll stay tuned. The second question I had was, again, on this slide, you've got...
Speaker Change: When you have a NIM change abrupt and as significant as what California did.
Speaker Change: And that causes a lot of pain, because people need to change in their behavior and then now you have to sell a battery how do you do that.
Speaker Change: That just doesn't happen like a light switch people some people adapt faster than others and so I think overall the fundamentals are really good across the industry.
Speaker Change: And but the the ability to see that through the headlines negative headlines as very challenging what that means for those that continue to execute like <unk>. This is a great time.
Speaker Change: This is the kind of time, where you can really gain market share. It's not just us obviously theres another peer doing it as well and pick up.
Speaker Change: Good business and generate a lot of cash that frankly, you couldnt do in the heyday, when everybody was happy which seems like a long time ago, but three years ago, or so two or three years ago. So.
Speaker Change: Great time fundamentally.
Speaker Change: And this too shall pass, but we'll come out the other end of this much much stronger with new technologies cheaper storage and.
John Berger: The investment in systems is growing, you know, kind of like 10 to 15% in 2025 based on these numbers. What sort of growth are you embedding in that forecast for investment? It just seems like, you know, there's a lot of cost deflation that we know about happening right now. So the growth in investment seems, you know, fairly meaningful unless you're implying, you know, either significant growth into 2025 next, you know, or maybe there's a mixed element in there too. So I don't know whether there would be help on what assumptions are baked into that. Thanks, guys.
Speaker Change: Better customer service.
Speaker Change: If I could sneak wanted to just thank you for that just come into election year I know we're still early.
Speaker Change: How are you judging risk are assessing risk.
Speaker Change: Heather let shneur if you could just talk about what your policy before talking to your growth.
Heather: I'm going to try to stay away from the politics, I am not going to say.
Heather: Who would we prefer and so forth look I think what's interesting is for the first time that I've ever seen. This then as long as I've been in this industry.
Heather: We don't really need anything we don't.
Heather: We just need what the IRA has provided to stay intact, largely and then when you look at the amount of investment in manufacturing plants.
John Berger: Yeah, if you look at it, the CapEx, which includes all of our spending, you know, anything that we spend on IT CapEx, our software to deliver our service, our service costs, our overhead, you know, G&A, and sales costs, that's all in those numbers. And so when you look at it, it's roughly about $4.2 billion, $4.8 billion. And so you're looking at very little, to your point, 10-15% growth from 24 to 25.
Heather: And even customer growth in the so called Red States, it's pretty phenomenal.
Heather: And I don't think that.
Heather: You can listen to some of the.
Heather: Message points, if you will from some parts of it.
Heather: The political spectrum, but at the end of the day I. Just don't think that this is going to go away in terms of the IRA and its provisions if anything just being located in Houston I will say that there is more activity on the hydrogen and carbon sequestration and then our area than I've ever seen by multiples and.
Heather: Very large company, so called conventional energy oil and gas conventional and power are now fully engaged in the IRA. So I think it's I think we're in.
John Berger: So we are, and then flat from 25-26. We are intentionally slowing the CapEx growth. I've said before in the last earnings call, I like where we were in that $4 to $5 billion CapEx range. And I just want to sit here and generate some cash at this point, particularly given where our debt's trading, corporate debt's trading, and where the equity is trading. So I like where we are. And we're just going to focus on how we cut costs, expand margins, and generate cash. Yeah, John, I guess I was talking more on the customer growth side. So you're doing 185 to 195,000 new customer ads this year on that, you know, $4.2, $4.3 billion base of investment. Presumably, $4.8 next year would go a lot further given some of the cost reductions you're making as well as, you know, cost deflation you're seeing on the hardware side.
Heather: We're certainly have energy policy, it's in place and I don't think regardless of the election outcome that that's going to change.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Joseph Osha from Guggenheim Partners. Your line is now open. Please go ahead.
Joseph Osha: Thanks, and good morning folks to two questions first I was wondering if we could drill down maybe a little bit more on the two converts which are trading at the levels that they are trading at is the plan.
Joseph Osha: Really to just sort of pick away at them now with with free cash.
Joseph Osha: The majority of them out when you refi or I'm, just wondering if I could get a better sense as to what your plan might be for taking advantage of the prices.
Joseph Osha: Those two instruments are trading at and then I have one other question.
Joseph Osha: Okay. Thanks, Joe This is John.
John Berger: Yes, I mean, we have a lot of Optionality, we have delivered cash flows.
John Berger: We expect to generate more cash.
John Berger: We securitized and lever through the cost of the asset with the ITC adders et cetera. So.
John Berger: How do we go about doing this and obviously as you pointed out the converts are trading at a very attractive level.
John Berger: It is entirely possible that we do.
John Berger: Look at.
John Berger: Buying some of those in.
John Berger: Those what I want to do is we want to execute over the next few weeks and then look to see what our options are and look to see where the market is and then make decisions accordingly, but we do have a number of options, including as we've answered a couple of questions on this call already the ability to sell some of those levered cash flow asset.
John Berger: So, I'm trying to get a sense of 10 to 15% growth, you know, modest in investment. What does that kind of translate to in your growth assumptions for, you know, new customers or whatever you're quantifying? Yeah, okay. So, we haven't given out, obviously, customer growth guidance that far out just for this year. So, roughly about 190 came in roughly at about 142, just a little north of that for last
John Berger: They have been paid.
John Berger: Pay down debt because they have been in place. The securitization has been in place for years. So we've got a number of weapons, but it's not lost on us that the debt's trading at a very attractive level.
John Berger: Our primary focus is to make do generate the cash to pay to pay that debt down and then whatever is left if it makes sense, we can refinance it as Rob said earlier, Rob anything you want to add to that.
John Berger: Sure.
Rob: We just want to be responsible stewards of capital and at some point, that's going to be repurchasing in the open market and in other parts of the quarter.
Speaker Change: Making sure that we continue to just build up the cash.
Rob: But we will.
Speaker Change: We've got Optionality between now and.
Speaker Change: Later in 2025, which would be the prudent time to go ahead and.
Speaker Change: Refinance those notes.
Speaker Change: Okay. Thank you and then my other question one.
John Berger: And so, obviously, you can do the simple math there: roughly about 31% customer growth. The CapEx is roughly about, you know, 20% customer growth. And so, I do feel like because of our different channels, the strong uptake in battery only sales, up sales, and load manager sales, EV chargers, et cetera, and these different channels that we now have, I think that we will continue to have our customer count grow a little faster than our CapEx growth. And the other side of that, or the reason for that, which you're pointing out, is, you know, declining equipment costs and declining EPC.
