Sunnova Energy International Inc.

Good morning and welcome to Sunova's second quarter 2023 earnings conference call. Today's call is being recorded and we'll have allocated an hour for prepared remarks and questions and answers. At this time, I would like to turn the conference over to Rodney McMahon, Vice President, Investor Relations at Sunova. 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 in our 2022 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.

Sunova achieved record growth in customer additions in the second quarter. This outstanding performance can be attributed to the strong demand for our comprehensive suite of services, the continued growth of our dealer base, and the expansion of our addressable market and market share. What sets Sunova apart and fuels our growth is our unique business model, exemplified by an unwavering commitment to delivering responsive and reliable service. While solar forms the foundation of our existing customer base, we have observed a growing trend among newer consumers. We see homeowners seeking a broader range of services that go beyond panels on the roof. To meet this evolving demand, we have introduced innovative solutions such as the Sunova Adaptive Home and the Sunova Adaptive Business, which combine advanced technologies to optimize energy usage for homeowners and businesses, as well as Sanova repair services to ensure the uninterrupted performance of solar systems without service. Underpinning our commitment to providing exceptional customer service is our 24-hour response time for our customers, currently in four markets. We have plans to expand to seven markets by the end of this year, which is expected to cover 70% of our customer base. This rapid expansion of our 24-hour response time will help us to solidify our position as the fastest service delivery leader while expanding our Sanova repair service business. Our ability to navigate macroeconomic financial conditions, regulatory changes, and market trends, all the while focusing on the customer, is unmatched in our industry. One market trend we are actively involved in is the current deflationary environment for equipment. In the current equipment cycle, falling prices coupled with our open equipment platform and our strong relationships with best-in-class manufacturers has empowered us to access top quality equipment at favorable pricing, thereby enhancing our scalability and market competitiveness. To get a sense of how drastic price declines have been so far this year, at the end of 2022, the average equipment stack consisting of panels, inverters, and a battery for an 8 kilowatt system in one of our major markets priced around $15,100. Now that same composition of equipment can be purchased for approximately $9,500, a reduction of 37%. This notable price shift translates to the equivalent of a 330 basis points decrease in the cost of capital, which will inure to the benefit of both the consumer in the form of lower pricing as the majority of the cost savings will be passed through to them and service providers like Sunova in the form of consumer demand upside as long as the service provider has managed their inventory properly and operate an open equipment platform. Slide 3 showcases the continued growth in Sunova's customers' solar power generation and energy storage under management, battery attachment rate and origination, and expected cash inflow over the next 12 months. During the second quarter, we placed over 39,000 customers into service, which brought our total customer count as of June 30, 2023 to 348,600 and brought our megawatt hours under management to 869 and total solar power generation under management to 2.1 gigawatts. As a reminder, we will count a customer only after they have been placed into service and we have an ongoing economic relationship with the customer. If the economic relationship ends, we will remove from our customer count. Additionally, we will count a customer only once, regardless of the number of services we provide to them. Our growth is fueled by our dedicated dealers. In the second quarter, we added another 216 dealers, bringing the total count to 1,592 as of June 30, 2023. Our strong customer additions during the first half of the year, our continued robust originations, and our conservative customer count methodology gives us the visibility and confidence to increase our customer additions guidance for 2023 by 10,000 customers at the midpoint and issue preliminary 2024 customer growth guidance of 40% over 2023. Given the timing of when these customers go into service, we expect the bulk of the financial benefit of the customer additions to accrue to Sanova in 2024 and beyond. We are furthering our growth by upselling our existing customers' additional services and are tracking this growth effort through our services per customer metric, which stands at 3.5 as of June 30, 2023. We continue to target seven services per customer by the end of 2025. Additionally, Our battery attachment rate on origination was 32% in the second quarter, and as of June 30, 2023, we reached 3,173 battery retrofits live today. Finally, we have updated our customer contract life and expected cash inflows. As of June 30, 2023, the weighted average contract life remaining on our customer contracts equaled 22.2 years and expected cash inflows from those customers over the next 12 months increased to $597 million. By focusing on being an energy as a service company, we have successfully differentiated ourselves and we are building a reputation for reliable and responsive service. Detailed on slide four, Sunova's growth strategy is built around the following key opportunities. In the U.S., we estimate there are approximately 108 million homes that could become Sunova adaptive homes. With only a 4% solar market penetration rate, there is significant untapped growth potential for Sunova. By aggressively expanding our operations, we are determined to establish our presence in all 55 U.S. markets by the end of 2024 to take full advantage of this untapped opportunity. Our larger footprint will also lower our concentration risk and reduce our exposure to region-specific concerns such as the recent change in the net metering tariff in California. Of the roughly 4 million homes that have solar in the U.S., approximately 2.5 million of them lack a service provider, creating additional market opportunity for Sunova through our Sunova Repair Service business. Based on our analysis, we have determined that these systems typically require at least one truck roll every three years resulting in a substantial revenue potential of approximately $1 billion per year when considering an average ticket price of approximately $1,100. While our current focus is on providing repair services to residential systems, there are opportunities to expand this capability to our Sunova Adaptive Business customers and future European customers. The Sunova Adaptive Business Market opportunity is vast, encompassing approximately 2.6 million businesses that could benefit from our solutions. Our goal is to expand our presence into all 55 U.S. markets by the end of 2024, positioning Sunova as a leading provider of energy as a service for businesses across the country. And finally, with an average EU energy cost of 1.61 euros per watt, and approximately 66 million potential Sanova adaptive homes and an estimated solar revenue opportunity of 462 billion euros, the European market presents a substantial opportunity for Sanova as we look beyond the U.S. and its territories. Additionally, a move internationally will further reduce our exposure to U.S. specific challenges and open Sanova up to more regulatory and consumer choice friendly markets. We will be nimble and opportunistic about capitalizing our growth opportunities overseas, and we intend to be methodical in our approach. As of now, our 2024 customer projections do not include Europe. In addition, we have determined that the rapidly growing Sunova customer base, particularly the storage and load management assets, possess substantial untapped financial potential as it pertains to existing accessible wholesale markets and emerging opportunities in other wholesale markets. As highlighted in slide five, our expanding optimization and modernization expertise extends into wholesale power, grid services, and retail energy provider services, collectively known as energy services. Leveraging our Synova sentient platform and employing realistic addressable market and attachment rate scenarios We project that Sanova Energy Services has the capability to generate cumulative revenues of $1 billion by 2030. With our primary focus on delivering outstanding value to our customers and shareholders, we continue to drive revenue growth, provide great service to minimize capital loss, and strengthen our brand. Our unique model serves as the foundation for these goals, allowing us to meet our customers' expectations regarding power reliability and affordability. As we move forward, we are committed to investing in innovative technologies, operational efficiencies, and logistical capabilities to enhance the quality and responsiveness of our services. I will now hand the call over to Rob, who will walk you through our financial highlights.