Sunrun Inc.

A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patrick Dobin, Investor Relations. Thank you, sir.

Thank you, Maria. Before we begin, please note that certain remarks we will make on this conference call constitute forward-looking statements. Although we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely. Please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements. Please also note that 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, Ed Fenster, Sunrun's co-founder and co-executive chair, and Danny Abadjan, Sunrun's CFO. And now let me turn it over to Mary.

Thank you, Patrick. I have really been looking forward to this call to share our strong fourth quarter and full year results with you, as well as to talk about our outlook and priorities for 2023. We ended 2022 delivering and even modestly exceeding our guidance, growing new installations by over 25%, and delivering greatly increased net subscriber values. We exited 2022 with nearly 800,000 customers, 5.7 gigawatts of network solar energy capacity, and 5.6 billion in net earning assets. I am confident 2023 will build on this strong momentum as the strength of our subscription model provides market share gains. The year is off to a great start. We are seeing early funnel sales growth in January of over 30% across our entire direct business and even faster growth in California. Part of this is expected acceleration ahead of the changes in California, but it is also indicative of the broader utility rate trends, which continue to rise and the growing consumer awareness of our offering. Our strong traction is also a result of our ability to attract the best sales talent in the industry. that is eager to work with the nation's leading clean energy provider, especially one that is leading on storage and innovation. Sunrun is the clear leader providing energy as a subscription service, with over 60% share of new subscriptions across the industry. Recent trends in financing costs for loans, the growing need for advanced systems with storage, awareness of the value of service and performance guarantees, along with the uncertain economic climate have all contributed to the growing relative advantages of our subscription offering. We are already seeing a shift in our sales activities towards the subscription offering and expect it will flow through in a meaningful way in our installation activities in the coming quarters. The customer value proposition is swinging even further towards the subscription model as the ITC and other potential adders are only available to homeowners in this model. making solar and storage even more accessible to more customers. Sunrun is significantly advantaged as the leader in storage deployments. We have installed more than 53,000 residential solar and storage systems across the country, more than any other company. We have developed considerable skills and capabilities communicating the value proposition of storage systems with customers, in addition to gaining experience in efficiently designing, permitting and installing these more advanced projects. We believe we are also leading in procuring storage hardware, given our strong relationships with multiple suppliers and our large scale. While storage supply was a constraint to growth as recently as last year, supply conditions have improved considerably for us, and we are well positioned to dramatically increase the attachment rate of storage. Storage solutions are not only a significant competitive advantage for Sunrun, and differentiator in the eyes of customers and salespeople in the industry, they are meaningfully accretive to our margins. At Sunrun, we are continuing to further differentiate our offering to customers and increase our competitive advantages. Just this month, we announced a collaboration with PG&E to form a 30-megawatt virtual power plant this summer, helping to provide critical baseload in a repeatable way when it is needed most. This builds on the 17-megawatt virtual power plant we announced in Puerto Rico just a few months ago. With 14 advanced virtual power plant opportunities now forged across the country, we are leading the industry and showing utilities and regulators the possibilities of leveraging our network of distributed home solar and storage systems while generating recurring revenue streams and driving increased customer value. In the fourth quarter, we demonstrated continued progress on making Sunrun faster, better, and stronger in all dimensions of the fundamentals. You can see the results of this through our record-setting net subscriber value of over 16,000, which, as Danny will discuss, helped us offset so many of the interest rate pressures we faced last year. We achieved this through hard work focused on the fundamentals of cost efficiency and performance improvements along with continued price optimization while ensuring a strong customer value proposition, even as we invest in innovation and differentiation. Throughout the year, we worked on streamlining our operations, leading to improved customer experience throughout the process and better productivity. We grew new installations over 25% in 2022, while only growing headcount at one-third of that rate. This was achieved through a strong focus on streamlining operations while delivering customers a great experience and value. The average hours spent on an installation by our crews improved 23% in Q4 compared to the prior year, driven in part by a reduction of the average crew size by 12% as we found ways to be more productive and efficient while maintaining our high safety and quality standards. We also maintained strong overhead cost disciplines. with G&A expenses declining more than 12% compared to last year and reaching 1,100 per new customer by Q4, a 29% improvement year over year, showing the benefits of our scale and our disciplined approach to sustainable, profitable growth. I am tremendously proud of what our team is doing in the field each and every day for our customers, and I know we will continue to drive even more efficiency while delighting our customers in 2023. Shifting gears to policy updates. The biggest development since our last call is the finalization of the NEM 3.0 proceeding in California where regulators