Q4 2024 Sunnova Energy International Inc Earnings Call
Good morning, and welcome to Synovus fourth quarter and full year 'twenty 'twenty four earnings conference call. Today's call is being recorded and we have allocated an hour for prepared remarks and Q&A at this time I would like to turn the conference over to Rodney.
Mcmahon Vice President Investor Relations at Sun Noga. Thank you and please go ahead Rodney.
Thank you operator.
Speaker Change: Before we begin please note that during today's call. We will make forward looking statements that are subject to various risks and uncertainties as described in our slide presentation earnings press release, and our 2024 Form 10-K. Please see those documents for additional information regarding those factors that may affect these forward looking statements.
Speaker Change: On the call today are John Berger, <unk>, Chairman and Chief Executive Officer, Eric Williams, Executive Vice President Chief Financial Officer, and Paul Matthews Executive Vice President and Chief Operating Officer, I will now turn the call over to John.
Speaker Change: Good morning, everyone and thank you for joining today's call.
Speaker Change: As you are aware the fourth quarter of 2024 was a challenging time for our industry.
Speaker Change: Peer distress and stubbornly high interest rates, along with regulatory and political uncertainties made both consumers and capital providers more cautious.
Speaker Change: This backdrop slowed the flow of tax equity, which in turn lowered the amount of capital we were able to deploy.
Speaker Change: Ultimately leading to our 2020 for cash generation to come in below expectations.
Speaker Change: But the team delivered a strong operational performance in a few key areas. This includes over the course of the last two years a reduction in debt service expense of 24% per customer while also reducing the total work orders opened for our fleet by 12%. This occurred while growing our accumulative solar customer base by over 70% and subsea.
Speaker Change: Quickly, reducing our average age of work order by 83%.
Speaker Change: Building on the strengths of the business yet also facing the realities of this market. We believe we have made the adjustments needed to better positioned for success in 2025 and beyond.
Speaker Change: Turning to slide four I want to share how we are positioned to deliver against the headwinds of backdrop. I described this includes continuing to prioritize margin over growth by focusing our originations in the most attractive markets and operating only our highest margin energy services, such as our solar lease and PPA offerings, which now make up effectively 100 <unk>.
Speaker Change: <unk> of our solar financings in 2024, it was a year of consistent price increases to offset a higher cost of capital if necessary, we will raise pricing again to protect our margins second reducing expenses and decreasing demand on our working capital recently, we reduced our headcount by over 15%, which is expected to contribute.
Speaker Change: Approximately $35 million towards a total estimated annual cash savings of approximately $70 million.
Speaker Change: Since the end of 2023, our total head count has declined by 30%.
Speaker Change: We further optimized working capital through revised either payments that are better aligned with their funding cycles in the current market structure, creating less lag between tax equity and debt funding and dealer payments.
Speaker Change: We also signed a nonrecourse asset base loan facility borrowing against our own net contracted cash value you've heard me referenced this embedded value before and it was the right time to access it.
Speaker Change: To strengthen the company. This facility will be used to manage our working capital and serve as a bridge to additional tax equity and enhance our ability to advance systems and progress and add new originations third we have taken additional steps to further strengthen and maximize our asset level funding.
Speaker Change: I will walk you through the details on the next slide but at a high level, we significantly increased our amount of asset level financing, including closing a $500 million tax equity fund in late December.
Speaker Change: However.
Speaker Change: The structure of this fund required the 75 million received at closing to be included in restricted cash. Thus it did not contribute to our cash generation guidance as we expected.
Speaker Change: February another $50 million was released under the same tax equity fund.
Speaker Change: Executing on these three items remains our top priority, we believe doing so best positioned for success and helps US address our late 2026 corporate debt maturities by mid 2025.
Speaker Change: I want to share more detail, how we are maximizing our asset level capital in the current environment.
Speaker Change: Right the more cautious capital markets environment as you can see on slide five in 2024, we securitized $1 $8 billion worth of solar assets and customer notes receivable and raised $1 $3 billion of tax equity combine these two sources of capital generated over $1 billion more and asset level financing compared to the prior year.
Speaker Change: A company record.
Speaker Change: 24 also marked the first year in the company's history, we did not issue corporate level capital as I noted earlier, we did not reach our cash generation target, we are well positioned to achieve it coming out of the third quarter, but our guidance is back weighted for the fourth quarter and we faced a number of headwinds that you're in most notable was the slowdown in project finance markets as <unk>.
Speaker Change: <unk> paused to assess the impact of the election, which resulted in delays to some of the tax equity funds, we anticipated to close in the fourth quarter.
