Sunrun Inc.

Greetings and welcome to the Sunrun 1Q22 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Patrick Jobin of Investor Relations. Please go ahead.

Thank you, Operator. Before we begin, please note that certain remarks we will make on this call constitute forward-looking statements. Although we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely. Please refer to the company's filings with the SEC for more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements. Please also note these statements are being made as of today, and we disclaim any obligation to update or revise them. On the call today are Mary Powell, Sunrun's CEO, Tom Weinreichbauer, Sunrun's CFO, and Ed Fenster, Sunrun's co-founder and co-executive chair. Following the prepared remarks, we will conduct a question-and-answer session. And now let me turn the call over to Mary.

Thank you, Patrick. Hi, it's wonderful to connect with all of you again today on what Sunrun has been up to in the last quarter. It's hard to believe it has only been about two months since our Q4 call because we have been incredibly active and I am pleased to say we have a lot of positive developments to share. I'm encouraged and excited about the progress we're making as a leading provider of clean energy. With climate related events becoming more urgent daily, our passion and optimism about our purpose and our ability to lead a distributed clean energy revolution has never been stronger. Bottom line is we delivered results in Q1 that beat our expectations. We added over 29,000 customers in Q1, representing over 213 megawatts of solar energy capacity installed, a 27% increase from last year and well above our guidance. We delivered a net subscriber margin of over $7,100, which was also slightly above guidance with an increase from last quarter. I want to cover a few topics today before I turn the call over to Tom and Ed for their quarterly updates. First, customer demand remains incredibly strong and Sunrun is growing at a rapid rate. We are also achieving these growth levels at a scale that is two times our nearest competitor, while innovating and continuing to generate value from the combination of the two companies. Our customer orders grew 39% compared to last year, outpacing our still impressive robust installation growth of 27%. These strong demand trends resulted in expected growth in our backlog of customers. We are working strategically and expeditiously to ramp our installation capacity both internally and with our partners. We are seeing strong improvements in our internal installation capabilities and feel blessed to have some of the longest standing channel partner relationships in the business, which are strategic and valuable for not just the incredible reach they provide in the market, but also for meeting additional customer demand. I fundamentally believe we are at a tipping point of adoption. We're in energy concept, but something customers are demanding. Customers see escalating energy costs and a lack of reliable power all around them, and they want the security and peace of mind that comes with energy independence. Climate change and geopolitical issues are now affecting the daily lives of so many consumers, accelerating what I have always seen as a looming consumer-led revolution to a cleaner, more decentralized energy future, one that is customer-centric and can incorporate the more reliable, localized, and innovative way consumers are thinking about powering their vehicles and home from their rooftops. Second, we are quickly adapting to the world around us. material costs and interest rates have increased, and we have taken fast and effective action to adjust to these industry-wide dynamics in a way that will make us faster, better, and stronger. We recently increased prices across most markets, with flexibility granted to us by double-digit utility rate inflation around us. These pricing adjustments will lead to considerable increases in subscriber values and can help mitigate the recent cost pressures faced by our industry. You can see in the accompanying slide deck that the customer additions to our backlog following this price change and other changes we have made are coming at much higher subscriber values, which we expect to realize over the coming quarters, given the size of our backlog and cycle times, which vary by market. Third, we are continuing our focus on innovation. We have now deployed over 37,000 residential batteries, far more than any other energy company, and are networking these batteries together to form virtual power plants in many markets. While it takes time to enter new markets and show how valuable dispatchable distributed energy resources are for the grid, at a certain point, I believe it will become self-evident to traditional utility companies and grid operators that they need to partner with us and our growing customer base. As utilities start to realize the resiliency value we offer to the grid and their customers' regulators will undoubtedly push them to do so as well. There is no quicker way to get to a more affordable resilience than by embracing the rapid adoption of distributed resources. Our partnership with Ford is on track and poised for exciting things in the very near future. Ford launched production of the F-150 Lightning last week, and Sunrun is now in the process of connecting with customers to facilitate the installation of the Charge Station Pro and the Home Integration System, along with providing options for solar and battery systems in participating markets. Over the next few months, Sunrun expects to install thousands of these systems for F-150 Lightning customers, and we will provide an update on the realized benefits of the partnership later this summer. During the quarter, we also invested an incremental $75 million in equity into the venture we co-established with SK. The venture is making significant progress and expects to unveil powerful new technology by the end of 2022, with commercialization expected this year or early 2023. Sunrun currently owns approximately 37% of the venture and has preferential access to the technology being deployed. Sunrun expects the differentiated products and services will accelerate Sunrun's business and expand the customer value proposition considerably. I am incredibly excited by the unique product offerings we will have for Sunrun customers through this partnership. Fourth, we have a strong team and we're moving fast. I am leveraging my experience transforming companies and finding ways we can make Sunrun even faster, better, and stronger, adding to the foundation that has been put in place. Over the last few months, we have collapsed several layers of management structures in various parts of the business to ensure we operate nimbly and can share information and learnings from our branches and from our customers in the fastest, most streamlined way possible. We have also taken actions to expand certain areas of the business while reducing investments in others. For instance, we opted to transition a few of our subscale branches to a channel partner-driven go-to-market strategy and took decisive action to walk away from aspects of markets that fundamentally weren't hitting our return thresholds. We also refined our approach to pricing home upgrade projects and increased our investment in our customer-facing teams. With this change, we are now achieving customer care agent answer times of 10 seconds on average when a customer calls with an issue. This is a big improvement from where we were in Q4 at about three minutes. We're always innovating and finding new opportunities for improvement, but these are a few examples of the kinds of investments we are making to make the company stronger. All of these changes were made with a laser focus on customers and the culture of customer obsession we are building together. I firmly believe that the more focused and deliberate we can be in our go-to-market strategies and organizational structure, the faster we can grow, innovate, and respond to the needs of our customers and the communities we serve. Today, we are also announcing that effective May 30th, Danny Abagian will succeed Tom von Reichbauer as our CFO. Danny currently oversees Sunrun's project finance group, where he has produced significant results for the company for nearly 12 years. He is a talented, driven, and passionate member of the Sunrun team who brings a wealth of experience and knowledge to the CFO role. I look forward to partnering with him for the next chapter in Sunrun's journey as he leads a combined project finance and corporate finance team. Tom, who has been our CFO for the last two years, will be leaving Sunrun to pursue another opportunity at a private technology company outside of our industry. I am so grateful for the partnership with Tom over the last two years, a period which included transformational changes with the acquisition of Vivint Solar and rapid growth while navigating the challenges of COVID. Tom will remain in a consulting capacity to ensure a smooth transition for the next four months, and we wish him all the best in his future endeavors. Last, but certainly not least, before I turn the call over to Tom and Ed, I want to thank our team for their hard work. Every time I am in a branch location or out in the fields with our team, I am inspired by their passion, ingenuity, and willingness to take on challenges. My mantra is delivering on our customer obsession faster, better, stronger, and I am proud of Sunrun's team who is embracing this opportunity to maximize our impact for our customers, investors, and the communities we serve. In addition to thanking our amazing employees, I also want to express my sincerest gratitude to our customers. They are the ones transforming our country's energy system and helping to solve climate change, one home at a time, at a very rapid pace. It is an honor to serve them. Over to you, Tom. And again, thank you so much for your service to Sunrun and our planet.