Q2 2024 Altus Power Inc Earnings Call

August 8, 2024

Operator: Good afternoon, and welcome to the Altus Power second quarter 2024 conference call. As a reminder, today's call is being recorded, and participants are in a listen-only mode. A question-and-answer session will follow the formal process. At this time, for opening remarks and introductions, I would like to turn the call over to Alison Sternberg, Head of Investor Relations.

Speaker Change: Good afternoon and welcome to the Altus Power second quarter 2024 conference call. As a reminder, today's call is being recorded and participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Alison Sternberg: At this time, for opening remarks and introductions, I would like to turn the call over to Alison Sternberg, Head of Investor Relations.

Alison Sternberg: Good afternoon, and welcome to our second quarter 2024 earnings call. Speaking on today's call are Gregg Felton, Chief Executive Officer, and Dustin Weber, Chief Financial Officer.

Alison Sternberg: This afternoon, we issued a press release and a presentation related to the matters to be discussed on this call. You can access both the press release and the presentation on our website, www.altuspower.com, in the Investor section. This information is also available on the SEC's website.

Speaker Change: Good afternoon and welcome to our second quarter 2024 earnings call.

Speaker Change: Speaking on today's call are Gregg Felton, Chief Executive Officer, and Dustin Weber, Chief Financial Officer.

Speaker Change: This afternoon, we issued a press release and a presentation related to matters to be discussed on this call. You can access both the press release and the presentation on our website, www.altispower.com, in the Investor section. This information is also available on the SEC's website.

Alison Sternberg: As a reminder, our comments on this call may contain forward-looking statements. These forward-looking statements refer to future events, including Altus Power's future operations and financial performance. When used on this call, the words expect, anticipate, believe, will, plan, forecast, estimate, outlook, and similar expressions as they relate to Altus Power identify a forward-looking statement. These statements are subject to various risks and uncertainties, which could cause actual results to differ materially from those predicted in the forward-looking statements. Altus Power assumes no obligation to update these statements in the future or if circumstances change except as required by law.

Alison Sternberg: For more information, we encourage you to review the risks, uncertainties, and other factors discussed in our SEC filings that could impact these forward-looking statements, specifically our 10-K filed with the SEC on March 14, 2024. During this call, we also refer to Adjusted EBITDA, Adjusted EBITDA Margin, and ARR, or Annual Recurring Revenue, which are non-GAAP financial measures. ARR is an estimate that management uses to determine the expected annual revenue potential of our operating asset base at given points in time. ARR assumes customary weather, production, expenses, and other economic and market conditions, as well as seasonality.

Speaker Change: As a reminder, our comments on this call may contain forward-looking statements.

Speaker Change: These forward-looking statements refer to future events including Altus Power's future operations and financial performance.

Speaker Change: When used on this call, the words expect, anticipate, believe, will, plan, forecast, estimate, outlook, and similar expressions as they relate to Altus Power identify a forward-looking statement.

Speaker Change: These statements are subject to various risks and uncertainties, which could cause actual results to differ materially from those predicted in the forward-looking statements.

Speaker Change: Altus Power assumes no obligation to update these statements in the future, or if circumstances change, except as required by law.

Speaker Change: For more information, we encourage you to review the risks, uncertainties, and other factors discussed in our SEC filings that could impact these forward-looking statements, specifically our 10-K filed with the SEC on March 14, 2024.

Speaker Change: During this call, we also refer to Adjusted EBITDA, Adjusted EBITDA Margin, and ARR, or Annual Recurring Revenue, which are non-GAAP financial measures. ARR is an estimate that management uses to determine the expected annual revenue potential of our operating asset base at given points in time.

Speaker Change: ARR assumes customary weather, production, expenses, and other economic and market conditions, as well as seasonality.

Alison Sternberg: Our management team uses all of these non-GAAP financial measures to plan, monitor, and evaluate our financial performance, and we believe this information may be useful to our investors. These non-GAAP financial measures exclude certain items and should not be considered as a substitute for comparable GAAP financial measures. Altus Power's methods of computing these non-GAAP financial measures may differ from similar non-GAAP financial measures used by other companies. More detailed information about these measures and a reconciliation from GAAP to these non-GAAP financial measures is contained in both the press release and the presentation that we issued today. And with that, I'm pleased to turn the call over to Gregg Felton, Chief Executive Officer of Altus Power.

Speaker Change: Our management team uses all of these non-GAAP financial measures to plan, monitor, and evaluate our financial performance, and we believe this information may be useful to our investors.

Speaker Change: These non-GAAP financial measures exclude certain items and should not be considered as a substitute for comparable GAAP financial measures.

Speaker Change: Altus Power's methods of computing these non-GAAP financial measures may differ from similar non-GAAP financial measures used by other companies.

Gregg Felton: More detailed information about these measures and a reconciliation from GAAP to these non-GAAP financial measures is contained in both the press release and the presentation that we issued today. And with that, I'm pleased to turn the call over to Gregg Felton, Chief Executive Officer of Altus Power.

Gregg Felton: Thanks, Alison, and welcome to all our investors and analysts joining our call today. This afternoon, we are excited to share some insights into our overall business, the findings from our pipeline review, and the competitive moats that we believe will support our growth ambitions going forward, as well as our results for the most recent quarter. Since our last earnings call, in the context of my newly expanded role, I have taken the time to fully review our business and operations to identify areas of strength, as well as areas where we have the opportunity to improve and drive efficiencies that support our growth plan. This review has resulted in several demonstrable changes.

Gregg Felton: Thanks, Alison, and welcome to all our investors and analysts joining our call today.

Gregg Felton: One key area of focus has been the reprioritization of our resources with a particular focus on our technology and analytical team. More specifically, we are prioritizing activities designed to improve revenues and operating efficiency while deprioritizing certain non-core activities. One priority that is high on our list is our ability to synthesize and efficiently analyze the robust data set that we collect on our projects and customers. We collect an enormous amount of data, and we are focused on ensuring that our field technicians are armed with the information that they need to optimize the revenues generated from our portfolio of solar projects.

Gregg Felton: This afternoon, we are excited to share some insights into our overall business, the findings from our pipeline review, and the competitive moats that we believe will support our growth ambitions going forward, as well as our results for the most recent quarter.

Speaker Change: Since our last earnings call, in the context of my newly expanded role, I have taken the time to fully review our business and operations.

Speaker Change: to identify areas of strength, as well as areas where we have the opportunity to improve and drive efficiencies that support our growth plans.

Gregg Felton: This review has resulted in several demonstrable changes.

Gregg Felton: One key area of focus has been the reprioritization of our resources with a particular focus on our technology and analytical teams.

Gregg Felton: More specifically, we are prioritizing activities designed to improve revenues and operating efficiency while deprioritizing certain non-core activities.

Gregg Felton: One priority that is high on our list is our ability to synthesize and efficiently analyze the robust data set that we collect on our projects and customers.

Gregg Felton: We collect an enormous amount of data, and we are focused on ensuring that our field technicians are armed with the information that they need to optimize the revenues generated from our portfolio of solar projects.

Gregg Felton: We are also focused on ensuring that we have the necessary customer data to support our growing portfolio of community solar projects.

Gregg Felton: We are also focused on ensuring that we have the necessary customer data to support our growing portfolio of community solar projects. Before turning to the performance in the quarter, I'd like to discuss the results of our pipeline review and provide some background as to where and how we source our projects, our philosophy around underwriting standards, and the cadence of deal flow in our business. You will recall that back in May, I announced my plan to put our development pipeline under review with a focus on execution certainty and increasing the velocity at which these opportunities convert into revenue-generating assets. Before elaborating on our findings, I want to provide some important context.

Speaker Change: Before turning to the performance in the quarter, I'd like to discuss the results of our pipeline review and provide some background as to where and how we source our projects, our philosophy around underwriting standards and the cadence of deal flow in our business.

Gregg Felton: You will recall that back in May, I announced my plan to put our development pipeline under review with a focus on execution certainty and increasing the velocity at which these opportunities convert into revenue-generating assets.

Gregg Felton: Before elaborating on our findings, I want to provide some important context.

Gregg Felton: Altus Power benefits from a diversity of origination channels. The agility of our platform allows us to onboard projects at any stage in the project journey, from early stage engagements with clients to fully developed but yet to be constructed projects, all the way to acquisitions of fully operational projects. We believe that this flexibility is one of our significant competitive advantages and has been an important driver of our market share gains to date. As we've often cited, we like all commercial-scale megawatts, but they do come in different shapes and sizes.

Gregg Felton: All this power benefits from a diversity of origination channels.

Gregg Felton: The agility of our platform allows us to onboard projects at any milestone in the project journey, from early stage engagements with clients, to fully developed, but yet to be constructed projects, all the way to acquisitions of fully operating projects.

Gregg Felton: We believe that this flexibility is one of our significant competitive advantages and has been an important driver of our market share gains to date.

Gregg Felton: And our investment discipline requires that each new site be financially accretive to our shareholders. Importantly, our rigor around the application of the same underwriting principles to any opportunity positions us to generate attractive returns irrespective of the source and stage of the project. This differentiated approach has allowed us to increase our revenues and adjusted EBITDA fourfold over the past five years and build a nationwide portfolio that is the largest in the segment, sitting at almost one gigawatt in size. What is more notable is that we have achieved this level of scale even as the proportion of incremental megawatts added to the portfolio from early stage development has been relatively immaterial.

Gregg Felton: Importantly, our rigor around the application of the same underwriting principles to any opportunity positions us to generate attractive returns irrespective of the source and stage of the project.

Speaker Change: This differentiated approach has allowed us to increase our revenues and adjusted EBITDA for fold over the past five years and build a nationwide portfolio that is the largest in the segment sitting at almost one gigawatt in size.

