Sunnova Energy International Inc.

Good morning and welcome to Sunova's fourth quarter and fall year 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 of Investor Relations at Sunova. Thank you. Please go ahead.

Thank you, Operator. Before we begin, please note during today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in our slide presentation, earnings press release, and in our 2021 Form 10-K. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. Also, we will record certain non-GAAP measures during today's call. Please refer to the appendix of our presentation, as well as the earnings press release for the appropriate GAAP, the non-GAAP reconciliations, and cautionary disclosures. On the call today are John Berger, the Novice Chairman and Chief Executive Officer, and Robert Lane, Executive Vice President and Chief Financial Officer. I will now turn the call over to John. Good morning, and thank you for joining us.

Today, I'm pleased to report we closed out the year with strong financial results, a summary of which can be found on slide three. We exceeded the top end of our 2021 guidance range for adjusted EBITDA and adjusted operating cash flow. met our objectives for the principal and interest we collect on solar loans, and achieved positive recurring operating cash flow. Our ability to deliver on these metrics despite numerous challenges that impacted the economy as a whole is a testament to the strength of our business model, our focus on increasing our operating leverage, our strong partnerships, and the importance of retaining long-term contracted cash flows. Not even the pandemic and its various surges could derail our ability to hit our financial numbers over the last two years. We are also reaffirming our intermediate term major metric growth plan, the triple-double-triple plan, which we announced in the third quarter of 2021. Turning to slide four, you will see this plan now consists of the following, an increase in customer account to approximately 400,000 by year-end 2023, An increase in net contracted customer value per share to approximately $37 by year-end 2023. An increase in services sold per customer to approximately $7 by year-end 2025. And an increase in adjusted EBITDA together with the principal and interest we collect on solar loans to approximately $530 million for full year 2023. Despite current and anticipated macroeconomic headwinds, we remain confident in our ability to accomplish the triple-double-triple plan. Driving this confidence is the following. Our track record of executing consistently, even through market uncertainty. Our ability to grow the number of services we offer to homeowners, which includes, but is not limited to, energy storage systems, electric vehicle chargers, generators, and load managers. Our cost-discipline approach. which consists of not just limiting spending in periods of high growth, but also plans to invest more in software and automation to further reduce costs, reduce the need for more headcount, and increase our operating leverage. Our continued expansion of strategic partnerships, such as those recently announced with Generac, ChargePoint, Home Depot, and Brinks, These strategic partnerships are the key to not only being able to offer more services to new customers, but to also upsell our existing customer base. And finally, the earnings visibility of our business model demonstrated by the fact that 67% of the midpoint of our 2023 targeted revenue and principal and interest from solar loans was locked in through existing customers as of January 31, 2022. Slide 5 summarizes the growth in SNOVA's customers, battery penetration, and dealer network. In the fourth quarter, we added over 18,400 customers. While this was an all-time high for organic customer ads in a quarter, it did fall short of our expectations as our Q4 customer additions were negatively impacted by the late December uptick in the Omicron variant of COVID-19. This uptick affected our dealers' ability to fill their installation crews and slowed down utilities granting permission to operate. As a result, our organic customer additions for the year ended December 31, 2021, was just under 54,500, which is approximately 500 customers shy of the bottom end of our guidance range. However, these delayed customer additions, which equaled approximately 2,000 customers, have since been interconnected. As such, we are increasing our 2022 guidance for customer additions by 2,000 customers to a range of 85,000 to 89,000. Our battery attachment rate on origination for the fourth quarter of 2021 was 22%, up from 19% in the fourth quarter of 2020, but down from 30% the prior quarter. This recent decline was primarily driven by the regional mix of customer originations in the fourth quarter of 2021. Specifically, in the fourth quarter, we had higher origination levels in markets with low battery penetration, such as those in the Northeast, and lower origination in markets with high battery penetration, such as our island markets. However, we have seen our battery attachment rate and our levered returns bounce up so far this quarter as the regional mix has normalized. Much more importantly, Our battery penetration rate continues to grow and reached 11% on a customer base of nearly 200,000 as of December 31st, 2021. Also, we have performed over 1,600 battery retrofit lives to date, a number we expect to double by the end of 2022. When it comes to dealer growth, we're focused on dealers of all business models and sizes, from tier one to tier five, from the snout all the way through the long tail. As such, over the past 12 months, We've been able to add 379 dealers, sub dealers, and new homes and sellers from all tiers, which brought our total dealer count to 814 as of December 31st, 2021. With the recent surge in dealer growth, we now expect to exceed our target of 1000 dealers by the end of this year. This growth remains powered by the attractiveness of Sanova's business model, our best in class technology platform, partnerships with the best equipment manufacturers in the industry, a broad suite of product offerings with all financing types, and our brand's growing ability to deliver strong lead generation to our dealers. Finally, on slide five, we've updated our information on customer contract life and expected cash inflows. As of December 31, 2021, the weighted average contract life remaining on our customer contracts equaled 22.4 years, and expected cash inflows over the next 12 months has increased to $384 million. Slide 6 lists out our recently launched service goals, which will provide our customers a level of service unparalleled in the industry and one that is a must for the Sunova Adaptive Home. Launching first in select key markets, we've established a goal to provide service within 72 hours for our solar-only customers and within 24 hours for our solar plus storage customers. In addition to these service goals, earlier this week, we launched Sunova Repair Services, which aims for 50% gross margins and expands our best-in-class service beyond our current customer base to homeowners in desperate need of repairs to their solar systems but who do not have a service provider. Responsive 24-hour service, new and improving hardware technologies to provide both energy supplies and manage energy demands, and the Sunova software platform will bring about a superior energy experience for homeowners who are frustrated with the increasing cost and decreasing reliability of their grid power provider. We will accomplish the goal of the Sunova Adaptive Home by accelerating the build-out of our software platform, continuing to build up our highly experienced and professionally managed service team, and improving our logistics capabilities. Slide seven illustrates this vision for the future, the Sunova Adaptive Home. which will integrate a large suite of energy services to make clean energy even more affordable, reliable, and resilient. With the right mix of technologies from multiple equipment manufacturers integrated into a single Sonova software interface, our customers will have the option when it comes to staying connected to the centralized grid or not. It is this option that an increasing number of homeowners are seeking in the wake of bad regulatory policies, increased power outages, and the rising cost of centralized power. By giving our customers the freedom to use very little utility power or even cut the cord, they can eliminate the need for net metering and avoid solar taxes in the form of high fees from centralized power monopolies. To make this a reality, we will roll out additional key strategic partnerships and continue to invest heavily in both our software platform and in redefining service to our customers. all of which can be accomplished while achieving our triple-double-triple plan as these investments are included in our forecast. Before turning the call over to Rob, I want to briefly point out slide eight. Over the past several weeks and months, these have been among the top areas of investor concern. We have summarized our positions with and responses to these challenges. We would be happy to discuss any of these in further detail during Q&A. I will now hand the call over to Rob.