Sunnova Energy International Inc.

Good morning and welcome to Sanova first quarter 2021 earnings conference call. Today's call is being recorded and we have allocated an hour for prepared remarks and question and answer. At this time, I would like to turn the conference over to Rodney McMahon, Vice President, Investor Relations at Sanova. Thank you. Please go ahead.

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, which will be referenced during this call. Joining me today are John Berger, Synovus 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... 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 the 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 an isolation or as a substitute for results prepared in accordance with GAAP. A recommendation 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.

Thank you, Rodney. Good morning and thank you for joining us. 2021 is off to an excellent start thanks to strong Q1 results, the quick closing of the SunStreet acquisition and our continued ability to grow faster than the overall market. Sunova is well positioned for an exciting year ahead, which includes delivering on its reaffirmed full year 2021 guidance. On slide three, you will see the details of our strong operational results where we grew our customer base increase both our battery penetration and attachment rates, and continue to expand our dealer network. Our customer growth remains healthy as we've added 8,900 customers in the first quarter of 2021. This is before any contributions from the SunStreet acquisition, which closed on April 1st. On storage, we continue to see strong demand as frustrated homeowners seek out more reliable and resilient energy solutions to combat outdated and ineffective power grids. As discussed during our last earnings call, this demand outpaced available inventory in the second half of 2020, resulting in an industry-wide supply constraint in energy storage systems. However, these constraints began to subside in Q1, resulting in an increase in our battery attachment rate on origination from 19% in Q4 2020 to 23% in Q1 2021. With this strong customer focus on reliability and resiliency, we continue to see an increasing penetration rate of storage on our full base. Our penetration rate now sits at 10.5% as of March 31st, 2021, more than double where it stood just one year ago. We expect this rate to rise even further and could see it reach as high as the mid to upper teens by the end of the year on expected customer base of roughly 200,000. This exceptional growth is fueled by our over 500 dedicated dealers and sub-dealers. Driven by the attractiveness of the SNOVA network, we anticipate our dealer count to grow even further in the coming quarters and be at or near 1,000 by the end of 2022. Finally, on this slide, we've added information on customer contract life and expected cash flows. As of March 31st, 2021, The weighted average contract life remaining on our customer contracts equal 22.4 years, while the cash inflows we expect to receive over the next 12 months, taking into account only our existing customer base of 116,400, stands at $266 million, or $2,285 per customer. Turning to slide four, we provide a summary of our Q1 2021 financial results. In our Q4 2020 earnings call, we noted that we expected to capture approximately 15% of both our full year 2021 adjusted EBITDA and principal and interest from solar loans in the first quarter. I am pleased to report we exceeded that target, as actual Q1 2021 results were all ahead of that goal. As expected, our cash flow results were negative for the quarter due to the typical seasonality of our business, as well as the impact of large annual cash expenses exclusive to Q1. We continue to anticipate large year-over-year growth in adjusted operating cash flow for full year 2021, as well as maintain a break-even midpoint on our recurring operating cash flow, so investors should expect these results to be positive for the balance of the year. On slide five, we provide a summary of our full-year adjusted EBITDA and the principal interest we receive on our solar loans. from the past few years, including our guidance estimate for 2021. As you can see, we've experienced significant growth in these key financial metrics with adjusted EBITDA expected to double between 2018 and 2021 and solar loan P&I to increase seven times over the same time period. This rapid growth together with the anticipated issuance of a non-amortizing green bond at the corporate level should translate directly into a significant increase in recurring operating cash flow in the coming years. 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. Using what is now a conservative discount rate of 4%, NCCV increased from $1.2 billion on March 31st, 2020 to $1.8 billion on March 31st, 2021. This equates to roughly $16.62 per share as of March 31st, 2021, which is approximately a 15% increase from March 31st, 2020. We continue to see NCCV per customer and services per customer trending higher. The NCCV per share calculation is relatively straightforward. It excludes any value for growth renewals or upsells, given that these cash flows are financed almost entirely with debt, whose interest rate would continue to lower and presently sits below the 4% discount rate used to calculate NCCV. We view this as a metric that is well below any reasonable valuation floor for our common shares. As such, we encourage investors to consider other valuation methodologies such as those that utilize cash flow metrics or consider attaching a multiple-to-afford estimate of our adjusted EBITDA and the principal and interest we receive on solar loans. Although these metrics, especially NCCV, vary in growth quarter to quarter due to financing transactions, one-time items, and growth intensity, We do expect these metrics to grow at or above the rate of our customer growth when viewed over several years. The growth in adjusted EBITDA and the P&I from our solar loans should trend higher than the customer growth once meter replacement spend ends and growth investment abates in the coming years. Earlier this month, Sunova published its inaugural ESG report detailing the company's strategy and performance on material ESG themes. As noted on slide seven, this report is aligned with the leading ESG frameworks, including the Sustainability Accounting Standards Board and the United Nations Sustainable Development Goals. As I have said from the beginning, I founded Sunova to deliver a better energy service at a better price and to make a positive difference in the lives of our customers, community, and the world. I firmly believe that we have a moral imperative to make the world a better place for future generations, and at Sunova, We intend to do just that by leading to a cleaner and more sustainable energy future. Since inception, through the end of 2020, Sunova Systems have generated 2.4 billion kilowatt hours of clean energy, resulting in 1.7 million metric tons of CO2 avoided. Not only did our systems help address climate change and avoid pollution, but they also provide our customers with affordable and reliable power that they can feel good about. While we believe that our core business is fundamentally more environmentally sustainable than the old energy paradigm, we also believe it's important to not rest on our environmental strengths alone but to also focus on being a good corporate citizen and making a positive difference in the communities where we operate. We are proud to support high-quality and good-paying jobs in both Houston and across the United States and its territories. In addition to supporting green jobs, we've also supported our communities in times of need such as after Hurricane Maria struck Puerto Rico. In the aftermath, Sanova was there to support power service recovery efforts by donating panels and batteries to families and nonprofits in need. To this day, we remain by far the largest residential solar and storage service provider on the island. We are also committed to upholding strong corporate governance practices and conducting business the right way as our core values of service, synergy, and sustainability underpin our corporate culture. We look forward to continuing our work on ESG and will continue to communicate our progress over time. We welcome your feedback on our first report as we enhance our strategies for long-term ESG performance. 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.