Speaker Change: More notable is that we have achieved this level of scale even as the proportion of incremental megawatts added to the portfolio from early stage development has ridden relatively immaterial.

Gregg Felton: Accordingly, we see the optimization of that channel as incremental upside to our long-term plan. With that, let's turn to the pipeline review over the past few months. We have enacted a three-pronged approach to analyzing our go-to-market strategy for early-stage engagement. First, we've spent a significant amount of time with the CBRE team digging into our current methodology and evaluating aspects of our strategy that we have seen successfully applied on the channel partner and acquisition side of our business.

Speaker Change: Accordingly, we see the optimization of that channel as incremental upside to our long-term plan.

Gregg Felton: With that, let's turn to the pipeline review.

Gregg Felton: Secondly, we have enlisted feedback from a variety of other channel partners and real estate owners to cultivate a comprehensive picture of how best to drive speed around decision making. And finally, we evaluated the timeline across each development deal currently in the pipeline to assess the factors that impact the timing of the project journey. This analysis produced certain findings that will shape our go-to-market strategy moving forward. Specifically, despite some progress, there remains a strong need for education.

Gregg Felton: Over the past few months, we have enacted a three-pronged approach to analyzing our go-to-market strategy on early-stage engagements.

Speaker Change: First, we've spent a significant amount of time with the CBRE team digging into our current methodology and evaluating aspects of our strategy that we have seen successfully applied on the channel partner and acquisition side of our business.

Speaker Change: Secondly, we have enlisted feedback from a variety of other channel partners and real estate owners to cultivate a comprehensive picture of how best to drive speed around decision-making.

Speaker Change: And finally, we evaluated the timeline across each development deal currently in the pipeline to assess the factors that impact the timing of the project journey.

Speaker Change: This analysis produced certain findings that will shape our go-to-market strategy moving forward.

Speaker Change: specifically

Gregg Felton: We must continue to amplify the merits of commercial solar broadly to ensure that landlords, tenants, and the general business community understand the value proposition and, importantly, Altus Power's unique ability to deliver a truly customized end-to-end solution. Given the localized nature of our projects, the top-down strategy that we implemented through our CBRE partnership to negotiate at an enterprise level was not the most efficient and effective path to client engagement. This approach created a significantly longer sell-in period for the landlord and tenant with a good deal of bureaucracy. Site-specific projects were not often considered a top priority as they may not be needle-moving across a large enterprise.

Speaker Change: Despite some progress, there remains a strong need for education.

Speaker Change: We must continue to amplify the merits of commercial solar, broadly, to ensure that landlords, tenants, and the general business community understand the value proposition and, importantly, Altus Power's unique ability to deliver a truly customized end-to-end solution.

Speaker Change: Given the localized nature of our projects, the top-down strategy that we implemented through our CBRE partnership to negotiate at an enterprise level was not the most efficient and effective path to client engagement.

Speaker Change: This approach created a significantly longer sell-in period for the landlord and tenant with a good deal of bureaucracy.

Speaker Change: Sight specific projects were not often considered a top priority, as they may not be needle moving across a large enterprise.

Gregg Felton: Solar sites are instead more typically a component of the enterprise customer's overall strategy. Going forward, as CBRE builds its sustainability solution program for its clients, We expect Altus Power to be positioned as a key partner for clients that are looking to expand their use of renewables in locations where Altus has a strong presence. In partnership with Altus board member and Seabury Chief Sustainability Officer Rob Bernard, we will refine our focus to target the intersection of Seabury's clients with Altus's strength in several U.S. markets.

Speaker Change: Solar sites are instead more typically a component of the enterprise customer's overall strategy.

Seabury: Going forward as Seabury builds its sustainability solution program for its clients.

Speaker Change: We expect all this power will be positioned as a key partner for clients that are looking to expand their use of renewables in locations where all this has a strong presence.

Speaker Change: In partnership with Altus board member and Seabury Chief Sustainability Officer Rob Bernard, we will refine our focus to target the intersection of Seabury's clients with Altus' strength in several U.S. markets.

Gregg Felton: Beyond repositioning our engagement with large enterprises, Altus will pursue a more targeted, market-specific approach to our broader client engagement, which has been our core operational philosophy since inception. This approach allows for a direct pipeline to the ultimate decision maker at the local level.

Speaker Change: Beyond repositioning our engagement with large enterprises, Altus will pursue a more targeted, market-specific approach to our broader client engagement, which has been our core operational philosophy since inception.

Speaker Change: This approach allows for a direct pipeline to the ultimate decision-maker at the local level.

Gregg Felton: This also aligns with our historical strategy of focusing on markets that offer attractive economics for landlords and tenants, as well as healthy project returns that meet our rigorous threshold. In order to support these efforts, I'm pleased to announce that Brett Phillips, who joined us following our acquisition of Unicosolar, will lead our client engagement efforts associated with early stage development. As we highlighted when we announced our acquisition last year, a key feature of the Unico acquisition was the deep experience that the Unico team brings to overcoming barriers to customer adoption and deepening customer relationships. So where does this leave us, and what's next?

Speaker Change: This also aligns with our historical strategy of focusing on markets that offer attractive economics for landlords and tenants, as well as healthy project returns that meet our rigorous thresholds.

Speaker Change: In order to support these efforts, I'm pleased to announce that Brett Phillips, who joined us following our acquisition of UnicoSolar, will lead our client engagement efforts associated with early stage development.

Speaker Change: As we highlighted when we announced our acquisition last year, a key feature of the Unico acquisition was the deep experience that the Unico team brings with overcoming barriers to customer adoption and deepening customer relationships.

Gregg Felton: We believe we have a clear roadmap, an engaged and growing list of channel partners, as well as efficient financing to scale our business. With a renewed focus on aligning our resources with the most successful parts of our track record, we are energized about our plan moving forward, which we believe positions us to expand our footprint, continue to deliver clean power to our customers through long-term contracts, and identify ways to grow those relationships over time.

Speaker Change: So where does this leave us and what's next?

Speaker Change: We believe we have a clear roadmap, an engaged and growing list of channel partners, as well as efficient financing to scale our business.

Speaker Change: with a renewed focus on aligning our resources with the most successful parts of our track record.

Speaker Change: We are energized about our plan moving forward, which we believe positions us to expand our footprint, continue to deliver clean power to our customers through long-term contracts, and identify ways to grow those relationships over time.

Gregg Felton: It's also worth emphasizing that we have a robust and growing in-place portfolio of operating assets that are generating revenue every day nationwide. One important feature of our ownership position that we believe is not well understood is the captive opportunity that we possess to redevelop and further optimize all of our assets over time. More specifically, our portfolio should be thought of as a collection of long-term infrastructure assets, each of which is strategically located and therefore conducive to ongoing investment.

Speaker Change: It's also worth emphasizing that we have a robust and growing in-place portfolio of operating assets that are generating revenue every day nationwide.

Speaker Change: One important feature of our ownership position that we believe is not well understood is the captive opportunity that we possess to redevelop and further optimize all of our assets over time.

Speaker Change: More specifically, our portfolio should be thought of as a collection of long-term infrastructure assets, each of which is strategically located and therefore conducive to ongoing investment.

Gregg Felton: One example we're highlighting is our recent acquisition of an eight and a half megawatt solar ray in Hamilton, New Jersey. We purchased this 11-year-old project along with the land on which it's situated with the specific intention of repositioning the site over the next several years, as we believe there's additional value that Altus can extract to enhance long-term shareholder value. Now imagine similar opportunities across our portfolio of nearly 500 operating assets. This is the power of incumbency in this category.

Speaker Change: One example worth highlighting is our recent acquisition of an eight and a half megawatt solar array in Hamilton, New Jersey.

Speaker Change: We purchased this 11-year-old project, along with a land on which it's situated, with the specific intention of repositioning this site over the next several years, as we believe there's additional value that all this can extract to enhance long-term shareholder value.

Speaker Change: Now, imagine similar opportunities across our portfolio of nearly 500 operating assets. This is the power of incumbency in this category.

Gregg Felton: Before turning the call over to Dustin to walk through quarterly financial performance, I'd like to end by offering some perspective on how we're thinking about shareholder value in the current environment. As a management team, we remain focused on making savvy, long-term investment decisions with the attention to risk management consistent with being a financial steward of our investors' capital.

Speaker Change: Before turning the call over to Dustin to walk through quarterly financial performance, I'd like to end by offering some perspective on how we're thinking about shareholder value in the current environment.

Dustin Weber: As a management team, we remain focused on making savvy, long-term investment decisions with the attention to risk management consistent with being a financial steward of our investors' capital.

Speaker Change: This necessarily means that we will not make hasty decisions more likely to ensure short-term volume targets are achieved.

Gregg Felton: Given our long-term orientation, the pace of our asset growth has proven to be somewhat lumpy over short-term periods. While we remain confident in our three-year guidance communicated on our Investor Day, we anticipate that the cadence of our activity will have an impact on the remainder of 2024, which Dustin will expand upon. With that, let me now turn the call over to our CFO, Dustin Weber, for additional financial highlights.

Dustin Weber: Given our long-term orientation, the pace of our asset growth has proven to be somewhat lumpy over short-term periods.

Dustin Weber: While we remain confident in our three-year guidance communicated on our investor day, we anticipate that the cadence of our activity will have an impact on the remainder of 2024.

Dustin Weber: which Dustin will expand upon. With that, let me now turn the call over to our CFO , Dustin Weber, for additional financial highlights.

Dustin Weber: Thank you, Gregg, and thanks to everyone joining the call. During the second quarter, we generated 364 million kilowatt hours of clean electricity from our nearly one gigawatt portfolio of operating assets. This power was sold to our customers at long-term contracted rates that resulted in 52.5 million in revenue compared to 46.5 million in the second quarter of 2023, an increase of 13% driven by the growth of our portfolio and increased sales of clean electricity to our customers. Gap net income for the quarter was $33.1 million compared to net income of $3.4 million during the second quarter of 2023.

