Q4 2023 Sunrun Inc Earnings Call

Speaker Change: [music].

Operator: and others. Thank you for watching. Go ahead.

Good afternoon, and welcome to son runs fourth quarter and full year 2023 earnings conference call. All participants have been placed on mute.

Please note that this call is being recorded and the one hour one hour has been allocated for the call, including the question and answer session to join the Q&A session. After repaired remarks. Please press star one at anytime we ask participants to limit themselves to one question and one follow up.

I will now turn the call over to Patrick Jobin, Sunrun Senior Vice President Investor Relations. Please go ahead.

Operator: Thank you, operator. Before we begin, please note that certain remarks we will make on this call constitute forward-looking statements. Although we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely. Please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements. Please also note these statements are being made as of today, and we disclaim any obligation to update or revise them. During today's call, we will also be discussing certain non-GAAP financial measures, which we believe can provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of current period performance on a comparable basis with prior periods. These non-GAAP financial measures should be considered as Supplement 2 and not Substitute 4 or in isolation from GAAP results.

Patrick S. Jobin: Thank you operator.

Patrick S. Jobin: Before we begin please note that certain remarks, we will make on this call constitute forward looking statements. Although we believe these statements reflect our best judgment based on factors currently known to US actual results may differ materially and adversely please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from protection.

Patrick S. Jobin: Made in any forward looking statements. Please also note. These statements are being made as of today and we disclaim any obligation to update or revise them. During today's call. We will also be discussing certain non-GAAP financial measures, which we believe can provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation upfront.

Patrick S. Jobin: Your performance on a comparable basis with prior periods.

Patrick S. Jobin: These non-GAAP financial measures should be considered as a supplement to and not a substitute for <unk>.

Patrick S. Jobin: Hum.

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Patrick S. Jobin: That's it or in isolation from GAAP results, you will find additional disclosures regarding non-GAAP financial measures discussed in today's call in our press release issued this afternoon and our filings with the SEC each of which is posted on our website.

Operator: You will find additional disclosures regarding non-GAAP financial measures discussed on today's call in our press release issued this afternoon and our filings with the SEC, each of which is posted on our website. On the call today are Mary Powell, Sunrun's CEO, and Dania Badgins, Sunrun's CFO. Ed Fenster, Sunrun's co-founder and co-executive chair, along with Paul Dixon, Sunrun's chief revenue officer, are also on the call for the Q&A session. A presentation is available on Sunrun's Investor Relations website, along with supplemental materials. An audio replay of today's call, along with a copy of today's prepared remarks and transcript, including Q&A, will be posted to Sunrun's Investor Relations website shortly after the call. We have allocated 60 minutes for today's call, including the question and answer session. And now, let me turn the call over to Mary.

Patrick S. Jobin: Got it on the call today are married Powell, Sunrun, CEO and Danny Abadgaran Sunrun CFO.

Patrick S. Jobin: <unk> son runs cofounder and co executive chair, along with Paul Dixon Sunrun as Chief revenue Officer are also on the call for the Q&A session. A presentation is available on Sunrise Investor Relations website, along with supplemental materials and the audio replay of today's call along with a copy of today's prepared remarks, and transcript, including Q&A will be posted.

Patrick S. Jobin: Runs Investor Relations website. Shortly after the call we have allocated 60 minutes for todays call, including the question and answer session and now let me turn the call over to Mary. Thank you Patrick and thank you all for joining us on our call. We have a lot of exciting things to talk about today first our team delivered on our storage first and margin focused strategy in 2020.

Mary Powell: Thank you, Patrick, and thank you all for joining us on our call. We have a lot of exciting things to talk about today. First, our team delivered on our storage-first and margin-focused strategy in 2023. In the fourth quarter, we far exceeded our storage capacity installation guidance and landed in our guidance range on installed solar capacity. This transition to higher-value subscription offerings resulted in significant increases in our subscriber values, up 7% from Q3 and 18% year-over-year. And, in combination with continued cost discipline, net subscriber values also exceeded our guidance. We generated $11 million in cash in the quarter and grew net earning assets to over $5 billion.

Mary: Three in the fourth quarter, we far exceeded our storage capacity installation guidance and landed in our guidance range on installed solar capacity.

Mary: This transition to higher value subscription offerings resulted in significant increases to our subscriber values up 7% from Q3, and 18% year over year and in combination with continued cost discipline net subscriber values also exceeded our guidance, we generated $11 million in cash.

Mary: Cash in the quarter and grew net earning assets to over 5 billion.

Mary Powell: We now operate a fleet of more than 1.3 gigawatt hours of storage capacity and near 7 gigawatts of solar capacity, with over 933,000 customers. We remain focused on driving meaningful cash generation in the business and are reiterating our strong cash generation outlook for the year. The fundamental demand drivers of our business continue to be robust. First, utility rates continue to rise due to the stress and strain of climatic events on the grid and massive utility capital expenditures.

Mary: We now operate a fleet of more than one three gigawatt hours of storage capacity and near seven Gigawatts of solar capacity with over 933000 customers. We remain focused on driving meaningful cash generation in the business and are reiterating our strong cash generation outlook for the year.

Mary: The fundamental demand drivers of our business continue to be robust first utility rates continue to rise.

Mary: The stress and strain of climatic events on the grid and the massive utility capital expenditures second solar and storage equipment costs are declining while our install labor labor productivity continues to improve.

Mary Powell: Second, solar and storage equipment costs are declining, while installed labor productivity continues to improve. Third, capital costs have stabilized and could decline. Finally, customers remain eager for clean, affordable, and resilient energy to power their lives. We are extending our differentiation by making clean, affordable, and reliable energy accessible to families across America with the most pro-consumer offerings and delivering the best customer experience and service in the industry. Being the chosen and trusted provider to deliver this clean energy future is critical.

Mary: Third capital costs have stabilized and could decline.

Mary: Customers remain eager for clean affordable and resilient energy to power their lives.

Mary: We are extending our differentiation by making clean affordable and reliable energy accessible to families across America with demos pro consumer offerings and delivering the best customer experience and service in the industry being the chosen trusted provider to deliver this clean energy future is critical.

Mary Powell: As a testament to our customer-first approach, our customer net promoter scores at the time of installation continued to increase, reaching 73 points in Q4. I am pleased to report that our volume trend is strong. Q1 sales are growing 23% compared to Q4, led by California, where sales are growing at over 40% sequentially. We believe this sales growth will flow through to installations over the coming quarter, leading to a sharp uptick in Q2. Q1 is seasonally a low installation quarter and typically declines from Q4.

Mary: As a testament to our customer first approach our customer net promoter scores at the time of installation continued to increase reaching 73 points in Q4.

Mary: I am pleased to report that our volume trend is strong Q1 sales are growing 23% compared to Q4 led by California, where Seo where sales are growing at over 40% sequentially. We believe the sales growth will flow through to installations over the coming quarter, leading to a sharp up.

Mary: Check in Q2.

Mary: Q1 is seasonally a low installation quarter and typically declines from Q4 results and Q1 will be influenced by the slower than expected recovery in California last year, and our strategic decision to exit certain unprofitable markets as we discussed on the last call.

Mary Powell: Resulting Q1 will be influenced by the slower than expected recovery in California last year and our strategic decision to exit certain unprofitable markets, as we discussed on the last call. Most important, we continue to increase the mix of storage. We installed 220 megawatt hours of storage capacity in Q4, growing 154% compared to the prior year and 25% from the prior quarter. Our storage offerings provide customers enhanced value and generate significantly higher margins for Sunrun. At the same time, they are the foundation for future monetization by providing at-scale distributed power plant capabilities. Our storage attachment rate was over 45% of installations across the country in the fourth quarter, up from 33% last quarter and 15% at the beginning of the year. And this number continues to rise with new sales. We remain disciplined in how we participate through the affiliate channel.

Mary: Most important we continue to increase the mix of storage, we installed 220 megawatt hours of storage capacity in Q4, growing 154% compared to the prior year and 25% from the prior quarter.

Mary: Our storage offerings provide customers enhanced value and generate significantly higher margins for sun.

Mary: At the same time, they are the foundation for future monetization by providing at scale distributed power plant capabilities, our storage attachment rate was over 45% of installations across the country in the fourth quarter up from 33% last quarter and 15% at the beginning of the year.

Mary: And this number continues to rise with new sales.

Mary: We remain disciplined in how we participate through the affiliate channel we value our partners and our focus on customer experience and that value our brand platform storage first product suite and sustainable pricing model.

Mary Powell: We value our partners that are focused on the customer experience and that value our brand, platform, storage-first product suite, and sustainable pricing model. There are pockets of irrational behavior in the affiliate partner segment of the market, with several financing-only participants scaling with pricing that we consider unattractive. Our decision not to compete for such business can influence short-term affiliate channel volume. We've seen this behavior several times in the company's nearly two-decade history and won't chase volumes at prices that we do not view as sustainable. We believe our diversified market approach, which includes an integrated sales force and fulfillment capacity, provides insulation from these behaviors from financing-only firms and is a strategic benefit to Sunrun. I am excited to announce today that we have selected Lowe's as our Home Improvement Retail Partner.

Mary: There are pockets of irrational behavior in the affiliate partner segment of the market with several financing only participants scaling with pricing that we considered unattractive.

Mary: Our decision not to compete for such business can influence short term affiliate channel volumes. We've seen this behavior several times in the company's nearly two decade history and won't chase volumes at economics that we do not view as sustainable.

Mary: We believe our diversified market approach, which includes an integrated sales force and fulfillment capacity provides installation from these behaviors from financing only firms and as a strategic benefit to saga.

Mary: I am excited to announce today that we have selected lowes is our home improvement retail partner Lowe's presents a new and exciting partner one that has a great homeowner focused model that overlaps with our target markets and geographies.

Mary Powell: Lowe's presents a new and exciting partner, one that has a great homeowner-focused model that overlaps with our target markets and geography. With many years of experience reaching customers through retail activities, we thoughtfully evaluate opportunities and are excited about our Lowe's partnership. We launched at Lowe's on Friday, February 16th, transitioning our sales staff out of Home Depot the prior day.

Mary: With many years of experience, reaching customers through retail activities, we thoughtfully evaluate opportunities and are excited about our lowest partnership we launched and lows on Friday on February 16, transitioning ourselves stopped out of home depot. The prior day, we are incredibly encouraged by the results so far.

Mary Powell: We are incredibly encouraged by the results so far. Over the last few months, we have advanced several strategic priorities, including launching an early renewal pilot and commencing storage retrofit installations for existing customers. I believe one of Sunrun's most underappreciated assets is the base of customers that we will serve for decades and the numerous opportunities we have to provide valuable products and services beyond our initial subscription agreement. As a trusted company who has built strong relationships with customers from the initial sales consultation to the installation and ongoing service, we are in an enviable position to be able to offer and realize value from additional products and services at many touchpoints throughout the customer life cycle Our early renewal pilot shows that most customers are interested in extending the length of their subscription agreement even well before they expire.

