Q1 2024 Spruce Power Holding Corporation Earnings Call
Operator: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to this Spruce Power first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.
Thank you for standing by my name is Krista and I will be your conference operator today at this time I would like to welcome everyone to the Bruce power first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise I forget the speaker's remarks, there will be a question and answer session.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. Thank you. I would now like to turn the conference over to Bronson Fleig, head of investor relations. Bronson, you may begin your presentation.
Robinson: I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question Heck out and press star. One. Thank you I would now like to turn the conference over to broaden and flag head of Investor Relations Robinson, you May begin your conference.
Good afternoon, and welcome to Steve Powers' Conference call to discuss results for the first quarter of 2024 with me today are Chris <unk>, Our Chief Executive Officer, and Sara <unk>, Our Chief Financial Officer.
Bronson Wells Fleig: Good afternoon, and welcome to Spruce Power's conference call to discuss results for the first quarter of 2024. With me today are Chris Hayes, our Chief Executive Officer, and Sarah Wells, our Chief Financial Officer.
Bronson Wells Fleig: Our call this afternoon will include statements that speak to the company's expectations, outlook, and predictions of the future, which are considered forward-looking statements. These forward-looking statements are subject to risk and uncertainty, many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements. We are not obliged to revise or update any forward-looking statements, except as may be required by law.
Robinson: Our call. This afternoon will include statements that speak to the company's expectations outlook and predictions of the future which are considered forward looking statements. These forward looking statements are subject to risks and uncertainties many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements.
Robinson: Obliged to revise or update any forward looking statements, except as maybe required by law. Please refer to our disclosures regarding risk factors and forward looking statements in today's earnings release and other SEC filings.
Bronson Wells Fleig: Please refer to our disclosures regarding risk factors and forward-looking statements in today's earnings release and other SEC filings. A copy of our press release has been posted on the Investor Relations page of our website for reference. The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP equivalent and can be found in the press release that we issued this afternoon. With that, I will turn the call over to our CEO. Chris, go ahead.
Robinson: A copy of our press release has been posted to the Investor Relations page of our website for reference the non-GAAP financial measures discussed in this call are reconciled to the U S. GAAP equivalent and can be found in the press release that we issued this afternoon.
Robinson: With that I will turn the call over to our CEO Chris go ahead.
Chris: Thank you Bronson and good afternoon to everyone. This is my first earnings call here at Bruce Power as Chief Executive Officer.
Christopher M. Hayes: Thank you, Bronson, and good afternoon to everyone. This is my first earnings call here at Spruce Power as Chief Executive Officer. And I'd like to say how excited I am to step into a new leadership position with the company. I have familiarity with spruce, having served as an independent director since Bruce was acquired 18 months ago in the reverse merger with XL Fleet. More importantly, I have been active in the renewable energy industry and project development for many years, and I'm excited to apply that expertise to our vision for Spruce.
Chris: And I'd like to say, how excited I am to step into a new leadership position with the company.
I had familiarity with spruce.
Chris: Having served as an independent director since Bruce was acquired 18 months ago, and the reverse merger with XL fleet.
Chris: More importantly, I have been active in the renewable energy industry and project development for many years and I'm excited to apply that expertise to our vision for Bruce.
Christopher M. Hayes: As I step into the CEO role, I believe Spruce is in its strongest position in its corporate history. There are three main reasons. First, our core solar business is inflecting toward positive cash generation as the benefits of 2023 M&A activity and greater scale are realized.
Speaker Change: As I step into the CEO role I believe spruce is in its strongest position in its corporate history.
Speaker Change: There are three main reasons.
Speaker Change: First.
Speaker Change: Our core solar business is inflicting towards positive cash generation as the benefits of 2023, M&A activity and greater scale are realized.
Speaker Change: Next spruce has a strong balance sheet and abundant liquidity.
Christopher M. Hayes: Spruce has a strong balance sheet and abundant liquidity. This positions us well to take advantage of the massive investment cycle occurring upstream in residential solar markets. Last, legacy Excel fleet overhang items are diminishing, allowing us to look forward to focusing on growing positive cash flows.