Dustin Weber: Thank you, Gregg, and thanks to everyone joining the call.

Dustin Weber: During the second quarter, we generated 364 million kilowatt hours of clean electricity from our nearly one gigawatt portfolio of operating assets.

Dustin Weber: This power was sold to our customers at long-term contracted rates that resulted in $52.5 million of revenue, compared to $46.5 million in the second quarter of 2023.

Dustin Weber: An increase of 13% driven by the growth of our portfolio and increase sales of clean electricity to our customers.

Speaker Change: Gap net income for the quarter was $33.1 million compared to net income of $3.4 million during the second quarter of 2023.

Dustin Weber: The primary drivers for the change relative to last year were a non-cash gain from the remeasurement of our alignment shares and an income tax benefit for the second quarter of this year. Moving to adjusted EBITDA, a non-GAAP financial measure, we reported $31.2 million compared to $30.6 million in the second quarter of 2023, amounting to growth of 2%. This increase was driven by the growth of our portfolio and partially offset by increased levels of operating and general and administrative expenses. I'd like to quickly touch on an operational note that puts some downward pressure on recognized revenue during the quarter.

Speaker Change: The primary drivers for the change relative to last year were a non-cash gain from the remesherment of our alignment chairs and an income tax benefit for the second quarter of this year.

Speaker Change: Moving to adjusted EBITDA, a non-GAAP financial measure, we reported $31.2 million compared to $30.6 million in the second quarter of 2023, amounting to growth of 2%.

Dustin Weber: This increase was driven by the growth of our portfolio and partially offset by increased levels of operating and general and administrative expenses.

Dustin Weber: I'd like to quickly touch on an operational note that puts some downward pressure on recognized revenue during the quarter.

Dustin Weber: Due to the increased production of our assets in the spring and summer months, we have accumulated community solar credits in excess of our current customer subscription level. These credits are banked, meaning that while we have generated the production, the revenue is currently deferred and expected to be recognized during the second half of 2024 with the seasonally adjusted production in Q4 and increased community solar subscription level. We are pleased to see the ongoing expansion of our community solar business, and we continue to strategically invest in resources to support this segment of our portfolio.

Speaker Change: Due to the increased production of our assets in the spring and summer months, we have accumulated community solar credits in excess of our current customer subscription levels.

Speaker Change: These credits are banked, meaning that while we have generated the production, the revenue is currently deferred and expected to be recognized during the second half of 2024, with the seasonally adjusted production in Q4 and increased community solar subscription levels.

Dustin Weber: We are pleased to see the ongoing expansion of our community solar business and we continue to strategically invest in resources to support this segment of our portfolio.

Dustin Weber: Turning to incremental megawatt growth. For the quarter, the cadence of the incremental megawatt additions has been slightly slower than anticipated. Additionally, while we have previously cited that the second half of the year is generally more favorable to megawatt additions, We now anticipate a slightly slower ramp up than previously expected. Accordingly, we are revising our previously stated 2024 guidance range of $200 to $222 million of revenue and $115 to $135 million of adjusted EBITDA to $196 to $201 million of revenue and $111 to $115 million of adjusted EBITDA.

Dustin Weber: Turning to incremental megawatt growth, for the quarter the cadence of the incremental megawatt additions has been slightly slower than anticipated.

Dustin Weber: Additionally, while we have previously cited that the second half of the year is generally more favorable to megawatt additions,

Dustin Weber: We now anticipate a slightly slower ramp-up than previously expected.

Dustin Weber: Accordingly, we are revising our previously stated 2024 guidance range of 200 to 222 million of revenue and 115 to 113 million of revenue.

Dustin Weber: $35 million of adjusted EBITDA to $196 to $201 million of revenue and $111 to $115 million of adjusted EBITDA.

Dustin Weber: While this outlook reflects slower-than-expected growth to be realized in 2024, we are pleased to reaffirm our previously stated three-year guidance of 20 to 30 percent CAGR on megawatt growth. Turning to our financing plan, we finished the second quarter with a total cash balance of $92.3 million. During the quarter, we fully repaid borrowings under a corporate revolver for balance sheet efficiency. Additionally, we continue to expand CapEx to support our megawatt growth.

Dustin Weber: While this outlook reflects a slower-than-expected growth to be realized in 2024, we are pleased to reaffirm our previously stated three-year guidance of 20-30% CAGR on megawatt growth.

Speaker Change: Turning to our financing plan, we finished the second quarter with a total cash balance of $92.3 million.

Speaker Change: During the quarter, we fully repaid barrings under a corporate revolver for balance sheet efficiency.

Speaker Change: Additionally, we continue to expand CapEx to support our megawatt growth.

Dustin Weber: Looking ahead, we believe we remain well positioned to finance our growth with the combination of cash from operations, our committed construction facility, tax equity partnerships, and our long-term financing access. With that, I'd like to turn the call back to Gregg for some final remarks.

Dustin Weber: Looking ahead, we believe we remain well-positioned to finance our growth with the combination of cash from operations, our committed construction facility, tax equity partnerships,

Dustin Weber: and our long-term financing access.

Speaker Change: With that, I'd like to turn the call back to Gregg for some final remarks.

Gregg Felton: During our investor day in May, I asserted our view that this is a great time to be a clean power company. As the market leader in this rapidly growing segment, we believe we are uniquely positioned to continue to grow our market share through several competitive moats as we continue to expand our significant footprint. We expect we will be able to drive increasing operational and maintenance efficiency. Second, we believe our vertically integrated platform gives us flexibility as it relates to customer engagement, including the ability to deliver a customized and localized end-to-end solution.

Gregg Felton: Thanks, Dustin.

Gregg Felton: During our Investor Day in May, I asserted our view is this is a great time to be a clean power company.

Speaker Change: As the market leader in this rapidly growing segment, we believe we are uniquely positioned to continue to grow our market share through several competitive moats.

Speaker Change: First, as we continue to expand our significant footprint, we expect we will be able to drive increasing operational and maintenance efficiencies.

Speaker Change: Second, we believe our vertically integrated platform.

Speaker Change: Gives us flexibility as it relates to customer engagement, including the ability to deliver a customized and localized end-to-end solution.

Gregg Felton: Third, we believe our nationwide footprint of operating assets and enviable network of partners drives equity in the Altus Power brand, bolstering our ability to scale our enterprise and community solar customer base. Finally, our scale and diversified portfolio ensures ongoing access to a competitive cost of capital, allowing us to efficiently expand our footprint. Altus Power has assembled a diversified portfolio of assets, which we believe will produce long-term value for our investors. We further believe that our platform is positioned to scale, to seize on the long-term growth opportunity in this sector.

Speaker Change: Third, we believe our nationwide footprint of operating assets and enviable network of partners drives equity in the Altus Power brand, bolstering our ability to scale our enterprise and community solar customer base.

Speaker Change: Finally, our scale and diversified portfolio ensures ongoing access to a competitive cost of capital, allowing us to efficiently expand our footprint.

Speaker Change: All this power has assembled a diversified portfolio of assets which we believe will produce long-term value for our investors.

Speaker Change: We further believe that our platform is positioned to scale to seize on the long-term growth opportunity in this sector.

Gregg Felton: Over the past six months, several transactions with private and public companies, both nationally and internationally, have been executed at levels which we believe support the intrinsic value of our asset base and platform. I remain committed to delivering value for our shareholders, and I'm confident that the business and operational analysis that we've performed over the past 90 days will put us on a path to expand our leadership position within the commercial-scale solar market. Thank you for your time, and we'll now take your questions.

Speaker Change: Over the past six months, several transactions with private and public companies, both nationally and internationally, have been executed at levels which we believe support the intrinsic value of our asset base and platform.

Speaker Change: I remain committed to delivering value for our shareholders, and I'm confident that the business and operational analysis that we've performed over the past 90 days will put us on a path to expand our leadership position within the commercial-scale solar market.

Operator: Good afternoon and welcome to the Altus Power Second Quarter 2024 Conference call. As a reminder, today's call is being recorded and participants are in a listen only mode. A question and answer session will follow the formal presentation.

Speaker Change: Thank you for your time and we'll now take your questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt indicating that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number 3. If you are using a speakerphone, please lift the handset before pressing any key.

Alison Sternberg: At this time for opening remarks and introductions, I would like to turn the call over to Alison Sternberg, Head of Investor Relations. Good afternoon and welcome to our second quarter 2024 earnings call.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question? Please press the star, followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised.

Speaker Change: Should you wish to decline from the polling process, please press the star followed by the number 2.

Alison Sternberg: Speaking on today's call, our Gregg Felton, Chief Executive Officer, and Dustin Weber, Chief Financial Officer. This afternoon, we issued a press release and a presentation related to matters to be discussed on this call. You can access both the press release and the presentation on our website, www.altuspower.com in the Investor Section. This information is also available on the SEC's website.

Speaker Change: If you are using a speaker phone, please leave the handset before pressing any keys.

Speaker Change: I would like to advise everyone to please limit their questions to one question and one follow-up question each.

Operator: I would like to advise everyone to please limit their questions to one question and one follow-up question each. One moment, please, for your first question. Your first question comes from James West of Evercore LSI. Please go ahead.

Speaker Change: One moment please for your first question.

Speaker Change: Your first question comes from James West of Evercore LSI. Please go ahead.

Alison Sternberg: As a reminder, our comments on this call may contain forward looking statements. These forward looking statements refer to future events, including Altus Power's future operations and financial performance. When used on this call, the words expect, anticipate, believe, will, plan, forecast, estimate, outlook, and similar expressions as they relate to Altus Power identify a forward looking statement. These statements are subject to various risks and uncertainties which could cause actual results to differ materially from those predicted in the forward looking statements.