Speaker Change: In response to this market tightness, we need this slower originations to match the pace of our own funding and this further impacted our ability to generate cash due to a lack of origination moving through our system.
As a reminder, we generate cash through a combination of recurring cash flows from our customers and through our ability to originate new customers and raised routine financing to support and investment in growth.
Speaker Change: Slide six provides an overview of our path forward in just the first couple of months into the new year, we have taken further steps to reduce cost without sacrificing customer service or quality adjusted dealer payment terms to better match, our funding and finally, we have signed the nonrecourse asset based loan facility.
Speaker Change: With these items accomplish we are now focusing our attention on our late 2026 corporate debt maturities with a mid 2025 target resolution date with this I will turn the call over to Eric.
Eric: Thanks, John and good morning, everyone, starting with slide eight which highlights our full year financial and operational results revenue came in at $840 million up 17% for the prior year. Our interest income is the $150 million also rose, 29% and our principal proceeds from solar loans of $191 million grew by 21%.
Eric: Cumulative customers increased by 5% despite a reduction of 57000 non solar customers as the number of slower customer has added more than offset the non solar loans, we monetized in the second quarter of 2020 for.
Eric: This growth until our customers can be seen in the 20% increase in solar power under management and 53% increase in energy storage under management.
Eric: Battery adoption continues to decline as our battery attachment rate in the fourth quarter of 2024 was 33% an all time high for the traditionally seasonally light fourth quarter core perspective or batteries hatchment rate in the fourth quarter of 2023 was 24%.
Eric: Of course over the course of 2020 for Synovus stockholder equity per share increased to $14 65 reps.
Eric: Representing an increase of 17% as value continues to transfer from redeemable noncontrolling interest and non controlling interest into stockholders' equity.
Eric: Our net contracted customer value for sure however decreased slightly by 4% to $24 22.
Eric: Due to the delays in receiving tax equity as Jon discussed previously and selling nearly all of our non core solar loans at a loss in 2024.
Eric: On slide nine we have an overview of our 2024 capital markets highlights and you can tell we've been busy during the year, we issued seven securitizations versus four in 2023 totaling an additional $613 million in securitized assets with the increase driven by lease and PPA Securitizations in 2024, our usage of tax equity.
Eric: We also moved up worried about 37% due to due to more lease and PPA growth and an increase in our annual weighted average ITC right that grew from 31, 5% in 2023% to 38% in 2024. This increase was driven by a greater utilization of ITC adders most significantly.
Eric: Relating to domestic content, because we were the first to require beginning in September 2024 that all lease and PPA originations qualify for the domestic content adder.
Eric: Additional accomplishments for the year include closing the industry's first Puerto Rico, only lease and PPA securitization monetizing those of our non solar loans and retroactively collecting ICC adders associated with both 2023 and 2024 originations.
Eric: On Slide 10, you will notice that we've removed our 2025 and 2026 cash generation guidance as we work to address our 2026 corporate maturities. We believe it is appropriate to Peru remove or now this guidance since the outcome and timing of addressing our upcoming corporate maturities will have a material impact on our cash generation for both years, we will certain.
Eric: We revisit this topic on future earnings calls with that I will turn the call back to John for closing remarks. Thanks, Eric in summary, we delivered strong operational results in critical parts of the business, but our cash generation for the quarter and the year did not meet our expectations.
Eric: We are concentrating our efforts on providing excellent service working side by side with our valued dealers streamlining our cost structure, improving working capital efficiencies and closing more asset level financings.
Eric: It's novo over 12 years ago.
Eric: I've seen challenging years in difficult cycles 2024 was without question one of the hardest we've had to make tough decisions and take decisive actions and theres more work to be done.
Eric: But the core fundamentals of our business are solid in a market that has strong growth opportunities to meet the growing demand for more power and consumers' needs for energy affordability and reliability are.
Eric: I remain steadfast in my belief that the service, we deliver and how soon you know, but uniquely does it continues to be a valuable solution that creates value for all stakeholders. I also want to thank the team and our dealers for the resilience and commitment. They show up every day to do their jobs, well and deliver on our mission of powering energy independence I am great.
Eric: Full for that now lets turn the call over to the operator to open up for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: I'd like to ask a question. Please press star followed by one on the telephone keypad. If you change your mind. Please press star followed by T. When configuring.
Speaker Change: <unk> asked a question. Please ensure your devices and you take locally who will make a quick pause for further questions to be much there.
Speaker Change: Yeah.
Speaker Change: Our first question comes from Philip Shen with Roth Capital Partners.
Philip Shen: Hey, guys. Thanks for taking the questions.
Speaker Change: I know you're going through a difficult time here.
