Sunrun Inc.

Good afternoon and welcome to Sunrun's first quarter 2023 earnings conference call. All participants have been placed on mute. Please note that this call is being recorded and that one hour has been allocated for the call, including the Q&A session. To join the Q&A session after the prepared remarks, please press star 1 at any time. We ask participants to limit themselves to one question and one follow-up question. I will now turn the call over to Patrick Jobin, Sunrun's Senior Vice President, 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 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 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, Paul Dixon, Sunrun's Chief Revenue Officer, and Danny Abadian, Sunrun's CFO. A presentation is available on Sunrun's Investor Relations website. along with supplemental materials. An audio replay of today's call, along with a copy of today's prepared remarks and transcript, including Q&A, will be posted to Sunrun's Investor Relations website shortly after the call. And now let me turn the call over to Mary.

Thanks, Patrick. Hi, all. We have a lot to catch up on today, so let's get going. Faster, better, stronger, and doing it right were the themes of our first quarter as we laser-focused on crushing it on the fundamentals and delivering value for our customers, shareholders, and the planet. Frankly, we pleasantly surprised ourselves with the momentum that our culture of high performance created as we entered the first quarter of our year, and we plan to accelerate this momentum as we move into the rest of the year. In the first quarter, we installed systems for over 32,000 customers, representing approximately 240 megawatts of solar capacity, 12% higher than the first quarter of the prior year, and significantly above our guidance range. Even with challenging weather conditions, including atmospheric rivers in many parts of California, our teams work to safely install solar systems on rooftops. We did so with a higher than expected net subscriber value and, most importantly, positive trends in customer satisfaction metrics. We are powering a customer-led revolution to clean affordable and locally generated energy and doing it at massive scale and unprecedented pace. Our networked solar energy capacity now stands at 5.9 gigawatts, and we are on track to add well over one gigawatt of clean power capacity this year alone. To put that in context, the capacity we are adding this year is equivalent to an average nuclear power plant, which takes decades to build. Most utility-scale solar projects are generally five megawatts or smaller and take six to 12 months to bring online. We do well over 20 megawatts per week. Think about that. Just think about that. As a former utility CEO who knows full well the amount of time and capital it takes to build projects of scale, Sunrun is scaling at a gigawatt pace with low risk, fast development times. The modern energy system we are developing is built efficiently on existing housing infrastructure, avoiding the intense environmental impacts that come from the massive land use tied to utility scale renewables, which would require use of 5,000 to 10,000 acres of land to produce similar scale and would certainly take years, not quarters, to build. Most important of all is that our offerings provide what customers really want, clean, affordable, and predictably priced energy to power their homes, their lives, and with increasing frequency, their transportation. Based on what we are seeing in our business and across the industry, I could not be more pleased with Sunrun's competitive position and market leadership. Sales activities were up over 30% in the first quarter compared to the prior year, with much faster growth in California. Sales in California increased by more than 80% year over year in Q1, as we successfully helped customers lock in value from the existing rate structure. Even excluding California, total sales activities increased by double digits, with about half of the states we operate in growing more than 20%. Part of this outcome, of course, was the expected acceleration ahead of the changes in California. But the results are also indicative of the loss of confidence in the utility grid infrastructure, rapidly rising utility rates, and growing consumer awareness of the energy independence afforded by our products and services. Our strong traction is also a result of our ability to attract the best sales talent in the industry, eager to work with the nation's leading residential clean energy provider, especially one that leads on storage and innovation. Sunrun is the clear leader, providing clean energy as a subscription service, with over 60% share of new subscriptions across the residential solar 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 increased the advantages of our subscription offering. We are seeing a significant shift in preference towards the subscription offering, with the mix of new subscribers increasing nearly seven percentage points from last quarter to 78% of our installations in Q1. Storage solutions are not only a significant competitive advantage for Sunrun and differentiator in the eyes of customers and salespeople, they are meaningfully accretive to our margins. we have now installed more than 58,000 residential solar and storage systems across the country. While storage supply was a constraint to growth as recently as last year, supply chain conditions have improved considerably for us given our strong vendor relationships, and we are well positioned to dramatically increase the attachment rate. Our wherewithal to tackle the increasing capital intensity required for a rapid transition to high battery attachment rates positions us well to continue to lead the charge on battery adoption. Sunrun will continue to lead with the best product offerings for customers and deliver them in the most cost-effective way possible, always prioritizing the customer experience and serving them with love, grit, and ingenuity. At Sunrun, we are building the beloved trusted brand that will help Americans achieve their clean energy lifestyle goals, towering their lives with the abundance of clean energy. We have built a high-performance team focused on the fundamentals, which will generate meaningful and sustainable value for our shareholders, customers, and employees. This has been a central factor in our ability to adapt to market changes with rapid speed and decisiveness. Our team not only stood up the infrastructure to process a wave of orders and qualify customers under California's prior rate structure in a way that maximized values for our customers and Sunrun, but we also started selling under the new rate structure with a compelling subscription offering faster than others in the industry. I have always espoused that culture eats strategy for breakfast, lunch, and dinner. And our team culture is all about the kind of high performance collaboration that drives strong execution and growth. We're starting to see the progress on these elements with improved field efficiency, improving customer satisfaction rankings, and continued innovations. An example of our focus on operating efficiency is the work we are doing to streamline field operations. We moved to job site delivery of equipment in many geographies, allowing crews to spend more time at customer locations instead of branches, increasing productivity, employee engagement, and customer satisfaction. As an anecdote, we improved installation crew efficiency by approximately 17% in March compared to the prior year. Driving the best financial outcome is critical to our success as we focus on growth and scale and is directly linked to how we increase the accessibility of solar energy across the country and make the largest impact on our communities and the environment. Last month, we published our sixth annual impact report. This is an inside view into what drives us as a company and how we operate the business. our purpose, our mission, and our people-first approach. I'm so proud to share the many amazing initiatives at Sunrun and the positive impact our important work is making on the planet. In summary, the Sunrun team is driving meaningful long-term value by focusing on sustainable, profitable growth, crushing it on the fundamentals, and accelerating the customer-led revolution in clean, independent energy lifestyles. This is the company that is focused on producing strong unit margins, which can enable strong, recurring cash generation. I will now turn the call over to Paul Dixon. Paul is Sunrun's Chief Revenue Officer and is a tremendous asset on our executive team, overseeing our go-to-market strategy, sales channels, product strategy, and technology development. He was one of the early leaders at Vivint Solar and a pioneer in the industry, building tremendously successful, impactful, and mission-oriented organizations.