Speaker Change: I'll see you in the next video.

James West: So Gregg clearly outlined, you know, a new enhanced vision for the company. One of the things I thought was interesting is your Findings of, One, the educational side, which it should be helping out with a lot of these recent events that have happened, like some power market auctions. But, and then of course, when the Wall Street Journal gets a hold of these things, usually it gets pretty widespread. But I'm curious on that and the enterprise, how do you see yourself educating further? And then secondarily on enterprise, develop those relationships that maybe you didn't have before. Is that leveraging CBRE or is it some other path market?

James West: So Gregg, clearly outlined a new and enhanced vision for the company. One of the things I thought was was interesting to circuit here.

Speaker Change: The findings of...

Speaker Change: You know one the educational side Which you know it should be helping out with a lot of these recent events that have happened like the power market auctions but

Speaker Change: And then of course, when the Wall Street Journal gets a hold of these things, usually it gets pretty widespread. But I'm curious on that and the enterprise, you know, how do you see yourself educating further?

Alison Sternberg: Altus Power assumes no obligation to update these statements in the future or circumstances change except as required by law. For more information, we encourage you to review the risks and uncertainties and other factors discussed in our SEC filings that could impact these forward looking statements.

Speaker Change: and then, secondarily, on enterprise, how do you develop those relationships that maybe you didn't have before? Is that leverage in CBRE, or is it some other path market?

Alison Sternberg: Specifically, our 10K filed with the SEC on March 14, 2024. During this call, we also refer to Adjusted Evidom, Adjusted Evidom Margin, and ARR, or Annual Recurring Revenue, which are non-gap financial measures. ARR is an estimate that management uses to determine the expected annual revenue potential of our operating asset base at given points in time. ARR assumes customary weather, production, expenses, and other economic and market conditions as well as seasonality. Our management team uses all of these non-gap financial measures to plan, monitor, and evaluate our financial performance, and we believe this information may be useful to our investors.

Gregg Felton: Yeah, thanks for the question, James. So you're right that the backdrop as it relates to power demand is definitely in everybody's focus, and so there's no doubt that that should help with respect to the message and the opportunity that commercial-scale solar can provide. As it relates to getting to and connecting with enterprise customers, as you heard from the prepared remarks, we are working closely with Robert Bernard, who is a board member and also head of sustainability at CBRE, to really restructure the engagement with enterprises, reflecting the fact that many enterprises benefit from a long-term advisory relationship rather than a narrower solar-specific engagement.

Speaker Change: Yeah, thanks for the question, James. So you're right that the.

Speaker Change: backdrop as it relates to power demand is is definitely in in everybody's focus and so there's no doubt that that should help.

Speaker Change: with respect to the message and the opportunity.

Speaker Change: that Commercial Scale Solar can provide.

Speaker Change: as it relates to getting to and connecting with enterprise customers.

Speaker Change: As you heard from the prepared remarks, we are working closely with Robert Bernard, who is a board member and also head of sustainability at CBRE.

Speaker Change: to really restructure the engagement with enterprises reflecting the fact.

Alison Sternberg: These non-gap financial measures exclude certain items and should not be considered as a substitute for comparable gap financial measures. Altus Power's methods of computing these non-gap financial measures may differ from similar non-gap financial measures used by other companies. More detailed information about these measures and a reconciliation from gap to these non-gap financial measures is contained in both the press release and the presentation that we issued today.

Speaker Change: That many enterprises benefit from a long-term advisory relationship, rather than any.

Gregg Felton: And so the details of our approach are oriented to acknowledging the enterprise engagement and how that should be approached. And we're pleased that Altus is gonna be featured prominently as an on-site solar solution within the context of CRE's broader sustainability relationship with enterprises.

Speaker Change: narrower solar-specific engagement, and so the...

Speaker Change: The details of our approach are oriented to acknowledging the enterprise engagement and how that should be approached and we're pleased that Altus is going to be featured prominently.

Speaker Change: as an on-site solar solution within the context of CRE's broader sustainability relationship with enterprises, but

Gregg Felton: But I do wanna add that, as you heard, at the same time, we are very focused on a bottoms-up approach, that first being a top-down enterprise approach. And the bottoms-up approach focuses on geographies where there's a real and tangible opportunity. So dovetailing with your first comments, that would be markets where there are high power prices and a real need and opportunity to bring commercial scale solar. So, as you know, it's not really something that we try to bring to every market, but we certainly are in 25 of 50 states, right?

Gregg Felton: And with that, I'm pleased to turn the call over to Greg Felton, Chief Executive Officer of Altus Power. Thanks, Allison, and welcome to all our investors and analysts joining our call today. This afternoon, we are excited to share some insights into our overall business, the findings from our pipeline review, and the competitive notes that we believe will support our growth ambitions going forward as well as our results.

Speaker Change: I do want to add that, as you heard, at the same time, we are very focused on a bottoms-up approach, that first being a top-down enterprise approach.

Speaker Change: and the bottoms-up approach focuses on geographies where there's a real, intangible opportunity. So, dovetailing with your first comments, that would be...

Speaker Change: markets where there are high power prices and a real need and opportunity to bring commercial-scale solar.

Gregg Felton: For the most recent quarter. Since our last earnings call in the context of my newly expanded role, I have taken the time to fully review our business and operations to identify areas of strength as well as areas where we have the opportunity to improve and drive efficiencies that support our growth plans. This review has resulted in several demonstrable changes. We prioritization of our resources with a particular focus on our technology and analytical teams.

Gregg Felton: So, what we're focused on is when there are existing opportunities, new programs, or states where there's a compelling opportunity, we're working with our partners, including CBRE, in a much more targeted fashion than we might have historically. So, that's really the nature of the approach: it is a combination of top-down enterprise and bottoms-up market specific.

Speaker Change: So as you know, it's not really something that we...

Speaker Change: Trying to bring to every market, but we certainly are in 25 of 50 states, right? So what we're focused on is when there are existing opportunities, new programs, or states.

Speaker Change: where there's a compelling opportunity, we're working with our partners, including CBRE, in a much more targeted fashion than we might have historically. So that's really the nature of the approach is a combination of top-down enterprise and bottoms-up market specific.

Dustin Weber: Okay, got it. If I could just throw in one follow-up here, as we watch rates go up, I know a good number of your contracts will adjust higher. Could you give us some help on what kind of percentage of your existing contracts have that inflector in them?

Speaker Change: Okay, got it. If I could just throw in one one follow-up here. As we watch rates go up, I know a good number of your contracts will adjust higher. Could you give us some help on what kind of percentage of your contract, existing contract, have that inflector in them?

Gregg Felton: More specifically, we are prioritizing activities designed to improve revenues and operating efficiency while deprioritizing certain non core activities. One priority that is high on our list is our ability to synthesize and efficiently analyze the robust data set that we collect on our projects and customers. We collect an enormous amount of data and we are focused on ensuring that our field technicians are armed with the information that they need to optimize the revenues generated from our portfolio of solar projects. We are also focused on ensuring that we have the necessary customer data to support our growing portfolio of community solar projects.

Dustin Weber: Yeah, our current portfolio has 54% of our PPAs at a floating rate. So as the prevailing utility increases those rates, we stand to benefit, and so that's a tailwind to our operating portfolio for sure. I got it.

Speaker Change: Hey, James, it's Dustin. Yeah, our current portfolio has a 54% of our PPAs at a floating rate, so as the prevailing utility increases those rates.

James West: We stand to benefit, and so that's a tailwind to our operating portfolio for sure.

James West: Got it. Thanks, guys.

Speaker Change: Got it. Thanks, guys.

Justin Clare: Your next question comes from Justin Clare of Roth Capital Partners. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Justin Clare of Roth Capital Partners. Please go ahead.

Justin Clare: Hi, good afternoon. So, you know, following on the completion of the review process here, you talked about taking a more targeted market-specific approach. So, just wondering what markets may be, you know, targeted initially, where do you see the, you know, most attractive near-term opportunities? And then if you could just speak a little bit more about how you're going to market, you know, how you're approaching the landlord of a building or the tenant, maybe just help us understand that process a little bit better.

Justin Clare: Hey, good afternoon!

Gregg Felton: Before turning to the performance in the quarter, I'd like to discuss the results of our pipeline review and provide some background as to where and how we source our projects, our philosophy around underwriting standards and the cadence of deal flow in our business. You will recall that back in May, I announced my plan to put our development pipeline under review with a focus on execution certainty and increasing the velocity at which these opportunities convert into revenue generating assets.

Justin Clare: So, you, afternoon. So, you know, following on the completion of the review process here, you talked about taking a more targeted market specific approach. So just wondering what markets may be, you know, targeted initially, what, where do you see the

Speaker Change: you know, most attractive near-term opportunities. And then if you could just speak a little bit more about how you're going to market, you know, how you're approaching the landlord of a building or the tenant, maybe just help us understand that process a little bit better.

Gregg Felton: So thank you for the question. You know, I think the first thing we'd like to make sure comes through as it relates to the review is that this is about Altus refocusing our resources on those areas where we've historically had the greatest success, or we can accelerate our revenue growth with greater prioritization. So that's the key objective that we're focused on, and we have had historical success in that bottoms-up orientation where specific markets have opened up, and community solar is a big part of this expansion.

Gregg Felton: Before elaborating on our findings, I want to provide some important context. All this power benefits from a diversity of origination channels. The agility of our platform allows us to onboard projects at any milestone in the project journey from early stage engagements with clients to fully developed, but yet to be constructed projects all the way to acquisitions of fully operating projects. We believe that this flexibility is one of our significant competitive advantages and has been an important driver of our market share gains to date.

Speaker Change: Sure.

Speaker Change: So, thank you for the question.

Speaker Change: You know, I think the first thing we'd like to make sure comes through as it relates to the review is this is about Altus refocusing our resources.