Mary: Over the last few months, we advanced several strategic priorities, including launching an early renewal pilot and commencing storage retrofit installations for existing customers.

Mary: I believe one of Sunrise most underappreciated assets is the base of customers that we will serve for decades and the numerous opportunities we have to provide valuable products and services beyond our initial subscription agreement as the trusted company, who has built strong relationships with customers from the initial sales call.

Mary: Filtration to the installation and ongoing service we are in an enviable position to be able to offer and realize value from additional products and services at many touch points throughout the customer lifecycle.

Mary: Our early renewal pilot highlights most customers are interested in extending the length of their subscription agreement, even well before they expire.

Mary Powell: While the pilot only targets several hundred customers, thus far, approximately three-quarters are eager to renew their contracts for five years at their current prices and agreement terms or are in the process of evaluating proposals. Approximately all those that have renewed did so an average of five years before the end of their initial contract to lock in the peace of mind and energy savings provided by their current subscription service. Only about one quarter of customers opted not to renew early at our first attempt at presenting the offer.

Mary: While the pilot only targets several hundred customers, thus far approximately three quarters are eager to renew their contracts for five years at their current pricing and agreement terms or are in the process of evaluating proposals nearly all of those that have renewed did so an average of five years.

Mary: Before the end of their initial contract to lock in the peace of mind and energy savings provided by their current subscription service.

Mary: Only about one quarter of customers opted not to renew early at our first attempt of presenting the offer however about half of these customers have expressed interest to buy the system outright explore upsizing their systems with sunrun with new equipment or expressed that they might be moving all of these.

Mary Powell: However, about half of these customers have expressed interest in buying the system outright, exploring upsizing their systems with Sunrun and new equipment, or expressing that they might be moving. All of these scenarios provide incremental margin opportunities for Sunrun. Customers are also eager for our battery retrofit offering. While it's still early days and only available in select markets, orders have been growing rapidly, and customer interest is high. Sunrun is uniquely positioned to see significantly better total lifetime customer value realization than financing only providers who do not develop the strong relationships we do with customers through the sales, installation, and ongoing service we provide.

Mary: Scenarios provide incremental margin opportunities for sunrun.

Mary: Customers are also eager for our battery retrofit offering.

Mary: While it's still early days and only available in select markets orders had been growing rapidly and customer interest is high sunrun.

Mary: Sunrun is uniquely positioned to see significantly better total lifetime customer value realization than financing only providers, who do not develop the strong relationships, we do with customers through the sales and installation and ongoing service we provide.

Mary Powell: While we are only targeting several hundred customers, we are pursuing the pilot to optimize sales strategies, systems, and processes to tackle these opportunities at scale in the years ahead. Shifting gears, I want to highlight our thoughtful and disciplined approach to funding Sunrun's growth and generating value for our investors before Danny covers it in more detail. We ended 2023 with more total cash than recourse debt, and we generated cash in both Q3 and Q4. During Q1, we executed numerous capital transactions that are aligned with our disciplined capital strategy and approach. First, we expanded our $1.8 billion non-recourse senior warehouse facility by $550 million to $2.35 billion and extended the maturity date by approximately three years from 2025 to 2028. Second, we extended the maturity of our recourse working capital facility from January 2025 to November 2025, with a provision to extend the maturity further to 2027, subject to meeting certain conditions.

Mary: Well, we are only targeting several hundred customers. We are pursuing the pilot to optimize sales strategies systems and processes to tackle these opportunities at scale in the years ahead.

Speaker Change: Shifting gears I want to highlight our thoughtful and disciplined approach to funding of Sunrise growers and generating value for our investors before Danny covers it in more detail.

Speaker Change: We ended 20 twenty-three with more total cash then recourse debt and we generated cash in both Q3 and Q4.

Speaker Change: During Q1, we executed numerous capital transactions that are aligned with our disciplined capital strategy and approach.

Speaker Change: First we expanded our one 8 billion nonrecourse senior warehouse facility by 550 million to 2.35 billion and extended the maturity date by approximately three years from 'twenty to 'twenty five to 'twenty 'twenty eight.

Speaker Change: Second.

Speaker Change: We extended the maturity of our recourse working capital facility from January 20th twenty-five to November 'twenty 25, with a provision to extend the maturity further to 2027 subject to meeting certain conditions. The terms of the extended facility are consistent with our objective to generate cash.

Mary Powell: The terms of the extended facility are consistent with our objective to generate cash, extend maturities at a time some of our competitors are at risk, reduce recourse leverage, and optimize our cost of capital, all to drive increased shareholder value. Third, we continue to execute tax equity funds and term out financings with strong terms, recently closing an approximately $470 million term out transaction. We are proactively and prudently managing our parent debt profile and funding to support growth and drive shareholder value. I am so appreciative of our finance team at Sunrun and our financial partners who share a vision to make clean energy affordable and accessible to all. Before handing the call over to Danny, I want to take a moment to celebrate our people, the heart and soul of this customer-led revolution in energy. First, a thank you to our team in Bakersfield, California, who were our top-ranked install crew based on safety, storage attachment rates, and customer experience this quarter. Thank you for all of your contributions and leadership at Sunrun.

Speaker Change: [noise] extend maturities at a time some of our competitors are at risk reduce recourse leverage and optimize our cost of capital all to drive increased shareholder value.

Speaker Change: Third we continue we continued to execute tax equity funds and term out financings with strong terms.

Speaker Change: Suddenly closing and approximately 470 million term out transaction.

Speaker Change: We are proactively and prudently managing our parents debt profile and funding to support growth and drive shareholder value I am So appreciative of our finance team at Sunrun, and our financial partners, who share our vision to make clean energy affordable and accessible to all.

Speaker Change: Before handing the call over to Danny I wanted to take a moment to celebrate our people the heart and soul of this customer led revolution in energy first thank you to our team in Bakersfield, California, who were our top ranked install crew based on safety storage attachment rates and customer.

Speaker Change: Her experience this quarter. Thank you for all of your contributions and leadership at Sunrise circa.

Danny: Second, a big shout-out to our friends at Bright Panel Solar, our top sales dealer in Puerto Rico. We are so thankful for your partnership over the years and look forward to many more to come. With that, I will turn the call over to Danny for our financial update. Thank you, Mary.

Speaker Change: A big Shout out to our friends at bright panel solar our top sales dealer in Puerto Rico. We are so thankful for your partnership over the years and look forward to many more to come with.

Speaker Change: With that let me turn the call over to Danny for our financial update.

Danny: Today, I will cover our operating and financial performance in the quarter, along with an update on our capital markets activities and outlook. Our team is delivering strong volumes, leading with storage, and financing our growth in an efficient and appropriate way. Turning first to the results for the quarter on slide 11. We have now installed over 90,000 solar and storage systems.

Danny Abadgaran: Thank you Mary today, I will cover our operating and financial performance in the quarter, along with an update on our capital markets activities and outlook. Our team is delivering strong volume meeting with storage and financing our growth in an efficient and appropriate way.

Danny Abadgaran: Turning first to the results for the quarter on slide 11.

Danny Abadgaran: We have now installed over 990000 solar and storage systems.

Danny Abadgaran: We expect storage installations will grow substantially in the quarters ahead.

Sales of storage attach system had been approximately 48% nationally.

Danny: We expect storage installations will grow substantially in the quarters ahead. Recent sales of storage-attached systems have been approximately 48% national, which should continue to drive installed attachment rates higher in future periods. During the quarter, we installed 220 megawatt hours of storage capacity, significantly topping the high end of our guidance and reflecting an increase of 154 percent from the same quarter last year, bringing total network storage capacity to over 1.3 gigawatt hours. In the fourth quarter, solar energy capacity installed was approximately 227 megawatts and within our guidance range of 220 to 245 megawatts.

Danny Abadgaran: Which should continue to drive installed attachment rates higher in future periods.

Danny Abadgaran: Our backup storage offerings carry higher margins typically by several thousand dollars per customer.

Danny Abadgaran: During the quarter, we installed 220 megawatt hours of storage capacity.

Danny Abadgaran: Secondly, topping the high end of our guidance and reflecting an increase of 154% from the same quarter last year.

Danny Abadgaran: <unk> total network storage capacity to over 1.3 gigawatt hours.

Danny Abadgaran: In the fourth quarter solar energy capacity installed was approximately 227 megawatts and within our guidance range of 220 to 245 megawatts customer additions were approximately 30000, including approximately 27000 subscriber additions.

Danny Abadgaran: Our subscription mix represented 92% of our deployments in the period, an increase from 89% last quarter and the highest level in many years.

Danny Abadgaran: We ended 2023 with approximately 933000 customers and 781000 subscribers, representing $6 seven gigawatts of networks solar energy capacity, an increase of 18% year over year.

Danny: Customer additions were approximately 30,000, including approximately 27,000 subscriber additions. Our subscription mix represented 92% of our deployments in the period, an increase from 89% last quarter and the highest level in many years. We ended 2023 with approximately 933,000 customers and 781,000 subscribers representing 6.7 gigawatts of network solar energy capacity, an increase of 18% year over year. Our subscribers generate significant recurring revenue with most under 20 or 25-year contracts for the clean energy we provide. At the end of Q4, our annual recurring revenue, or ARR, stood at over $1.3 billion, up 28% over the same period last year. Additionally, we had an average contract life remaining of nearly 18 years.

Danny Abadgaran: Our subscribers generate significant recurring revenue with most under 20 or 25 year contracts for the clean energy we provide.

Danny Abadgaran: At the end of Q4, our annual recurring revenue or a R. R stood at over $1 3 billion up 28% over the same period last year.

Danny Abadgaran: We had an average contract life remaining of nearly 18 years.

Danny Abadgaran: Turning to slide 12 in Q4 subscriber value was approximately 50300 and creation costs was approximately 36900, delivering a net subscriber value of $13445, our Q4 subscriber value and that subscriber value now reflect a blended 33.8.

Danny Abadgaran: Percent investment tax credit benefiting from the energy community is ITC adder and a portion of the system is eligible for the low income adder.

Danny Abadgaran: Total fat value generated which is been that subscriber value multiplied by the number of subscriber additions in the period was $363 million in the fourth quarter.

Danny Abadgaran: Our present value based metrics are presented using a 6% discount rate, but for but our financial underwriting already accounts for our cat current capital costs, which is in the seven 5% area.

Danny: Turning to slide 12, in Q4, subscriber value was approximately $50,300, and creation cost was approximately $36,900, delivering a net subscriber value of $13,445. Our Q4 subscriber value and net subscriber value now reflect a blended 33.8% investment tax credit, benefiting from the energy community's ITC adder and a portion of the systems eligible for the low-income adder. Total value generated, which is the net subscriber value multiplied by the number of subscriber additions in the period, was $363 million in the fourth quarter. Our present value-based metrics are presented using a 6% discount rate, but our financial underwriting already accounts for our current capital costs, which are in the 7.5% area. As a reminder, to enable ease of comparison across periods, we generally do not update the discount rate frequently.