Speaker Change: Alright.
Speaker Change: One of your folks are telling me at one point talking about dealers and making working capital available to dealers. He said, we're not a bank.
Speaker Change: I'm curious as you look at your customer adds this year.
John Berger: You basically get more for your buck per customer. That's also going to contribute to having a little bit higher customer growth than CapEx growth. Okay. Fair enough. Makes sense. I'll pass it on.
John Berger: Thanks, guys. Thank you. Our first question today comes from Ben Kallo from BARD. Hey, good morning.
John Berger: Thank you guys. Just real quickly on the asset sales. Just what are you seeing, John and Rob, in the private market? And, you know, how does that impact your decision on sales? Just evaluate, talk a little bit about that.
Speaker Change: Quite a few of them and has that failure rate gone up over the last year. Yes. It has so we we do have if you will hydrated the dealer versus the entire marketplace or industry and we're going to continue to do that but we see very large.
John Berger: Yeah, so we look at private market pricing, we look at third-party buyers, and we look at the securitization market. We put them one up next to each other, and what we see is that they have different expectations that can make the pricing of certain loans more attractive for securitization and others more attractive for sale. So really, it's an optimization game for us.
Speaker Change: Demand coming from competitors and so forth for dealers to come on board with Us and we easily replaced any of those that we lost I mean very easily replaced so we feel like we're in a good spot financially we understand the risks were managing it and we're seeing the growth in Rehydrating Uhm our partners.
Speaker Change: As as as you would expect.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Question comes from mock trials from J P. Morgan.
Speaker Change: Please go ahead.
Speaker Change: Good morning. Thank you for taking my question just a couple of quick ones I think for Rob.
John Berger: And then the other thing that is an impact for us is the Hestia channel. And that allows us to be able to securitize certain loans that might be flat if we were to sell them, but then can bring cash if we elect to securitize them instead. So it really is an optimization game.
J P: So fully appreciate the the greater than 20 per cent reduction that you're targeting and pro forma opex.
J P: Four Q, though the pro forma opex was a bit higher than what I think it was implied in the guide.
Rob: Can you just kind of talk about what drove that and then the the.
J P: Second question is just the the ITC sales in your 2024 EBITDA I think you said on the last call that was gonna be about 15 to 20 per cent correct me, if I'm wrong, but just looking for an update their thank you.
Speaker Change: Yeah, no absolutely so we get to break out of our adjusted Opex and you can see that in the back of our tech one of the drivers some of the increases that adjusted Opex Woozy increase in direct sales and that's really a driver in the second half of the year. There were other drivers as well, but some of that had to do.
John Berger: And we spend a lot of time, my finance team, the pricing team, the marketing team spend a lot of time together to try to make sure that we're pricing optimally. And then we're tranching optimally for the right outcome. Thank you. John, you mentioned in your prepared remarks just the carnage in the marketplace. I don't know if that's the right word.
J P: <unk> with part of the year and of course, we had part of it as well had to do with some technological improvements and part of it had to do with what we were doing internally to help move along some weapon just some stuff that we have to expense ourselves and don't actually put into a P. C that opposite yet.
J P: More systems up built in the service so.
J P: So a combination of those things if you look at the guide I think we were talking about 20% give or take as a combination of the adjusted EBITDA plus to see and I I take it we're still looking at the base case that we have calls for somewhere around 35 to 41 billion of ITC sales per.
John Berger: But, you know, how does that affect you positively and negatively? There has to be some negative impact, too, I imagine. But could you just talk about the health of the industry and its impact here? Yeah, yeah. I don't think I'll use that term, Ben.
J P: <unk> on a go forward basis, we could certainly exceed that and that is going to be a function of <unk>.
John Berger: But yeah, it's been, I think, a challenging year. Yeah, you know, look, obviously, we outperformed everybody last year across the value chain, and, you know, we delivered the numbers. And I think, you know, that kudos goes to all the folks at Sunnova and our dealers for really just a great year. Now, we want to focus even more on how you get a lot more efficient, stay in this range of capex of 45 billion and generate the cash, just given where, again, our corporate debt securities and equity are trading. And that gets into that there's an overall clearly negative cloud over the industry, whether it's from the debt markets, the credit markets, or the equity markets, or, you know, sometimes in the media. We've seen that. So I think that's, overall, just an unfortunate cloud that will, at some point, blow away.
J P: Partially how quickly we are able to deploy our leases and P. T A's and especially from getting later on into the year, what type of I T C and tax equity partners were bringing along the.
J P: The transfer abilities really opened up this universe to a lot of folks, but what we tend to find is that a lot of them like the economics.
J P: Of of ITC transferability, they make a few pennies on the dollar to do the transfer but then they look at the economics of tax equity and that becomes much more attractive to them and so our goal is to continue to try to convert I T C buyers into tax equity partner.
J P: On a go forward basis.
Speaker Change: Thank you Rob.
Speaker Change: Our next question comes from Kashi Harrison some type of phone line.
Kashi Harrison: Please go ahead.
Kashi Harrison: Good morning, and thank you for taking my questions.
Kashi Harrison: So my my first one was on the liquidity forecast slide does this charter C. You may seven per cent cost of that and then can you guys give us a sensitivity framework for.
John Berger: And because the reality, even when you look at California, which we're not big in California, made that point over and over. But just looking at California, I think there's surprising strength there. I know there is, and the numbers, when you run the numbers, make a lot of sense.
Kashi Harrison: Changes in the cost of that to the net change in cash forecast.
Speaker Change: Alright, yeah. So what I'd say is that this is assuming the current cost of that environment, we're not.
Speaker Change: We're not assuming any improvement in the risk free or any improvement risk premium. Although we are seeing risks risk <unk> premium improvement. It does take into account the cost cuts that John highlighted and it does take into account our current pricing as well. So if we're able to take advantage of better Fry.
John Berger: Why? Because the utilities jacked up rates like crazy in the last 12 months, and we're continuing to see that across the country. So you're selling into an industry that is increasing rates despite natural gas prices plummeting to historic lows at orders of 50%, 19%. Just in the last week alone, three major utilities announced rate increases of 15% and greater.
Speaker Change: Missing that certainly <unk> to those numbers.
Speaker Change: Generally speaking I would say that if you look at this capital budget.
Speaker Change: About every.
Speaker Change: Point of additional advance that we would get on our deck would give us somewhere around $45 million to $50 million of additional liquidity.
Speaker Change: And then if you look at advanced rates I would say that.
Speaker Change: Probably talking about seven.
