Sunnova Energy International Inc.

Good morning and welcome to Sunova's second quarter 2022 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 of 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 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 reference 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 to non-GAAP reconciliations and cautionary disclosures. On the call today are John Berger, Synovus Chairman, 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.

Sunova delivered solid second quarter results as we delivered where it counts the most. Growth was strong in revenue and adjusted EBITDA. We grew our quarterly fully burdened unlevered return by 50 basis points from the prior quarter, and we increased our net contracted customer value, or NCCV, during what is typically a light quarter for NCCB growth. Additionally, we saw both our adjusted operating expense on a per-customer basis and our customer default and delinquency rates decline. However, we did fall short of our expectations in customer additions, primarily due to delays in receiving permission to operate, or PTO, from some utilities that we believe were stressed due to high industry growth. We also collected less than expected unscheduled principal payments on our solar loans as the economic recession and the sudden spike in mortgage rates led to a significant decline in mortgage and mortgage refinancing activities. While missing these targets was frustrating, investors should consider these shortfalls to be timing-driven as we still expect to hit our 2022 customer additions target with a more back-end weighting, and we will ultimately still collect the principal owed to us over the terms of the solar loans. More importantly, we are able to reaffirm our 2022 guidance as well as our intermediate term major metric growth plan, the triple-double-triple plan, due to the following reasons. The large backlog of customers we have under contract but not yet placed in service. Sunova had its best quarter for sales in company history in the second quarter, creating a significant backlog of customers, which we expect to be placed in service by the end of the year. the increasing traction with upselling energy services to existing customers, the earning stability our long-term contracted cash flows generate that allow us to meet and in some cases exceed expectations for adjusted EBITDA and the interest payments we collect on solar loans, even when customer additions fall below expectations, and the robust demand we are seeing for our essential energy services even in the face of waning consumer confidence as homeowners seek an offset to rapidly rising energy costs. Slide four summarizes the growth in Synovus customers, battery attachment rate on origination, battery penetration, and dealer network. In the second quarter of 2022, we added approximately 17,300 customers, bringing our total customer count to 225,000 customers as of June 30, 2022, a 40% increase in cumulative customers from June 30, 2021. As I just noted, the delay in customer additions was primarily driven by slower than expected interconnection times in select utility areas, but was also impacted by battery deliveries scheduled to occur late in the second quarter moving into earlier in the third quarter, and accessory and service-only sales ramping later in the second quarter than initially anticipated. While these factors impacted the number of customers who placed in service in Q2, We still expect to fall within our guidance range of 85,000 to 89,000 customer additions for full year 2022. As anticipated, our battery attachment rate on origination increased in the second quarter of 2022 to 31%. More importantly, our battery penetration rate continues to grow and reach 14.2% as of June 30, 2022, inclusive of over 2,000 battery retrofits we have performed live to date. Our backlog of battery retrofit sales also grew materially in the second quarter. Our growth continues to be driven by our dealer network, which as of June 30, 2022, stood at 986 dealers, sub-dealers, and new homes installers, only a few dealers shy of our year-end target of 1,000. We expect our dealer growth to accelerate further as we move out of the current peak selling season. Finally, on slide four, we have updated our information on customer contract life and expected cash inflows. As of June 30, 2022, the weighted average contract life remaining on our customer contracts equaled 22.3 years, and expected cash inflows from those customers over the next 12 months increased to $432 million, an increase of 45% versus June 30, 2021. On slide five, we provide a summary of the broad and rapidly growing energy services we offer. centered around our vision of the Sanova Adaptive Home, which is increasingly being demanded by both current and new customers. When we discuss our goal of increasing the number of services sold on a per customer basis to seven by the end of 2025, these service offerings position Sanova to achieve that goal. We derive the number of services per customer by dividing the total number of unique service transactions by our cumulative customer base which as of the end of Q2 stood at 225,000. As you can see on slide five, we sold an average of 3.84 services per customer as of June 30, 2022, compared to 3.52 when we established this goal last year. In addition to growing our services per customer, we've also seen an increase in non-unique transactions. These non-unique transactions consist of up sales to our existing customer base. And while they do not increase our cumulative customer count, they will assist us in our ability to achieve our NCCV per share and services sold per customer targets included in the triple, double, triple plan. We currently offer 29 distinct services categorized here to both current and new customers. As technological advancements in our industry continue to accelerate, allowing us to create a margin-rich, integrated, and comprehensive energy service for our customers, We are increasingly called upon to expand the number of services we sell to meet our customers' demands as we move beyond just the solar panel. I will now hand the call over to Rob.