Speaker Change: You named a peer distress as a reason for capital providers to be cautious in your prepared remarks.
Speaker Change: But run is not having these issues.
Speaker Change: What do you think you could've done prevented the tax equity to slow down.
Speaker Change: What would you have done differently.
Speaker Change: And the mandate of domestic content in October of last year exacerbated the situation.
John: Hey, Phil it's John Thanks.
John: I think they are distressed refers to sunpower as bankruptcy.
Speaker Change: And the terms the change in the tax equity markets and the debt markets Accordingly.
John: Services become.
John: Something that obviously as I've talked about pounding the table on for over a decade.
John: And very few candidly very few people really paid much attention to it in the capital markets now Theres a lot of attention on it.
John: And so there is a lot of changes that's gone into payment terms of capital, whether it's tax equity debt and mandating and looking at service not just collecting the bills, but rolling trucks and getting things fixed monitoring and so forth and that's what I would add Paul joined the call to answer any questions on that because we've seen a lot of success there.
John: Look we got behind a well over a year ago, we've talked about that in previous quarters.
John: And candidly I think the election, just caused a lot of pausing, we still closed on tax equity and I think we're in pretty good shape right now for the next few months as we look at it as well.
John: We have and what we see in front of us and what we've closed on.
John: And so we look to finally get ahead of that I think this last securitization. We did we finally got ahead on securitization too so.
John: We were behind in between the Sunpower bankruptcy in the election.
John: It's been it's been challenging in the marketplace.
John: However, I do see more constructive dialog going on right now.
John: With incoming tax credit buyers tax equity.
John: Securitization the asset market has done pretty well, so I am cautiously optimistic as we move forward here.
John: Even with an overall economy, that's slowing which candidly is helpful with regards to the cost of debt going down and as you know so.
John: The domestic content.
Speaker Change: And that did nothing but help that was a great call. It was a bold call.
John: Controversial.
John: But at this point I think everybody realizes that without the domestic content without the domestic manufacturing candidly politically we werent in good shape.
John: And with it I think that.
John: Yes, I think the irate changes will be much lighter than it would've been otherwise. So it was a good to get ahead of that definitely helped on the cash generation, we still expect.
John: Good cash generation is just simply at this point in time it.
John: It was prudent to remove guidance given the focus on dealing with the corporate debt maturities and other than that.
John: <unk>.
John: Was it was a good call and we see more and more value in terms of cash generation are doing domestic content and our dealers about now see that as well.
John: There was skepticism initially they now see that that was right call to make on the divested content mandate, we expect our competitors to follow.
John: If they have not already.
John: Okay. Thanks.
John: Thanks, Sean.
Speaker Change: Terms of the tax equity fund talked about $500 million fund.
Speaker Change: I think 75 float and then but that was in restricted cash and a $50 million.
Speaker Change: That's come through.
Speaker Change: Can you talk about when that might flow more easily and freely.
Speaker Change: We're running about.
Speaker Change: The dealer payments being restricted for some time now and so and.
Speaker Change: The second part of this question is.
Speaker Change: When do you expect to get caught up with them.
Speaker Change: The dealer payments.
How much do you owe the dealers at this point do you need to get cut off.
Speaker Change: And when do you think that could actually happen as well.
Yes sure.
Speaker Change: Yes.
Speaker Change: Again, the amount of capital, we have and the type of around the table does get us and it does have us in a pretty good spot. We've got a couple of other things we wanted to do that small around the edges, but where we see ourselves in a pretty good spot given our run rate right now.
Speaker Change: With the loan facility that we announced that we signed last night, coupled with those sources of capital and a lot of the changes that we've made in particular, the dealer payment terms cost reductions and so forth.
Speaker Change: We feel pretty good.
Speaker Change: We're going to be able to get everything caught up here in the next few days and weeks.
Speaker Change: So we feel like we're in a good position into.
Speaker Change: Bridging into more tax equity, even if it takes us longer than we expect to close more tax equity and close more.
Speaker Change: Securitizations were prepared for that and taking care of the dealers. So were not were not where we want to be but we're in a heck of a lot better spot than we were at the close of the year.
Speaker Change: And we'll get things taken care of with our dealers appreciate them and their patients with us and looking forward to getting on a more regular pace here very shortly.
Speaker Change: Okay got it one last quick question, if I can what triggered the going concern language specifically.
Speaker Change: Okay.
Speaker Change: Well I think that the overall I'll, let Erik answer this but my mic.
Speaker Change: When you look at overall the concern around.
Speaker Change: We must address the corporate maturities and so I think thats, there, whether thats explicitly mentioned or not.