Speaker Change: Seven points of advance for each point of interest expense.
John Berger: So selling into that kind of market where you've got, despite fuel prices dropping, or at least going sideways, in the case of oil, is pretty interesting to do. And on the other side of this, you've got stabilization of cost of capital, kind of in the worst side of things, if you will, maybe an improvement, and you have equipment pricing that's clearly declining. And then you've got additional incentives through the IRA that are yet to be employed, specifically the Domestic Content ITC Adder. So all this is, if you look at the numbers and see what's going on, yeah, it's difficult to move when you have a NIM change that's as abrupt and as significant as what California did. And that causes a lot of pain because people need to change their behavior. And now you have to sell a battery. How do you do that? That just doesn't happen like a light switch.
Speaker Change: Sorry.
Speaker Change: Each point each point of interest rate.
Speaker Change: Great improvement or degradation. So right now the risk free came back up it to about 443, it's come back down since then there's still the belief that it goes down further in the year. If you were to see a one point improvement in the risk free without anything else changing we waited.
Speaker Change: Equate that to about six or seven points of improvement in advanced right and that.
Speaker Change: It would translate into another at about $45 million to $50 million, you could extrapolate that to another $300 million with cash generation.
Speaker Change: Assuming that pricing held steady.
Speaker Change: One thing caches, John I would add that the assumption of the ITC adders and is very conservative relative to others.
Speaker Change: I'd say.
Speaker Change: Low thirties.
Speaker Change: All the way across so any sort of upside potential there with domestic content is going to move that these numbers up quite meaningfully.
Speaker Change: Oh I appreciate that yeah, well since you brought it up can you give us a sensitivity on on the IPC as well.
John Berger: Some people adapt faster than others. And so I think overall, the fundamentals are really good across the industry. But the ability to see that through the headlines, the negative headlines, is very challenging. What that means for those that continue to execute like Synova, this is a great time. This is the kind of time where you can really gain market share. It's not just us.
Speaker Change: Okay somewhere with 32% to 40 would be are kind of maximum.
Speaker Change: May be too conservative given some other commentary, but I would say we haven't considered anything north of 40, Yeah. I mean, most of this is running at about 32. So if you got up to 40, you would call that a 25% increase in the tax equity proceeds and pretty much everything else. Your debt. My Tech proceeds would go down maybe a little bit on that.
Speaker Change: So call that.
Speaker Change: Ah net 15% increase that we would expect to get on on the total tax equity less the any change in the recourse debt. So.
Speaker Change: It's not a lot but to be call it.
John Berger: Obviously, there's another peer doing it as well, and they pick up good business and generate a lot of cash that frankly you couldn't do in the heyday when everybody was happy, which seems like a long time ago, but three years ago or so, two or three years ago. So a great time fundamentally, and this too shall pass. But we'll come out on the other end of this much, much stronger with new technologies, cheaper storage, and better customer service. If I could speak on one in too, just thank you for that.
Speaker Change: 225.
Speaker Change: 250 in this capital in this plan.
Speaker Change: Now there could be other additional guidance and it depends on where we ended up deploying but one thing that's been very gratifying to US is that there does appear to be a really strong push for building domestic content and there tends to be an appetite for people to want to use domestic content.
Speaker Change: We just need to get the final rules and to make sure that that the rules actually allow us to fully.
Speaker Change: Why is it so at this point domestic contents really not even in this plan. This is really a reflection of.
John Berger: Just coming into the election year, I know we're so early, but how are you judging risk or assessing risk as you're headed into the election year? If you could just talk about that and what your policy people are talking to you about. I'm going to try to stay away from politics. I'm not going to say who we prefer and so forth.
Speaker Change: Energy communities more than anything else based on where we are we're building and we're we're targeting.
Speaker Change: I appreciate all that color and then this is my my quick follow up question.
Speaker Change: Spreads are.
Speaker Change: They're back to 600 basis points, which I think is pretty close to where you guys were prior to the beginning of the hike and presumably other experienced players in the market are benefiting as well from widespread.
John Berger: Look, I think what's interesting is that for the first time that I've ever seen this, for as long as I've been in this industry, we don't really need anything. We don't. We just need what the IRA has provided to stay intact largely intact. And when you look at the amount of investment in manufacturing plants and even customer growth in the so-called red states, it's pretty phenomenal. And I don't think that, you know, you can listen to some of the, you know, message points, if you will, from some parts of the political spectrum.
Speaker Change: How how do you think about the upper limit specifically I'm wondering.
Speaker Change: What do you think that point is I, which spreads becomes so why about competition comes in and then we're back to that 600 range was at 800 900 of the thousands just trying to understand Gwen competition comes in and push it to the back to normal like a normal lifestyle.
Speaker Change: Thank you.
Speaker Change: [laughter].
John Berger: This is John.
John Berger: I would say yeah, we'd been consistent on saying that.
John Berger: And stated again or are prepared remarks that we believe that the longterm spread is 500 basis points.
John Berger: And that's 500 basis points on Unlevered basis. So.
John Berger: But at the end of the day, I just don't think that this is going to go away in terms of the IRA and its provisions. If anything, just being located in Houston, I would say that there's more activity in the hydrogen and carbon sequestration areas in our area than I've ever seen by multiples. And very large companies, so-called conventional energy, oil, and gas, conventional power, are now fully engaged in the IRA. So I think we certainly have an energy policy that's in place, and I don't think, regardless of the election outcome, that that's going to change. Thank you. Now comes the next question... Thanks and good morning, folks. I have two questions.
John Berger: You, obviously lever these assets up and that can be quite meaningful spread.
John Berger: And when you look at our history, we've talked out something closer to 700 for maybe one quarter. It was above two or three quarters 600, and above and so I think somewhere in that six to 700 range is probably the peak.
John Berger: And again, we played out for years that we felt like it would be 500 will be a long term average.
John Berger: That I don't see any reason why that wouldn't be the case now.
John Berger: The only reason why it wouldn't be the case is it more competition drops out of the market for at least a period of time it could.
John Berger: Expand further, especially if you get it pretty big.
John Berger: First, I'm wondering if we could drill down maybe a little bit more on D2 Converts, which are trading at, you know, we know the levels that they're trading at. Is the plan really to just sort of pick away at them now with free cash and take the majority of them out when you refi? Or I'm just wondering if I can get a better sense as to what your plan might be for taking advantage of the prices that those two instruments are trading at. And then I have one other question. Thanks, Joe. This is John.
John Berger: <unk> declined and the risk free and more importantly, the risk premiums.
John Berger: Suddenly maybe brought on by a recession or something of that nature and given our strong paper performance.
