Sunnova Energy International Inc.

Hello, ladies and gentlemen. Thank you all for your patience. The conference call will begin momentarily. If you would like to ask a question during the Q&A session of today's call, please press star followed by one on your telephone keypad. As a reminder, we will be beginning momentarily. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Good morning and welcome to Sanova's third quarter 2022 earning 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.

Rodney McMahon 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 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. When I founded Sanova, I set out to build a company capable of withstanding virtually any market scenario and to solve a multifaceted global energy crisis. The world is in desperate need of clean, resilient, and reliable energy, and we are focused on delivering a superior energy service to address the global energy crisis trifecta, energy affordability, energy security, and climate change. Now, as we look to celebrate our 10-year anniversary, It is clear that Sunova has built high credit quality, long-term cash flows that have created a strong balance sheet to ride out inevitable bad economic cycles. Over the past several quarters, we have had a more negative view of the broader economy. As such, we decided to position Sunova for what we had anticipated to be a more challenging macro environment. This meant working with our dealers to raise pricing, as well as fortifying Sunova's balance sheet by raising more liquidity than projected and on an accelerated basis. These actions, coupled with our long-term contracted cash flows, have placed the company in what we believe to be an optimal liquidity position for these challenging economic times. In addition, to strengthening our balance sheet this past quarter, we also experienced strong year-over-year growth in customers, revenue, adjusted EBITDA, net contracted customer value, or NCCV, and the fully burdened unlevered return on newly originated customers. However, as we have discussed over the last few months, we have seen a slowdown in principal prepayments on our solar loans. This has resulted in stronger than expected interest income, but less than expected principal payments on those loans. Rising interest rates, a decline in the housing market, materially lower refinancings and mortgages, and overall concerns about the economy have caused our loan customers to keep cash on hand rather than make unscheduled principal payments. However, scheduled payments and collections of delinquent or previously defaulted accounts were all better than expected. Investors should consider the unscheduled payments merely delay cash flow and thus there is no loss of cash to Sanova. As a result, we are lowering our full year 2022 guidance for the principal we expect to receive from solar loans as well as our guidance for both recurring and adjusted operating cash flow due to the fact that principal payments, both scheduled and unscheduled, flow through both of those metrics. However, please note that the liquidity impact of the lower than expected principal payments is not material as much of the cash flow from these payments was assumed to pay down debt quicker than obligated. In fact, even if all unscheduled loan prepayments were to cease in the near future, which we do not expect, it would have very little impact upon our liquidity. While rising interest rates are expected to curtail unscheduled principal payments, this same interest rate movement has had a positive impact on the mark-to-market value of Sanova's interest rate hedges. As of September 30, 2022, our derivative asset position on these hedges stood at $118 million. As rising interest rates reduce our customer prepayments, Our hedges have allowed us to accumulate significant value that is well in excess of the expected shortfall. While we intend to continue to monetize these hedges over time, they represent an option that could immediately bring in a significant amount of cash and have therefore improved our overall liquidity more than we expected. As I mentioned earlier, higher interest income will partially offset the lower unscheduled principal payments Therefore, we are raising our full year 2022 guidance for the interest we expect to receive from solar loans. There are no changes to our full year 2022 estimates for adjusted EBITDA or customer additions, and we are reaffirming our intermediate term major metric growth plan, the triple-double-triple plan, including our targeted $530 million of adjusted EBITDA together with the principal and interest we collect on solar loans, for the year ended December 31st, 2023. While we expect the inflow of unscheduled principal payments to remain depressed into next year, we also believe that we will achieve greater adjusted EBITDA and interest income collected on solar loans than originally forecasted. Slide four summarizes the growth in Synovus customers, battery penetration, and dealer network. In the third quarter of 2022, we added approximately 21,800 customers, more unique customer additions than in any other quarter in the company's history. This brings our total customer count to nearly a quarter of a million as of September 30th, 2022. While this record is impressive, we expect to add over 30,000 customers in the fourth quarter to put us within guidance range of 85,000 to 89,000 customer additions for full year 2022. Our battery attachment rate on origination for the third quarter of 2022 was 30%. More importantly, Our battery penetration rate continues to grow and reach 14.5% as of September 30, 2022. Inclusive of over 2,200 battery retrofits, we have performed life to date. The availability of battery supply grew materially in the third quarter, and we expect this battery availability trend to continue. In the third quarter, we eclipsed our year-end target of 1,000 dealers, sub-dealers, and new homes installers, with our latest due there count currently standing at 1,033 as of September 30th, 2022. Our ability to surpass this target ahead of schedule was driven by the attractiveness of SNOVA's dealer-friendly business model and technology platform. Finally, on slide four, we updated our information on customer contract life and expected cash inflows. As of September 30th, 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 $459 million, an increase of 39% from September 30, 2021. I will now hand the call over to Rob.