Sunrun Inc.

Good afternoon, and welcome to Sunrun's second 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 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. I will now turn the call over to Patrick Jobin, Sunrun's Investor Relations Officer. Please go ahead.

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. 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, superior to, or in isolation from GAAP results. You will find additional disclosures regarding the non-GAAP financial measures discussed in 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 CEO, and Damian Badgian, Sunrun 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 the investor relations website shortly after the call. We've 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 today. Sunrun's strategy to become the beloved, trusted provider of clean energy and storage for households across America is delivering strong results. In the second quarter, the Sunrun team set records for storage installation and attachment rates, beating the high end of our installation guidance while delivering solid quarter-over-quarter solar installation and net subscriber value growth. We also delivered strong cash generation of $217 million in Q2, recouping the tax credit transfer-related working capital investment noted in Q1. Our primary focus is accelerating our differentiation, launching additional products and services to expand customer lifetime values, and remaining the disciplined margin and customer focus leader, growing cash generation in the business for years to come. We are on track to achieve our cash generation objectives as we exit 2024 and our increasing cash generation guidance for 2025. We are also on track to exceed the high end of our full year storage installation guidance this year as our focus on storage products pays dividends faster than we even expected. Driven by our margin focus strategy and slightly lower sales pacing than we initially expected, We now expect our solar volumes for 2024 to be at the lower end of our guidance range. Nevertheless, we are seeing strong sequential growth in order activity as consumer interest continues to build over this hot summer with soaring electricity rates. We continue to focus on the most margin-accretive customers. The hot summer and high utility bills are driving consumers to focus on their home energy use and related costs. Our strategy is to focus on products and geographies where Sunrun shareholders can earn a strong return while Sunrun customers experience an excellent value proposition. Driven by these dynamics, we are increasing our storage capacity installation guidance from approximately 58% to approximately 86% growth in the year. And we are narrowing our solar installation guidance to reflect the low end of our prior range. down approximately 15% for the year. We expect to see solid high-teens sequential growth in solar installations into Q3 and Q4, and to resume double-digit year-over-year growth in Q4. We are reiterating our cash generation guidance of 50 million to 125 million in Q4. In addition, we are initiating even higher cash generation guidance for 2025 of $350 million to $600 million. The fundamental drivers of our business continue to accelerate. Utility rates continue to rise, while solar and storage equipment costs are declining. Our operating efficiency and customer experience continues to improve. Customers remain eager to take control of their energy needs with affordable and resilient solutions to power their lives, the ultimate in independence. A Pew study issued in June affirmed what polls have said for years. The majority of Americans, Republicans, Democrats, and Independents favor expanding solar power in the United States. Over a year ago, 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 faster and better than others in the industry. In Q2, we installed storage on 54% of our new customers, up from an 18% attachment rate in the prior year, and a four-point increase from levels achieved in Q1. We installed 265 megawatt hours of storage in Q2, up 152% from a year ago, and the most we have installed in any quarter. Someone's experience selling Installing and monetizing storage for the grid is a clear differentiator. Storage systems provide increased customer value to enhance resiliency and control while providing higher margins for sunruns. Our fleet of network storage capacity has reached 1.8 gigawatt hours with 116,000 systems installed. While still in the early stages of commercializing these valuable dispatchable energy resources, we continue to advance programs which prove their value potential. We now have more than a dozen operating virtual power plants across the country. Just this afternoon, we announced a program with Tesla in Texas. The program has already enrolled customers and will scale up while dispatching stored solar energy from at-home batteries to rapidly increase capacity on the grid during periods of high consumption. Customers will be compensated for their participation while retaining a portion of their stored energy to provide backup power to their homes in the event of a power outage. Sunrun will also earn incremental recurring revenue for the program. These same resources are providing tremendous value for our customers. During prolonged power outages in the aftermath of Hurricane Beryl, More than 1,600 Sunrun customers