John Berger: We have seen investors flocked to it versus some of the other paper markets and that could widen it out further than what I've ever seen but I think right now.
John Berger: Where we are maybe a little bit north towards 700 is probably what I would consider will be peak.
Speaker Change: Our next question comes from safety.
Speaker Change: Your line is my life and please go ahead.
Safety: I have mine days. Thank you for taking my question.
Safety: I was wondering if you could give us a quick rundown on what's different markets in the U S look like in the current environment in terms of demand trends and where you see.
John Berger: Yes, I mean, we have a lot of optionality. We have the levered cash flows, and we expect to generate more cash, you know, as we securitize and lever through the cost of the asset with the ITC adders, etc. So, you know, how do we go about doing this?
Speaker Change: <unk> geographically and which ones do you consider unsellable right now and for the foreseeable future.
Sophie: Sophie this John.
Sophie: We're seem pretty strong growth across the board with with the exception of California, that's probably.
John Berger: And obviously, as you pointed out, the converts are trading at a very attractive level. It is entirely possible that we do look at, you know, buying some of those in. What I want to do is we want to execute over the next few weeks and then look to see what our options are, look to see where the market is, and then make decisions accordingly. But we do have a number of options, including, as we've answered a couple of questions on this call already, the ability to sell some of those levered cash flow assets that have been, you know, paid down debt because they've been in place – those se So we've got a number of weapons, but it's not lost on us that the debt's trading at a very attractive level. And my primary focus is to make – to generate the cash to pay that debt down, and then whatever's left, if it makes sense, we can refinance it, as Rob said earlier. Rob, anything you want to add to that?
John Berger: Uncertain it it's more about us.
John Berger: Most of our the vast majority of our California businesses are new homes channel.
Speaker Change: We do have plans to improve that <unk>.
Speaker Change: <unk>.
Speaker Change: And we are so small in that region on the retrofit market.
Speaker Change: That it.
Speaker Change: It'd be pretty easy to increase market share there.
Speaker Change: The rest of you know, we're pretty seem pretty strong growth in the islands.
Speaker Change: Those markets continue to mature.
Speaker Change: We've been building out and started those markets like Puerto Rico for instance, you're over a decade ago.
Speaker Change: Northeast mid Atlantic seems to be doing pretty well I would say general trend growth solid growth.
Speaker Change: But what we're seeing is a lot of growth in the south and then some of these other.
Speaker Change: States that we've historically never had that much of anything in.
Speaker Change: Some of that is gonna be enabled by our home depot relationship and some of the other dealers that we've been able to bring on so it's.
Speaker Change: It's something that we certainly had been a bit surprised about in the market I think.
Speaker Change: And decidedly from loan to T. P O fairly quickly and get his continued to gain traction and so there's just not that many folks out there as you know with the with the lease or a P. P. A.
Robert Ling: No, I mean, we just want to be the best stewards of capital possible. And at some point, that's going to mean repurchasing in the open market and other parts, making sure that we continue to just build up the cash. But we will. We've got optionality between now and later in 2025, which would be the prudent time to go ahead and refinance those. Okay, thank you.
Speaker Change: Mmm.
Speaker Change: Alright that was helpful and maybe along those lines on the partnership with home depot and now the channels that you guys have you given any thought to addressing the structural sales cause customer.
Speaker Change: Customer acquisition costs I guess.
Speaker Change: In your in your markets.
Speaker Change: Yes, the knock on the economics of the U S. <unk>, hi, customer acquisition costs and kind of get into that so I was wondering if you guys have given this and your thoughts.
John Berger: And then my other question, you know, one of your folks said to me at one point, talking about dealers and making working capital available to dealers, he said, yeah, quote: we are not a bank. I'm curious, as you look at your customer ads this year, you know, how it breaks down in terms of new dealers coming onto the platform or existing dealers expanding their footprint, just in the context of some of the pressure that the financial pressure that exists on dealers out there and your emphasis on preserving working capital. Thank you, and Mark Strauss. Thank you. Thank you, everyone. Kashi Harrison from Piper Thornler: you're live.
Speaker Change: Typically how can you address that.
Speaker Change: At some point in the future.
Speaker Change: Yes, we are actually with retail we have addressed it we do have a fundamentally different model again. This company is very focused on its dealers and that is what we built the counting Delta company on and we're going to continue to have that focus on that business model and then going into the retail channels.
Speaker Change: And specifically you asked me about home depot that a dealer driven.
Speaker Change: So we had a very different perspective and model than what others have done and are.
Speaker Change: Are doing in the retail channel and it's been very successful for us financially for dealers financially and for our partner retail partners financially. So we have changed that model up and it is working.
John Berger: So, my first one is on the liquidity forecast slide. Does this charter assume a 7% cost of debt, and then can you guys give us a sensitivity framework for, you know, changes in the cost of debt to the net change in cash forecast? I'm probably talking about seven. I appreciate all that color.
Speaker Change: Mmm. Thank you I'll take that with a fine. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from.
Speaker Change: Raymond James Your line is my legs and please go ahead.
James Carlyle West: Thanks for taking a question at the risk of delving a bit into politics.
James Carlyle West: So to speak.
James Carlyle West: You obviously.
James Carlyle West: The letter from the Congressional committee about Hestia that was several months ago can we just get an update on that whole situation.
John Berger: And then just my quick follow-up question. You know, spreads are back to 600 basis points, which I think is pretty close to where you guys were prior to the Fed beginning to hike. And, you know, presumably other experienced players in the market are benefiting as well from the wider spread. This is John.
James Carlyle West: Yeah sure.
James Carlyle West: Yeah, most unfortunate it.
James Carlyle West: It's very clear politics are at play.
James Carlyle West: But.
James Carlyle West: To be clear that that letter was directed at the department of energy and the loan program office not so obviously were mentioned.
John Berger: I would say, you know, we've been consistent in saying that and stated again in our prepared remarks that we believe that the long-term spread is 500 basis points. You obviously lever these assets up, and that can be quite a meaningful spread. And when you look at our history, we've topped out something closer to 700 for maybe one quarter. It was above two or three quarters, 600 and above.
James Carlyle West: But we're not subject to any investigation at this point in time.
James Carlyle West: And look what what I would say is I'm, just gonna focus on having us do a better better job serving customers.
James Carlyle West: There is always ways that we can improve our customer service, there's always ways that we can improve our.
James Carlyle West: Quality control, our consumer protection, we've got plans that we put out put forth about how to improve consumer protection.
James Carlyle West: Mandating service I think the states in the.