Speaker Change: This positions us well to take advantage of the massive investment cycle occurring upstream in residential solar markets.
Speaker Change: Laughs legacy Excel fleet overhang items are diminishing, allowing us to look forward to focusing on growing positive cash flows.
Christopher M. Hayes: My core near-term focus will center on driving Spruce to pursue capital-light, organic growth opportunities that can leverage our outstanding owner-operator platform. This includes acquisitions of operating residential solar portfolios with attractive return profiles and a sharpened focus on extracting value from Spruce's best-in-class solar servicing technology platform. My goal is to leverage my experience in productizing several once nascent technology services businesses in renewable energy markets into businesses that today are sustainable generators of recurring revenue.
Speaker Change: My core near term focus will center on driving spruce to pursue capital light organic growth opportunities that can leverage our outstanding owner operator platforms.
Speaker Change: This includes acquisitions of.
Speaker Change: Operating residential solar portfolios.
Speaker Change: With attractive return profiles.
Speaker Change: And a sharpened focus on extracting value from spruce is best in class, So they're servicing technology platform.
Speaker Change: My goal is to leverage my experience.
Speaker Change: And product ties in several once Nathan technology services businesses in renewable energy markets into businesses that today are sustainable generators of recurring revenues.
Speaker Change: I believe that spirit is servicing technology platform is primed for optimization.
Christopher M. Hayes: I believe that Spruce's servicing technology platform is primed for optimization that can drive organic growth opportunities. I'm happy that the Board of Directors has entrusted me to unlock this value as an additional source of growth for Spruce.
Speaker Change: It can drive organic growth opportunities.
Speaker Change: I'm happy that the board of directors has entrusted me to unlock this value as an additional source of growth for spruce.
Speaker Change: Spruce servicing.
Christopher M. Hayes: So, let's start there with Spruce's servicing technology platform. I want to discuss our servicing platform in more detail because it's really our quote secret sauce. The platform foundationally enables us to do many things well, including our ability to be the preeminent consolidator of residential solar assets through M&A. Spruce's servicing technology platform has been years in the making and today stands as a mature, fully integrated business. It was crafted to provide exceptional customer service while operating residential solar assets in the most efficient manner, thus maximizing asset-level cash flows.
Speaker Change: Let's start there with versus servicing technology platform.
Speaker Change: Wanted to discuss our servicing platform in more detail because it's really our quote secret sauce.
Speaker Change: Platform Foundation enables us to do many things well, including our ability.
Speaker Change: To be the preeminent consolidator of residential solar assets through M&A.
Speaker Change: Bruce is servicing technology platform with years in the making and today stands as a mature fully integrated business.
Speaker Change: It was crafted to provide exceptional customer service.
Speaker Change: While operating residential solar assets, the most efficient manner, thus maximizing <unk>.
Asset level cash flows.
Speaker Change: Our full wrap servicing suite includes infrastructure such as one.
Christopher M. Hayes: Our full-wrapped servicing suite includes infrastructure such as one, a billing and collections platform that enables seamless customer payment services and in-house collection activities, too, asset operations, in which we remotely monitor our rooftops and collect data and analytics, enabling us to efficiently deploy field services teams to service rooftops and keep revenues flowing. Third, homeowner support, a suite of both online tools and U.S.-based call center agents that handle anything from basic customer questions to system transfers during a home sale process.
Bruce: Our billing and collections platform that enables seamless customer payment services.
Speaker Change: In house collection activities.
Speaker Change: Q.
Speaker Change: Asset operations in which we remotely monitor our rooftops and collect data and analytics.
Speaker Change: Tabling us to efficiently deploy field services teams to service rooftops and keep revenues flowing.
Speaker Change: Third Homer.
Speaker Change: Homeowner support.
Speaker Change: Our suite of both online tools and U S based call center agents that handle anything from basic customer questions two system transfers in a home sale process.