Danny Abadgaran: As a reminder to enable ease of comparison across periods. We generally do not update the discount rates frequently instead, we provide advance rate ranges that reflect current interest rates, enabling investors to calculate the obtainable net cash unit margins on our deployments.

Danny Abadgaran: In addition, we provide a pro forma net subscriber value using using the capital costs observed for the quarter.

Danny Abadgaran: At a seven 5% discount rate net subscriber value was 8447 and total value generated was $228 million.

Danny Abadgaran: We expect additional tailwind that subscriber value in future periods from the following variety of factors sequential growth in volume higher storage attachment rates increased realization of ITC adders, and lower costs from hardware price reductions labor efficiency and operating leverage from volume growth.

Danny Abadgaran: On slide 13, we detail the tailwind from ITC adders and hardware costs.

Danny Abadgaran: During the fourth quarter, we continued to recognize cash proceeds for the energy communities adder, while proceeds from the awarded low income Adders are still pending final government approval on each application, which we would expect in late Q1 or Q2.

Danny: Instead, we provide advanced rate ranges that reflect current interest rates, enabling investors to calculate the obtainable net cash unit margins on our deployments. In addition, we provide a pro forma net subscriber value using the capital cost observed for the quarter. At a 7.5% discount rate, the net subscriber value was $8,447, and the total value generated was $228 million.

Danny Abadgaran: Proceeds from domestic content adders are expected to be realized in the coming quarters guidance on what will qualify for the domestic content out or has it been issued however, we are still awaiting additional rule, making processes sometime this year.

Danny Abadgaran: Combined these three hours represent up to $450 million or more in annual additional annual run rate cash proceeds.

Danny Abadgaran: We continue to see decreasing prices for key hardware components, which are gradually flowing through our reported costs. Since we finished consuming our higher cost inventory.

Danny Abadgaran: On a like for like basis for seven and a half kilowatt solar with backup battery system by the end of this year hardware costs are expected to decline by over 18%.

Danny: We expect additional tailwinds to net subscriber value in future periods from the following variety of factors: sequential growth in volume, higher storage attachment rates, increased realization of ITC adders, and lower costs from hardware price reductions, labor efficiency, and operating leverage from volume growth. On slide 13, we detail the tailwinds from ITC adders and hardware calls.

Danny Abadgaran: Nearly $2500 per system from their peak in the second quarter of 2023.

Danny Abadgaran: These beneficial trends may be X geared up scared by an increasing mix of storage, which carries higher net margins, but will increase hardware and install costs and therefore impact creation cost.

Danny Abadgaran: Turning to slide 14.

Danny Abadgaran: We have presented a pro forma net subscriber value to show the potential impacts of unit margins from the forthcoming ITC adders, if fully realized along with the hardware cost tailwind as we expect in the coming quarters based on our mix of business in Q4 pro forma net subscriber value with these benefits was approximately 15300 out of six.

Danny: During the fourth quarter, we continued to recognize cash proceeds for the Energy Communities Adder, while proceeds from the awarded low-income adders are still pending final government approval on each application, which we would expect in late Q1 or Q2. Proceeds from domestic content adders are expected to be realized in the coming quarters. Guidance on what will qualify for the Domestic Content Adder has been issued; however, we are still awaiting additional rulemaking processes sometime this year.

Danny Abadgaran: Sent discount rate and 10300 at a seven 5% discount rate.

Danny Abadgaran: Turning now to gross and net earning assets in our balance sheet on slide 16, gross earning assets were $14 2 billion at the end of the fourth quarter.

Danny Abadgaran: Earning assets as the measure of cash flows we expect to receive from subscribers over time net of operating and maintenance cost distributions to tax equity partners and partnerships flip structures and distributions to project equity financing partners all discounted at a 6% Unlevered capital cost.

Danny: Combined, these three adders represent up to $450 million or more in additional annual run rate cash proceeds. We continue to see decreasing prices for key hardware components, which are gradually flowing through our reported costs as we finish consuming our higher-cost inventory. On a like-for-like basis for a 7.5-kilowatt solar system with backup battery system, by the end of this year, hardware costs are expected to decline by over 18 percent, or nearly $2,500 per system from their peak in the second quarter of 2023. However, these beneficial trends may be obscured by an increasing mix of storage, which carries higher net margins but will increase hardware and install costs and therefore impact creation costs. Turning to slide 14.

Danny Abadgaran: Net earning assets were 5 billion at the end of the fourth quarter net earning assets is gross earning assets plus cash less all debt.

Danny Abadgaran: That earning assets increased by $466 million this quarter net earning assets does not include inventory or other construction in progress assets or net derivative assets related to our interest rate swaps all of which represent additional value.

Danny Abadgaran: The value creation upside, we expect from future grid services opportunities and selling additional electrification product and services to our customer base, including our storage retrofit offering are not reflected in these metrics.

Danny Abadgaran: We programmatically enter into interest rate hedges to insulate our capital costs from adverse near term fluctuations the.

Danny: We have presented a Proforma Net Subscriber Value to show the potential impact to unit margins from the forthcoming ITC adders, if fully realized, along with the hardware cost tailwinds we expect in the coming quarters. Based on our mix of business and Q4, the Proforma Net Subscriber Value with these benefits was approximately $15,300 at a 6% discount rate and $10,300 at a 7.5% discount rate. Turning now to gross and net earning assets on our balance sheet, on slide 16. Gross earning assets were $14.2 billion at the end of the fourth quarter.

Danny Abadgaran: The vast majority of our debt is either fixed coupon long dated securities are floating rate loans that had been hedged with interest rate swaps as such we do not adjust the discount rate used in net earning assets to match current capital cost for new installations.

Danny Abadgaran: We ended the quarter with $988 million in total cash an increase of 36 million compared to the prior quarter.

Danny Abadgaran: Turning to our capital markets activities, we have been incredibly active over the last few months arranging capital to support our growth and further optimize our balance sheet in ways that we believe can drive considerable long term shareholder value.

Danny Abadgaran: We have successfully extended and upsized, our nonrecourse revolving senior warehouse facility to support our scale.

Danny: Gross earning assets is the measure of cash flows we expect to receive from subscribers over time, net of operating and maintenance costs, distributions to tax equity partners and partnership flip structures, and distributions to project equity financing partners, all discounted at a 6% unlevered capital cost. Net earning assets were $5 billion at the end of the fourth quarter. Net earning assets is gross earning assets plus cash less all debt. Net earning assets increased by $466 million this quarter. The net earning assets do not include inventory or other construction and progress assets or net derivative assets related to our interest rate swaps, all of which represent additional value. The value creation upside we expect from future grid services opportunities and selling additional electrification products and services to our customer base, including our storage retrofit offering, is not reflected in these metrics. We programmatically enter into interest rate hedges to insulate our capital costs from adverse near-term fluctuations. The vast majority of our debt is either fixed-coupon long-dated securities or floating-rate loans that have been hedged with interest rate swaps. As such, we do not adjust the discount rate used in net earning assets to match current capital costs for new installations.

Danny Abadgaran: This facility finances assets temporarily before we raised her mouth financing.

Danny Abadgaran: Principally in the asset backed securitization market.

Danny Abadgaran: We increased the size of the facility by 550 million from $1 8 billion to 2.35 billion and extended the maturity by approximately three years from April 2025 to February 2028.

Danny Abadgaran: The effective credit spread increase of 50 basis points was commensurate with the recent movement in the securitization market for term out transactions with similar advance rates. The facility continues to have a diversified set of nine relationship lenders. We also achieved certain other improved terms that afford more flexibility to fund our anticipate.

Danny Abadgaran: <unk> future product and geographic mix.

Danny Abadgaran: Our team also continues to execute tax equity transactions, including structures that facilitate I T. C transfers to a deepening pool of large buyers of traditional tax equity market has it been tighter recently, which we believe is owing to the calendar year tax planning exercises that are partners undertake.

Danny Abadgaran: Along with the fact that many of our partners are exploring the options now available to increase the size of structures by utilizing ITC transfers, that's structural rethinking can impact the timing of fund commitments that said, our long term track record as a sponsor and relationships, which have spanned well over a decade continue to put us in a good position to <unk>.

Danny Abadgaran: Tax equity funding.

Danny Abadgaran: As of today close transactions and executed term sheets provide us with expected tax equity capacity to find over 195 megawatts of projects or subscribers beyond what was deployed through the fourth quarter.

Danny: We ended the quarter with $988 million in total cash, an increase of $36 million compared to the prior quarter. Turning to our capital markets activity, we have been incredibly active over the last few months arranging capital to support our growth and further optimize our balance sheet in ways we believe can drive considerable long-term shareholder value. We have successfully extended and upsized our non-recourse revolving senior warehouse facility to support our scale. This facility finances assets temporarily before we raise term financing, principally in the asset-backed securitization market.

Danny Abadgaran: Southern also had $577 million in unused commitments available and its nonrecourse senior revolving warehouse loan at the end of the quarter pro forma to reflect the subsequent upsize an amendment.

Danny Abadgaran: And use them out with fund approximately 211 megawatts of projects for subscribers, our strong capital runway allows us to be selective and timing transactions.

Danny Abadgaran: In February we also closed an ABS transaction with a private credit investor along with arranging a subordinated financing the $361 million nonrecourse senior debt was rated a minus by Kroll and was priced with a 232 and a half basis points spread.

Danny: We increased the size of the facility by $550 million, from $1.8 billion to $2.35 billion, and extended the maturity by approximately three years, from April 2025 to February 2028. The effective credit spread increase of 50 basis points was commensurate with recent movement in the securitization market for term-out transactions with similar advance rates. The facility continues to have a diversified set of nine relationship lenders.

Danny Abadgaran: This demonstrated yet another improvement in capital costs with spreads declining from our last securitization in September that was priced with a 240 basis point spread.

Danny Abadgaran: We placed a $109 million subordinated loan on the portfolio as well.

Danny Abadgaran: All in full stack weighted average cost of capital was approximately seven 5% and resulted in a cumulative advance rate as measured against our contracted subscriber value metric of over 80%.

Danny Abadgaran: The use of private credit investors shows the strong interest in our assets from a growing and broad set of investors.

Danny: We also achieved certain other improved terms that afford more flexibility to fund our anticipated future product and geographic ventures. Our team also continues to execute tax equity transactions, including structures that facilitate ITC transfers to a deepening pool of large buyers. The traditional tax equity market has been tighter recently, which we believe is owing to the calendar-year tax planning exercises that our partners undertake, along with the fact that many of our partners are exploring the options now available to increase the size of structures by utilizing ITC transfers. This structural rethinking can impact the timing of fund commitments.

Danny Abadgaran: On the parent capital side, we have a couple of updates to share.