James Carlyle West: The fed federal government audit mandate service with credit worthy companies service companies like ourselves, we've been calling for that for years. So we're going to focus on doing a better better job or a customer again, there's always something we can improve on and we're going to focus on doing that and we're going to leave the.
John Berger: And so I think somewhere in that 600 to 700 range is probably the peak. And again, we've laid out for years that we felt like it would be 500 as a long-term average. And I don't see any reason why that wouldn't be the case now. The only reason why it wouldn't be the case is if more competition drops out of the market for at least a period of time. It could expand further, especially if you get a pretty big decline in the risk-free and, more importantly, the risk premiums quite suddenly, maybe brought on by a recession or something of that nature.
James Carlyle West: The noise shall we say two two others to deal with.
Speaker Change: Okay Fair enough can I just follow up on M&A, you've been asked a lot about sort of selling assets I'm curious if in the current.
Speaker Change: Industry conditions, there are any.
James Carlyle West: Corporate M&A opportunities for snow as a company.
Speaker Change: Particularly when it comes to entering new geographies.
Speaker Change: That's a good question, we do see some attractive asset purchases that we are taking a look at we haven't.
John Berger: And given our strong paper performance, we have seen investors want to flock to it versus some of the other paper markets. And that could widen it out further than I've ever seen. But I think right now, you know, where we are, maybe, you know, a little bit north towards 700 is probably what I would consider to be peak, and David Hart from KeyBank. Your line is now open.
Speaker Change: <unk> anything yet, but we have seen that we see more of it particularly in the in the business market side of things.
James Carlyle West: That may be pretty interesting to do.
James Carlyle West: The terms of the corporate Act M&A, obviously, we can't comment anything specifically, but.
James Carlyle West: Right now I think it's really we have all the growth we need we need to make sure that the growth comes in at the highest possible cash generation possible. So I'm not really looking to do anything at this point in time, we don't need to it candidly.
James Carlyle West: Candidly that was one of the reasons just shutting down the international and some of the other moves as we don't need to do it to get the growth that we need to generate the cash. So we just need to we need to stay focused on generating the cash rather than doing some of these other things and there'll be there.
John Berger: We're seeing pretty strong growth across the board. With the exception of California, that's probably, you know, I'm certain it's more about us. Most of our, the vast majority of our California businesses are new homes, you know, channel. We do have plans to improve that region. And we're so small in that region in the retrofit market that it would be pretty easy to increase market share there. The rest of, you know, we're seeing pretty strong growth in the islands. You know, those markets have continued to mature. We've been building out and starting those markets, like Puerto Rico, for instance, over a decade ago. The Northeast Mid-Atlantic seems to be doing pretty well.
James Carlyle West: Down the road because nobody else is you're able to really.
James Carlyle West: Expand and exploit those opportunities right now either so.
James Carlyle West: I don't see anything on the horizon, but there's always a possibility.
Speaker Change: Thank you very much.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Williams.
Williams: Your line is now please go ahead.
Williams: Great. Good morning, and thanks for Sweden Man here. My first one was wondering if you could touch on O&M costs.
Williams: How you are seeing those trend relative to what's embedded in your customer value assumptions, particularly in light of your enhancements in response time and service levels that you discussed here.
John Berger: Yeah. This is John.
John Berger: Yes, we we see the cost per customer coming down rather quickly we have.
Speaker Change: Been putting a lot of it.
John Berger: I would say general trend growth, solid growth. But what we're seeing is a lot of growth in the South and then some of these other states that we've historically never had much of anything in. And some of that is going to be enabled by our Home Depot relationship and some of the other dealers that we've been able to bring on. So it's something that, you know, we certainly have been a bit surprised about. And the market, I think, went decidedly from loan to TPO fairly quickly and has continued to gain traction. And so there's just not that many folks out there, as you know, with a lease or PPA. Mm-hmm, at some point in the future. James, your line is now open. Yeah, sure, Pavel. Yeah, most unfortunate.
John Berger: And place new processes, we clearly had new leadership, we brought in over a year ago.
John Berger: And that's been a tremendous improvement so the way I'd put it as we wanted to get effective the best in the industry at service. We I think we have done that now it doesn't mean that we can improve to go into that question I just answered from another gentleman.
John Berger: But.
John Berger: We see a lot of opportunity to improve our cost structure on the service side of things and we're realizing that so we.
John Berger: We expect quite a bit quite large decreases in even greater than the 20% on the service cost per customers. We're moving forward really from here on out and I'm quite confident will achieve those.
Speaker Change: Perfect and just the last one from here here you gave a pretty wide range on the cash generation guidance exiting 2024 could you walk us through some of the puts and takes that would get you to the higher end versus lower end of that range and then.
John Berger: It's very clear that politics are at play. But, you know, to be clear that that letter was directed at the Department of Energy and the Loan Program Office, not us. Obviously, we're mentioned, but we're not subject to any investigation at this point in time. And look, what I would say is, I'm just going to focus on having us do a better and better job of serving customers. There are always ways that we can improve our customer service. There are always ways that we can improve our, you know, quality control, and our consumer protection. We've got plans that we put out, put forward about how to improve consumer protection, you know, mandating service. I think the states and the Fed, the federal government ought to mandate service with a credit-worthy company, service companies like ourselves.
Speaker Change: Is that going to be more cost of capital driven or more a function of growth.
Speaker Change:
Speaker Change: There's a couple of things that will get us there one is.
Speaker Change: Better ITC guidance, if we get the domestic content, there's a significant upper <unk>, we would assume we could get there. The second is if we continue to see the contraction of the risk free so at the risk premium we've seen risk premium come back down, but it's still much much wider.
Speaker Change: Then it was even three or four years ago. When this we still are pretty nascent industry and was enjoying very tight margins.
Speaker Change: On the risk premium and then the third obviously is to risk free if that comes in that's a benefit.
Speaker Change: And then finally I would say it depends on the magnitude of asset sales. If we can accelerate some asset sales then that would end up being accretive to that cash number as well we could frankly could go through the target too I mean, there's nothing that's really keeping it artificially at that number but we are.
John Berger: We've been calling for that for years. So, you know, we're going to focus on doing a better, better job for our customers. And again, there's always something we can improve on, and we're going to focus on doing that. And we're going to leave the, you know, the noise, shall we say, to others to deal with, selling assets, particularly when it comes to entering new geography. That's a good
Speaker Change: Not trying to be rationally aspirational with that with that range.
Speaker Change: Got it and I appreciate the time.
Speaker Change: Extra much.
Speaker Change #100: Our next question comes from.
Speaker Change: <unk>.