Speaker Change: And lastly.
Christopher M. Hayes: And lastly, a suite of many other valuable services. This includes tools that use in-depth financial analysis and reporting to generate detailed records for asset owners and third-party funds on a multitude of financial and operational reporting metrics. All these systems are technology-driven, such that we can provide integrated, seamless services to both Spruce and third-party assets. The key takeaway?
Speaker Change: Our suite of many other valuable services.
Speaker Change: This includes tools that used in depth financial analysis and reporting to generate detailed records.
Speaker Change: For asset owners and third party funds on a multitude of financial and operational reporting metrics.
Speaker Change: All of these systems are technology driven.
Speaker Change: Such that we can provide integrated.
Speaker Change: <unk> services to both spruce.
Speaker Change: And third party assets the key takeaway two.
Speaker Change: To our knowledge spruce.
Christopher M. Hayes: Spruce has the most comprehensive service offering in the market. It's hard to replicate, and we believe we have created a moat in service. Spruce services its own solar assets, as well as some third-party portfolios, a few of which are now wholly owned through acquisitions. Our platform has matured such that we can scale this servicing business to far more of those third-party portfolios. To that end, it's important to emphasize our addressable market.
Speaker Change: Bruce has the most comprehensive service offering in the market.
Speaker Change: It's hard to replicate and we believe we have created a moat in servicing.
Speaker Change: Spruce services its own solar assets as well as some third party portfolios.
Speaker Change: A few of which are now wholly owned through acquisition.
Speaker Change: Our platform has matured such that we can scale. This servicing business so far more of those third party portfolios.
Speaker Change: To that end.
Speaker Change: It is important to underscore our addressable market.
Christopher M. Hayes: Upstream to Spruce, we are amid a massive investment wave in residential solar and distributed energy assets, according to leading industry data sources. Around 25 gigawatts of rooftop solar have been installed in the United States over the past five years. Despite the transitory challenges of policy and cost of capital volatility, the magnitude of residential solar installations ahead is compelling. We believe hundreds of thousands of homeowners will adopt solar through the end of the decade.
Speaker Change: Stream just Bruce.
Speaker Change: Amid a massive investment waves and residential solar and distributed energy assets.
Speaker Change: Turning to leading industry data sources.
Speaker Change: Around 25, Gigawatts of rooftop solar has been installed in the United States over the past five years.
Speaker Change: Despite the transitory challenges of policy and cost of capital volatility the magnitude of residential solar installations ahead.
Speaker Change: It's compelling.
Speaker Change: We believe hundreds of thousands of homeowners will adopt solar through the end of the decade.
Christopher M. Hayes: Even more encouraging for Spruce, lease and PPA paper is becoming a preferred consumer financing choice, as this paper can be more efficiently priced by originators for the consumer in this quote higher for longer rate environment. This robust outlook creates tremendous opportunity for Spruce to offer its best-in-class servicing platform to third-party originators and, of course, the opportunity to consolidate solar portfolios over time through M&A.
Speaker Change: Even more encouraging first Bruce lease and PPA paper is becoming a preferred consumer financing choice.
Speaker Change: Has this tape can be more efficiently priced by originators for the consumer.
Speaker Change: This quote higher for longer rate environment.
spruce: This robust outlook creates tremendous opportunity for spruce to offer our best in class servicing platform to third party originators and of course.
spruce: The opportunity to consolidate solar portfolios over time through M&A.
spruce: Why.
spruce: Answer simple.
spruce: One.
Christopher M. Hayes: From a servicing perspective, we offer what we believe is the most comprehensive and price competitive service offering in the market. Our platform is purpose-built and years in the making. So we are competitively advantaged versus competing piecemeal offerings, solar originators, and financing parties attempting to retain servicing quotes in-house alongside asset ownership. From an M&A perspective. History tells us that most originators are good at what they do; installing solar, although owning solar assets for 20 to 30 years is not their forte. These solar installers and their partners, who look to own portfolios for either economic or tax reasons, eventually look to recycle capital for future development activities.