Danny Abadgaran: Our overarching strategy is to drive the lowest cost of capital across the enterprise supporting high asset level financing to generate cash while appropriately managing parent leverage to make sure we have flexibility in terms of our debt maturity timelines.

Danny Abadgaran: It is prudent to extend facilities early to navigate potential an unexpected macroeconomic conditions and volatility.

Danny Abadgaran: Consistent with this strategy, we have been planning to refinance our recourse working capital facility and we recently closed that extension.

Danny Abadgaran: We reduced the size from 600 million to 447, and a half million dollars with.

With an option to upsize the facility to 477 and a half million prior to September 30th 'twenty 'twenty four the reduction in the facilities in line with the reduced working capital needs of the business, especially as we have substantially reduced inventory as pandemic related supply chain challenges fade into the past.

Danny: That said, our long-term track record as a sponsor and relationships that have spanned well over a decade continue to put us in a good position to arrange tax equity funding. As of today, closed transactions and executed term sheets provide us with expected tax equity capacity to fund over 195 megawatts of projects or subscribers beyond what was deployed through the fourth quarter. Sunrun also had $577 million in unused commitments available on its non-recourse senior revolving warehouse loan at the end of the quarter.

Danny Abadgaran: We amended the facility to extend the maturity from January 20th twenty-five to November 'twenty 'twenty. Five. We also included a feature that will further extend the maturity to March 20th 27 should we meet the requirements for this provision.

Danny Abadgaran: <unk> now has typical grid price they get Brent based pricing tied to utilization with spreads ranging from 325 to 375 basis points. This facility can be refinanced without penalty at any time.

Danny: This unused amount would fund approximately 211 megawatts of projects for subscribers. Our strong capital runway allows us to be selective in timing transactions. In February, we also closed an ABS transaction with a private credit investor, along with arranging a subordinated financing. The $361 million non-recourse senior debt was rated A- by Kroll and was priced with 232.5 basis points spread.

Shifting to our convertible debt.

Danny Abadgaran: In 2020, one we issued 400 million of zero coupon debt that is due in February 'twenty twenty-six during Q4 and into Q1, we have opportunistically taken advantage of the market dislocation in the pricing of these bonds by repurchasing nearly $26 million of principal value at a significant discount to par in the open market.

Danny Abadgaran: Deploying approximately $20 million.

Danny: This demonstrated yet another improvement in capital costs with spreads declining from our last securitization in September that was priced with a 240 basis point spread. Additionally, we placed a $109 million subordinated loan on the portfolio as well. The all-in, full-stack weighted average cost of capital was approximately 7.5% and resulted in a cumulative advance rate, as measured against our contracted subscriber value metric, of over 80%. The use of private credit investors shows the strong interest in our assets from a growing and broad set of investors. On the Parent Capital side, we have a couple of updates to share. Our overarching strategy is to drive the lowest cost of capital across the enterprise, supporting high asset-level financing to generate cash, while appropriately managing parent leverage to make sure we have flexibility in terms of our debt maturity timeline.

Danny Abadgaran: These repurchases reflect a healthy low teens area yield to final maturity levels, we believe are accretive to shareholders.

Danny Abadgaran: This afternoon, we also issued a press release, indicating we are launching a 475 million convertible debt offering.

Danny Abadgaran: I will refer you to read that release for more information on the proposed transaction the use of proceeds and the cap call transaction that is intended to mitigate dilution.

Danny Abadgaran: As of today, we have $374 million of 'twenty 'twenty six convertible bonds outstanding our previous transactions buying the 'twenty 'twenty six bonds resulted in a reduction to net debt.

Danny Abadgaran: We also recently reduced our working capital facility by about 153 million.

Danny Abadgaran: Content plating does balance sheet optimization opportunity that is consistent with our strategy of being prudent with the quantum and duration of recourse debt.

Danny Abadgaran: Depending on the execution of the new convert issuance and the repurchase of the 'twenty 'twenty six notes total recourse indebtedness could either decline or increase.

Danny: It is prudent to extend facilities early to navigate potential and unexpected macroeconomic conditions and volatility. Consistent with this strategy, we have been planning to refinance our Recourse Working Capital Facility, and we recently closed that extension. We reduced the size of the facility from $600 million to $447.5 million, with an option to upsize the facility to $477.5 million prior to September 30, 2024. The reduction in the facility is in line with the reduced working capital needs of the business, especially as we have substantially reduced inventory as pandemic-related supply chain challenges fade into the past. We amended the facility to extend the maturity from January 2025 to November 2025.

Danny Abadgaran: Unlikely material in either direction, while the maturity schedule will be extended significantly.

Danny Abadgaran: What do we think about our balance sheet, we prioritize a strong cash position and use of asset level nonrecourse debt financing. This strategy provides the lowest cost of capital to finance cash flow producing assets backed by high credit to consumers and to use parent recourse debt that is appropriately sized and balances maturity dates cash interest costs and <unk>.

Danny Abadgaran: <unk> ability.

Danny Abadgaran: Turning now to our outlook on slide 19, the market remains very Underpenetrated and we continue to believe we can sustain robust growth throughout this decade.

Danny Abadgaran: And this strong long term demand backdrop, our priority is to generate cash by continuing to increase customer values through growing storage adoption and other high value products and services.

Danny Abadgaran: And by reducing costs by driving further efficiencies across the business storage capacity installed is expected to be in a range of 160 270 megawatt hours in Q1.

Danny: We also included a feature that will further extend the maturity to March 2027 should we meet the requirements for this provision. The facility now has typical grid-based pricing tied to utilization with spreads ranging from 325 to 375 basis points. This facility can be refinanced without penalty at any time.

Danny Abadgaran: This represents 125% to 139% growth year over year for the full year, we expect storage capacity installed to be in a range of 800 megawatt hours to one gigawatt hour, reflecting 40% to 75% growth year over year solar energy capacity installed is expected to be in a range of 165 to 100.

Danny Abadgaran: 75 megawatts in Q1.

Danny Abadgaran: This represents a decline of approximately 25%.

Danny: Shifting to our convertible debt, in 2021, we issued $400 million of zero-coupon debt that is due in February 2026. During Q4 and into Q1, we have opportunistically taken advantage of the market dislocation and the pricing of these bonds by repurchasing nearly $26 million of principal value at a significant discount to par in the open market, deploying approximately $20 million. These repurchases reflect a healthy, low-teens area yield to final maturity, levels we believe are accretive to shareholders. This afternoon, we also issued a press release indicating that we are launching a $475 million convertible debt offering. I will refer you to that release for more information on the proposed transaction, the use of proceeds, and the CAP call transaction that is intended to mitigate dilution. As of today, we have $374 million of 2026 convertible bonds outstanding.

Danny Abadgaran: Q4 at the midpoint.

Danny Abadgaran: Q1 is typically the lowest period of the year based on seasonal constraints to sales activities in Q4, and Q1, along with weather related obstacles to installations in Q1.

Danny Abadgaran: Our volume has declined from Q4 to Q1 and every year, we've reported our volume and this year is no exception. In addition, the continued discipline. We are exercising in the affiliate partner segment has a slight effect along with the fact that we exited Arizona.

Because of the pull in of demand in California in early twenties 23 year over year comparisons are less relevant in Q1, we are confident that Q1 volumes will mark the low point and we expect very robust sequential growth into Q2, and the rest of the year for the full year, we expect solar capacity installed to be.

Danny Abadgaran: In the range of down 5% to up 5%.

Danny Abadgaran: This represents market share gains as the strength of our subscription offering and our disciplined go to market approach to deliver strong results.

Danny Abadgaran: Our growth and the value we create with this volume will be much larger we forecast subscriber values will increase by greater than 10% in 'twenty 'twenty four as we increase our mix of higher value offerings and input costs decline, resulting in growth of total value generated a greater than 15% in 'twenty 'twenty four.

Danny: Our previous transactions buying the 2026 bonds resulted in a reduction in net debt. We also recently reduced our working capital facility by about $153 million, contemplating this balance sheet optimization opportunity that is consistent with our strategy of being prudent with the quantum and duration of recourse debt. Depending on the execution of the new convert issuance and the repurchase of the 2026 notes, total recourse indebtedness could either decline or increase, unlikely to be material in either direction, while the maturity schedule will be extended significantly. When we think about our balance sheet, we prioritize a strong cash position and the use of asset-level non-recourse debt financing.

Danny Abadgaran: Turning to slide 20, we expect our disciplined and focused strategy will allow us to capitalize on our long term opportunity with our current focus on cash generation in 2024.

Danny Abadgaran: We are reiterating reiterating our range of $200 million to $500 million in recurring annual cash generation, which we expect to achieve by the fourth quarter of 'twenty 'twenty four we generated cash in the fourth quarter, the second consecutive quarter of positive cash generation.

Danny Abadgaran: We continue to expect cumulative cash generation to be positive from Q4 2023 through the end of 'twenty 'twenty four keep in mind cash generation can be lumpy quarter to quarter based on project financing timing and inherent seasonality in our business to this point, we expect to have lower cash generation in Q1, owing to the timing of financing.

Danny Abadgaran: <unk> and lower volumes, the latter of which result in worse fixed cost absorption.

Danny: This strategy provides the lowest cost of capital to finance cash-flow-producing assets backed by high-credit consumers and to use parent recourse debt that is appropriately sized and balances maturity dates, cash interest costs, and flexibility. Turning now to our outlook on slide 19, the market remains very underpenetrated, and we continue to believe we can sustain robust growth throughout this decade. In this strong long-term demand backdrop, our priority is to generate cash by continuing to increase customer values through growing storage adoption and other high-value products and services, and by reducing costs by driving further efficiencies across the business. Storage capacity installed is expected to be in a range of 160 to 170 megawatt hours in Q1.

Danny Abadgaran: In addition, refinancing our warehouse.

Danny Abadgaran: The facility will result in a one time reduction to cash as we reflect the new advanced rate on assets in the facility.

Danny Abadgaran: Our cash generation range is based on assumptions, we have outlined on the bottom of slide 20 with that let me turn it back to Mary.

Mary: Thanks, Danny I am so appreciative of the work of the Sunrun team executing on our transition to a storage first company to extend our differentiation expand our margins and deliver the best value to customers Importantly, I believe our steadfast commitment to a disciplined growth strategy will maximize the value we can create in the long run.

Speaker Change: Operator, let's open the line for questions.

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Speaker Change: Try to only ask one question and one follow up.

Speaker Change: Our first question comes from the line of Andrew.

Andrew: So with Morgan Stanley. Please proceed with your question.

Andrew: Hey, guys. Thank you for taking the question. This evening I guess just to start out with your guidance I just wanted to break down your solar growth guidance for the year, you're showing some pretty impressive sequential growth within your slides. So can you just maybe just provide some context on what your break baking into that guy.

