Sunrun Inc.

Good afternoon and welcome to Sunrun's fourth quarter and full year 2023 earnings conference call. All participants have been placed on mute. Please note that this call is being recorded and one hour has been allocated for the call, including the question and answer session. To join the Q&A session after 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.

Patrick Jobin 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. During today's call, we will also be discussing certain non-GAAP financial measures, which we believe can provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of current period performance on a comparable basis with prior periods. These non-GAAP financial measures should be considered as a supplement to and not a substitute for or in isolation from GAAP results. You will find additional disclosures regarding non-GAAP financial measures discussed on today's call and our press release issued this afternoon and our filings with the SEC, each of which is posted on our website. On the call today are Mary Powell, Sunrun's CEO, and Danny Abadjian, Sunrun's CFO. Ed Fenster, Sunrun's co-founder and co-executive chair, along with Paul Dixon, Sunrun's chief revenue officer, are also on the call for the Q&A session. 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. We have allocated 60 minutes for today's call, including the question and answer session. And now let me turn the call over to Mary.

Thank you, Patrick. And thank you all for joining us on our call. We have a lot of exciting things to talk about today. First, our team delivered on our storage first and margin focus strategy in 2023. In the fourth quarter, we far exceeded our storage capacity installation guidance and landed in our guidance range on installed solar capacity. This transition to higher value subscription offerings resulted in significant increases to our subscriber values, up 7% from Q3 and 18% year over year. And in combination with continued cost discipline, net subscriber values also exceeded our guidance. We generated $11 million in cash in the quarter and grew net earning assets to over $5 billion. We now operate a fleet of more than 1.3 gigawatt hours of storage capacity and near 7 gigawatts of solar capacity with over 933,000 customers. We remain focused on driving meaningful cash generation in the business and are reiterating our strong cash generation outlook for the year. The fundamental demand drivers of our business continue to be robust. First, utility rates continue to rise. due to the stress and strain of climatic events on the grid and the massive utility capital expenditures. Second, solar and storage equipment costs are declining, while our installed labor productivity continues to improve. Third, capital costs have stabilized and could decline. Finally, customers remain eager for clean, affordable, and resilient energy to power their lives. We are extending our differentiation by making clean, affordable, and reliable energy accessible to families across America with the most pro-consumer offerings and delivering the best customer experience and service in the industry. Being the chosen, trusted provider to deliver this clean energy future is critical. As a testament to our customer-first approach, our customer net promoter scores at the time of installation continue to increase, reaching 73 points in Q4. I am pleased to report that our volume trend is strong. Q1 sales are growing 23% compared to Q4, led by California, where sales are growing at over 40% sequentially. We believe this sales growth will flow through to installations over the coming quarter, leading to a sharp uptick in Q2. Q1 is seasonally a low installation quarter and typically declines from Q4. Results in Q1 will be influenced by the slower than expected recovery in California last year and our strategic decision to exit certain unprofitable markets, as we discussed on the last call. Most important, we continue to increase the mix of storage. We installed 220 megawatt hours of storage capacity in Q4, growing 154% compared to the prior year and 25% from the prior quarter. Our storage offerings provide customers enhanced value and generate significantly higher margins for Sunlar. At the same time, they are the foundation for future monetization by providing at-scale distributed power plant capabilities. Our storage attachment rate was over 45% of installations across the country in the fourth quarter, up from 33% last quarter and 15% at the beginning of the year. and this number continues to rise with new sales. We remain disciplined in how we participate through the affiliate channel. We value our partners that are focused on customer experience and that value our brand, platform, storage first product suite, and sustainable pricing model. There are pockets of irrational behavior in the affiliate partner segment of the market with several financing only participants scaling with pricing that we consider unattractive. Our decision not to compete for such business can influence short-term affiliate channel volumes. We've seen this behavior several times in the company's nearly two-decade history and won't chase volumes at economics that we do not view as sustainable. We believe our diversified market approach, which includes an integrated sales force and fulfillment capacity, provides insulation from these behaviors from financing-only firms and is a strategic benefit to Sunruns. I am excited to announce today that we have selected Lowe's as our home improvement retail partner. Lowe's presents a new and exciting partner, one that has a great homeowner-focused model that overlaps with our target markets and geography. With many years of experience reaching customers through retail activities, we thoughtfully evaluate opportunities and are excited about our Lowe's partnership. We launched in Lowe's on February 16th transitioning our sales staff out of Home Depot the prior day. We are incredibly encouraged by the results so far. Over the last few months, we advanced several strategic priorities, including launching an early renewal pilot and commencing storage retrofit installations for existing customers. I believe one of Sunrun's most underappreciated assets is the base of customers that we will serve for decades. and the numerous opportunities we have to provide valuable products and services beyond our initial subscription agreement. As the trusted company who has built strong relationships with customers from the initial sales consultation to the installation and ongoing service, we are in an enviable position to be able to offer and realize value from additional products and services at many touch points throughout the customer life cycle. Our early renewal pilot highlights most customers are interested in extending the length of their subscription agreement even well before they expire. While the pilot only targets several hundred customers, thus far, approximately three-quarters are eager to renew their contracts for five years at their current pricing and agreement terms or are in the process of evaluating proposals. Nearly all of those that have renewed did so an average of five years before the end of their initial contract to lock in the peace of mind and energy savings provided by their current subscription service. Only about one quarter of customers opted not to renew early at our first attempt of presenting the offer. However, about half of these customers have expressed interest to buy the system outright, explore upsizing their systems with Sunrun with new equipment, or express that they might be moving. All of these scenarios provide incremental margin opportunities for Sunrun. Customers are also eager for our battery retrofit offering. While it's still early days and only available in select markets, orders have been growing rapidly and customer interest is high. Sunrun is uniquely positioned to see significantly better total lifetime customer value realization than financing only providers who do not develop the strong relationships we do with customers through the sales and installation and ongoing service we provide. While we are only targeting several hundred customers, we are pursuing the pilot to optimize sales strategies, systems, and processes to tackle these opportunities at scale in the years ahead. Shifting gears, I want to highlight our thoughtful and disciplined approach to funding Sunrun's growth and generating value for our investors before Danny covers it in more detail. We ended 2023 with more total cash than recourse debt, and we generated cash in both Q3 and Q4. During Q1, we executed numerous capital transactions that are aligned with our disciplined capital strategy and approach. First, we expanded our $1.8 billion non-recourse senior warehouse facility by $550 million to $2.35 billion and extended the maturity date by approximately three years from 2025 to 2028. Second, we extended the maturity of our recourse working capital facility from January 2025 to November 2025 with a provision to extend the maturity further to 2027 subject to meeting certain conditions. The terms of the extended facility are consistent with our objective to generate cash, extend maturities at a time some of our competitors are at risk, reduce recourse leverage, and optimize our cost of capital, all to drive increased shareholder value. Third, we continue to execute tax equity funds and term out financings with strong terms. recently closing an approximately $470 million term out transaction. We are proactively and prudently managing our parent debt profile and funding to support growth and drive shareholder value. I am so appreciative of our finance team at Sunrun and our financial partners who share a vision to make clean energy affordable and accessible to all. Before handing the call over to Danny, I want to take a moment to celebrate our people, the heart and soul of this customer-led revolution in energy. First, thank you to our team in Bakersfield, California, who were our top-ranked install crew based on safety, storage attachment rates, and customer experience this quarter. Thank you for all of your contributions and leadership at Sunrun. Second, a big shout out to our friends at Bright Panel Solar, our top sales dealer in Puerto Rico. We are so thankful for your partnership over the years and look forward to many more to come. With that, let me turn the call over to Danny for our financial update.