in the greater Houston area were able to keep their homes energized, with more than 70,000 hours of backup energy provided by their solar and storage systems. With over 3 million homes and businesses without power, we are seeing strong demand in Texas, as many are seeing the obvious value our service can provide. Just last week, we announced the operation of the nation's first vehicle-to-home power plant. using a small group of customer-owned bi-directional electric vehicles. Initiated by forward-thinking regulation and in partnership with Maryland's largest utility, Baltimore Gas and Electric, this program utilizes all-electric Ford F-150 Lightning trucks to deliver power this summer during peak demand times. These programs build on many others we are operating. including the Demand Side Grid Support Program initiated by regulators in California. This virtual power plant is being actively used to support California's power grid. Just last month, during a heat wave, over 16,000 Sunrun customers' solar plus storage systems dispatched power during peak hours, supplying the grid with an average of 48 megawatts each night, exceeding the capacity of several costly and polluting gas-fired peaker plants in California. Home solar and battery systems are modernizing and strengthening the electric grid. With forward-thinking regulation, these resources could lower the cost of the overall grid for all users. As a reminder, California has 14,000 megawatts of power plants that are used less than 5% of the time. We are quickly becoming a multi-product company that offers a suite of clean energy products to our consumers in a bundled, easy to finance way. By continuing to invest heavily in service and providing a leading customer experience, we are able to monetize opportunities to provide additional services to our large base of customers for decades into the future. We are proud of our customer first approach. evidenced by a continued increase in customer net promoter scores at the time of installation, which this quarter reached 76 points, up over five points in the past year. We have invested time and resources to develop products and learn from pilots to best inform our strategy to harness these opportunities. On slide seven, we highlight our focus, including renewals, repowering customers with new equipment that meet increased energy demands, installing batteries for existing solar-only customers to provide energy resilience, networking systems to form virtual power plants, and providing electric vehicle charging or even bi-directional solutions. We are seeing strong traction. For instance, we have over 1,000 orders by existing customers to add batteries. While we just recently launched this, orders are growing at a rapid rate. I want to spend a minute discussing developments with a public peer who recently announced their market exit and restructuring. This presents an opportunity for Sunrun to continue our industry leadership and gain share in a financially disciplined and measured way. We are engaged in conversations with many of their former dealers and are selectively onboarding partners that share our vision and commitment to provide the best customer experience. We have been an established leader in the new homes business for many years and are engaging with many large national home builders about joining the Sunrun platform. In July, we announced the addition of two strong leaders and industry veterans who most recently led the new homes business at SunPower. We expect strategic growth in the new home segment in the coming quarters, given by our leading platform, expanded leadership team, and a long track record of being a reliable, trusted partner for homeowners. This dislocation will provide opportunities for competitors as well, especially new entrants in the financing segment eager for volume. We continue to see irrational pricing and immature controls from some of the new entrants, but have also seen some indication that as they have gained more experience, they are adjusting pricing and controls accordingly. We continue to hear from our partners that they value Sunrun most for being a sustainable, reliable partner, and that has led to strong long-term relationships. We deeply value these partners and our shared vision of success, particularly some of our longest standing and largest partners. Before handing over to Danny, as always, I want to take a moment to celebrate some of our people who truly embrace the power of clean energy, and the desire to connect customers to the cleanest energy on earth. Thank you to our leading direct-to-home sales team in Los Angeles. Thanks so much to our team members, Adler, Rich, and John, for delivering on safety, quality, battery attachment rates, and customer experience, delivering some incredible results this quarter. I also want to celebrate the team at Snap and Rack, our independently run business, which is proudly manufacturing premium solar racking in the United States, creating jobs and helping improve the efficiency of Sunrun's installation activities and those across the industry. The team is busy innovating and ramping production of U.S.-made equipment to help the entire industry, including Sunrun, meet domestic content standards. Thanks so much, Troy, Charles, Arun, and the entire team. With that, let me turn the call over to Danny for our financial update.