Sunrun Inc.

Good afternoon and welcome to Sunrun's first quarter 2024 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 question and answer session. To join the Q&A session after prepared remarks, please press star 1 at this time. We ask participants to limit themselves to one question and one follow-up. 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 that these statements are being made as of today, and we disclaim any obligation to update or revise them. During today's call, we will 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 as a substitute for, superior to, or in isolation from GAAP results. You will find additional disclosures regarding the 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, Danny Abadian, Sunrun's CFO, Ed Fenster, Sunrun's co-founder and co-executive chair, along with Paul Dixon, Sunrun's President and 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 Q&A session. And now let me turn the call over to Mary.

Thank you, Patrick. And thank you all for joining us today. We are starting the year with solid momentum in the business as our storage first margin focus strategy is delivering strong results. In the first quarter, we beat the high end of both our storage and solar installation guidance. Set new records for storage attachment rates and delivered another quarter of strong net subscriber values. Our installation productivity and success driving a storage first strategy is delivering strong results. At the same time, sales activities in Q1 did grow slightly slower than initially expected, coming in at 13% sequential growth in our direct business. While less than initially anticipated, this level is still consistent with our historical seasonal norm. We continue to prioritize margins over volumes, and we believe this approach will result in the highest long-term value for our shareholders. We are reiterating our full-year storage capacity installation guidance And we are reducing our full year solar installation capacity outlook to down 15% to flat from our prior guidance range of down 5% to up 5%. We expect 2024 will be a strong year in terms of total value generated, which will grow by over 10%. Most important, we are reiterating our cash generation guidance of a Q4 annualized level of 200 to 500 million. We are confident in achieving strong growth in installation activities through the year as the fundamental demand drivers of our business continue to be robust. Utility rates continue to rise while storage and solar equipment costs are declining, and our operating efficiency continues to improve. Customers remain eager for clean, affordable, and resilient energy to power their lives. In the beginning of 2023, we oriented the business to be storage first. which increases the customer value proposition and lays the foundation for future value creation from grid services. This strategy has also allowed us to capitalize on regulatory changes better than others in the industry. In Q1, we installed storage on 50% of our new customers, up from a 15% attachment rate in the prior year. We installed 207 megawatt hours of storage in Q1, almost triple the year ago quarter. Storage systems provide increased customer value through enhanced resiliency and control while providing higher margins for Sunrun. Our fleet of networked storage capacity has reached 1.5 gigawatt hours with 102,000 systems installed. Based on industry data, we represent about half of new storage installations in the United States and are gaining. In 2023, we were under 20% share of residential storage deployments across the U.S., and by Q4, we were approximately 45%. Our fleet is growing in significance and is already at a scale that could replace multiple polluting peaker power plants. For instance, these resources could power a city like San Francisco for multiple hours and do so daily as batteries are recharged from the sun. While still in the early stages of commercializing these resources, we just announced two new record setting grid service programs. For the second year in a row, Sunrun will set a national record for the largest number of residential solar plus battery systems enrolled in a virtual power plant. Last year, we did a 30 megawatt program with PG&E. This year, we are launching a statewide demand side grid support program that is about twice the size with more than 16,000 Sunrun customers. We also have now enrolled nearly 1,800 customers in our Puerto Rico virtual power plant. Our resources have been dispatched nearly a dozen times, helping to prevent rolling blackouts and keeping the power on for all Puerto Ricans, not just our customers. The fact that we are running these two successful programs shows that VPPs can rapidly scale all across the country. Last month, a Brattle Group study concluded that virtual power plants could save California consumers $550 million per year. We also continue to innovate with AI, enhance customer experiences, new products, adding batteries to existing systems, EV charging, and of course, our early renewal opportunities. The team is busy innovating to extend Sunrun's differentiation in the market even as we dial up our focus on efficiency and cash generation. We are making clean, affordable, and reliable energy accessible to families all 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 approach, our customer net promoter scores at the time of installation continue to increase. exceeding 75 points this quarter. We are driving this great customer experience and investing in innovation while also dramatically increasing operating efficiencies. Our crew labor productivity has improved by 5% compared to the prior year, even as we more than tripled our mix of more complex battery jobs. Our efficiency gains installing systems with batteries are particularly impressive, improving 30% year over year. Overall headcount in our installation organization is down five percentage points more than the change in volumes. In addition, general and administrative costs have declined slightly year over year and continue to be a fraction of that of our peers, even as we accelerate the pace of innovation, highlighting the tremendous scale advantages we derive and sizable barriers to entry in the space. We are also driving increased efficiency and improved quality throughout the organization from leveraging artificial intelligence. We have already started using AI to improve the speed and accuracy of system design, pipeline management, and material handling. We are increasingly encouraged by how AI can improve our operating efficiency and customer experience even further. Growth in AI and the voracious energy consumption that comes with it will drive even greater need for Sunrun's fleet of solar and battery systems. The International Energy Agency forecast power demand from data centers in the U.S. will increase 60 terawatt hours by 2026 to account for nearly 6% of total U.S. electricity demand. Electric grids will need to procure more power to meet this need, especially at peak times, and distributed, flexible, renewable resources will be one of the solutions. Much of this growth is also coming from companies who are eager to use clean energy to meet their environmental objectives. Before handing the call over to Danny, I want to take a moment to celebrate some of our people who truly embrace the power of solar energy to make a real difference in our world. Thank you to our leading teams in Houston, Texas, our top ranked installation crew led by Jonathan, and direct-to-home sales team in the quarter based on safety, quality, battery attachment rates, and customer experiences. They were all in Texas this quarter. Thank you all for your contributions and leadership at Sunrun. With that, let me turn over the call to Danny for our financial update.