approved an updated net billing tariff. The final language was dramatically improved from the initial draft as the regulators dropped the proposed discriminatory fixed fee on solar customers. The new proposal will introduce variable pricing with significant reductions of the value of energy exported back to the grid during the day. dramatically increasing the value proposition of storage. As I noted earlier, Sunrun is the leader in storage solutions and is well positioned for this transition to more solar plus storage installations. In addition to our solar offering and solar with storage offerings for home backup, we will launch a new offering in California that incorporates storage to optimize the economics of energy produced by the solar system, reducing low-value exports and increasing self-consumption for our customers' benefit. This system will be easier and quicker to install. We believe this new offering delivers a strong value proposition for our customers and net subscriber value for Sunrun. In the interim, prior to the new structure becoming effective in mid-April, we are already working hard to help customers sign up under the current rate structure in California to lock in even greater savings potential. We are seeing record-breaking demand in California, with early funnel sales activity in January growing more than 30% compared to last year. Lower sales activity is expected immediately following implementation of the new tariffs, but we also expect that the combination of the pull forward of demand into Q1 and the anticipated strong customer response to our innovative offering will result in strong growth over the long term in this market. Combined with the strong sales-driven backlog in California and strong demand across the country, we expect to deliver smooth and sequentially growing installations throughout 2023. On other policy matters, we are excited by the increased opportunities created by the Inflation Reduction Act. Investing to help disadvantaged low-income communities providing economic benefits to areas with high unemployment or that have high exposure to fossil fuel-based economies and helping encourage domestic production of advanced clean technologies are all things that Sunrun is well positioned to do. As we have discussed before, the Inflation Reduction Act established three investment tax credit adders to accomplish these objectives. We, along with so many across the industry, were disappointed to see that so many low and moderate income Americans and those in multifamily dwellings will now have to wait to benefit from the LMI adders. The initial Treasury guidance released last week appears in opposition to the administration's broad goal to encourage as much solar in low-income communities as fast as possible. As many in the industry have already noted, the proposed drawn-out and long mechanism to allocate the available capacity likely delays many projects, delaying and potentially risking delivering benefits to low-income communities. These are the communities that need the benefits of solar energy the most, and Sunrun is particularly well positioned to help these communities gain access to affordable, clean, and predictably priced energy at a critical time when utility rates are escalating so quickly and household budgets are being squeezed. We will continue to work with others in the industry and with policymakers to make sure these communities benefit in the way the IRA legislation intended. While we are awaiting guidance from the Treasury, on the other two ITC adders for energy communities and domestic content, we are proactively taking steps today to ensure we can act quickly once clarity is obtained. For example, we have already entered into agreements for nearly 200 megawatts of module supply from a leading domestic producer in addition to meaningful supply arrangements for storage solutions produced in the U.S., which should, in our opinion, allow a significant portion of our volume to qualify for the domestic content adder. But obviously we will have to wait until official guidance from Treasury is obtained. In summary, Sunrun continued our focus of crushing it on the fundamentals and we have the right strategy and high energy focused and experienced team in place to continue to successfully navigate these uncertain times. The value proposition for customers continues to increase as utility rates escalate rapidly and consumers demand affordable, clean, and predictably priced energy. While 2022 brought its set of challenges, and we will certainly have our share of things to overcome in 2023, I am proud of our team's quick actions last year to adapt to the rapidly changing macro environment around us. At Sunrun, we see adversity as a way to help shape ourselves and make us stronger, company for the long run. We have more work to do, so we won't be sitting idle, and I am confident that our team is up to the challenge. Before I hit one final item, I want to express my sincere appreciation for all the Sunrun employees working so hard to create a company that is faster, better, and stronger for our customers and our communities. Building the best company and helping turbocharge this consumer-led revolution in energy is only possible with the talented and committed team who is ready to lead the charge every single day. Last, but certainly not least, I also want to update you on a management change we announced today. After over 15 years in a full-time leadership capacity, Ed Fenster, who has been on parental leave since August, decided the timing was right to transition to a role where he can spend more time with his young family. While Ed will cease having direct reports at the company, he will remain very active in strategic matters. Ed won't be quite as visible day to day, but his trusted counsel will be omnipresent. And we certainly know that he won't hesitate digging deep on topics with our team as needed. To state the obvious, Ed has played an invaluable role in making Sunrun the market leader, and he will continue to play an invaluable role going forward. You'll continue to hear from him, and he'll continue providing his wisdom, insight, and leadership throughout the company in so many ways. Thank you so much, Ed. And with that, I turn it over to you.