Speaker Change: Now I think.
Speaker Change: Hey, guys I wanted to follow up with I forget who wasn't someone else asked about customer acquisition costs and.
Speaker Change #101: Home depot and the way you approach that it sounds like you have proactive.
John Berger: We do see some attractive asset purchases that we're taking a look at. We haven't executed on anything yet, but we have seen that. We see more of it, particularly on the business market side of things; that may be pretty interesting to do. On terms of the corporate act, M&A, obviously, we can't comment on anything specifically, but right now, I think we really have all the growth we need. We need to make sure that the growth comes in at the highest possible cash generation possible. I'm not really looking to do anything at this point in time.
Speaker Change #102: Actions and measures and things that you take to address it but I'm curious if you can talk more generally about the.
Speaker Change #102: The overall kind of industry trends there right now so.
Speaker Change #102: Mmm I think one parallel.
Speaker Change #102: Comes to mind and it just it just kind of raises this question and it makes you kind of contemplate, but but you guys are probably the best ones to have an answer.
Speaker Change #102: In the <unk> in the market for commercial or sorry for consumer is.
Speaker Change #102: There has been this sort of slower growth and maybe people were initially thinking the idea that.
Speaker Change #102: Well you had the early adopters and then maybe some kind of <unk>.
Speaker Change #102: Intermediate <unk>.
Speaker Change #102: Wave of adopters and then a third or fourth wave is is is getting is somehow a bit more difficult somehow.
Speaker Change #103: So I'm wondering if there's anything that you guys have seen it all and that and if that has had impacts from customer acquisition cost uhm does any kind of commentary around there would be helpful.
John Berger: We don't need to. Candidly, that was one of the reasons for just shutting down the international and some of the other moves is that we don't need to do it to get the growth that we need to generate cash. We need to stay focused on generating cash rather than doing some of these other things. They'll be there down the road because nobody else is able to really expand and exploit those opportunities right now either. I don't see anything on the horizon, but there's always the possibility.
Speaker Change #102: Certainly I think when you look at our overall strategy being an adaptive energy services company, where you're selling multiple serve energy services and services to customers.
Speaker Change #102: That's been a huge <unk>.
Speaker Change #102: Benefit to us in terms of profitable growth.
Speaker Change #102: And we expect that to continue and so specifically as as storage pricing is battery pricing continues to plummet downwards.
John Berger: Hey guys, I want to follow up with, I forget who it was, but someone else asked about customer acquisition costs and you know, with Home Depot and the way you approach that, it sounds like, you know, you're proactive, that comes to mind, and it just, it just kind of raises this question. And so I'm wondering if there's anything that you guys have seen at all in that and if that has had any impact on customer acquisition costs. So, I think, one, just how do you, you know, margin stack, and think about expanding the EBITDA per customer, the cash generated per customer. We've been doing that.
Speaker Change #102: That is enabling us to go back and upsell, our existing customer base quite a bit and you can see that over the years that we've done that better than anybody frankly, and then we have additional items like EV charging load management, that's really come into their.
Speaker Change #102: Pretty interesting and the.
Speaker Change #102: The the other items that we offer and roofing and generators and all of that is really got it pretty strong uptake.
Speaker Change #102: So I think one just how do you.
Speaker Change #102: Margin stack and think about expanding the EBITDA per customer of the cash generated per customer we've been doing that that goes to our services per customer metric.
John Berger: That goes to our services per customer metric. And so we see a lot of opportunity to really drop our customer acquisition costs by just mining our current customer base and delivering better and better services as products come on the market that are better and cheaper, frankly. On overall organic growth, you know, outside, adding new customers, you know, that continues to be where we're taking market share. And I think some, you know, a big portion of that is that our product set is the widest and the best in the industry.
Speaker Change #102: And so we see a lot of opportunity to really drop our customer acquisition costs, but just mining our current customer base and delivering them better and better services as products come on the market that are better and cheaper.
Speaker Change #102: Frankly on the overall.
Speaker Change #102: Organic growth.
Speaker Change #102: Outside adding new customers.
Speaker Change #102: That's continues to be where we're taking market share and I think some big portion of that is.
Speaker Change #102: Our product said is the widest and the best in the industry we feel.
John Berger: We hear that a lot from our dealers and more people that, you know, more dealers that want to come on board and be our dealers. And so I think it's really about the products that we offer, the service. Service has become something that nobody but us talked about, and now everybody's talking about it. And how do you have great service? How do you get that power to flow?
Speaker Change #102: We hear that a lot from our dealers and more people that are more dealers that want to come on board and beer dealer and so I think it's really about the products that we offer this service services become something that nobody, but us talked about to now everybody's talking about it and how do you have great service, how do you get that power to flow not.
John Berger: Not just for the first few weeks after the installation, the first six months of the contract life, if you will, but how do you do that for, you know, 25 plus years? And having the best service and then being able to sell service only is expanding the marketplace quite nicely. So we focus on service. We focus on delivering these new products. If our OEM partners focus on delivering better products, hardware, and cheaper, then I think the market will continue to expand, and the cost of acquisition will continue to go down. And we're seeing some of that in some of the southern states and the middle part of the country. And so, again, there's a lot more good things happening in the marketplace than I think, obviously, that most people speak of today with regard to the capital market. Okay, that's helpful. And then just as a follow-up, if we, you know, you guys have always stood out as, you know, for the presence in Puerto Rico, some other islands, you know, even kind of maybe Southern Markets, and less so, say, California, compared to some other peers.
Speaker Change #102: Just for the first few weeks after the install the first six months of the contract like if you will but how do you do that for 25 plus years and having.
Speaker Change #102: Having the best service, and then being able to sell service only.
Speaker Change #102: Even is expanding the marketplace quite nicely. So we focus on service we focus on delivering these new products that.
Speaker Change #102: Our oan partners focus on delivering better products hardware cheaper than I think the market will continue to expand and the cost of acquisition will continue to go down.
Speaker Change #102: And we're seeing some of that in some of the southern states in the in the middle part of the country States and so again, there's a lot more good things happening in the marketplace.
Speaker Change #102: Then I think obviously that most speak up today with regards into the capital markets.
Speaker Change #104: Okay. That's helpful. And then just as a follow up if we.
Speaker Change #104: You guys have always stood out as you know for the presence in Puerto Rico, Some other islands and you've been kind of movie more southern markets in <unk>, California compared to some other peers.
Speaker Change #104: Peers, so I'm wondering.
Speaker Change #104: In terms of the LMI, you know add or for the the tax credits in the Iran and the energy communities Adders are.