Speaker Change: The overall environment, it's terrible.
Speaker Change: It's the political environment the capital markets look at the equity Trey.
Speaker Change: Trading off.
Speaker Change: And so that just gets everybody in a very bad mood candidly.
Speaker Change: Should it straight and then the fourth quarter, we struggled to close them things after the election, but again I think things are.
Speaker Change: At this point in time.
Speaker Change: Contrarian trader and needs looking at this and going okay well.
Speaker Change: The baby has been thrown out with the bathwater.
Speaker Change: Say.
Speaker Change: I think that now the sentiment is so negative that at some point here, we got to start getting constructed because what we do.
Speaker Change: Is very fundamentally need it right now.
Speaker Change: The power business I've been in it for almost 30 years and for 22 of those years up until the last couple of years has been a bear market a pretty significant one and now we're seeing a lot of energy demand that everybody is well aware of from variety of sources re shoring manufacturing AI data centers et cetera.
Speaker Change: Vacation are transportation et cetera. So when you look at the demand for what we sell.
Speaker Change: Energy service, it's going up and the equipment pricing is going to continue to go down and now cost of capital it seems to be trending off as well.
Speaker Change: So when you look at overall the picture fundamentally it's really good but the perception and yes, the election outcome and so forth.
Speaker Change: And some of those headlines that we always see coming out of the.
Speaker Change: The politicians is not helpful. It does generate a negative sentiment I would tell you that under the requirements that looking going concern.
Speaker Change: I'm not sure we would ever met you know when you look at 12 months out we always need capital, we always will need capital. We've always had that and so we feel like we have a plan candidly we've been executing on that plan you can see that youll see some more announcements.
In the coming weeks is what we anticipate and we feel confident we can execute on the plan.
Speaker Change: Others may feel differently and all.
Speaker Change: Leave it at that Eric do you want to add anything yeah. No I. Appreciate the question and we will have our 10-K out this afternoon and it provides a little bit more detail.
Speaker Change: I will answer is that we do the going concern analysis every single quarter, and we are assessing whether or not there is substantial doubt.
Speaker Change: Nickel terminology as to our ability to meet our needs over the next 12 months or 15 months from the financial statement date.
Speaker Change: And John's right, we believe that having closed tax equity a significant tax equity fund last year.
Speaker Change: Resetting our dealer payment terms to match, our inflows with our outflows.
Speaker Change: And then signing the the loan facility that basically closed the working capital gap as we enter 2025.
Speaker Change: Was it was a really powerful sorry, but we have to assess.
Speaker Change: <unk> abilities.
Speaker Change: Loosely defined I think people look at is around 70% or greater.
Speaker Change: That will be able to continue to meet our needs and I think the two things that we struggled with in the analysis.
Speaker Change: But the management is still confident in but if were just to be objective the ability to unilaterally control the addressing of our corporate maturities midyear is something behind our ability to but we are actively working in that direction.
Speaker Change: And then just the ability to unilaterally control closing additional tax equity.
Speaker Change: We have some great things in motion and we're certainly confident in our ability to do so you've seen the industry move to more asset level of protections you saw the cash restrictions in the last nine to provide some of those protections that we believe will enhance our ability to close that in and so we're working in that direction.
Speaker Change: We will continue to assess this every quarter as we always have.
Speaker Change: So if once we've <unk>.
Speaker Change: Pass the hurdle of addressing the corporate maturities closing tax equity there.
Speaker Change: Certainly a chance that we could reach a different conclusion and adjust that disclosure in our 10-Qs accordingly.
Speaker Change: But for now we felt that it was the right call.
Speaker Change: And the balance sheet their financial statement date to put this in.
Speaker Change: Okay.
John: John Thank you best wishes for the coming months.
Speaker Change: Thank you.
Brian Lee: Our next question comes from Brian Lee with Goldman Sachs.
Tyler bisset: Hey, guys. This is Tyler bisset on for Brian Thanks for taking our questions.
Tyler bisset: Can you start by just discussing the factors that led you to remove your guidance youre.
Tyler bisset: We're always assuming addressing the debt this year and had been articulating that last quarter. When the guidance was reiterated so what has changed since then.
Tyler bisset: Yeah, we can't talk much about the corporate debt maturities are I will say that we are obviously very focused on and particularly after getting some of these.
Accomplishments closed out.
But where we're looking to tackle those corporate debt maturity sooner rather than later and we'll leave it at that.
Tyler bisset: At this point in time.
Tyler bisset: We can go back and take a look at the Q3 call and say should we not have issued the guidance or continued guidance on cash gen. Knowing that we would need to tackle these corporate debt maturities, maybe so I would just remind everybody that was right prior to the election to and we've had some other.