Danny: This represents 125 to 139 percent growth year-over-year. For the full year, we expect storage capacity installed to be in a range of 800 megawatt-hours to 1 gigawatt-hour, reflecting 40 to 75 percent growth year-over-year. Solar energy capacity installed is expected to be in a range of 165 to 175 megawatts in Q1. This represents a decline of approximately 25% from Q4 at the midpoint. Q1 is typically the lowest period of the year based on seasonal constraints on sales activities in Q4 and Q1, along with weather-related obstacles to installations in Q1.

Speaker Change: In terms of California, and in non California growth throughout the year.

Speaker Change: Yeah for sure Andrew Nice to hear from you Yeah. I mean, what we're really seeing is that Q1, you know we've seen some nice sales growth volume as I hit right. So we've seen sales growth sales growing 23% California's growing 40% sequentially and you know in our in our cons.

Speaker Change: Monitoring our with all of our sales leaders across the company, yes, we feel very very comfortable around the demand that we're seeing as you also know we're very very focused on not just that solar volume, but also the storage attachment rate, where we've seen again really really healthy.

Danny: Our volume has declined from Q4 to Q1, and every year we've reported our volume, and this year is no exception. In addition, the continued discipline we are exercising in the affiliate partner segment has had a slight effect, along with the fact that we exited Arizona. Because of the pull-in of demand in California in early 2023, year-over-year comparisons are less relevant in Q1. We are confident that Q1 volumes will mark the low point, and we expect very robust sequential growth in Q2 and the rest of the year. For the full year, we expect solar capacity installed to be in the range of down 5% to up 5%.

Speaker Change: Upticks in the in the percentage of the attachment rate as well as what we're seeing every single week from the field in the context of you know what the attachment rate that they're selling so we're feeling really good about the volumes, we talked about and we're also really expecting again that net subscriber value growth a tie.

Speaker Change: Did a lot to the storage attachment rate the retrofit work, we're doing in some of the other initiatives we had.

Speaker Change: Understood. That's helpful context, and then maybe just switching gears a bit.

Danny: This represents market share gains as the strength of our subscription offering and our disciplined go-to-market approach deliver strong results. However, our growth and the value we create with this volume will be much larger. We forecast subscriber values will increase by greater than 10% in 2024 as we increase our mix of higher value offerings and input costs decline, resulting in growth of total value generated of greater than 15% in 2024. Turning to slide 20, we expect our discipline and focus strategy will allow us to capitalize on our long-term opportunity with our current focus on cash generation in 2024. We are reiterating our range of $200 to $500 million in recurring annual cash generation, which we expect to achieve by the fourth quarter of 2024. We generated cash in the fourth quarter, the second consecutive quarter of positive cash generation.

Speaker Change: This renewal pilot is really interesting so just kind of want to double click on that for a second.

Speaker Change: I guess based on the conversations you're having with some of your debt providers, what do you need to demonstrate to get start getting some of that renewal value credit within the underwriting process. It seems like this is a pretty small sample size and you're still kind of working through it. So how far are you in those conversations and what needs to be done.

Speaker Change: In order to start getting additional credit as you come to market with future Securitizations.

Speaker Change: Yeah, Great Great question I think it's it's more track record you know.

Getting the numbers that continue to build and I think there's also obviously a variety of things we can pilot and test are in this period, where we have customers that have long term relationships with them. We can go back to a different subset of customers in and test the effectiveness of what works.

Speaker Change: So I think it's it's it's really continuing at it and building the track record I think that we're very encouraged with the initial results.

Speaker Change: From a from a debt underwriting perspective, it it's really the the track record lengthening and the number is building.

Danny: We continue to expect cumulative cash generation to be positive from Q4 2023 through the end of 2024. However, cash generation can be lumpy quarter to quarter based on project financing timing and inherent seasonality in our business. To this point, we expect to have lower cash generation in Q1, owing to the timing of financing activity and lower volumes, the latter of which result in worse fixed cost absorption.

Speaker Change: Understood. Thank you so much.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Julien.

Julien: Marlin with Smith with Bank of America. Please proceed with your question.

Julien Marlin: Thank you operator, good afternoon team nice to chat with you guys.

Julien Marlin: So just kicking things off on on cash in and obviously the ramp in India to meet your cash guidance can you talk a little about external financing needs you know beyond the sort of the present context here as you think about ramping up into that more ongoing sort of sustainable cash number how does you know today's developments Jackson.

Julien Marlin: Suppose against the the ongoing needs, presumably that you achieve by the end of the year here in terms of cash yeah.

Danny: In addition, refinancing our warehouse facility will result in a one-time reduction in cash as we reflect the new advance rate on assets in the facility. Our cash generation range is based on assumptions we have outlined on the bottom of slide 20. With that, let me turn it back to Mary.

Julien Marlin: Yeah, I would say that you know that the the exercise and you know that the activity that we've been talking about is really about taking care of the AR at the parent recourse level that the maturities and the amount of leverage and then at the asset level as we.

Mary Powell: Thanks, Danny. I am so appreciative of the work of the Sunrun team executing on our transition to a storage-first company to extend our differentiation, expand our margins, and deliver the best value to customers. Importantly, I believe our steadfast commitment to our disciplined growth strategy will maximize the value we can create in the long run. Operator, let's open the line for questions.

Julien Marlin: Talked about with the warehouse that you are pushing out for three years. The runway of our warehouse financing are in line with the strategy to maximize the nonrecourse level.

Julien Marlin: And all of that taken together is within the kind of backdrop of even more importantly, the cash generation picture and delivering into that later this year, which is which is looking on track.

Andrew Hughes: Thank you. Hi guys, thank you for taking the question this evening. I guess just to start out with your guidance, I just want to break down your solar growth guidance for the year. You're showing some pretty impressive sequential growth within your slide. So can you maybe just provide some context on what you're breaking into that guidance in terms of California and non-California growth throughout the year? Yeah, for sure, Andrew. It's nice to hear from you.

Speaker Change: Got it excellent and then do you want to talk a little bit more about the volumetric breakdown here I mean, what stands out to me is your commentary on sales here, even though they started the year seems to reflect some sort of a if you use the word sharp uptick.

Mary Powell: Yeah, I mean, what we're really seeing is that in Q1, you know, we've seen some nice sales growth volume as I hit, right? So we've seen sales growth, sales growing 23%, and California is growing 40% sequentially. And, you know, in our constant monitoring, with all of our sales leaders across the company, yes, we feel very, very comfortable with the demand that we're seeing. As you also know, we're very, very focused on not just that solar volume but also the storage attachment rate, where we've seen, again, really, really healthy upticks in the percentage of the attachment rate, as well as what we're seeing every single week from the field in the context of, you know, what the attachment rate that they're selling.

Speaker Change: Uptick do you want to elaborate a little bit more geographically on what you're seeing out there you talked about your enthusiasm for the field, how does that juxtaposed against maybe some of the other day. The places we're seeing about you know California's specifically here. If you can elaborate and obviously it seems like that's really are informing your second quarter expectations and installs too.

Uptick: Yeah for sure Julien you know what we're seeing is yes.

Uptick: Recent trends are positive and as we talked about before yeah. We were managing through some changes in the context of policy in California, but the trends, particularly in PA in California are positive and growing in fact, California's growing faster now than the rest of the country for us. So we're feeling good about.

Uptick: Are the build back in California, and you know again, we're seeing really good results in other parts of the country. What you see with US largely is you know in Q1 as a result of what what I view as really important prudent decisions. We made on volume that again is just seeing its way through a quarter that traditionally always.

Mary Powell: So we're feeling really good about the volumes we talked about, and we're also really expecting, again, that net subscriber value growth, tied a lot to the storage attachment rate, the retrofit work we're doing, and some of the other initiatives we discussed. understood. That's a helpful context. And then maybe just switching gears a bit, this renewal pilot is really interesting, so I just kind of want to double-click on that for a second. I guess based on the conversations you're having with some of your debt providers, what do you need to demonstrate to start getting some of that renewal value credit within the underwriting process?

Uptick: Has lower volumes.

Uptick: So it's our it's a reflection of our disciplined.

Uptick: <unk> on a sustainable profitable growth and that's you know again, what drove up our net subscriber value that we talked about it's really our execution of that.

Uptick: Yeah.

Speaker Change: Wonderful thanks, guys.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of <unk>.

Speaker Change: Harrison with Piper Sandler. Please proceed with your question.

Harrison: Thank you and good afternoon, everyone. Thanks for taking the question.

Harrison: So the first one just a quick financing strategy question. Mary you know you you know as you indicated you've exited the year with $680 million in unrestricted cash and it sounds like the cash balance is going to be higher by the end of 'twenty 'twenty four given the cash Gen commentary.

Mary Powell: It seems like this is a pretty small sample size, and you're still kind of working through it. So how far are you in those conversations, and what needs to be done in order to start getting additional credit as you come to market with future securitization? Yeah, great, great question. I think it's more of a track record, you know, getting the numbers to continue to build. I think there's also obviously a variety of things we can pilot and test in this period, where we have customers that have long-term relationships with them; we can go back to different subsets of customers and test the effectiveness of what works. So I think it's really continuing to do it and building a track record. I think we're encouraged with the initial results. I think from a debt underwriting perspective, it's really the track record lengthening and the numbers built. I understand. Thank you so much.

Mary: So why pursue a convert rather than just you know pay down since you you would have had you know excess cash after the convert pay down.

Speaker Change: Yeah, I think I'll take I'll take that and you know that.

Speaker Change: The exercise here is obviously with a few facilities involved across the stack them. You know maturity extension you know near term liability management, Yeah. That's been driving some of the timing of the layering of financings them I think we saw again the you know the the convertible bonds, where they're trading.

Speaker Change: <unk> looked at you know very apparently dislocated to us and.

Speaker Change: We did go ahead and purchase them a bit of that I think pricing moved them as you know during that a few week process that we were repurchasing.

But I think generally I'm you know it it was the near term focus on the liability management.

Julien Dumoulin: Thank you, operator. Good afternoon, team. Nice to chat with you guys. So, just kicking things off on cash and obviously the ramp to meet your cash guidance, can you talk a little bit about external financing needs, you know, beyond the sort of present context here, as you think about ramping up into that more ongoing sort of sustainable cash number? How does, you know, today's developments juxtapose against the ongoing needs, presumably that you will achieve by the end of the year here, in terms of cash? Yeah, I would say, you know, the exercise and the activity that we've been talking about is really about taking care of the, you know, at the parent recourse level, the maturities, the amount of leverage, you know, and then at the asset level, as we talked about with the And all of that taken together is within the kind of backdrop of, obviously, more importantly, the cash generation picture and delivering on that later this year, which is looking on track.

Speaker Change: We think that's prudent extending out the maturities and then shifting you know for the balance of the year with that behind us through cash generation and then optimizing the use of that extra cash as it arrives to maximize shareholder value.

Speaker Change: Okay.

Speaker Change: Fair enough and then my my follow up question is on the cash generation target guidance that you reiterated a can you just remind us what the sensitivities are to interest rates all else equal and then and then maybe part and parcel with that I guess I would've thought the project costs would be maybe closer to 7% given recent securitizations.