From a servicing perspective, we offer what we believe is the most comprehensive and price competitive service offering in the market are.
Speaker Change: Our platform is purpose built in years in the making.
Speaker Change: So we are competitively advantaged versus competing piecemeal offerings from solar originators and financing parties attempting to retain servicing quote in house alongside asset ownership.
Speaker Change: Two.
Speaker Change: On an M&A perspective.
History tells us that most originators are good at what they do.
Speaker Change: Stalling solar.
Speaker Change: Owning solar assets for 20 to 30 years is not there for Te.
Solar installers and their partners.
Speaker Change: Who look to own portfolio through either economic or tax reasons, eventually look to recycle capital.
Speaker Change: For future development activities.
Christopher M. Hayes: In fact, this has been the catalyst for many of Spruce's 13 acquisitions to date, and in these first few weeks as CEO, I have begun to present our team with a goal of creating value from this tremendous platform we have. Earlier this year, we announced the launch of Spruce Pro, which is our B2B brand for marketing our servicing technology platform to other residential solar assets, as well as commercial solar and other energy businesses.
Speaker Change: In fact this has been the catalyst for many of the spruce 13 acquisitions to date.
Speaker Change: So in.
Speaker Change: In these first few weeks as CEO.
Speaker Change: I've begun to present, our team with the goal of creating value from this tremendous platform we have.
Speaker Change: Earlier this year, we announced the launch of <unk> Pro which is our <unk> brand for marketing our servicing technology platform to other residential solar assets.
Speaker Change: As well as commercial solar and other energy businesses.
Christopher M. Hayes: Early indications of interest for Spruce Pro and our servicing technology offering are exciting and outpacing our initial expectations. I look forward to providing more updates over the next few quarters. Next, I want to discuss our philosophy and current position around capital allocation. At quarter end, Spruce had $150 million of cash.
Speaker Change: Early indications of interest for spirits pro and our servicing technology offering our exciting and outpacing our initial expectations.
Speaker Change: I look forward to providing more updates over the next few quarters.
Next I want to discuss our philosophy and current position around capital allocation at quarter end spruce had $150 million of cash.
Christopher M. Hayes: This war chest enables us to pursue growth by acquiring residential solar portfolios and through expanding our service and customer base. Our philosophy around capital allocation has been consistent since Bruce went public via the merger, and we have no intention of changing it. Our investment decisions are driven by a rigorous analysis of opportunity costs. At any point in time, we will direct our capital to the highest return alternative. We retain maximum flexibility in deciding what to do because we can't predict in advance which alternative will be most attractively priced, as market conditions are always changing.
This war chest enables us to pursue growth.
Speaker Change: By acquiring residential solar portfolios, and they're expanding our service and customer base.
Speaker Change: Our philosophy around capital allocation has been consistent since Bruce went public via the merger and we have no intention of changing it.
Speaker Change: Our investment decisions are driven by a rigorous analysis of opportunity cost.
Speaker Change: At any point in time, we will direct our capital to the highest return alternatives.
Speaker Change: We retain maximum flexibility in deciding what to do.
Speaker Change: Because we can't predict in advance, which alternative will be most attractively priced at.
Speaker Change: As market conditions are always changing.
Christopher M. Hayes: Occasionally, like this quarter, we may do nothing because our alternatives are equivalent, and we expect future conditions to create better opportunities. I watched the Berkshire annual meeting last weekend and noted that Buffett was raising cash for the same reason.
Speaker Change: Occasionally like this quarter, we may do nothing because our alternatives are equivalent and we expect future conditions to create better opportunities.
Speaker Change: I watched the Berkshire annual meeting last weekend.
Speaker Change: Notice that Buffett was raising cash for the same reason.
Christopher M. Hayes: He wants to be ready for more compelling opportunities he expects in the coming quarters. However, we do not rush to deploy capital merely to boost our growth metrics temporarily. Instead, we emphasize patience, ensuring that when we make moves, they are both strategic and prudent. This disciplined approach means we are not swayed by short-term market trends or pressures to close deals rapidly. We can wait for our fat pit, the right opportunity that aligns perfectly with our long-term objectives and company values.