Tyler bisset: Tension in the markets clearly capital markets. Since then so I think really at this point in time, it's a good time to just frankly, just flush everything out was restart.
Tyler bisset: Tackle as corporate debt.
Tyler bisset: And then get back at it and reset the table I mean.
Tyler bisset: Why not just given where things are so I think it was just the prudent thing to do and focus on taking care of the corporate debt maturities, which clearly everybody is really focused on whether it's equity or credit Eric anything you want to add to that no. I think it was we're just assessing momentum coming into the year and we put out.
Tyler bisset: Adjusted cost structure targets, and so I think that we wanted to take a holistic approach to updating guidance.
Tyler bisset: Once we have a little bit more clarity as to how these things are coming together.
Speaker Change: Thank you very much and then just curious what trends you guys seeing with your weighted average ITC I think you were expecting 43% in <unk> and it sounds like you guys were close on that.
Speaker Change: So I suppose the ITC and <unk> and I guess, how are you seeing that trending so far in Q1.
Speaker Change: It has been in the low forties and we do.
Speaker Change: Still see that continuing the latest domestic content guidance was a little less than ideal, but not too bad and we're working with that and.
Speaker Change: We have some of the other couple of matters as well and so overall I think thats pretty close to where we thought it would be maybe maybe a little bit lighter. If you look at over the year, but we're seeing the manufacturers adjust pretty quickly too.
Speaker Change: Two the change in guidance, so I suspect, it's largely going to come out where we think it will.
Speaker Change: The one thing I will say on the policy side, it's heartening to see is that the politicians.
Speaker Change: Weather.
Speaker Change: Regardless of what party really loved the 45 acts and domestic manufacturing.
Speaker Change: And they should.
Speaker Change: But what goes with that is you need the ITC and the PTC.
Speaker Change: <unk> essentially have consumers buy all those those wonderful pieces of equipment and so the combination of those and the need for the combination of those is now I think seen by a good majority of.
Speaker Change: The folks in Congress and in particular, the Republican side of Congress that now leads Congress. So I think that's that's heartening to see and that's something to take note of.
Speaker Change: Alright, Thank you very much I'll hop back in queue.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Julien Dumoulin Smith with Jefferies.
Speaker Change: Hey, good morning team sort of see all of these challenges here.
Speaker Change: At the time I appreciate it.
Speaker Change: Jim can you speak a little bit to what you're actually seeing on the ground and origination trends year to date and just how.
Speaker Change: The dealer community is responding here I mean, obviously, we've got the payment dynamics, but.
Speaker Change: What are the origination trends and then maybe speak to that in tandem I'm thinking about what you can do on further cost rationalization just steady the ship if you will but just first on what youre seeing of late and how to just benchmark a little bit even year to date on how we should be think about 25.
Julien: Yes Julien.
Julien: Dealers have been great overall, they've been really sticking with us and.
These are the times that.
Julien: That.
Julien: It's easy to be partners in the in the in the good times, but it's not so easy and the bad times and they've done a really good job.
Julien: Look there are issues across the industry and I can talk to ours, but I can also see that the industry itself is is is definitely challenged I mean, there's no question about that but.
Julien: There's there's great unit economics, when you look at cost structure referred to it we've been aggressively attacking it for over well over a year now and we continue to see more opportunities to take out cost but.
At some point you just got to continue to grow the business and we generate cash on origination not just recurring cash flows, which we have those in times of.
Julien: Of need kind of a piggy bank. If you will and now is the time of need and Thats why we did the loan facility and it will help us greatly we expect any ways on the corporate debt maturities.
Julien: Addressing those.
Julien: When you look at moving forward I like the origination pace.
Julien: We've been on to really kind of rightsize ourselves to them up to the amount of capital that we have.
Julien: And I think that what we will see as we start to get.
Julien: Get these payments caught up as I answered <unk> question in the next few days and weeks.
Julien: The origination.
Julien: We will actually go up quite up quite a bit and we've had a very conservative.
Julien: Forecast.
Julien: And.
Julien: So we're looking at things.
Julien: That wouldn't be much different than where we were last year, maybe a little bit a little bit higher and I kind of like to see where our dealers are coming out on that and I expect that that will hit that internal plant. So.
Julien: Not so bad.
Julien: At the end of the day.
Julien: Yeah.
Julien: Got it understood and then just can you speak a little bit to this dynamic or thought of a like a private yieldco you talked about the Piggy Bank. If you will how would you set expectations that the ability to tap those on.
Julien: Committed cash flows I mean, just what.
Julien: What structure, you're thinking right now.