Speaker Change: The drop in the benchmark rate versus you know at the time of the last three Q calls. So I guess I'm. Just curious why are your project finance costs only moved down 25 bps relative to the last update thank you.

Speaker Change: Great questions. The first one is about a.

Speaker Change: A quarter point is about a one point and or about 75 basis points in advance rate move I think we've gotten a little bit less rate sensitive as as kind of a baseline of rates.

Julien Dumoulin: Excellent. And then do you want to talk a little bit more about the volumetric breakdown here? I mean, what stands out to me is your commentary on sales here, even at the start of the year, seems to reflect some, as you use the word, sharp uptick. Do you want to elaborate a little bit more geographically on what you're seeing out there?

Speaker Change: Stabilized higher on an annualized basis, that's between 40 and $50 million of cash generation change yeah per quarter point of change in interest rates.

Speaker Change: And on the second one that's a fair observation I would say the seven 5% does skew a little conservative relative to what we've been seeing in the market. I think you know there's there's a possibility we'd end up a tad lower on a subsequent transaction.

Mary Powell: You talked about the enthusiasm from the field. How does that compare to maybe some of the other data points that we're seeing about, you know, California specifically here, if you can elaborate? And obviously, it seems like that's really informing your second quarter expectations for installs, too. Yeah, for sure, Julian.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Moses Sutton with.

Moses Sutton: BNP Paribas please.

Moses Sutton: Please proceed with your question.

Thanks for the question I, just had a follow up to Kashi on the convert.

Mary Powell: You know, what we're seeing is recent trends are positive. And as we talked about before, yeah, we were managing through some changes in the context of policy in California, but the trends, particularly in California, are positive and growing. In fact, California is growing faster now than the rest of the country for us.

Moses Sutton: Just to clarify do you expect to repurchase a majority of the 374 million in 2020 to convert I get this is mostly a refi I'm just trying to understand if the majority of that would be repurchased and do you expect an arbitrage considering you're using a convert to buy a discounted convert I'm trying to understand if there would be a pricing premium relative to the 2026.

Mary Powell: So we're feeling good about the build back in California. And, you know, again, we're seeing really good results. What you see with us largely is, you know, in Q1 is a result of what I view as really important, prudent decisions we made on volume that, again, is just seeing its way through a quarter that traditionally always has lower volume. So it's our disciplined focus on sustainable profitable growth. And that's, You know, again, what drove up our net subscriber value that we talked about is really our execution of that. wonderful.

Speaker Change: Yeah, I think I think you know I I.

Speaker Change: I do want to I'm just kind of.

Speaker Change: Refer you more to the press release I think a repurchase was noted in the press release and I think that's that's kind of use of proceeds.

Speaker Change: As to how much I think that will come out in due time and you know we did note in the script that we.

Speaker Change: Could see you know leverage fall as a result of the transaction. It could go slightly up but you know generally that's you know that's the positioning on the range, but you know in either direction not intending to be material.

Michael Weinstein: Thanks, guys. Thank you. Thank you. Good afternoon, everyone.

Speaker Change: Got it got it that's very helpful and I guess shifting to them three point no. Mary I believe you noted Ta is growing faster for you now than the rest of the country, which as you know.

Michael Weinstein: Thanks for taking the question. So first one, just a quick financing strategy question. Mary, as you indicated, you exited the year with $680 million in unrestricted cash, and it sounds like the cash balance is going to be higher by the end of 2024, given the cash gen commentary. So why pursue a convert rather than just pay it down since you would have, you know, excess cash after the convert.

Speaker Change: No quite astonishing I know it relates a lot to the ER to the storage attach rates.

Speaker Change: How much do you think it relates to the underlying NIM 3.0 return profile.

Speaker Change: We get that there's a lot of friction to point out a 3.0, there was a lot of pull forward. So it's really hard to get a real time sense of the economics.

Speaker Change: With eye-popping time of use rates I'm curious if there is a misconception out there on how NIM three P or three point of return books.

Danny: Yeah, I think I'll take that, you know, the exercise here is obviously with a few facilities involved across the stack, you know, maturity extension, you know, near-term liability management, you know, that's been driving some of the timing of the layering of financings. I think we saw, again, the, you know, the convertible bonds where they're trading looked at, you know, very apparently dislocated to us. We did go ahead and purchase a bit of that.

Speaker Change: Yeah, I mean, I you know Sunrun. The story is our differentiation because we had expertise in storage and so again, we innovated as you know with our product to grab customers as soon as possible that shift product and then we found that really what customers were wanting across California was whole home backup.

Speaker Change: And we have great expertise in that so and we launched as you know we called 2023 the year of a storage and we were going to we were leading with storage in our numbers show that that was a very effective strategy, particularly in California. So, California is for some still probably a challenging market for <unk>.

Danny: I think pricing moved, you know, during that few-week process that we were repurchasing. But I think, you know, generally, it was the near-term focus on liability management. We think that's prudent, extending out the maturities and then shifting, you know, for the balance of the year with that behind us to cash generation, and then optimizing the use of that extra cash as it arrives, you know, to maximize shareholder value. Fair enough.

Speaker Change: <unk> that are selling solar only or who don't have this kind of differentiation. You also note and it's correct that utility rates, there's nothing stopping the pressure on utility rates. So overtime that also is it's certainly helpful. In the context of the sunrun value proposition with our solar plus storage off.

Michael Weinstein: And then my follow-up question is on the cash generation target guidance that you reiterated. Can you just remind us what the sensitivities are to interest rates, all else equal, and then maybe part and parcel with that? I guess I would have thought project costs would be maybe closer to 7% given recent securitizations and the drop in the benchmark rate versus, you know, the time of the last 3Q call. So I guess I'm just curious why your project finance costs only moved down 25 BPS relative to the last update. Thank you. Great questions. The first one is about a quarter point is about one point in or about 75 basis points in the advance rate move.

Speaker Change: Right.

Speaker Change: Excellent. Thank you I'll pass it on.

Speaker Change: Thank you. Our next question comes from the line of Michael Blum with Wells Fargo. Please proceed with your question.

Michael Weinstein: Thanks, Good afternoon, I want to go back to the program you have here to to renew our contracts for customers could you just kind of walk through the process of turning those indications into actual.

Michael Weinstein: <unk> contracts and what are the plans to roll this program out.

Michael Weinstein: More broadly to your customer base.

Michael Weinstein: Yeah. Great question, we're really excited about the early results and as you know we were really pleased to get this renewal pilot going we have Paul Dickson here, who has led this effort. So Paul why don't you address some of those questions. Yes. Thanks for the questions I think really the focus for US obviously as was mentioned in an earlier question around you know fine.

Danny: I think we've gotten a little bit less rate sensitive as kind of the baseline of rates has stabilized higher. On an annualized basis, that's between 40 and 50 million dollars of cash generation change per quarter point of change in interest rates. And on the second one, that's a fair observation.

These assets and securitizing, the full value that we're creating with these customers but on these initial pilots. The focus is really for us in better understanding our consumers needs and desires and interests and as we've dug in to doing customer pulling and now actually selling customer renewals were finding exactly you know what we hope to find which is customers.

Michael Weinstein: I would say the 7.5% does skew a little conservative relative to what we've been seeing in the market. But I think, you know, there's a possibility we'd end up a tad lower on a subsequent transaction. Thanks for the question. I just have a follow-up question for Kashi on the Convert. Just to clarify, do you expect to repurchase a majority of the $374 million 2026 Convert? I understand this is mostly a refi. I'm just trying to understand if the majority of that would be repurchased. And do you expect an arbitrage, considering using a Convert to buy a discounted Convert?

Michael Weinstein: Loved the product, they're eager to extend and renew and Theres a whole host of avenues that we can take that with adding additional products and increasing rate or keeping them, where they are with their steady escalator. So there's a lot on the table for us as we opened the store in an expanded but really it's about.

Michael Weinstein: Understanding the assets that we're sitting on and and picking pulled out you have them and giving customers what they are looking for.

Speaker Change: Great. Thanks for that and then you know.

Speaker Change: You recently as you noted.

Speaker Change: Which from home depot to Lowe's.

Speaker Change: Wondering if you can address the difference in the arrangements there and just more broadly maybe how youre viewing the different sales channels from them.

Danny: I'm trying to understand if there would be a pricing premium relative to the 2026. Yeah, I think I think, you know, I do want to just kind of, you know, refer you more to the press release. I think a repurchase was noted in the press release.

Speaker Change: Yeah. So so we like having a strong presence in in a home improvement area for retail.

Speaker Change: And as we've been focused on cash generation and driving profitable growth and evaluated the opportunity and what we found some really interesting and advantageous things about that.

Danny: And I think that's the kind of use of proceeds as to how much I think that will come out in due time. You know, we did note in the script that we could see leverage fall as a result of the transaction, or it could go slightly up. But you know, generally, that's, you know, that's the positioning on the range. But, you know, in either direction, not intending to be material.

As a whole site, if you will one being a really high homeowner demographic and two just the general reality that theres been far west solar presence in those retail sites.

Speaker Change: And although it's only been a few days of selling them outside it's been really encouraging so where I'm really excited about the consumer demographic and the relatively underpenetrated nature of it.

Michael Weinstein: Got it, got it. That's very helpful. Shifting to 3.0, Mary, I believe you noted CA is growing faster for you now than the rest of the country, which is... You know, quite astonishing. I know it relates a lot to the storage attach rates.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Tristan Richardson with Scotiabank. Please proceed with your question.

Tristan Richardson: Hi, Good afternoon, guys. Just a question on the cost reductions you're seeing on the equipment side. You know you mentioned, 18% greater than 18% off the highs is that just sort of what you're seeing today in terms of your product categories and then also you.

Mary Powell: How much do you think it relates to the underlying NEM 3.0 return profile? And we get that there's a lot of friction 2.0 to 3.0. There was a lot of pull forward. So it's really hard to get a real-time sense of the economics. With eye-popping time-of-use rates, I'm curious if there's a misconception out there about how NEM 3.0 return looks.

You talk about realizing this over the next couple of quarters. You know we're hearing throughout the value chain. The pricing pressures is not completed yet so is there a possibility that that 18% over the next couple of quarters.

Speaker Change: It could.

Speaker Change: Ended up higher than 18%.

Speaker Change: Yeah, Great question. So definitely the 18 is being driven by actual pricing on procurement activity. We are conducting in the market. The reason we are talking about it in a lag manner again is the amount of inventory we've been carrying on hand has been.

Mary Powell: Yeah, I mean, I, you know, Sunrun, the story is our differentiation because we had expertise in storage. And so again, we innovated, as you know, with a product to grab customers as soon as possible, that shift product. And then we found that really what customers were wanting across California was whole home backup, and we have great expertise in that. So, and we launched, as you know, we called 2023 the year of storage. And we were going to, we were leading with storage. And our numbers show that that was a very effective strategy, particularly in California.