Speaker Change: He wants to be ready for more compelling opportunities.
Speaker Change: Do you expect in the coming quarters.
Speaker Change: We do not rush to deploy capital nearly to boost our growth metrics temporarily.
Speaker Change: Instead, we emphasize patient.
Speaker Change: Ensuring that when we make moves they are both strategic and prudent.
Speaker Change: This disciplined approach means we are not swayed by short term market trends or pressures to close deals rapidly.
Speaker Change: We can wait for our fat pitch.
Speaker Change: The right opportunity that aligns perfectly with our long term objectives and company values.
Christopher M. Hayes: The great thing is Bruce is paid to wait. If we do not grow our portfolio with an acquisition, we are still collecting meaningful and attractive cash flow from the assets we own. This is a stark contrast to the broader residential solar industry, which must, quote, grow or die. Thus, we have no reason to force any capital allocation.
The great thing is.
<unk> paid to wait if.
Speaker Change: If we do not grow our portfolio with an acquisition.
Speaker Change: We are still collecting meaningful and attractive cash flow from the assets we own.
Speaker Change: This is in Stark contrast to the broader residential solar industry.
Speaker Change: Quote grow or die.
Speaker Change: So we.
Speaker Change: We have no reason to force any capital allocation moves, we can and we'll be patient and act only when a likely return is compelling and is the best among the alternatives we have.
Christopher M. Hayes: We can and will be patient and act only when a likely return is compelling and is the best among the alternatives we have, before handing it off to Sarah for some final thoughts. I've enjoyed many conversations with the investment community over the past several weeks. Many of you are no doubt listening today. I'll echo the sentiments that I've expressed, in that Spruce remains head down, executing on our core strategies. I'm excited to leverage my experience to enhance the value of our underlying servicing business, which offers us a durable competitive advantage over the long run. Spruce is very well positioned, and I look forward to building on the momentum our team has created to date.
Sarah: Before handing it off to Sarah and final thoughts.
Sarah: I have enjoyed many conversations with the investment community over the past several weeks.
Sarah: Many of you no doubt listening today.
Speaker Change: I'll Echo the sentiments that ive expressed in that spruce remains heads down executing on our core strategies.
Sarah: I'm excited to leverage my experience to enhance the value of our underlying servicing business.
Sarah: Which offers us a durable competitive advantage over the long run.
Sarah: <unk> is very well positioned.
Sarah: And I look forward to building on the momentum our team has created to date.
Sarah: Sarah.
Chris: Thanks, Chris I'll first address some housekeeping items that impact our financial reporting specifically an update on wrapping up legal proceedings related to legacy XL Clean Corp, and its operations.
Sarah Weber Wells: Thanks, Chris. I'll first address some housekeeping items that impact our financial reporting, specifically an update on the wrap-up of legal proceedings related to Legacy XL Fleet Corp and its operations. As previously communicated during the quarter, Spruce made a payment in the amount of $15 million to settle the Southern District of New York securities class action lawsuits surrounding the 2020 merger of XL Fleet. This matter, as well as the previously disclosed STC inquiry, has been settled.
Speaker Change: As previously communicated during the quarter Bruce made a payment in the amount of $15 million to settle the southern District of New York Securities Class action lawsuits surrounding the 2020 merger of Axon fleet.
Speaker Change: This matter as well as the previously disclosed FTC inquiry have been settled with legacy XL fleet legal items diminished. This allows us to look forward to growing the cash flows from our core business.
Sarah Weber Wells: With legacy XL Fleet legal expenses diminishing, this allows us to look forward to growing the cash flows from our core business. Moving on to the first quarter financial results. First quarter revenue was $18.3 million compared to $18.1 million in the prior year period. The year-over-year increase is largely due to incremental revenues from the Tredegar acquisition completed in August 2023. First Quarter Core OpEx, which we define as SG&A and Portfolio O&M, was $16.6 million in total as compared to $17.6 million for the prior year.