Julien: Will it take and then how does that kind of morph into the question about dealing with some of these forthcoming maturities here.
Julien: Okay.
Julien: Open too.
Julien: What what's best and I think that's why we've.
Julien: Retained J P Morgan to to help us in that in that effort and.
Julien: They're looking at all options at this point in time, and we'll choose and choose quickly the best option. So.
Julien: I think that you'll look these cash flows whether their leases and ppas are performing materially better than anybody thought they've continued to do that.
Julien: And on the loans the loans are really picking up prepayment speed significantly and I think that with this recent back off.
Julien: And the 10 year and the mortgage rates and if that continues these prepayments could really move up.
Julien: And a very very significant way right now we're materially ahead, where we thought we'd be by this time last year on prepayments I mean materially and and I think that goes even higher so the loans are performing extremely well at this point in time. So those cash flows our cash flows and people can argue about it I know, it's sometimes it's difficult to see in the financial statements but.
Julien: The cash is really truly.
Julien: Truly there.
Julien: And you can see it as an example here we're able to put together.
Julien: Our loan facility to work and help us on the working capital side.
Julien: And then it get through the corporate debt maturity exercise and I think it will obviously significantly as I said earlier helps us on the corporate debt maturity exercise as well.
Jonathan: Alright, Thanks, Jonathan him all the best good luck.
Speaker Change: Our next question comes from DRAM Maisano at Wolfe Research.
DRAM Maisano: Hey, good morning, everyone.
DRAM Maisano: I just wanted to go back to the comments on kind of during the quarter you saw lower originations kind of due to the slower financings.
DRAM Maisano: Just kind of it sounds like it's creating a bit of a negative cycle.
DRAM Maisano: Where it's harder for you to execute on growth. So I guess, just how long do you expect this kind of cycle to persist and you kind of break out of it and that is it.
DRAM Maisano: Matter of kind of waiting for the tax equity market to catch up to you or you have to kind of model growth until then thank you.
DRAM Maisano: Yes.
DRAM Maisano: Some ways that was intentional to do that is you don't have the capital coming in at the pace that you expect it to the prudent thing to do would be to slow that the origination down and so we did we did do that I wouldn't say it was all.
DRAM Maisano: Grand plan on our part, but it certainly.
DRAM Maisano: It has worked out where we've been able to get to a spot where I said, we've secured capital for the foreseeable future next few months from our plan and so we feel pretty good about where we sit today.
DRAM Maisano: So I think that.
DRAM Maisano: Look I I expect that we would see.
DRAM Maisano: The increased amount of origination maybe maybe significantly so over the course of the next few weeks and it's just in time for the selling season, the fundamentals as I mentioned earlier with the power rates and what's going on in the.
DRAM Maisano: U S electric industry.
DRAM Maisano: Our very strong and the equipment is improving and dropping in costs continually so in its domestic content. So look the unit economics are like I've said earlier, the best the industry has ever seen so I like where we sit and I like where the projected growth is get get some of our dealers taken care of as I mentioned and this loan facility was a big.
DRAM Maisano: Piece of that.
DRAM Maisano: I think.
DRAM Maisano: <unk> and onwards.
DRAM Maisano: Yes, I would just add.
DRAM Maisano: We began the year with $540 million of tax equity capacity.
Speaker Change: So as John said this term loan allows us to fed funds back into the system to get the dealers moving I think there's pent up.
DRAM Maisano:
DRAM Maisano: Energy.
DRAM Maisano: He said entered the sales season and with capital to allow that to flow I think we are in much better shape.
DRAM Maisano: Got it thank you.
DRAM Maisano: And then my follow up so just to kind of circle back to the upcoming corporate maturities.
DRAM Maisano: You can't say a whole lot here, but just curious.
DRAM Maisano: What extent.
DRAM Maisano: Equity funding has increased or decreased in terms of likelihood of needing to do that.
DRAM Maisano: I don't think Thats changed at all I mean, obviously the stock price has gone down materially including Miss.
DRAM Maisano: This morning, but it certainly hasn't changed in terms of the cash flows the contracted cash flows that we have and that we are.
DRAM Maisano: Used to originally raised the existing corporate debt so.
DRAM Maisano: I don't think the environment is any different at all and maybe with these rates coming down over the last few weeks.
DRAM Maisano: That actually could be incrementally positive I will say that the asset level market as we saw in the securitization and our competitors are solid and our securitization is performing very very well and so thats extremely helpful.
DRAM Maisano: Two two.
DRAM Maisano: Look at getting it.
DRAM Maisano: A deal that makes sense for everybody on the corporate debt side.