Speaker Change: A little bit more sticky in terms of being.

Speaker Change: Above target I think it's moving towards target over the next quarter or two as we've guided to over the last couple of quarters and as that moves through we do have good line of sight into that greater than 18.

Speaker Change: It could certainly be more at this point, it's most heavily being driven by a battery price says end module prices are which are the obviously the most significant part of the stack.

Speaker Change: But yeah definitely.

Speaker Change: Rice, saying has softened up a bit and remain that way and and there could there could be opportunity for us for a bit more.

Speaker Change: I appreciate it and then just a follow up I mean going in the same vein around it you said greater than 100 days, maybe on last quarter and today. We're approximately 100 days does that reflect the uptick in sales activity. You guys are talking about seeing here in <unk> or should we expect that to accelerate downward just.

Mary Powell: So California is, for some, still probably a challenging market for companies that are selling solar only, or who don't have this kind of differentiation. You also note, and it's correct, that utility rates are going up, and there's nothing stopping the pressure on utility rates. So over time, that also is, is certainly helpful in the context of the Sunrun value proposition with our solar plus storage offer. Thank you all. Good afternoon.

Speaker Change: Given what you're seeing early in the top of the funnel.

Speaker Change: Yeah, so not yet reflected and part of what brings it down is apart from just bringing down the gross dollars of inventory balance the significant increase we are expecting and our install activity that will follow our sales in that that's also in line with that kind of one to two quarter guidance as our daily rate of installs will be much higher.

Operator: I want to go back to the program you have here and renew it. Can you just kind of walk through the process of turning those indications into action? signed contracts, and what are the plans? to go out more broadly. Yeah, great question. We're really excited about the early results. And as you know, we were really pleased to get this renewal pilot going. We have Paul Dixon here, who's led this effort. So Paul, why don't you address some of those questions?

Speaker Change: Here and our balance will be lower we should naturally get to our target days.

Speaker Change: Super helpful. Thank you guys.

Speaker Change: It's of course.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Joseph Osha.

Joseph Osha: <unk> partners. Please proceed with your question.

Joseph Osha: Hi, everybody.

Paul Dixon: Yeah, thanks for the questions. I think really the focus for us, obviously, as was mentioned in an earlier question around, you know, financing these assets and securitizing the full value that we're creating with these customers. But in these initial pilots, the focus is really for us on better understanding our consumers' needs, desires, and interests. And as we've dug into doing customer polling and now actually selling customer renewals, we're finding exactly what we hope to find, which is that customers love the product and are eager to extend and renew. And there's a whole host of avenues that we can take that with adding additional products and increasing rates or keeping them where they are with their steady escalator. So there's a lot on the table for us as we open this door and expand it. But really, it's about understanding the assets that we're sitting on and taking full value of them and giving customers what they're looking for. Great, thanks for that. And then, you know, you recently, as you noted, switched from Home Depot to Lowe's.

Joseph Osha: Two kind of interlinked questions first understanding that.

Joseph Osha: We hope this convert was largely refi can you give us some <unk>.

<unk> or set of limits that we can use to think about what the trajectory of recourse debt for the company might look like and in that vein. When you talk about the $2 million to $500 million yeah. The annualized cash generation by Q4 of this year or can you commit to us that that is cash.

Joseph Osha: Generation that occurs without the benefit of equity or equity linked or recourse debt issuance.

Speaker Change: Yeah, Yes yesterday that second part are you you know that the cash generation here is really geared towards a maximum use of nonrecourse.

Speaker Change: So it's a really implied here is a growing amount of nonrecourse that is exceeding the cost to generate the origination so that that that is the cash generation a that's not a you know that's obviously a different yeah, that's not a plan to raise more parent capital.

Speaker Change: Okay and on the first question how can we think about what recourse debt you know, how we should think about that.

Mary Powell: I'm just wondering if you can address the difference in the arrangements there and, just more broadly, maybe how you view the different sales channels. Yeah, so we like having a strong presence in a home improvement area for retail. And as we've been focused on cash generation and driving profitable growth and evaluated the opportunity and the lows, we found some really interesting and advantageous things about that. As a host site, if you will, one being a really high homeowner demographic, and to just the general reality that there's been far less solar presence in those retail sites. And although it's only been a few days of selling on that site, it's been really encouraging.

I think yeah.

Speaker Change: Obviously, you know with a with a transaction with a $1 44, a transaction in the market I'm you know I I will have to kind of reiterate pointing to that.

Speaker Change: But you know I'll I'll kind of like reiterate that the you know the.

Speaker Change: Part of the prepared remarks.

Speaker Change: No no no material movement.

Speaker Change: Movement in either direction in the amount of like net parent leverage.

Speaker Change: That is net recourse.

Speaker Change: Rick recourse recourse correct.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you. Our next question comes from the line of Philip Shen.

Philip Shen: Ross and Kam. Please proceed with your question.

Philip Shen: Hi, all thanks for the questions as it relates to renewals was wondering if you could share I'm sorry, if I missed it but can you share from a renewal standpoint, the dollar per megawatt volume that could be up.

Danny: So we're really excited about the consumer demographic and the relatively unpenetrated nature of it. Hi, good afternoon, guys. Just a question on the cost reductions you're seeing on the equipment side. You know, you mentioned 18% or greater than 18% off the highs. Is that just sort of what you're seeing today in terms of your product categories? And then also, you talk about realizing this over the next couple of quarters.

Philip Shen: Per year this year next year, and how that might scale thereafter. Thanks.

Speaker Change: Yeah. So this year, we have no customers that are up for renewal to proactive pilots. So we're reaching out to customers that in.

Speaker Change: Three to four years from now begin to start renewing and so we're proactively talking to them to understand what those opportunities are.

Danny: You know, we're hearing throughout the value chain that pricing pressure is not completed yet. So, is there a possibility that that 18% over the next couple of quarters could end up higher than 18%? Yeah, great question.

Speaker Change: And in fact renewing them early.

Speaker Change: And like it is about learning and scaling so again, where we're not at all thinking about this as something like we're going to sit here and wait for customers to renew we're gonna come up with programs and ways to meet their needs ahead of the end of their renewal period.

Danny: So definitely, the 18 is being driven by actual pricing on procurement activity we are conducting in the market. The reason we are talking about it in a lagged manner again is that the amount of inventory we've been carrying on hand has been a little bit more sticky in terms of being, you know, above target. I think it's moving towards target over the next quarter or two, as we've guided to over the last couple of quarters. And as that moves through, we do have a good line of sight into that greater than 18.

Speaker Change: Yeah, I totally get everything you said and I don't really understand the renewals went out for some time, but I was wondering if you guys had a view as to what the volume might be that's all I'll move to the second question here with your flat 24 megawatt guide as a backdrop, our work with our freedom forever, which.

Speaker Change: I believe is one of your largest if not the largest dealers suggest they may be growing 60% to 100% year over year. So our estimates our estimates suggest they might may have contributed 250 megawatts.

Danny: It could certainly be more. At this point, it's most heavily being driven by battery prices and module prices, which are obviously the most significant parts of the stack. But you know, definitely, pricing has softened up a bit and remained that way, and there could be opportunity for a bit more.

Do your business and 23 and 24 this could be closer to 380 megawatts as they're splitting their volume between you and everbright.

Speaker Change: So our rough numbers suggest that they might be adding what roughly 130 megawatts to your megawatts and 24 of your roughly one gig.

Speaker Change: So given that you have got it flat year over year can you give us some color on what is happening with the rest of the business. If they're growing 130, you know Kim perhaps our assumptions on the freedom situation are off the Mark you know maybe correct us if we're wrong, but maybe share with us what's going on with the rest of your dealer business year over year.

Danny: And then just to follow up, I think going in the same vein around the you said greater than 100 days, maybe the last quarter, and today, we're approximately 100 days. Does that reflect the uptick in sales activity you guys are talking about seeing here in one cue? Or should we expect that to accelerate downward, just given what you're seeing early in the top of the funnel? Yeah, so not yet reflected.

Speaker Change: Sure.

Speaker Change: A direct standpoint, how is that business going.

Speaker Change: As your direct business I know on slide <unk>.

Speaker Change: Ah 20 or success there slide six it shows that you know you're you have a direct business growing really well, but was wondering where freedom is categorized are they categorized in the affiliate program there or partner or is that in the blues. Yeah. So yeah I can share some more color on that situation that would be fair.

Danny: And part of what brings it down is, apart from just bringing down the gross dollars of inventory balance, the significant increase we are expecting in install activity that will follow our sales. And that that's also in line with that kind of one to two quarter guidance, as our daily rate of installs will be much higher, and our balance will be lower. We should naturally get to our target days. That's a problem.

Speaker Change: Thanks.

Speaker Change: Yeah. So that's what I was going to point you to is slide six which really gives you a very clear picture of how we see 24 currently and yes, our freedom Forever, who has been a partner for you know.

Operator: Thank you, guys. Of course. Hi, everybody. Two kinds of interlinked questions.

Speaker Change: Quite a long time, a valued partner shows up in the affiliate partner installations category. You know currently no affiliate partner is over 10%.

Operator: First, understanding that this conversion was largely reified. Can you give us some ratio or, you know, set of limits that we can use to think about what the trajectory of recourse debt for the company might look like? And in that vein, when you talk about the $200 to $500 million in annualized cash generation by Q4 of this year, can you commit to us that that is cash generation that occurs without the benefit of, you know, equity or equity-linked or recourse debt issuance? Yeah, yes, yes to that second part. You know, the cash generation here is really, you know, geared towards maximum use of non recourse. So it's really implied that there is a growing amount of non recourse that is exceeding the cost to generate the origination. So that that is the cash generation. That's not, you know; that's obviously different.

Speaker Change: Of our of our volume and yes, you're right, we're seeing our direct business growing nicely.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Brian Lee: Hey, everyone. Good afternoon, Thanks for squeezing me in.

Brian Lee: I know a lot's been covered here on the call, but maybe just one for me on this.

Brian Lee: Slide 20, where you're talking about the different.

Brian Lee: Levers and assumptions on the cash flow generation, you mentioned its going to be lumpy throughout the year, but can you give us a sense for I guess, what are maybe milestones events, you know capital raises et cetera that we.

Brian Lee: Would give you and maybe in what timeframe more visibility as to whether you hit the low mid high and I mean, it seems like if I just parse through some of this you're already tracking well above you know the storage mix. That's embedded here in the assumption I think you mentioned to a prior question the seven 5% might be a bit.

Danny: You know, that's not a plan to raise more parent capital. Okay. And on that first question, how can we think about recourse debt, you know, how we should think about that in action? Yeah. I think, yeah. Obviously, you know, with a transaction, with a 144A transaction in the market, I will have to kind of reiterate, point to that. But, you know, I'll kind of, like, reiterate the part of the prepared remarks about no material movement in either direction in the amount of, like, net parent leverage. That is NetRecord.