Sarah Weber Wells: Breaking this out, first quarter portfolio O&M expense increased to $3.1 million from $1.9 million in the prior year period. The increase is largely due to timing considerations, as $2 million of accrued expenses at year end were settled during the first quarter. SG&A expenses decreased to $13.5 million in the first quarter from $15.7 million in the first quarter of 2020. The prior year period saw an impact due to legal fees tied to legacy XL Fleet lawsuits and restructuring charges.
Speaker Change: The first quarter financial results first quarter revenue was $18 3 million compared to $18. One in the prior year period the year over year increase is largely due to incremental revenues from the <unk> acquisition completed in August 2023.
Speaker Change: First quarter core Opex, which we define as SG&A and portfolio O&M was $16 6 million and total.
Speaker Change: As compared to $17 6 million for the prior year period.
Speaker Change: Breaking this out first quarter portfolio O&M expense increased to $3 1 million from $1 9 million in the prior year period. The increase is largely due to timing considerations in which $2 million of accrued expenses at year end were settled during the first quarter.
Speaker Change: SG&A expenses decreased to $13 5 million in the first quarter from $15 7 million in the first quarter of 2023.
Speaker Change: The prior year periods, the impact due to legal fees tied to legacy <unk> lawsuit and restructuring charges. Finally first generated a GAAP net loss attributable to stockholders of $2 5 million in the first quarter as.
Sarah Weber Wells: Finally, Spruce generated a gap net loss attributable to stockholders of $2.5 million in the first quarter. As we discussed in our last call, management considers operating EBITDA as a key measure in evaluating Spruce's operating performance. We define operating EBITDA as adjusted EBITDA plus net proceeds from the investment in SEMTH master lease, interest earned on cash investments, and proceeds from buyouts and prepayments, as these items represent material cash inflows from our ongoing business and strategy. Adjusted EBITDA was $3.8 million for the first quarter.
Speaker Change: As we discussed in our last call management considers operating EBITDA as a key measure and evaluating <unk> operating performance, we define operating EBITDA as adjusted EBITDA plus net proceeds from investment in CMT H Master lease interest earned on cash investments and proceeds from buyouts and prepay.
Speaker Change: Amos.
Speaker Change: These items represent material cash inflows from our ongoing business and strategy.
Speaker Change: Adjusted EBITDA was $3 8 million for the first quarter.
Sarah Weber Wells: Adding in the net proceeds from the Spruce Power IV portfolio of $3.9 million brings the total to $7.7 million. Next, adding $1.6 million of interest earned on cash investments and $1.4 million of proceeds from buyouts and prepayments, operating EBITDA totaled approximately $10.7 million for the first quarter. Next, I'll address our capital and liquidity position. As of March 31, 2024, we had cash and cash equivalents of $150 million. This compares to $173 million in cash and cash equivalents as of December 31, 2023.
Speaker Change: Adding in the net proceeds from this very powerful portfolio of $3 9 million brings the total to $7 7 million.
Speaker Change: Adding $1 6 million of interest earned on cash investments and $1 4 million of proceeds from buyouts in prepaid lines operating EBITDA totaled approximately $10 7 million for the first quarter.
Sarah Weber Wells: The net change in cash is primarily attributable to Excel wind-down activities, namely the previously mentioned $15 million net payment to settle the SDNY shareholder lawsuit. The total principal balance of long-term debt was $640 million as of March 31, 2024, with a blended interest rate of 5.8 percent, including the impact of hedge rates. As a reminder, all of Spruce's debt is non-recourse to the company and consists of project-level debt that is supported by our solar lease and PPA portfolios and is non-recourse to the company.
Speaker Change: Next I'll address our capital and liquidity position.
As of March 31, 2024, we had cash and cash equivalents of $150 million.
This compares to $173 million of cash and cash equivalents as of December 31, 2023.