DRAM Maisano: Got it thank you.
Speaker Change: Our next question comes from then Carlo with Bank.
Speaker Change: Hey, good morning, guys.
Speaker Change: Follow up Carlos maybe you addressed this a little bit, but we over the past you've talked about asset sales or something like that.
Speaker Change: Maybe how much of discussions have you had in the past I guess.
Speaker Change: Hindsight is about where you want to talk about <unk>.
Speaker Change: If there was discussions before the wide.
Speaker Change: Act on it.
Speaker Change: Do you still think industrial auction.
Speaker Change: For liquidity.
Speaker Change: Hey, Ben Sean.
Speaker Change: Yeah.
Speaker Change: The best thing to do is to borrow against the cash flows.
Speaker Change: It was the most economic I would say that.
Speaker Change: The asset market, we're still selling some loans on a forward flow basis, and we're getting a margin there.
Speaker Change: But certainly it's something we look at but that to us the numbers are pretty clear and you wanted to borrow against it I think a lot of it is also in the servicing side of things and the importance of that so.
Speaker Change: Again, we are open to options, but it was pretty clear that this loan facilities.
Speaker Change: First economics.
Speaker Change: Great and then just one follow up.
Speaker Change: You have the press release.
Speaker Change: Yeah.
Speaker Change: Got.
Speaker Change: Youre right sizing the workforce for the environment.
Speaker Change: Is there more to do on that front or would you characterize as.
Speaker Change: You guys have gone through most of those possible.
Speaker Change: We've cut a lot.
Speaker Change: 30% from our high and we've grown the customer base significantly in that timeframe and continue to grow the customer base. So I think we are getting to a point, where there is diminishing returns certainly more cuts.
Speaker Change: But we're going to constantly look for them.
Speaker Change: Think on the capital market side, the cost of closing transactions and so forth I think we could especially as we scale up the larger transactions that we have in front of us I think that we can do more cutting there.
Speaker Change: Those are those are material in size as far as our expenditures so.
Speaker Change: I think that Thats, probably more of the area that we can we can chop chop the woods so to speak.
Speaker Change: Okay, great. Thanks, guys. Good luck.
Speaker Change: Thank you.
Speaker Change: The next question comes from <unk> Satish Novak.
Satish Novak: [laughter] with Wells Fargo.
Satish Novak: Thanks, I'll just ask both of my questions. Together. So you kind of mentioned in your comments the latest rules on domestic content where.
Satish Novak: Less than ideal do you see the new rules impacting your sourcing decisions for batteries and burgers are modules and then do you feel the need.
Satish Novak: Do you feel like you need to safe Harbor products to lock in the existing domestic content rules before the April 15th cutoff and then finally, if so how much capacity do you have to do safe harboring.
Satish Novak: Yeah.
Satish Novak: Yes on the safe harboring side, we could do that we're taking a look at it.
Satish Novak: I think that again the manufacturers have been fairly nimble and so I think when I say less than ideal we'd love to see some consistency and I know the manufacturers would they make plans and then suddenly it changes. So we got to see some consistency there, but they have been very agile and adaptive so let's see.
Satish Novak: We're all that comes out but.
Satish Novak: I think overall again, where our domestic content percentage on the ITC is coming out is going to be fairly close to what we expected previously.
Speaker Change: No Paul ran supply chain any comments you want to make there.
Satish Novak: I'm just really.
Satish Novak: Proud of the fact that we took a stand and we brought the market and the industry really with us.
Satish Novak: Our partners and our Oems have all been really supportive.
Satish Novak: I'll move with us very quickly they've changed plans they have updated timelines. So we're all marching in the right direction. I'm also really proud of the fact that those actions really brought jobs back to the U S. So we have a lot to be proud for there.
Satish Novak: I'm looking forward to seeing where we'd end up.
Satish Novak: Alright, Thanks, guys. Good luck.
Mark: The next question comes from Mark.
Speaker Change: Monday night with Mizuho.
Speaker Change: Hey.
Speaker Change: Morning, Thanks for the question too.
Speaker Change: The.
Speaker Change: The residual cash flows you have using some of that against the one 5 million alone just want to understand how much is available.
Speaker Change: For the for future loan so for acquisitions for you.
Speaker Change: Well I think we'd be mostly focused on addressing.
Speaker Change: Addressing the corporate debt maturities.
Speaker Change: And so I don't think it would be looking at adding any corporate level capital like we did last year for the first time in the company's history. So I think we're at look we're a pretty good size.
Speaker Change: Company with the very large cash flow base.
Speaker Change: And those cash flows are.