Speaker Change: On those areas where we've historically had the greatest success, or we were can accelerate our revenue growth with greater fertilization, so that's the key objective that we're focused on and we have had historical success.

Speaker Change: in that bottom-sup orientation where...

Gregg Felton: So states like Maryland or Maine or Illinois, which are effectively introducing programs that expand the opportunity, those are markets where we're very focused on bringing the benefits of commercial-scale solar, and obviously, we do that often on large industrial rooftops or other land-based systems and putting them in locations where we can identify an attractive site, and that landlord might be a building where that landlord could be land, real estate that is real property. So in either case, the goal here is to identify and target these markets and then work with our partners, and we consider CBRE an important partner, but certainly they're a partner along many other channel partners that we've talked about in the past that are local to these markets that are working directly with landlords.

Speaker Change: Specific markets that have opened up and community solar is a big part of this expansion.

Gregg Felton: As we've often cited, we like all commercial scale megawatts, but they do come in different shapes and sizes, and our investment discipline requires that each new site be financially accretive to our shareholders. Importantly, our rigor around the application of the same underwriting principles to any opportunity positions us to generate attractive returns irrespective of the source and stage of the project. This differentiated approach has allowed us to increase our revenues and adjusted EBITDA for fold over the past five years, and build a nationwide portfolio that is the largest in the segment, sitting at almost one gigawatt in size. More notable is that we have achieved this level of scale even as the proportion of incremental megawatts added to the portfolio from early stage development has written relatively immaterial.

Speaker Change: So states like Maryland or Maine or Illinois, which are effectively introducing programs that expand the opportunity. Those are markets where we're very focused on bringing...

Speaker Change: The benefits of commercial skill solar, and obviously we're doing that in often cases on large industrial rooftops or other land-based systems, and putting them in locations where we can identify in a tract of sight.

Speaker Change: And that landlord might be a, again, a building, or that landlord could be land, real estate that is real property. So in either case...

Speaker Change: The goal here is to identify and target these markets and then work with our partners, and we consider CBRE an important partner, but certainly they're a partner along many other channel partners that we've talked about in the past.

Gregg Felton: So we are both working at the early stage level with landlords directly, and that's the announcement we made today about Brett Phillips, and he's going to lead that effort, but we're also working with many partners who are bringing us opportunities where that landlord has already been engaged. So it's a combination of factors all intended to drive market-specific flow.

Justin Clare: Okay, I got it. I appreciate it.

Speaker Change: that are local to these markets, that are working directly with landlords. So we are both...

Gregg Felton: Accordingly, we see the optimization of that channel as incremental upside to our long term plan.

Speaker Change: working at the early stage level with landlords directly, and that's the announcement we made today around Brett Phillips, and he's going to lead that effort. But we're also working with many partners who are bringing us opportunities where that landlord has already been engaged. So it's a combination of factors all intended to drive market-specific flow.

Gregg Felton: With that, let's turn to the pipeline review. Over the past few months we have enacted a three pronged approach to analyzing our go-to-market strategy on early stage engagements. First, we've spent a significant amount of time with the CBRE team digging into our current methodology and evaluating aspects of our strategy that we have seen successfully applied on the channel partner and acquisition side of our business. Secondly, we have enlisted feedback from a variety of other channel partners and real estate owners to cultivate a comprehensive picture of how best to drive speed around decision making.

Justin Clare: Maybe just shifting over to your guidance here, the reduction to the 2024 guide, you did mention the cadence of activity is maybe not, you know, what you had anticipated here. So just wondering, you know, are you seeing new build projects move to the right? Or, you know, as part of the review process, have some projects been maybe moved out of your pipeline? Maybe they didn't meet return expectations. And then maybe you could comment on acquisitions as well. Was there anything maybe anticipated to close this year and maybe is moving out?

Speaker Change: Okay, got it. I appreciate it.

Speaker Change: Maybe just shifting over to your guidance here, the reduction to the 2024 guide, you did mention the cadence of activity is maybe not, you know, what you had anticipated here, so just wondering, you know, are you seeing new build projects move to the right, or, you know, as part of the review process, have some projects been moved out of your pipeline, maybe they didn't meet return expectations?

Speaker Change: and then maybe you could comment on acquisitions as well, was anything anticipated to close this year and maybe it's moving out.

Gregg Felton: And finally, we evaluated the timeline across each development deal currently in the pipeline to assess the factors that impact the timing of the project journey. This analysis produced certain findings that will shape our go-to-market strategy moving forward. Specifically, despite some progress, there remains a strong need for education. We must continue to amplify the merits of commercial solar broadly to ensure that landlords, tenants, and the general business community understand the value proposition, and importantly, office powers unique ability to deliver a truly customized end-to-end solution.

Dustin Weber: I'll start with the new build. So this is more of a timing issue than it is a number of megawatts. I think you hit the nail on the head where they're pushed out to the right, and that's really the main culprit there are – have been utility and interconnection delays. You know, many on the call were at our Investor Day at a community solar site here in New York, and if you were there, what you saw was a completed solar array, and that was in early May.

Speaker Change: Yeah, hey Justin. I'll start in with the new build.

Speaker Change: So this is more of a timing issue than it is a number of megawatts. I think you hit it on the head where they're pushed out to the right and that's

Speaker Change: Really, the main culprit there has been utility and interconnection delays.

Speaker Change: Many on the call were at our Investor Day at a community solar site here in New York.

Speaker Change: If you were there, what you saw was a completed solar array, and that was in early May, and here in August , that solar array is still not interconnected by the utility.

Dustin Weber: And here in August, that solar array is still not interconnected by the utility. And I think you've probably heard others cite the same frustrations, but that's an example of one particular project, but there are other examples like that in our portfolio where things are getting pushed out a little bit.

Gregg Felton: Given the localized nature of our projects, the top-down strategy that we implemented through our CBRE partnership to negotiate at an enterprise level was not the most efficient and effective path to client engagement. This approach created a significantly longer selling period for the landlord and tenant with a good deal of bureaucracy. Site-specific projects were not often considered a top priority as they may not be needle-moving across a large enterprise. Solar sites are instead more typically a component of the enterprise customers overall strategy.

Speaker Change: And I think you've probably heard others cite the same frustrations, but that's an example of one particular project, but there are other examples like that in our portfolio where things are getting pushed out a little bit.

Gregg Felton: And I would just add, Justin, so in the context of that, you know, taking a sober view, certainly in the context of my broader remit and focus on the development side of the business in particular, what we're trying to do here is not necessarily suggest anything about the volume of opportunity, but there has been, as you know, a consistent challenge in predicting the timing of operationalizing these assets. So that's the key feature that we're talking about. On your question, as it relates to operational assets that are in our focus to be acquired, there continues to be a very robust pipeline of opportunities. So there's no shortage of deals to be had there.

Speaker Change: And I would just add, Justin, so in the context of that, you know, taking a sober view, certainly in the context of my broader remit and focus on the development side of the business in particular, what we're trying to do here is not necessarily suggest anything about the volume of opportunity, but there has been, as you know, a consistent challenge in predicting the timing of operationalizing these assets. So that's the key feature that we're talking about. On your question as it relates to operational assets that are in our focus to be acquired, there continues to be a very robust

Gregg Felton: Going forward, as CBRE builds its sustainability solution program for its clients, we expect all this power will be positioned as a key partner for clients that are looking to expand their use of renewables in locations where all this has a strong presence. In partnership with all this board member and CBRE Chief Sustainability Officer Rob Bernard, we will refine our focus to target the intersection of CBRE's clients with all this strength in several US markets.

Gregg Felton: I think that what we would also say, and hopefully those on the call would appreciate the fact that, as a steward of capital, with the appropriate discipline that I articulated in my prepared remarks, it's important for us to both demonstrate to you confidence with respect to the opportunity, which is significant, but also the fact that the opportunities that we see in our pipeline have timing that will be later this year or early next year. And so we're kind of being, again, sober with respect to thinking about timing and not the scale of the opportunity.

Speaker Change: pipeline of opportunity. So there's no shortage of deals there. I think that what

Speaker Change: What we would also say is that, and hopefully those on the call would appreciate the fact that there are as a steward of capital with the appropriate discipline that I articulated in the prepared remarks, it's important for us to both demonstrate to you confidence with respect to the opportunity which is significant.

Gregg Felton: Beyond repositioning our engagement with large enterprises, all this will pursue a more targeted market-specific approach to our broader client engagement, which has been our core operational philosophy since inception. This approach allows for a direct pipeline to the ultimate decision-maker at the local level. This also aligns with our historical strategy of focusing on markets that offer attractive economics for landlords and tenants, as well as healthy project returns that meet our rigorous thresholds.

Speaker Change: but also the fact that the opportunities that we see in our pipeline.

Speaker Change: or, you know, have a timing that will be later this year, early next year. And so we're kind of being, again, sober with respect to thinking about timing, not the scale of the opportunity.

Gregg Felton: The scale of the opportunity and the scale of the pipeline remain quite large, so we have a lot of confidence with respect to that opportunity. And I would further add on that point. I think I may have mentioned on prior calls, a consolidation that's happening in this space. There is a very real opportunity for Altus Power where our scale and, frankly, leadership position in this market have put us in a spot where we continue to see a robust set of opportunities. And we would say with the departure of certain players, there continues to be a greater flow of opportunities coming our way.

Speaker Change: The steal of the opportunity and the steal of the pipeline remains quite large. So we have a lot of confidence with respect to the opportunity. And I would further add on that point. I think I may have mentioned on prior calls a consolidation that's happening in this space.

Gregg Felton: In order to support these efforts, I'm pleased to announce that Brett Phillips, who joined us following our acquisition of Unico Solar, will lead our client engagement efforts associated with early stage development. As we highlighted, when we announced our acquisition last year, a key feature of the Unico acquisition was the deep experience that the Unico team brings with overcoming barriers to customer adoption and deepening customer relationships.