The net change in cash is primarily attributable to XL wind down activity, namely the previously mentioned $15 million net payment to settle the SD NY shareholder lawsuit.
Speaker Change: The total principal balance of long term debt was $640 million as of March 31, 2024, with a blended interest rate of five 8%, including the impact of the hedge arrangement.
Speaker Change: As a reminder, all of that is non recourse to the company and project level debt that is supported by our solar lease and PPA portfolio.
Speaker Change: And is non recourse to the company.
Sarah Weber Wells: At quarter end, 97% of our debt profile was hedged, with mark-to-market on our swaps of a positive $34 million. Spruce's nearest maturing facility, the SC4 facility, is due August 2025, and we are actively engaged with the Linden community to refinance the facility.
At quarter end, 97% of our debt profile with hedges with Mark to market on our swaps of a positive 34 million.
Speaker Change: First is nearest maturing facility. The <unk> facility is due August 2025, we are actively engaged with the lending community to refinance the facility.
Sarah Weber Wells: Last, moving to full-year financial guidance, which can be found on slide 20 of our investor relations deck. We are reaffirming our guidance, which includes an outlook for adjusted free cash flow, a break-even to moderately positive. As a reminder, this outlook excludes the impact of legacy Excel fleet items, namely legal expenses. This concludes our prepared remarks. Operator, please open the lines for questions.
Speaker Change: Moving to full year financial guidance, which can be found on slide 20 of our Investor Relations deck, we are reaffirming our guidance, which includes an outlook for adjusted free cash flow breakeven to moderately positive.
Speaker Change: As a reminder, this outlook excludes impact from legacy XL sweet items, namely legal expenses.
Speaker Change: This concludes our prepared remarks, operator, please open the lines for questions.
Speaker Change: Thank you.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw that question, again, press star 1. Your first question comes from the line of Peter Gastreich with Water Tower Research. Please go ahead.
Speaker Change: I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Speaker Change: I would like to withdraw that question again press star one.
Speaker Change: Your first question comes from the line of Peter <unk> with water Tower Research. Please go ahead.
Peter Gastreich: Yes, good afternoon, and congratulations on your results and thank you very much for the presentation. I have just a couple of questions here for starters. First of all, I noticed in your Q1 results that you did not repurchase any shares in the first three months. So I just would like to understand if there's any reason why the company was not proactive there. And the second question is just about your service platform, and you talked a bit about that in your presentation.
Peter: Yes, good afternoon, and congratulations on your results and thank you very much for the presentation.
Peter: A couple of questions here for starters.
Peter: First of all I've noticed in your Q1 results.
Peter: You did not repurchase any shares in the first three months, so just would like to understand it.
Peter: If there is any reason why the company was not proactive there.
Peter: And the second question is just about your servicing platform you talked a bit about that in your presentation I Wonder if you could dig a bit deeper there to help us understand those competitive advantages and in particular.
Peter Gastreich: I wonder if you could dig a bit deeper there to help us understand those competitive advantages and, in particular, if this could help to drive your revenues outside the PPAs and SLAs going forward. Thank you very much.
Peter: This could help to drive your revenues outside of the Ppas and escalators going forward. Thank you very much.
Speaker Change: Great. Thanks for the question so on the share buyback question.
Christopher M. Hayes: Great, thanks for the question. So on the share buyback question, our focus is to build a long-term sustainable business, and we think we will be a dominant operator of solar assets over the long term and reach greater scale. We are seeing compelling opportunities at compelling prices. And to execute, we need capital.
Speaker Change: Our focus is to build a long term durable business.
Speaker Change: And we think to be a dominant operator of solar assets over the long term and to reach greater scale.
We are seeing compelling opportunities at compelling prices.
Christopher M. Hayes: And we think that is a great element of this business, and it's driving M&A flow from an origination perspective into the business. As to your second question on the servicing platform, we've been building this over seven years, and we're doing it while managing our existing portfolio. And this is a fully wrapped service, completely integrated technology and services, start to finish. And we're not aware of a more comprehensive offering than ours, and having the ability to leverage our fixed costs makes this a very interesting business opportunity for us. And that's one of the reasons we're pursuing it in a capital light manner.