Speaker Change #104: Are you finding like kind of.
Speaker Change #104:
Speaker Change #104: Like luck of the draw like you.
Speaker Change #104: Finding out in hindsight Gee Whiz.
John Berger: So I'm wondering, in terms of the LMI adder for the tax credits and the IRA and the energy communities adders, are you finding it's kind of, you know, like luck of the draw like you're finding out in hindsight, gee whiz, you know, you like, I look at California, and in California, you're probably not going to have quite so many low or middle income homeowners. You know, you're gonna have a lot of low, middle-income residents in the state, but property. House prices are so high, it's not as often you're going to get an overlap between home ownership and somebody's... Physicians and Socioeconomics. Whereas, you know, maybe somewhere like Puerto Rico or parts of Texas or other, you know, or other island nations and markets you've been to in the past. Yeah, I'm just curious if... No, they didn't know it.
Speaker Change #104: Like I look at California, and California, you're probably not gonna have.
Speaker Change #104: Quite so many low or middle income home owners.
Speaker Change #104: Low middle income.
Speaker Change #104: Residents in the state, but the property you know.
Speaker Change #104: House prices are so high.
Speaker Change #104: It's not as often you're gonna get an overlap between homeownership.
Speaker Change #104: And somebody sort of position and socio economic sense, whereas you know, maybe somewhere like Puerto Rico, or what's the Texas or other.
Speaker Change #104: [noise] Island Nations and markets you've been in the past.
Speaker Change #104: And similar thing with the energy communities, Yeah, I'm just curious if if it's.
Speaker Change #104: I think of oil and gas companies that had so much acreage held by production and then the whole shell Revolution happened and it was like Oh, My gosh, they're sitting on a goldmine.
Speaker Change #104: They didn't know or are you seeing any like the thing like that from your own geography, just when you look at like Alanon energy communities.
Speaker Change #109: Yeah, that's an insightful question the answer is yes.
Speaker Change #105: [laughter], Okay [laughter], okay. Thank you I appreciate it I'll take the rest of my questions offline.
Speaker Change #106: Thank you.
Speaker Change #110: Our next question comes from the heat.
Speaker Change #106: <unk>.
Speaker Change #108: Of your line is my wife's and please go ahead.
Heat: Hey, thanks.
Speaker Change #110: Squeezing me in.
Wife: Just a question on acid savings with a T M.
Wife: None of those those plan into the the guidance for $25.
Speaker Change #111: But in your talks today or what you are saying, which look more attractive here and and how how should we think about asset pricing we keep hearing.
John Berger: Are you seeing anything like that from your own geography, just when you look at things like LMI and energy? That's an insightful question. The answer is yes, on it. Hey, thanks for squeezing me in. Just a question on asset sales versus ATM, and I said none of those are planned into the guidance for 2025. But in your talks today, or what you're saying, which looks more attractive here, and how should we think about asset sale pricing? We keep hearing low to mid teens for high-yield tranches from some of the asset managers. I'm just curious. How are you thinking? What price?
John Berger: To make teams for high yield tranches from some of the <unk>.
Speaker Change #113: Manages but just curious.
<unk> how are you thinking more questions. Thanks.
John Berger: So we think about pricing holistically, we think about whole stack pricing and where does it make sense to sell assets thinking through the entire stack versus to pull me burden I'm never return and it's not really an either or what we're looking at the a T. M. In the asset sales the asset sales or function of works more attractive to us what's going to yield.
John Berger: A better cash return and better liquidity is it's an asset sale or is it a full fact securitization or is it a securitization with monetizing the residual the ATM like we said that's housekeeping that's not meant to be in there.
John Berger: They were looking at.
John Berger: To be using this is something that we just said.
John Berger: Haven't seen for Awhile has been requested the board for much longer than that that we go ahead and put into place an ATM.
John Berger: And and again good housekeeping.
John Berger: Just a question on the guidance here, and in the prepared remarks, you kind of talked about not changing it at this stage, and maybe at the next court, you'll revisit it, so what's the upside there? Is it mostly on the OPEX cuts or anything else we should look for, and how much tax credit transferability is in the EBITDA guidance at this stage? Sure, like I said, on the EBITDA guidance, we've got about $30 to $40 million of ITC sales per quarter in there, so fairly modest and less than what we have produced this year. We could certainly do much better than that, but it's not a big part of the guidance.
John Berger: And the best time to do it when you don't need to do it.
Speaker Change: Got it and then just a question on the guidance hit.
John Berger: And then the prepared remarks that kind of talked about not changing at this stage and maybe in the next quarter will revisit it what's the upside like it's mostly on the <unk>.
John Berger: Look for and.
John Berger: And how much of that is good to transferability isn't the EBITDA got the dosage.
John Berger: Sure like I said on the EBITDA guidance, we've got about about 30 to 40 million.
John Berger: Million dollars of ITC sales per quarter in there so.
John Berger: Fairly modest and less than what we had produced this year, we could certainly do much better than that but it's it's not a big part of the guidance and then we have gone through the budget process, but part of what we want to make sure is to see how this market starts to develop to see how we do with.
Robert Ling: And then we have gone through the budget process, but part of what we want to make sure is to see how this market starts to develop, to see how we do with lease and PPA growth versus loan growth, as well as to make sure that we can roll through and grind out a lot of the cost cuts that we've been doing and see if we can get some additional impact and uplift there. So we don't necessarily expect guidance to change, but admittedly, there is a pretty wide range out there. So we're hoping to be able to maybe tighten that up a little bit and get a bit more granular there. I appreciate that. Thank you. Our next question comes... from Wolf Research. Your line is now open. Hey, good morning.
Wolf Research: Lease and PPA growth versus Lone Grove.
Speaker Change: As well as making sure that we can roll through and grind out a lot on a cost stripes.
Wolf Research: We've been doing and see what see if we can get some additional impact and uplift there.
Wolf Research: So we don't necessarily expect guidance to change, but admittedly, it's pretty wide range out there. So we're hoping to be able to maybe tighten that up a little bit and get a bit more granular there.
Wolf Research: I appreciate that thank you.
Wolf Research: Our next question comes from Nathan Wolfe reset to your line is my lights and please go ahead.
Wolf Research: Hey, good morning. Thank you for your time now we're running a bit long here. So just one quick question for me. So you said on the prepared remarks that you may update 2024 guidance. Once you see all cost cutting is pulling out you've laid out some upside cases for EBITDA, but I'm also wondering is there a scenario where customer additions may be a bit lower <unk>.