Speaker Change: There is a very real opportunity for Altus Power, where our scale and, frankly, leadership position in this market has put us in a spot where we continue to see a robust set of opportunities. And we would say, with the exiting of certain players, there continues to be a greater flow of opportunity coming our way.

Gregg Felton: So where does this leave us and what's next? We believe we have a clear roadmap and engaged and growing list of channel partners, as well as efficient financing to scale our business. With a renewed focus on aligning our resources, with the most successful parts of our track record, we are energized about our plan moving forward, which we believe positions us to expand our footprint, continue to deliver clean-powered our customers through long-term contracts and identify ways to grow those relationships over time.

Speaker Change: Okay, good to hear. Just one more, if I may, here. The community solar credits that were not recognized in this quarter, could you share what the expected value of those credits were, and then do you anticipate realizing those in Q3 or Q4 of this year?

Justin Clare: Okay, good to hear. Just one more question, if I may ask here, the community solar credits that were not recognized in this quarter, could you share what the expected value of those credits was? And then do you anticipate realizing those profits in Q3 or Q4 of this year?

Speaker Change: Yeah, I'm going to kick that off, Justin, just give a little bit of context for Community Solar to make sure that we frame this.

Dustin Weber: Yeah, I'm going to kick that off, Justin. Just give a little bit of context for Community Solar to make sure that we frame this for Dustin to fill in the financials. So, just as a reminder, what we're talking about here in the case of Community Solar are commercial-scale sites, consistent with every other site that we own, where the consumption is not quite there proximate to the production. So, think of a landfill or a carport or a rooftop where the building tenant consumption is insufficient relative to the scale of the project. These are all use cases for Community Solar.

Speaker Change: For Dustin to fill in the financials. So just as a reminder, what we're talking about here in the case of Community Solar are commercial scale sites consistent with every other site that we own.

Speaker Change: where the consumption is not quite there proximate to the production.

Speaker Change: So think of a landfill or a carport.

Speaker Change: or a rooftop.

Speaker Change: where the building tenant consumption is insufficient relative to the scale of the project. These are all use cases for community solar. So we're building on sites.

Gregg Felton: So, we're building on sites where instead of selling to the onsite consumer, we're instead selling to the adjacent community specifically within that same utility zone. And so, what we're talking about are building sites where the customers that are ultimately acquired by us or our partners have to come in the hundreds, let's say, per site in order to satisfy the power that we're generating. But Dustin, you want to take it from there? Yeah, yeah.

Speaker Change: where instead of selling to the on-site consumer, we're instead selling to the adjacent community specifically within that same utility zone.

Gregg Felton: One example worth highlighting is our recent acquisition of an 8.5 megawatt solar ray in Hamilton, New Jersey. We purchased this 11-year-old project along with a land on which it with the specific intention of repositioning the site over the next several years, as we believe there's additional value that all of this can extract to enhance long-term shareholder value. Now imagine similar opportunities across our portfolio of nearly 500 operating assets. This is the power of income and see in this category.

Speaker Change: and so what we're talking about are building sites.

Speaker Change: where the customers that are ultimately acquired by us or our partners

Dustin Weber: have to come in the hundreds, let's say, per site in order to satisfy the power that we're generating. But Dustin, you wanna take it from there? Yeah, yeah. So the deferral in Q2 is really a function of how rapidly we've grown that segment of our business in terms of megawatts and customers.

Dustin Weber: So, the deferral in Q2 is really a function of how rapidly we've grown that segment of our business in terms of megawatts and customers, 500% in a 2-year period. And so, what I would say is there's sometimes a ramp-up to onboard new customers. And so, as a result, in Q2, we had a generation that we instead will monetize and book as revenue in Q3 and Q4. And I'd estimate that to be about 4 million dollars worth of revenue that was production generated in Q2 and what we expect to monetize in the second half of the year.

Gregg Felton: Before turning the call over to to walk through quarterly financial performance, I'd like to end by offering some perspective on how we're thinking about shareholder value in the current environment. As a management team, we remain focused on making savvy long-term investment decisions with the attention to risk management consistent with being a financial steward of our investors capital. This necessarily means that we will not make hasty decisions more likely to ensure short-term volume targets are achieved.

Dustin Weber: 500% in a two-year period and so

Speaker Change: What I would say is there's sometimes a ramp up to onboard new customers, and so as a result in Q2, we had generation.

Speaker Change: that we instead will monetize and book as revenue in Q3 and Q4, and I'd estimate that to be about $4 million worth of revenue that production was generated in Q2 and what we expect to monetize in the second half of the year.

Dustin Weber: And Justin, just again, on the one last thing as it relates to the task that we're talking about, just for anyone who's a little less familiar, we're talking about selling dollar credits for 90 cents. So this is anybody living in New York who wants to, quote unquote, sign up for an Altus Power community solar project can benefit from discounted power, literally a discount on their bill. It should not be a hard sale, but again, we have to go out and acquire customers who want to save money on their utility bill.

Speaker Change: And Justin, just again on the one last thing as it relates to the task that we're talking about, just for anyone who's a little less familiar, we're talking about selling dollar credits at 90 cents.

Speaker Change: So this is anybody living in New York who wants to quote-unquote sign up for a Altus Power community solar project.

Speaker Change: can benefit from discounted power, literally a discount on their bill. It should not be a hard sale, but again we have to go out in a car customer who want to save money on their utility bill, and that's really the process. Now we're talking about this multi month.

Dustin Weber: And that's really the process. Now, we're talking about this multi-month sort of gap that Dustin referred to from pushing that out from one quarter to the next. Contextualize that in the context of a 25-year contract. So this is really immaterial in a short-term sense, but it does affect recognition of revenue by the quarter.

Dustin Weber: I mean, now turn the call over to our CFO Dustin Weber for additional financial highlights. Thank you, Gregg, and thanks to everyone joining the call. During the second quarter, we generated 364 million kilowatt hours of clean electricity from our nearly one gigawatt portfolio of operating assets. This power was sold to our customers at long-term contracted rates that resulted in 52.5 million of revenue compared to 46.5 million in the second quarter of 2023.

Speaker Change: is sort of a gap that Dustin referred to from a...

Dustin Weber: pushing that out from one quarter to the next, contextualize that in the context of a 25-year contract. So this is really immaterial in a short-term sense, but it does affect recognition of revenue by the quarter.

Justin Clare: Got it. Makes sense. Okay. Thank you.

Vikram Bagri: Your next question comes from Vikram Bagri of Citigroup. Please go ahead.

Speaker Change: Good morning, make sense. Okay, thank you.

Speaker Change: [inaudible]

Speaker Change: Your next question comes from Vikram Baggery of City Group. Please go ahead.

Vikram Bagri: Hi, thanks for taking the question. Could you give us a little bit of insight into how we should be thinking about the mix of operating versus M&A assets or construction assets rather over time, especially in the context of that three year outlook? Does the opportunity for additional domestic content, does that change that mix outlook at all? Just curious on that.

Dustin Weber: An increase of 13% driven by the growth of our portfolio and increased sales of clean electricity to our customers. Gap net income for the quarter was 33.1 million compared to net income of 3.4 million during the second quarter of 2023. The primary drivers for the change relative to last year were a non-cash gain from the remeasurement of our alignment shares and an income tax benefit for the second quarter of this year.

Speaker Change: Hi, thanks for taking the question. Could you give us a little bit of insight into how we should be thinking about the mix of operating versus M&A assets or construction assets, rather, over time?

Vikram Baggery: especially in the context of that three year outlook, just the opportunity for additional domestic content is that change, that that makes out look at all just curious on that.

Dustin Weber: Hi Vikram, this is Dustin. You know, on the mix piece, I would say if you look back at the last couple years, I think that's going to be roughly 75% acquisition of operating projects, 25% of new builds. I think that that's a decent proxy.

Speaker Change: Thank you for watching. Bye.

Dustin Weber: Hi Vikram, it's Dustin.

Dustin Weber: Moving to adjusted EBITDA, a non-gap financial measure, we reported 31.2 million compared to 30.6 million in the second quarter of 2023, a mounting to growth of 2%. This increase was driven by the growth of our portfolio and partially offset by increased levels of operating in general and administrative expenses.

Vikram Baggery: You know, on the mix piece, I would say, if you look back at the last couple years, I think that's going to be roughly 75% acquisition of operating projects, 25% of new builds.

Gregg Felton: Gregg spoke about how there's a lot of opportunity, a very fragmented market, higher interest rates, impacting certain market participants who maybe have never gotten to scale, but it makes a lot of sense for them to own and operate a handful of assets. And so we do expect the acquisition side to be a key feature of our three-year growth plan, and rightfully so.

Vikram Baggery: I think that that's a decent proxy, Gregg.

Vikram Baggery: spoke on the go forward. Gregg spoke about.

Gregg Felton: How there's a lot of opportunity, very fragmented market, higher interest rates impacting certain market participants who maybe have never gotten to the scale, that it makes a lot of sense for them to own and operate a handful of assets.

Dustin Weber: I'd like to quickly touch on an operational note that puts some downward pressure on recognized revenue during the quarter. Due to the increased production of our assets in the spring and summer months, we have accumulated community solar credits in excess of our current customer subscription levels. These credits are banked, meaning that while we have generated the production, the revenue is currently deferred and expected to be recognized during the second half of 2024, with the seasonally adjusted production in Q4 and increase community solar subscription levels. We are pleased to see the ongoing expansion of our community solar business, and we continue to strategically invest in resources to support this segment of our portfolio.

Vikram Baggery: And so we do expect the acquisition side to be a key feature of our three-year growth plan.