<unk> already hit are starting the year. So just trying to understand you know what the puts and takes but also the timeline as to when you know that that view kind of crystallize. It as we move through the year granted it's going to be lumpy on a quarter to quarter basis. Thank you.

Speaker Change: Great question, So I'll start Oh, maybe highlight a few of the factors on the page are on volume I think we talked about directionally throughout the year picking up sequentially considerably throughout the year and implied there is hitting that 15% year over year Mark in the <unk>.

Danny: Recourse, recourse, correct. Okay, thank you very much. Hi all, thanks for the questions. As it relates to renewals, I was wondering if you could share, sorry if I missed it, but can you share from a renewal standpoint the dollar or megawatt volume that could be up per year this year, next year, and how that might scale thereafter? Yeah, so this year, we have no customers that are up for renewal. It's a proactive pilot.

Speaker Change: Have a beer of course, we also highlighted that the year over year comps in the first half won't look as good and we do have that Q1 sequential decline you know really pacing out of that you know it gives us a very decent return back on operating cost leverage in the business and as we get that.

Speaker Change: That will be trending well.

Speaker Change: Up storage Max we believe.

Mary Powell: So we're reaching out to customers that will, you know, three to four years from now, begin to start renewing. And so we're proactively talking to them to understand what those opportunities are, and, in fact, renewing them early. So, again, it is about learning and scaling. So, again, we're not at all thinking about this as something like we're going to sit here and wait for customers to renew.

Speaker Change: Believe we will exceed based on the remarks that the I T. C. Adders are were a little bit shy of about 34% I think we have pathways building.

In that kind of Q3 Q4 timeframe to getting more of it I think that you know the two factors there would be more G O targeting.

Speaker Change: Where it relates to energy communities and low income and of course on domestic content.

Speaker Change: Onset of of that as as the regulations get crystallized.

Mary Powell: We're going to come up with programs and ways to meet their needs ahead of the end of their renewal period. Yep, I totally get everything you said, and I understand the renewals are for some time, but was wondering if you guys had a view as to what the volume might be. That's all.

Speaker Change: And then capital costs. Obviously are you now in a range, we are giving the range at the moment and saying you know a quarter point is between 40 and $50 million.

Speaker Change: So theres, a north of 100 basis points of kitchen.

Speaker Change: From high end to low end of range as it respects as as respects capital costs.

Operator: With your flat 24 megawatt guide as a backdrop, you know, our work with Freedom Forever, which I believe is one of your largest, if not your biggest, dealers, suggests they may be growing 60 to 100% year over year. So our estimates suggest they may have contributed 250 megawatts to your business in 23. In 24, this could be closer to 380 megawatts, as they're splitting their volume between you and Everbright.

Speaker Change: Right I appreciate the color I'll pass it on thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.

Colin Rusch: Thanks, So much could you guys talk about the maturity of the V. P. P monetization, obviously, what's incremental deployments of energy storage just want to get a sense of on a portfolio level, how you see that that value potentially increasing the you know the NPV of the portfolio.

Colin Rusch: Okay.

Colin Rusch: Yeah, we're really pleased with the P. G D. I I'm sure you saw the press release that we did with that program, where 8500 customers participated in a program over a number of months, we think it sets up a really good framework for future Ah you know virtual power.

Mary Powell: So our rough numbers suggest that they might be adding roughly 130 megawatts to your megawatts in 24 of your roughly one gig. So given that you have got it flat year over year, can you give us some color on what is happening with the rest of the business? If they're growing by 130, perhaps our assumptions on the freedom situation are off the mark; maybe correct us if we're wrong, but maybe share with us what's going on with the rest of your dealer business year over year, and from a direct standpoint, how is that business going? Is that your direct business? I know on slide 26 there, slide six, it shows that you have a direct business growing really well, but I was wondering where Freedom is categorized. Are they categorized in the affiliate program there or partner, or is that in the blue Sunrun Direct? So if you can share some more color on that situation, that would be fantastic.

Colin Rusch: Power plant structures that we do you know that really results in like you know what a view that over time it would be a net net subscriber value of about $2000.

Colin Rusch: Fantastic and then just mentioned labor efficiency.

Colin Rusch: And both on the sales and installation of fun I, just want to get a sense of order of magnitude you're expecting to see over the course of the year on the cadence of that efficiency as soon as it goes throughout the year.

Speaker Change: Yeah, I mean, we're really pleased with the efficiency gains we've seen across the business I would say and the installation area, particularly where that productivity has a really resulted in you know some great benefits.

Operator: Yeah, so that's what I was going to point you to is slide six, which really gives you a very clear picture of how we see 24 currently. And yes, Freedom Forever, who has been a partner for, you know, quite a long time, a valued partner, shows up in the affiliate partner installations category. You know, currently, no affiliate partner is over 10% of of our volume. And yes, you're right. We're seeing our direct business growing nicely. Hey, everyone. Good afternoon.

Speaker Change: As a percent of subscriber value is coming down obvious you know and that is happening. Despite the distortion created by some of the mix change you know so yeah. We're really pleased particularly as again, we've moved to a solar plus storage company. So that also as you think about productivity gains and you think about the.

Gains we've had where we are in essence, having our folks selling two products installing two products and so yes, we've been really pleased by the results. We've seen around are kind, a maniacal focus on cost in the business.

Operator: Thanks for squeezing me in. I know a lot's been covered on this call, but maybe just one from me on this slide 20 where you're talking about the different levers and assumptions on cash flow generation. You mentioned it's going to be lumpy throughout the year, but can you give us a sense for, I guess, what are maybe milestones, events, capital raises, et cetera, that would give you, and maybe in what time frame, more visibility as to whether you hit the low, mid, and high end? I mean, it seems like if I just parse through some of this, you're already tracking well above the The 7.5% might be a bit conservative already here at the start of the year.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Mohit <unk> with Mizuho. Please proceed with your question.

Speaker Change: Okay.

Speaker Change: Hi, This is David Benjamin from H I have a question on the convert can you please talk or give a little bit of color around.

David Benjamin: The timing I understand that as further refinance.

David Benjamin: The converts due in 2026 different good current until 2025. So just any color you could provide around that would be helpful. Thanks.

Speaker Change: Yeah, I think I think you know really a you know an early you know getting out ahead are at an early liability management exercise.

Speaker Change: The revolver was the same thing the warehouse was the same thing I think we like the you know market conditions are you know we have obviously you know good depth in that area, especially on the I'm not addressing the convert directly but across the capital spectrum I think just you know deep pool.

Danny: So just trying to understand, one, the puts and takes, but also the timeline as to when that view kind of crystallizes as we move through the year. Granted, it's going to be lumpy on a quarter to quarter basis. Thank you.

Danny: So I'll start, I'll maybe highlight a few of the factors on the page. On volume, I think we talked about directionally throughout the year, picking up sequentially, considerably throughout the year, and implied there is hitting that 15% year over year mark in the back half of the year. Of course, we also highlighted that the year over year comps in the first half wouldn't look as good.

Speaker Change: [noise] of capital available to us and just wanting to be exceptionally timely and handling all of that.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: That concludes the time that has been allocated for Q&A you may now disconnect.

Speaker Change: You have been removed from the comp goodbye.

Speaker Change: Hum.

Danny: We do have the Q1 sequential decline. You know, really pacing out of that gives us a very decent return on operating cost leverage in the business. As we get that, you know, that will be trending well. The backup storage mix, we believe we will exceed based on the remarks. The ITC adders, we're a little bit shy of about 34%. I think we have pathways building, again, in that kind of Q3, Q4 timeframe to getting more of it. I think, you know, the two factors there would be more geo-targeting where it relates to energy communities and low income.

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Danny: And, of course, on domestic content, the onset of that as the regulations get crystallized. And then capital costs, obviously, you know, in a range. We are giving the range at the moment and saying, you know, a quarter point is between $40 and $50 million. So there's north of 100 basis points of cushion from the high end to the low end of the range as it relates to capital costs. Alright, appreciate the caller, I'll pass it off, thank you. Thank you. Thanks so much. Could you both talk about the maturity of the VPP monetization, obviously with the incremental deployments of energy storage? Just want to get a sense of, on a portfolio level, how you see that value potentially increasing the NPP as a portfolio?

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Mary Powell: Yeah, we're really pleased with PG&E. I'm sure you saw the press release that we did with that program where 8,500 customers participated in a program over a number of months. We think it sets up a really good framework for future virtual power plant structures that we do. That really results in a view that, over time, it would be a net subscriber value of about $2,000.

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Mary Powell: Fantastic. And then I mentioned labor efficiency, and both on the sales and installation fronts, I just want to get a sense of the order of magnitude you're expecting to see over the course of the year and the cadence of that efficiency as we go. Yeah, I mean, we're really pleased with the efficiency gains we've seen across the business. I would say in the installation area, particularly, where that productivity has really resulted in some great benefits, CAC as a percent of subscriber value is coming down. Obviously, you know, and that is happening despite the distortion created by some of the mixed changes.

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Mary Powell: You know, so, yeah, we're really pleased, particularly as, again, we've moved to a solar plus storage company. So that also, as you think about productivity gains and you think about the gains we've had, where we are, in essence, having our folks selling two products and installing two products. So, yes, we've been really pleased by the results we've seen around our kind of maniacal focus on cost in the business. Hi, this is David Benjamin. I'm from Heap. I have a question about the Convert.

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Operator: Can you please talk or give a little bit of color around, The timing, I understand that it's for a refinance, but the converts due in 2026 don't go current, https://www.kenhub.com Yeah, I think, you know, really, you know, in early, you know, getting out ahead in early liability management exercises, you know, the revolver was the same thing, the warehouse was the same thing. I think we like the, you know, market conditions, you know, we have obviously, you know, good depth in the, especially on, I'm not addressing the convert directly, but across the capital spectrum, I think just, you know, deep pools of capital available to us, and just wanting to be exceptionally timely in handling all of that. You have been removed from the call. Goodbye, and many more. Thank you. Thank you... The Ultimate Parody Site!

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Operator: ... The Bulletproof Executive 2013, Bye! BF-WATCH TV 2021, == Notes == == External links == == External links == The Bulletproof Executive 2013, The Ultimate Parody Site! The Bulletproof Executive 2013.

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Operator: .. The Bulletproof Executive, 2013.

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Operator: .. The Bulletproof Executive, 2013.

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Operator: ... The Ultimate Parody Site!.. The Bulletproof Executive, 2013, Bye! The Ultimate Parody Site!

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Operator: The Bulletproof Executive 2013, All of them are here for every single one of us. They are very, very, very important people in the community. At issues on the tax cut, my involvement has been so important because it's the center of public health, PU's public health. In saying that, to me, the sense of that, it's part of the precision, a sense of that as we speak, a number of things that have to come and provide 14.7 million dollars annually. I'm a leader in public health and community health groups, but officially and in essence, The Bulletproof Executive 2013, BF-WATCH TV 2021, The Bulletproof Executive 2013

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