Sunnova Energy International Inc.

Good morning and welcome to Sunova's third quarter 2020 earnings conference call. Today's call is being recorded and we have allocated an hour for prepared remarks and questions and answers. At this time, I would like to turn the conference over to Rodney McMahan, Vice President, Investor Relations at Sunova. Thank you. Please go ahead, sir. Rodney McMahan, Vice President, Investor Relations at Sunova Thank you, Operator.

And good morning, everyone. Yesterday, we released our earnings press release and posted a slide presentation to the investor relations portion of our website at investors.sonova.com, which will be referenced during this call. Joining me today are John Berger, Sonova's Chairman and Chief Executive Officer, and Robert Lane, Executive Vice President and Chief Financial Officer. Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, beliefs, estimates, plans, and prospects. Such statements are subject to a variety of risk, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risk and other factors are set forth in our press releases and filings with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release. I will now turn the call over to John.

Good morning, and thank you for joining us for our third quarter 2020 earnings call. We are pleased to report another quarter of strong, steady results, enabling us to once again reaffirm our full year 2020 guidance and to initiate full year 2021 guidance. Our third quarter performance is characterized by record-setting customer growth as we added more customers in the third quarter of 2020 than in any other quarter in the company's history. While this record is impressive, we expect to add significantly more unique customers in the fourth quarter. This exceptional customer growth, coupled with our stable unit economics and declining costs on a per-customer basis, has placed us in the desirable position of being able to optimize recurring operating cash flow and company growth for 2021 and beyond. Simply put, we will either invest to grow profitable cash flows quicker, or we will preserve the recurring cash flows for our shareholders. On slide three, you'll see the details of yet another quarter of strong operational results. We increased our customer base, expanded our dealer network, and maintained a robust storage attachment rate. We continued our rapid growth by adding over 7,000 new customers in the third quarter of 2020, a 40% increase from what was added in the same quarter in 2019. This exceptional growth is fueled by the 270 dealers and subdealers who power our differentiated, low-cost model. Sunova has nearly doubled its number of dealers over the past 12 months by selectively adding 134 dealers and subdealers. If you are a contractor seeking a solar and storage service provider partner that does not compete with you, that offers the broadest array of products with all the financing types, loans, leases, and PPAs, that partners with the leading energy storage and other technology providers, and that has a stable capitalization strategy, there is only one solar and storage service provider available to you, and that is Sunova. As a result, we expect to see our dealer count continue to rise during the remainder of this year and well into 2021. Our storage attachment rate on origination increased from 15% in Q3 2019 to 34% in Q3 2020, as we continue to see strong consumer appetite for Solar Plus storage. The large driver of our robust storage attachment rate over the past several quarters has been our 100% attachment rate in our island markets of Guam, Saipan, Hawaii, and Puerto Rico. However, we have recently seen storage attach rates rapidly increase in select non-island markets, such as Florida and California, which had Q3 2020 attachment rates on origination of 16% and 12% respectively. In fact, to date we have sold storage service in 17 states and territories. In addition to providing battery storage to new customers, We've also been busy retroactively adding battery storage to previously solar-only customers. Since we began offering storage as a service, we have performed 883 battery retrofits through September 30, 2020, for both Sunova and non-Sunova customers alike. We expect to double this amount over the next two quarters. Turning to slide four, we provide a summary of our third quarter 2020 financial results, which are further expanded on slide five. Our total customer count, adjusted EBITDA, the principal and interest we collect on solar loans, and our adjusted operating cash flow were all at or above our expectations. On slide six, you will see both our gross contracted customer value, or GCCV, and our net contracted customer value, or NCCV, are experiencing significant increases year over year. This translates directly into shareholder value creation. Using a discount rate of 4%, NCCB increased from $1.1 billion on September 30th, 2019 to $1.4 billion on September 30th, 2020. This equates to approximately $15.63 per share as of September 30th, 2020, which is nearly a 17% year-over-year increase. This increase clearly shows our rapid growth is creating value for shareholders. Please note both our GCCB and NCCB metrics represent only our existing contracted cash flow base after MSA fees, which we collect and use to service the contracts, and after payments to tax equity providers. It excludes all future contract renewals. It assumes we sell no complementary products and energy services to existing customers, and it assumes no growth. While these items are not reflected in our contracted customer values, They do have value and will become more meaningful to SNOVA as the number of services sold per customer grows. Later in the call, I'll expand upon these additional service opportunities and provide an overview of how we expect them to grow over time and what impact they will have on our NCCB. For unit economics, we continue to see stable returns and expect those to continue. For instance, over the last 90 days, we achieved approximately 9.7% unlevered and 8.6% fully burdened unlevered returns. As you can see through the slight improvement in our fully burdened unlevered returns, we have seen improved single customer net margins. We accomplished this through scaling our sales overhead by increasing our nominal per quarter customer growth. At Sunova, we believe in consumer choice, which is why we offer our customers the broadest portfolio of service offerings in the industry. Recently, we've seen loans make up a larger percentage of our contract mix, going from 27% of originations in June to over 40% in October. We expect this trend to continue into next year and have set our 2021 guidance accordingly. I will now turn the call over to Rob to walk you through our financial results, our recent financing activities, and our guidance in greater detail.