Speaker Change: Under Levered compared to really almost anybody in the space, whether it's <unk> or utility scale is what we've been told so we've got we've got pretty good assets really good assets and we're.
Speaker Change: We're looking to focus that on addressing the corporate debt maturities, Eric do you want to comment anymore on that.
Speaker Change: <unk>.
Speaker Change: Mystically.
Speaker Change: The adders.
Speaker Change: For provide a significant opportunity to increase cash flow, we're working to capitalize on that as we've talked about.
Speaker Change: We've adjusted our cost structure.
Speaker Change: I think that as we enter the year, we're still focused on that asset level.
Speaker Change: Cash flow and don't see the need to look beyond that.
Speaker Change: Got it but just as I said I think like last quarter you'd mentioned the thing $135 million of our.
Speaker Change: It's still cash flow the levered cash flows of exiting 'twenty four.
Speaker Change:
Speaker Change: Do you have a sense of how much could approach a sense of how much of that is used against the term loan.
Speaker Change: Okay.
Speaker Change: Oh well.
Speaker Change: That does it is comprised of emission credits MSA service fees and the residuals and the emission credits and MSA fees are not a part of this facility.
Speaker Change: So there's still quite a bit of cat and we see increasing amounts of levered cash flows moving forward, including this year.
Speaker Change: That number keeps bumping up.
Frankly, so that that's due to the asset level performance increasingly it's just better than expected and as more tax equity funds that we've had in our history flip and as the prepayment speed continues to gain to accelerate.
Speaker Change: All of that portends very well for the Levered cash flows.
Speaker Change: Got it and then just separately.
Speaker Change: Are there any of the maturities due in the Q1 and Q2 I'm thinking of the revolvers ease off or other facilities.
Speaker Change: We have the loan warehouse.
Speaker Change: But that is being addressed through us.
Speaker Change: Taking your doing a securitization and loans are very small part of our business I think at this point solar loans are.
Speaker Change: Less than less than 2% of our origination. So it's something we just do for our dealers and will probably frankly just to get into selling those along with the other loans that we're doing at port flow on.
Speaker Change: Got it appreciate it thanks.
Manny: Thanks Manny.
Speaker Change: And our final question comes from William <unk> with UBS.
Thanks, very much just a quick one here, but on a going concern noticed.
Speaker Change: Do you do you think that could have an impact on customer willingness to sign new lease contracts with some of them just given their enduring need to be comfortable entering a 20 plus year contract with you folks and if so what steps can you take to potentially mitigate that impact.
John: This is John.
Speaker Change: Don't think so.
Speaker Change: This is a an accounting term that candidly I'm not sure how many people really understand what that is.
Speaker Change: We have a solid plan as Eric pointed out we're executing on that plan. It's not that we are going to execute we're executing on it we feel very good about it and frankly, we would have a different opinion.
Speaker Change: In terms of our outlook on the world.
Speaker Change: Of Sunoco.
Speaker Change: And I think what customers really care about is great service and we're doing that and so my commitment is that we will not the greater service just because that would save more money I know there is some concern about that but that is not the case, we want to make sure. These assets are performing performing assets.
Speaker Change: In engineered consumers to be happy happy consumers are paying consumers and.
Speaker Change: Paying consumers generate great asset level returns and cash flows and no company is more dependent on those asset level returns of cash flows obviously than synovus. So it's in our best interest to deliver great service to customers and that's at the end of the day, that's what they really care about and I think that we have seen thus far despite all challenges.
Speaker Change: And so forth and negative headlines.
Speaker Change: In the press with regards to our industry.
Election outcome and all this other stuff that we have not seen a huge drop in demand from consumers if anything as these power bills keep getting higher and the outages keep getting more frequent.
Speaker Change: More and more folks turn and look for a different solution.
Speaker Change: That only our industry can provide against the monopolies. So.
Speaker Change: Again, I see fundamentally the market's great capital markets, not so great but that.
Speaker Change: Essentially the capital markets will connect up with the fundamentals and that is that we're delivering a better energy service at a better price.
Speaker Change: Alright, Thanks, John Good luck to everybody in the months ahead here.
Speaker Change: Thank you.
Speaker Change: So that was our final question and now I'll hand back over to John for any final remarks.
Speaker Change: Thank you.
Speaker Change: It's a challenging time for our industry and the capital markets.
Speaker Change: But where it really counts in the marketplace, we're seeing a huge opportunity to deliberate better energy service at a better price we have a plan to get back to success and we expect to continue to execute on this plan and achieve that success. We look forward to sharing more with you in the coming earnings call. Thank you for joining us this morning.
Speaker Change: Thank you everyone have a nice day you may now disconnect.
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