John Berger: Thanks for your time. I know we're running a bit late here, so just one quick question. You said in the prepared remarks that you may update 2024 guidance once you see how cost-cutting is playing out. You've laid out some upside cases for EBITDA, but I'm also wondering, is there a scenario where customer addition? lowers. This is John.
Speaker Change: <unk> growth initiatives.
John Berger: Any elaboration on that comment would be appreciate it. Thank you.
John Berger: This is John.
John Berger: You know, possibly, but I think we feel pretty good about where this range is. I would say that, as we cut our CapEx down from the Q3 call for this year, we clearly had customer additions north of this range in our plan. And so I think we're just coming back into the plan. We feel pretty good about where we are. Again, we have the ability, with the accessory channels and the other services, to sell more or grow customers faster, as I mentioned earlier, than our CapEx growth. So right now, we feel pretty good about our trend here. We are seeing more and more pickup on growth as the quarter goes on.
John Berger: Possibly but I think we feel pretty good about where where this range is I would say that we had.
John Berger: We cut our capex down from the Q3 call.
John Berger: For this year.
John Berger: We clearly had customer additions north of this range and our plan and so I think we're just coming back into plan. So we feel pretty good about where we are again, we have the ability with the assessor channels and the other services.
John Berger: To be able to sell.
John Berger: Sell more or grow customers faster as I mentioned earlier than our Capex growth. So right now we feel pretty good about our trend here, we are seeing more and more pick up on growth.
John Berger: The quarter goes on so that's quite nice to see for obviously us, but also the industry as well and so I think we're I think we're going to have a a better year overalls and industry than people think and certainly we're on track to what we feel like it's going to be at yet another record.
John Berger: So that's quite nice to see for obviously us, but also the industry as well. And so, you know, I think we're going to have a better year overall as an industry than people think. And certainly, you know, we're on track to what we feel like is going to be yet another record year for us. We have time for just one more question, so meet FACA from BMO Capital Markets. Your line is now open.
FACA: A record year for us.
FACA: Great. Thanks, Sir.
FACA: We have time for just one more question from I mean.
FACA: And being a capsule market. Your line is not <unk> go ahead.
Robert Ling: Hey, thanks for squeezing me in. I think in the past, you guys kind of targeted a 60% debt-to-capital ratio, and we've been a little bit north of that the last couple of years. I was just wondering if maybe that ratio you've got more ability to kind of add more leverage given the increasing size of the overall entity, or are the asset sales gonna be designed to kind of bring you back towards that? And that's kind of what we're trying to drive. Yeah, you're right.
Robert Ling: Hey, Thanks for Sweetening and I think.
Robert Ling: In the past you guys kind of targeted a 60 per cent at the cap ratio.
Robert Ling: We've been a little bit north of that in the last couple of years I was just wondering if.
Robert Ling: Named that ratio eat got more ability to kind of add more leverage getting besides making increasing the size of the overall entity or or the asset sales can be designed to kind of bring you back towards that 60 per cent and that's kind of what we're kind of trying to drive towards.
Speaker Change: Yeah, you're right. So we've been targeting at 55 to 60 and worry about 68 men pegging there for the last few quarters.
John Berger: So we've been targeting 55 to 60, and we're about 68. I've been pegging there for the last few quarters. A long-term target is to bring that down to 55 to 60. So, again, primarily focused on generating cash and paying down debt. So even with the selling of assets and monetizing, I would expect to see that to be a net reduction of debt, or it wouldn't necessarily make that much sense to do. So we're going to bring that down.
John Berger: Long term target is to bring that down in the 50 560, So again, primarily focused on generating cash and paying down debt. So even with selling of assets of monetizing I would I would <unk>.
John Berger: Expect to see that via a net reduction of that.
John Berger: Or wouldn't necessarily make that much sense to do so we're we're going to bring that down.
John Berger: I think that's a good call out, and it's something that clearly it's my top focus. Okay, and then like something within kind of like the loan portfolio, and you guys talked about kind of what sorts of assets would be more, I guess, make more sense for you to kind of potentially look at monetizing. Like, can you just give us a sense for like, you know, like, what's the what's kind of the notional value of that whether it's loans or TPO? on the marginal origination, that which has not been securitized yet. Yeah.
John Berger: Good call out and it's something that clearly it's my top top focus.
John Berger: Okay, and then like <unk> kind of like the loan portfolio and you guys talked about kind of what sorts of that that would be more I guess make more sense for you to kind of potentially look at monetizing can you could just give us a sense really.
John Berger: What's the what's kind of the notional value of that whether it's loans or T. P. S.
John Berger: On on the marginal origination.
John Berger: Which has not been securitized yet.
John Berger: Yeah.
Robert Ling: We probably have not quite a billion within in-service and within the warehouses right now on loans. Probably we'll generate another, call it, billion of net origination over the course of the next 12 months. So that's your pool of existing assets that we could go after, absent a pickup in loan origination. Thanks. That concludes the Q&A portion of today's call. I will now hand back over to... Thank you.
Robert Ling: Oh.
Robert Ling: We probably got not quite a 1 billion.
Robert Ling: Within in service in within the warehouses right now on loans, probably won't generate another call. It billion of net origination over the course of the next 12 months.
Robert Ling: So that's that's your pool of existing assets that we could go after <unk>.
Speaker Change: <unk> absolutely.
Robert Ling: <unk> in a pickup and loan origination.
Speaker Change: Great. Thank thank you again.
Speaker Change: Thank you.
Robert Ling: Yeah.
Speaker Change: <unk> I will now have that kind of like to jump asked for any final remarks.
Speaker Change: Thank you.
John Berger: We are going to continue to aggressively pursue cost cuts to improve our operating leverage, and we're going to continue to expand our margins. Most importantly, we're reaching scale, and we're prioritizing cash generation. We look forward to updating you on our execution as we work to deliver excellent energy services to a growing number of customers around the country and to deliver returns to our shareholders. Thank you for joining us. That concludes today's Sunnova fourth quarter full year 2023 earnings conference call; you may now disconnect your line. Steven Fleishman, Marshall Carver, Steven Peter, Roger Clark, and Dominics Picascia ["Rich Shoot"].
Robert Ling: We're going to continue to aggressively pursue cost cuts to improve our operating leverage we're gonna continue to expand our margins most importantly.
John Berger: We're reaching scale and rare prioritizing cash generation.
John Berger: We look forward to updating you on our execution as you work to deliver excellent energy services to a growing number of customers around the country and to deliver returns to our shareholders. Thank you for joining us.
John Berger: That can take today <unk> 2023 earnings conference call you May now disconnect your lines.
John Berger: [noise].