Speaker Change: And to execute we need capital and we think that is.
Speaker Change: A great element of this business and it's driving.
Speaker Change: M&A flow from.
Speaker Change: From an origination perspective into the business.
Speaker Change: As to your second question on the servicing platform.
Speaker Change: We've been building this over seven years.
Speaker Change: And we're doing it while managing our existing portfolio.
Speaker Change: Portfolio.
Speaker Change: And this is a full wrap service completely integrated technology services.
Speaker Change: To finish and we are not aware of a more comprehensive offering than ours and having the ability to leverage our fixed cost makes this a very interesting business opportunity for us.
Speaker Change: And that's one of the reasons, we're pursuing it in a capital light manner.
Speaker Change: Okay. Thank you very much.
Speaker Change: Your next question comes from the line of Tristan Richardson with Scotiabank. Please go ahead.
Operator: Your next question comes from the line of Tristan Richardson with Scotiabank. Please go ahead.
Tristan James Richardson: Hey, good afternoon, guys, maybe just one for me.
Tristan James Richardson: Hey, good afternoon, guys. Maybe just one for me, talk about M&A, and maybe just kind of curious in your new role, do you see the pace of M&A changing going forward within your core TPO assets? [inaudible] Curious maybe how the bid-ask spread looks today as you review deals.
Tristan James Richardson: Talk about.
Tristan James Richardson: M&A and maybe just kind of curious in your new role do you see the pace of M&A changing going forward within your core GPO.
Tristan James Richardson: Asset.
Tristan James Richardson: And then.
Tristan James Richardson: Curious maybe.
Tristan James Richardson: How the bid ask spread looks today.
Tristan James Richardson: As you review deals.
Tristan James Richardson: Well, it's a great. It's a great question.
Christopher M. Hayes: Well, it's a great question. You almost answered the first with the second.
Tristan James Richardson: You almost answered the first with the second so we are for sure.
Christopher M. Hayes: So we are for sure seeing a widening spread between bid and ask. And, you know, you look across this space, and for whatever reason, there is all sorts of chaos and opportunity. And so as it relates to us being a pure play, right? I mean, we are one of the largest third-party owners. We think that is a great business model. We are a great buyer at the right price. We will be disciplined. I would love to announce a deal tomorrow, but we are going to be super disciplined and wait for the right opportunity in IRRs to come our way, and then we will execute aggressively.
Tristan James Richardson: A widening spread between bid and ask and.
Tristan James Richardson: You look across the space.
Tristan James Richardson: And for whatever reason there is all sorts of chaos and opportunity and so as it relates to us being a pure play right. I mean, we are one of the largest third party owners. We think that is a great business model.
Tristan James Richardson: We are a great buyer at the right price, we will be disciplined I would love to announce a deal tomorrow, but we are going to be super disciplined and wait for the right opportunity in irr's to come our way.
And then execute aggressively.
Chris: I appreciate it thanks, Chris and congrats on your new role.
Tristan James Richardson: I appreciate it. Thanks, Chris, and congrats on your new job.
Christopher M. Hayes: Thank you. I really appreciate it.
Chris: Thank you really appreciate it.
Operator: And that concludes our question and answer session. I will now turn the call back over to Bronson Fleig for closing remarks.
And that concludes our question and answer session I will now turn the call back over to <unk> for closing remarks.
Speaker Change: Thanks, operator, and thank you to everyone, who joined our call today, if you have any follow up questions.
Bronson Wells Fleig: Thanks, operator. And thank you to everyone who joined our call today. If you have any follow-up questions, please reach out to me separately on our investor relations team.
Speaker Change: Please reach out to me separately in our Investor Relations team. This concludes our call have a great day.
Speaker Change: This concludes our call. Thank you for your participation and have a great day.
Operator: This concludes our call. Have a great day. This concludes our call. Thank you for your participation, and have a great day.
Speaker Change: [music].