Gregg Felton: And just to give you some additional texture around the development side, you know, clearly the development channels, the channel partners that we engage in, as well as direct early stage, which is us engaging directly with the landlord. All of those are areas of focus with, as you know, a different horizon with respect to the timeline from initial engagement. But there is a robust flow of those opportunities as well. And so when I referred earlier to the consolidation in the market, that is impacting in a positive way the opportunities we're seeing from a variety of different developers in the market who are looking to partner with Altus.

Vikram Baggery: and just to give you some additional texture around the development side.

Vikram Baggery: You know, clearly, the development channels, the channel partners that we engage in, as well as direct early stage, which is us engaging directly with a landlord. All of those are areas of focus with, as you know, a different horizon.

Vikram Baggery: with respect to the timeline from initial engagement. But there is a robust flow of those opportunities as well. And so when I referred earlier to the consolidation in the market, that is impacting in a positive way the opportunities we're seeing from a variety of different developers in the market who are looking to partner with Altus.

Dustin Weber: Turning to incremental megawatt growth for the quarter, the cadence of the incremental megawatt additions has been slightly slower than anticipated. Additionally, while we have previously cited that the second half of the year is generally more favorable to megawatt additions, we now anticipate a slightly slower ramp up than previously expected. Accordingly, we are revising our previously stated 2024 guidance range of 200 to 222 million of revenue and 115 to 135 million of adjusted EBITDA to 196 to 201 million of revenue and 111 to 115 million of adjusted EBITDA. While this outlook reflects a slower than expected growth to be realized in 2024, we are pleased to reaffirm our previously stated three or guidance of 20 to 30% Kager on megawatt growth.

Vikram Bagri: Got it. Thank you. And just one follow-up on the income statement, the $21 million tax benefit, was that a one-time item, or is that related at all to the NOLs that you have in the bill? Yeah, it's not related to the NOLs, Vikram. It's just a one time, and it's really not.

Speaker Change: Got it. Thank you. And just one follow-up on the income statement, the $21 million tax benefit, was that a one-time item or is that related at all to the NOLs that you have in the business?

Dustin Weber: Yeah, it's not related to the NOLs, Vikram. It's a one-time, and it's really driven by that non-cash fair value on the alignment shares.

Speaker Change: Yeah, it's not related to the NOLs, Vikram. It's a one-time and it's really driven by that non-cash fair value on the alignment shares.

Speaker Change: Barrett.

Barrett: Thank you.

Dustin Weber: All right, as a reminder, if you wish to ask a question, please press star one on your telephone keypad. Your next question comes from Jeffrey Campbell of Seaport Research Park. Please go ahead.

Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to our channel.

Speaker Change: Thanks for the questions.

Speaker Change: All right, as a reminder, if you wish to ask a question, please press star 1 on your telephone keypad.

Speaker Change: Your next question comes from Jeffrey Campbell of Seaport Research Partners. Please go ahead.

Jeffrey Campbell: Hi, good afternoon. Gregg, I was thinking about the issue of utility connection that you highlighted. Does this potentially prioritize existing assets like the one that you noted recently acquired in New Jersey that provides opportunities for self-help once acquired? And if so, is that sort of selection available? as you're looking for the acquisitions that Dustin talked about. Thanks. Yeah, it's a it's a great question. And you're

Dustin Weber: Turning to our financing plan, we finished the second quarter with a total cash balance of 92.3 million. During the quarter, we fully repaid borrowings under a corporate revolver for balance sheet efficiency. Additionally, we continue to expand CAPEX to support our megawatt growth. Looking ahead, we believe we remain well-positioned to finance our growth with the combination of cash from operations, our committed construction facility, tax equity partnerships, and our long-term financing access.

Jeffrey Campbell: Good afternoon. Greg, I was thinking about the issue of utility connection that you highlighted.

Jeffrey Campbell: This is potentially prioritized existing assets like the one that you noted recently acquired in New Jersey that provides opportunities for self-help once acquired, and if so, is that sort of selection available to HABs?

Gregg Felton: Yeah, it's a great question and you're highlighting one of the features of our business that we feel is maybe not as well understood as we'd like it to be. So the way we think about that is we own a portfolio of projects across the country that are strategically located in areas of high power consumption, and obviously every asset we acquire just builds to that portfolio. And so, you know, given the demand characteristics and pressure on the grid.

Speaker Change: as you're looking for the acquisitions that Dustin talked about. Thanks.

Greg: Yeah, it's a it's a great question. And you're highlighting one of the features of our business that we

Speaker Change: feel is maybe not as well understood as we'd like it to be so

Gregg Felton: With that, I'd like to turn the call back to Greg for some final remarks. Thanks, Dustin.

Speaker Change: The way we think about that is we own a portfolio of projects across the country that are strategically located in areas of high power consumption, and obviously every asset we acquire just builds to that portfolio.

Gregg Felton: During our investor day in May, I asserted our view is this is a great time to be a clean power company. As the market leader in this rapidly growing segment, we believe we are uniquely positioned to continue to grow our market share through several competitive modes. First, as we continue to expand our significant footprint, we expect we will be able to drive increasing operational and maintenance efficiencies. Second, we believe our vertically integrated platform gives us flexibility as it relates to customer engagement, including the ability to deliver a customized and localized end-to-end solution.

Speaker Change: and so, you know, given the demand characteristics and pressure on the grid.

Gregg Felton: You know, we think there's an opportunity to reposition these assets, as you are alluding to. And clearly, that redevelopment opportunity is most palpable later in the life. So let's say that's a decade after that system was put in operation.

Speaker Change: You know, we think there's an opportunity to reposition these assets as you are alluding to. And clearly, that redevelopment opportunity is most palpable later in the life. So let's say that's a decade after that system was put in operation.

Gregg Felton: So no doubt that should be thought of as a captive opportunity within our portfolio, where that interconnection already exists, and it's effectively a permanent interconnection. And so we have that opportunity when we acquire an asset, or when we own an asset, to effectively avail ourselves of that redevelopment opportunity. You know, and that interconnection issue, of course, is mitigated to a great degree as a consequence of the fact that there is an existing asset.

Speaker Change: So no doubt that should be thought of as a captive opportunity.

Speaker Change: within our portfolio where that interconnection already exists and it's effectively a permanent interconnection.

Speaker Change: And so we have that opportunity when we acquire an asset or when we own an asset to effectively avail ourselves of that redevelopment opportunity, you know, and that interconnection issue, of course.

Gregg Felton: Third, we believe our nationwide footprint of operating assets and enviable network of partners drives equity in the office power brand, bolstering our ability to scale our enterprise and community solar customer base. Finally, our scale and diversified portfolio ensures ongoing access to a competitive cost of capital, allowing us to efficiently expand our footprint. All this power has assembled a diversified portfolio of assets, which we believe will produce long-term value for our investors.

Gregg Felton: So that doesn't mean that we're not focused on driving new assets forward from an interconnection perspective. So I don't want to give the impression that it's not critical and a focus of ours to drive those interconnection timelines shorter as we can. But your point is correct, which is those existing assets that we acquire sort of jump over that challenge that does exist on new builds.

Speaker Change: to a great degree as a consequence of the fact that there's an existing asset.

Speaker Change: driving new assets forward from an interconnection perspective. So I don't want to give the impression that it's not critical and a focus of ours to drive those interconnection timelines shorter as we can. But your point is correct, which is those existing assets that we acquire

Gregg Felton: We further believe that our platform is positioned to scale, to seize on the long-term growth opportunity in this sector. Over the past six months, several transactions with private and public companies, both nationally and internationally, have been executed at levels which we believe support the intrinsic value of our asset base and platform. I remain committed to delivering value for our shareholders, and I'm confident that the business and operational analysis that we've performed over the past 90 days will put us on a path to expand our leadership position within the commercial scale solar market.

Speaker Change: sort of jump over that challenge that does exist on new builds.

Gregg Felton: and Gregg. Thank you.

Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: There are no further questions at this time.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: Thank you for your time, and we'll now take your questions. Thank you.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process? Please press the star followed by the number two. If you are using a speaker phone, please leave the handset before pressing any case. I would like to advise everyone to please limit their questions to one question and one follow-up question. One moment, please, for your first question.

James West: Your first question comes from James West of Evercore LSI. Please go ahead. So, Gregg, clearly outlined a new, enhanced vision for the company. And one of the things I thought was interesting is your findings of one, the educational side, which should be helping out with a lot of these recent events that have happened, like the power market, auctions. And then, of course, when the Wall Street Journal gets a hold of these things, usually, it gets pretty widespread, but I'm curious on that and the enterprise, how do you see yourself educating further?

James West: And then, secondarily, on enterprise, how do you develop those relationships that maybe you didn't have before? Is that leverage in CBRE or is it some other path market? Yeah, thanks for the question, James. So, you're right that the backdrop as it relates to power demand is definitely in everybody's focus. And so, there's no doubt that that should help with respect to the message and the opportunity that commercial scale solar can provide.

James West: As it relates to getting to and connecting with enterprise customers, as you heard from the prepared remarks, we are working closely with Robert Bernard, who is a board member, and also head of sustainability at CBRE to really restructure the engagement with enterprise. So, the enterprises reflecting the fact that many enterprises benefit from a long-term advisory relationship, rather than a narrower solar specific engagement. And so, the details of our approach are oriented to acknowledging the enterprise engagement and how that should be approached.

James West: And we're pleased that all this is going to be featured prominently as an onsite solar solution within the context of CBRE's broader sustainability relationship with enterprises. But I do want to add that as you heard, at the same time, we are very focused on a bottoms-up approach that first being a top-down enterprise approach. And the bottoms-up approach focuses on geographies where there's a real and tangible opportunity. So, dovetailing with your first comments, that would be markets where there are high power prices and a real need and opportunity to bring commercial scale solar.

James West: So, as you know, it's not really something that we try to bring to every market, but we certainly are in 25 of 50 states, right? So, what we're focused on is when there are existing opportunities, new programs or states where there's a compelling opportunity. We're working with our partners, including CBRE, in a much more targeted fashion than we might have historically. So, that's really the nature of the approach is a combination of top-down enterprise and bottoms-up market specific. Okay. Got it.

James West: If I could just throw in one follow-up here as we watch rates go up. I know a good number of your contracts will adjust higher. Could you give us some help on what kind of percentage of your contract, this in contract, have that inflector in them?

Dustin Weber: Hey James, it's Dustin. Our current portfolio has 54% of our PPAs at a floating rate. So as the prevailing utility increases those rates, we stand to benefit. And so that's a tailwind to our operating portfolio for sure.

James West: Thanks guys. Thank you.

Justin Clare: Your next question comes from Justin Clare of Roth Capital Partners. Please go ahead. Hi, good afternoon. So you afternoon. So, you know, following on the completion of the review process here, you talked about taking a more targeted market specific approach. So just wondering what markets may be targeted initially, what where do you see the most attractive near-term opportunities. And then if you could just speak a little bit more about how you're going to market, how you're approaching the landlord of a building or the tenant, maybe just help us understand that process a little bit.

Gregg Felton: Sure. So thank you for the question. I think the first thing we'd like to make sure it comes through as it relates to the review is this is about Altus refocusing our resources on those areas where we've historically had the greatest success, or we can accelerate our revenue growth with greater prioritization. So that's the key objective that we're focused on. And we have had historical success in that bottoms-up orientation where specific markets that have opened up and community solar is a big part of this expansion.

Gregg Felton: So in either case, the goal here is to identify and target these markets and then work with our partners. And we consider CBRE an important partner, but certainly they're a partner along many other channel partners that we've talked about in the past that are local to these markets that are working directly with landlords. So we are both working at the early stage level with landlords directly and that's the announcement we made today around Brett Phillips and he's going to lead that effort. But we're also working with many partners who are bringing us opportunities where that landlord has already been engaged. So it's a combination of factors all intended to drive market-specific flow.

Justin Clare: Okay, got it. Appreciate it. Maybe just shifting over to your guidance here, the reduction to the 2024 guide. You did mention the cadence of activity is maybe not what you had anticipated here. So just wondering, are you seeing new build projects move to the right or as part of the review process, have some projects been maybe moved out of your pipeline? Maybe they didn't meet return expectations. And then maybe you could comment on acquisitions as well. Was anything maybe anticipated to close this year and maybe is moving out of your pipeline?

Dustin Weber: Yeah, hey, Justin. I'll start in with the new build. So, this is more of a timing issue than it is a number of megawatts. I think you hit it on the head where they're pushed out to the right. And that's really the main culprit there has been utility and interconnection delays. Many on the call were at our investor day at a community solar site here in New York. And if you were there, what you saw was a completed solar array.

Dustin Weber: And that was an early May. And here in August, that solar is still not interconnected by the utility. And I think you've probably heard other site, the same frustrations put that's that's an example of one particular project, but there are other examples like that in our portfolio where things are getting pushed out a little bit. And I would just add, Justin, so in the context of that, you know, taking a sober view, certainly in the context of my broader remit and focus from the development side of the business in particular what we're trying to do here is not necessarily suggest anything about the volume of opportunity, but there has been as you know, a consistent challenge in predicting the timing of operationalizing these assets.

Dustin Weber: So that's the key feature that we're that we're talking about on your question as it relates to operational assets that are in our focus to be acquired. There continues to be a very robust pipeline of opportunity. So there's no shortage of deals there. I think that what what we would also say is that and hopefully those on the call would appreciate the fact that that there are as he stood a capital with the appropriate discipline that I articulated in the prepared remarks.

Dustin Weber: It's important for us to both demonstrate to you confidence with respect to the opportunity, which is significant, but also a the fact that the opportunities that we see in our pipeline. Or, you know, have a timing that will be later this year, early next year. And so we're kind of being again sober with respect to thinking about timing, not the scale of the opportunity, the scale of the opportunity and the scale of the pipeline remains quite large.

Dustin Weber: So we have a lot of confidence with respect to the opportunity. And I would further add on that point, I think I may have mentioned on prior calls, consolidation that's happening in this space. There is a very real opportunity for all this power where our scale and frankly leadership position in this market has put us in a spot where we continue to see a robust set of opportunities. And we would say with with the exiting of certain players, there continues to be a greater flow of opportunity coming our way.

Justin Clare: Okay, good to hear. Just one more, if I if I may here, the community solar credits that we're not recognizing this quarter, could you share what the expected value of those credits were and then do you anticipate realizing those in Q3 or Q4 of this year?

Gregg Felton: Yeah, I'm going to kick that off just and just give a little bit of context for for community solar to make sure that we frame this for Dustin to fill in the financial. So just as a reminder, what we're talking about here in the case of community solar, our commercial scale sites consistent with every other site that that we own. Where the consumption is not quite their approximate to the production. So think of a landfill or a car port or a rooftop, where the building tenant consumption is insufficient relative to scale the project.

Gregg Felton: These are all use cases for community solar. So we're building on sites where instead of selling to the onsite consumer, we're instead selling to the adjacent community specifically within that same utility zone. And so what we're talking about are building sites where the customers that are ultimately acquired by us or our partners have to come in the hundreds, let's say, first per site in order to satisfy the power that we're generating.

Gregg Felton: But Dustin, you want to take it from there? Yeah, so the deferral in Q2 is really a function of how rapidly we've grown that segment of our business in terms of megawatts and customers 500% in a two year period. And so what I would say is there's sometimes a ramp up to onboard new customers. And so as a result in Q2, we had generation that we instead will monetize and book as revenue in Q3 and Q4.

Gregg Felton: And I'd estimate that to be about $4 million of worth of revenue that was production was generating Q2 and what we expect to monetize in the second half, here. And Justin, just again on the one last thing as it relates to the task that we're talking about just for anyone who's a little less familiar, we're talking about selling dollar credits at 90 cents. So this is anybody living in New York who wants to quote unquote sign up for a Altus Power community solar project can benefit from discounted power, literally a discount on their bill.

Gregg Felton: It should not be a hard sale. But again, we have to go out and acquire customers who want to save money on their utility bill. And that's really the process. Now we're talking about this multi month sort of gap that doesn't refer to from pushing that out from one quarter to the next contextualize that in the context of a 25 year contract. So this is really immaterial in a short term sense, but it does affect recognition of revenue by the quarter.

Justin Clare: Good, it makes sense. Okay, thank you.

Vikram Bagri: Your next question comes from Vikram Bagri of city group. Please go ahead. Hi, thanks for taking the question.

Dustin Weber: Could you give us a little bit of insight into how we should be thinking about the mix of operating versus MNA assets or construction assets rather over time. Especially in the context of that three year outlook does the opportunity for additional domestic content does that change that that makes out look at all just curious on that. Hi, Vikram, this Dustin, you know, on the mixed piece, I would say if you look back at the last couple of years, I think that's going to that's going to be roughly 75% acquisition of operating.

Dustin Weber: I think that that's a decent proxy. Greg spoke on the go forward. Greg spoke about how there's a lot of opportunity, very fragmented market, higher interest rates impacting certain market participants who maybe have never gotten to the scale that it makes a lot of sense for them to own and operate a handful of assets. So we do expect the acquisition side to be a key feature of our three year growth plan.

Dustin Weber: And just to give you some additional texture around the development side, clearly the development channels, the channel partners that we engage in as well as direct early stage, which is us engaging directly with the landlord. All of those are areas of focus with, as you know, a different horizon with respect to the timeline from initial engagement, but there is a robust flow of those opportunities as well. And so when I referred earlier to the consolidation in the market that is impacting in a positive way, the opportunities we're seeing from a variety of different developers in the market who are looking to partner with all this. Got it. Thank you.

Dustin Weber: And just one follow up on the income statement, the $21 million tax benefit, was that a one time item or is that related to the adults that you have in the business? Yeah, it's not related to the animals that grow. It's a one time and it's really driven by that non cash fair value on the alignment shares. Product. Thanks. Thank you. Thanks for the questions. All right, as a reminder, if you wish to ask a question, please press part one on your telephone keypad.

Jeffrey Campbell: Your next question comes from Jeffrey Campbell of Seaport Research Partners. Please go ahead. Hi, good afternoon. Greg, I was thinking about the issue of utility connection that you've highlighted. This is potentially prioritized existing assets like the one that you noted recently acquired in New Jersey that provides opportunities for self-help once acquired. So, is that sort of selection available to us as you're looking for the acquisitions that Dustin talked about?

Gregg Felton: Thanks. Yeah, it's a great question and you're highlighting one of the features of our business that we feel is maybe not as well understood as we'd like it to be. So, the way we think about that is we own a portfolio of projects across the country that are strategically located in areas of high-power consumption and obviously every asset we acquire just builds to that portfolio. And so, given the demand characteristics and pressure on the grid, we think there's an opportunity to reposition these assets as you are alluding to and clearly that redevelopment opportunity is most palpable later in the life.

Gregg Felton: So, let's say that's a decade after that system was put in operation. So, no doubt that should be thought of as a captive opportunity within our portfolio where that interconnection already exists and it's effectively a permanent interconnection. And so, we have that opportunity when we acquire an asset or when we own an asset to effectively avail ourselves of that redevelopment opportunity. You know, and that interconnection issue, of course, is mitigated to a great degree as a consequence of the fact that this is an existing asset.

Gregg Felton: So, that doesn't mean that we're not focused on driving new assets forward from an interconnection perspective. So, I don't want to give the impression that it's not critical and a focus of ours to drive those interconnection timeline shorter as we can, but your point is correct, which is those existing assets that we acquire sort of jump over that challenge that does exist on new builds.

Jeffrey Campbell: Great. Thank you.

Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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